Last week was a profound time of change for most businesses. I wanted to share important updates with you that I have shared with my family, friends, clients and colleagues.
As you are working to find a new way of managing your business affairs, please know that I am here as a resource for you and you should feel free to reach out any time to set up a call so that I may help you in any way I can.
For those needing assistance with the SBA disaster relief programs, click http://disasterloan.sba.gov/ela to apply

Also, here is a compilation of small business resources shared by the California State Treasurer, Fiona Ma: https://bit.ly/2xntDpn
California Governor Gavin Newsom has made an irresponsible statement claiming that three of the largest banks will allow their borrowers deferrals on their current mortgage payments up to three months due to COVID-19, however this isn’t the case.
Homeowners that have not been able to work (who have proof of unemployment), have non-essential businesses or are impacted with health issues which currently have mortgages impacted by this pandemic are eligible to file for forbearance with a valid proof of hardship which will allow them not to make payments for the next three months.

However, after the three months expire, homeowners will have to make those payments, either in a lump sum or six or twelve month installments. Currently, there are no other options and while several lenders are considering traditional forbearances (which means that the missed payments will be tacked on to the end of the mortgage) this option is not currently available but what lenders are offering instead are Loan Modifications (formal processed to modify the terms of an existing loan). It is important to keep in mind that each of these options runs the risk of putting homeowners in default or foreclosure situations.

Stay Responsible.
Using this time to get a break from mortgage payments can put the Real Estate industry, Real Estate Market and our nation’s economy in a very similar crisis to 2008 due to the shortage of liquidity. Can you imagine millions of homeowners deferring their payments all at the same time? If you are blessed to currently have a job or funds to make your payment in the next month, this will help our country protect its financial well-being and preserve your economic standing.

Are you in the Real Estate or Mortgage Industry?
If you are, now is the time to educate your clients, family and friends. Shortcuts don’t exist in times like this. Each of us has a responsibility to spread facts and accurate information to help one another navigate our way through this crisis. It is our job to guide society through this crisis when it comes to their financial and economic decisions.

Let’s all do our part as professionals to not only help people get their dream homes and build Real Estate portfolios but to also keep their homes, assets and liabilities intact.

If you or someone you know has lost a job

States will still continue to pay unemployment to people who qualify. This bill adds $600 per week from the federal government on top of whatever base amount a worker receives from the state. That boosted payment will last for four months. 

If you’re a freelancer or independent contractor

Typically, self-employed people, freelancers and contractors can’t apply for unemployment. This bill creates a new, temporary Pandemic Unemployment Assistance program that provides unemployment coverage through the end of the year to freelancers and independent contractors and also provides an additional $600 per week for 4 months in addition to regular state benefits.

What is a Forbearance? Should you consider it? When this program was first announced by congress it was very frustrating for me to see all the misinformation that was being promoted by those who weren’t in our industry. It has also been frustrating for me to see the misinformation that is being promoted in the responses from individuals in our industry, as well.  You might say – I’m just plain frustrated. Forbearance is not forgiveness. Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, forbearance is an option for homeowners who cannot afford to make their mortgage payments due to the economic impact of COVID-19, the disease caused by the Coronavirus. If you have lost some or all of your income, then the forbearance program with your existing mortgage servicing company might offer temporarily relief.  However, as a Mortgage Advisor and individual who lived through the 2008 Mortgage Crisis I have to warn you, it might not be the best option and in my humble opinion should be avoided at any cost, if possible. Some of the immediate negative implications of a forbearance are:

• Inability to refinance to better rates and terms – once you enter into a forbearance, you forgo the ability to refinance the loan on better rates and terms.
• Issues with meeting the repayment terms – the issues that caused you to enter a forbearance may not go away so you would end up in the same position as you were before the forbearance
• Impact on rates – the added risk to mortgage backed securities will demand a higher yield to justify that risk, and result in a lower value of loan servicing which will have to be reflected in the rates the consumers pay

There may be other risks as well, but these are those that immediately come to mind. Under a forbearance program, mortgage servicers are not collecting up to 6 monthly payments to allow some financial relief for the time being but the public must understand, the servicers are NOT forgiving or forgetting these payments and they DO expect these payments to be paid in full as quickly as possible and repayment terms may not be any different from existing mortgage terms. So let’s say your monthly payment is $4,000 , using a forbearance plan you don’t make payments for 6 consecutive months and then here comes the 7^th month which now requires you to either request additional assistance or, if you are not eligible for further assistance, you must then repay the skipped payments and currently, there are only the following 3 options available: Option 1 John skipped April, May, June, July, August and September for a total of $24,000.   Come October 1^st John is going to be expected to make a $28,000 payment to cover the last 6 months as well as pay the October payment. It reasonably likely that someone who was unable to pay $4,000 in April would likely not be able to pay $28,000 in a matter of months. Option 2 The mortgage servicer will do a quick calculation and offer the homeowner the option to pay the unpaid balance due over the next 6 months.  $24,000.00 unpaid balance divided by 6 equaling $4,000.00. The new monthly payment will be $8,000.00 ($4000.00 + $4,000.00) for the next 6 months or if they make it 12 months, you are still to pay $6,000.00 a month. Option 3 Loan Modification.  This option would require that the homeowner first quality for the program based on its guidelines and also be willing to accept the HUGELY negative impact on his/her credit, as well as possibly lowering his/her FICO score, possibly preventing him/her from future refinance options or purchasing new property for about 2 to 4 years based on current mortgage lending guidelines. Additionally, this could affect other things including lending rates on auto financing, student loans, business loans, credit card applications and essentially anything that relies on credit ratings. In short, forbearance affects credit. This could impact the ability to refinance or purchase a new home in the future. Is there an alternative? Depending on what you are looking to accomplish and what your circumstances are, I will make myself available to you to discuss your options.  Feel free to call or email me directly and I will be more than glad to discuss whether refinance, debt consolidation, cash-out refi, HELOC or anything else I can offer could be an alternative option for you.

HUD-1 Going Away: Understand New Closing Forms, Procedures

The HUD-1 settlement statement and Good Faith Estimate forms are going away on August 1. The Truth in Lending Act disclosure is going away as well. In their place will be a new closing disclosure and a new loan estimate. There will be changes to the closing process as well, including a new rule requiring everything to be in place three days prior to closing. And last-minute changes face new hurdles. Learn about the changes in this walk-through.

There are also new rules for the closing procedure. One rule requires all forms to be ready three days prior to closing. NAR is recommending you actually get everything ready seven days prior to closing, so when you go into the three-day period, you don’t have to make any changes. Because making changes as the clock winds down comes with a cumbersome  set of hurdles.

What this means is, you and the other settlement service providers, including the lender and title agent, are under the gun to get everything squared away earlier than you have to today. And the buyers and sellers have to be cooperative as well, because if last-minute changes are made, a new three-day waiting period kicks in, at least in some cases.

The good news is, you have until August 1 to get familiar with the new forms and learn about the new closing procedures, and NAR is hosting a series of webinars on the topic. To learn when the next one is, go to Realtor.org/respa.

The video above, with Ken Trepeta of NAR Government Affairs, provides a concise overview of what to expect and also shares some tips on how to decrease the likelihood of snags in this new environment.

The CFPB’s goal in making these changes is to increase transparency for consumers. Start your education process by accessing the 5-minute video.

 

 

 

 

 

 

 

 

Source