When Mortgage Forbearance Ends: Know Your Options

When Mortgage Forbearance Ends: Know Your Options

 When Mortgage Forbearance Ends: Know Your Options

Last year, a $2 trillion stimulus bill called the CARES (Coronavirus Aid, Relief, and Economic Security) Act was enacted to soften the impact of an economic downturn set in motion by the coronavirus pandemic. Since then, more than nine million Americans have pushed the pause button on their monthly mortgage payments and entered into what is technically referred to as forbearance.

Under the CARES Act, homeowners with conventional, FHA, VA, or USDA loans could request an initial home loan forbearance for up to six months. They could also request a six-month extension for up to one year of total forbearance. “Forbearance plans are based on when you requested them,” explains David Shapiro, president, and CEO of EquiFi Corporation. That means homeowners who entered forbearance plans early in the coronavirus pandemic are likely nearing their forbearance end dates. 

Anticipating a wave of pandemic-fueled foreclosures, the Consumer Financial Protection Bureau has issued new rules to ensure borrowers have time to explore their options, including loan modifications and selling their homes. The rules cover loans on an owner’s primary home and will go into effect on Aug. 31, a month after a federal moratorium on foreclosures is set to expire.

About 2 million people are currently under forbearance plans, with at least 900,000 homeowners projected to exit forbearance between now and the end of the year, according to the CFPB.

Concerns over foreclosure increases have been “wildly overestimated.”

As forbearance periods come to an end and homeowners resume making their mortgage payments, one mortgage and foreclosure expert said concerns over foreclosure increases have been “wildly overestimated.” Once homeowners exit their forbearance periods, they have several options available to them to resume payments on their mortgage loan.

A new servicing rule from the Consumer Financial Protection Bureau (CFPB) stipulates that mortgage servicers can move all missed payments to the end of a loan term, and may not modify the loan in a way that increases monthly payments. 

“An unchecked wave of foreclosures would … risk destabilizing the housing market for all consumers,” said Dave Uejio, the CFPB’s acting director. We are giving homeowners the time and opportunity to make informed decisions about the best course of action for them and their families” said Uejio. The new rules include safeguards like requiring mortgage servicers to increase their outreach to borrowers before beginning a foreclosure. 

When Mortgage Forbearance Ends: Know Your Options

Mortgage forbearance is not the same as mortgage forgiveness. After your forbearance period ends, you’ll have to make arrangements with your loan servicer to repay any amount suspended or paused. Forbearance repayment can look very different depending on your lender. Borrowers will typically have several options for repayment once forbearance expires:

  1. Make a full repayment. This is a one-time lump sum payment. Lenders are not allowed to require this and if you’re unable to pay one lump sum, there are other options available.  
  2. Make intermittent payments. Borrowers can repay the missed amount over 3-12 months on top of their regular monthly mortgage payments.
  3. Lengthen the loan term. Pay off the missed amount at the end of the extended loan term by additional mortgage payments.
  4. Request payment deferral. This allows borrowers to pay off the missed amount when the home is sold or refinanced, or at the end of the loan term.
  5. Pursue a loan modification. This helps borrowers who are at risk of default change their mortgage terms, usually including a lower interest rate, reduced length of the loan, or reduced monthly payment. 

Just as your eligibility for debt forbearance may differ between different lenders, so might the options available for repayment of those deferred payment agreements. The most important thing is that you ask your lender about the options available to you, and make sure you get the final agreement in writing. Ultimately, the right option for you depends on your current finances, employment status, and ability to resume mortgage payments.

Will the housing market be affected by foreclosures?

Homeowners are currently at an advantage, partly due to historically low-interest rates, resulting in competition and high demand driving home prices higher. “Demographics (millennials reaching prime homebuying age in very large numbers), low-interest rates, and pandemic-driven trends (migration from urban renter to suburban homeowner) will continue to drive demand,” RealtyTrac Executive Vice President Rick Sharga said.

” While some borrowers will not be able to recover from the financial distress COVID inflicted on them and will face the choice of selling their home or losing it to foreclosure, there won’t be enough of those properties to fix the supply/demand imbalance in the market, and they shouldn’t need to be sold at so much of a discount that they’ll impact prices in any given market,” said Rick Sharga.

Additional actions to prevent foreclosures  

On July 23, the White House released a fact sheet explaining how homeowners with government-backed mortgages will be given further options to enable them to keep their homes when exiting forbearance. These actions were taken by three federal agencies that back mortgages including the Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA), and the US Department of Agriculture (USDA). The Federal Housing Finance Agency (FHFA) provided similar relief for mortgages backed by Fannie Mae and Freddie Mac. Here are two examples mentioned in the release:

  • “For homeowners who can resume their pre-pandemic monthly mortgage payment and where agencies have the authority, agencies will continue requiring mortgage servicers to offer options that allow borrowers to move missed payments to the end of the mortgage at no additional cost to the borrower.”
  • “The new steps the Department of Housing and Urban Development (HUD), Department of Agriculture (USDA), and Department of Veterans Affairs (VA) are announcing will aim to provide homeowners with a roughly 25% reduction in borrowers’ monthly principal and interest (P&I) payments to ensure they can afford to remain in their homes and build equity long-term. This brings options for homeowners with mortgages backed by HUD, USDA, and VA closer in alignment with options for homeowners with mortgages backed by Fannie Mae and Freddie Mac.”

For non-federally backed loans

Check with your loan servicer for the forbearance repayment options that they offer. You may be able to find information about forbearance programs by checking the websites of your lender and servicer for more detailed information. Be sure to inquire about what limitations, options, and fees may apply to the repayment of your loan due to the fact that it is not federally backed.

Takeaway

Ultimately, your best next steps depend on whether you plan to sell your home or adjust your finances to pay an adjusted mortgage after your forbearance period ends. Familiarize yourself with your options so you’ll know what to request. If you are concerned about losing your home, contact a HUD-approved housing counseling agency. They can help you figure out your options and guide you through the paperwork and process of working with your loan servicer. Find a housing counselor near you. Remember, help is free. You don’t have to pay anyone to help you avoid foreclosure.

Partner With Oakland County MI REALTOR® – Tom Gilliam 

REALTOR® – Tom Gilliam is your expert to buy or sell your home in Oakland County, Michigan – the Oakland County community’s number one REALTOR®.  In Oakland County, MI, you need to find an experienced agent who knows the community. Tom currently lives in the Oakland County area and is very familiar with the local market, neighborhoods, schools, and community issues. His office is located in the heart of Farmington Hills, with five additional offices throughout the southeast metropolitan area.

Tom is always ready to help families find the perfect home in the Oakland County area they want to live, whether it’s Farmington Hills, Novi, Birmingham, Troy, Rochester Hills, West Bloomfield, Bloomfield Hills, Ferndale, Royal Oak, Northville, Novi, Troy, Rochester, or Rochester Hills.  Give Tom Gilliam – your number one Oakland County Michigan REALTOR® – a call today!

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Homes2MoveYou.com
License #314578 

Sources: 

https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/23/fact-sheet-biden-administration-announces-additional-actions-to-prevent-foreclosures/
https://themortgagereports.com/69687/cares-act-mortgage-forbearance-ending-what-to-do  
https://myhome.freddiemac.com/blog/homeownership/20200629_understanding_covid-19_forbearance_part_II.page

Interested in Purchasing a Foreclosed Home in Oakland County MI?

Interested in Purchasing a Foreclosed Home in Oakland County MI?

Interested in Purchasing a Foreclosed Home in Oakland County MI?

Real estate bargain hunters can find great deals on foreclosures and foreclosed homes in Oakland County MI. The biggest selling point of foreclosed homes is, of course, their marked-down price, which is often significantly lower from other similar properties in the same area, also known as “comparables ” or “comps” in real estate speak. 

Foreclosed homes are available in just about every real estate market across the country, providing opportunities for homeowners and investors alike. Most foreclosures are sold at a sizable discount below market value. Buyers may also take advantage of additional savings such as reduced down payments, lower interest rates, or the elimination of appraisal fees and certain closing costs. 

A REALTOR® for foreclosed homes in Oakland County MI will often know about properties that are nearing foreclosure because they are familiar with the local market, actively network with other agents, and frequently works directly with banks and other lenders.

With access to comprehensive foreclosure listings that include homes already in foreclosure as well as those approaching it, your agent can help you uncover a great deal on a home that you might not find otherwise.  

Locating foreclosures and foreclosed homes in Oakland County MI

One can find foreclosed properties in multiple-listing service (MLS) periodicals and websites, via online real estate searches, bank offices and websites, and through local newspapers. Lenders are increasingly selling their seized assets through real estate agents, so don’t hesitate to ask an Oakland County MI REALTOR® for opportunities.

Some real estate pros even specialize in foreclosure properties, which are often sold well under market value because the owners are eager to unload them.  

Locating foreclosures and foreclosed homes in Oakland County MI greatly depends on what stage the property is in during the foreclosure process. Properties can still be owned by the original homeowner or by an entity such as a bank or the government.

Stages of Foreclosure

Here are the various stages of foreclosure:

1). Pre-foreclosures – A home is in pre-foreclosure after the lender has notified the borrowers that they are in default but before the property is offered for sale at auction. If the homeowner can sell their home during this time, they may be able to avoid foreclosure proceedings. As a result, some homeowners are willing to negotiate. Your agent can help locate those properties that are still in the pre-foreclosure phase. 

2). Short sales – Short sales occur when the lender will accept less for the property than what is owed on the mortgage. Although borrowers don’t necessarily need to be in default of their mortgage for a lender to agree to a short sale, they typically need to prove that they are in fact experiencing financial hardship, such as the loss of a job, which is likely to result in default. Often, the property is worth less than the outstanding balance on the mortgage. 

In order to qualify as a short sale, the lender must agree to accept less than is owed, and the property must be listed as a short sale. A successful short sale helps the lender avoid yet one more foreclosed home on their books as well as the cost and time associated with maintaining that home until its potential sale. Also with a short sale, the likelihood that the borrower/ homeowner will trash the property on his way out the door is reduced.

3). Sheriff’s sale auctions – happens after the lender has notified the borrower of default and allowed a grace period for the borrower to catch up on mortgage payments. An auction is designed for the lender to get repaid quickly for the loan that is in default. Auctions often occur on the steps of a city’s courthouse and managed by the local law enforcement authorities. 

The property is auctioned to the highest bidder at a publicly announced place, date, and time. The large cash outlay required to buy foreclosed property at the Sheriff’s Sale is the biggest deterrent for many buyers. Certified checks and sometimes cash will be required to bid on properties. In addition, you may not be able to inspect a foreclosed property before bidding on it. 

4). REO properties – Properties that don’t sell at auction revert back to the bank or become real estate owned (REO) properties. Cathy has access to extensive listings of such bank-owned properties. REOs are generally purchased “as is,” but buyers can negotiate with the lender to pay for any repairs. 

The option for a home inspection makes REO properties especially attractive to investors because they review the current condition of the property, including any repairs that will need to be made. With short sales or bank-owned (REO) properties, you can finance the purchase with a mortgage. In fact, it’s common to do so.

5). Government-owned properties –  Government foreclosures are residential properties that have been repossessed and put up for sale by a government agency. Several government agencies such as the Housing and Urban Development Department (HUD), the Federal Housing Authority (FHA), the Veteran’s Affairs Department (VA) offer mortgages at special rates for qualified borrowers. 

When a homeowner defaults on their mortgage, these agencies will repossess their property and sell it to recoup money lost on the unpaid loan. Other reasons government properties are sold include homes seized and sold by the IRS due to tax debts and property seized and sold by Homeland Security due to criminal activity. Typically, a government-registered broker must be contacted to purchase a government-owned property.   

Potential pitfalls when buying a foreclosed home in Oakland County MI 

There are some standard difficulties you may encounter when purchasing an Oakland County MI foreclosed home. While foreclosures can be great investments as fixer-uppers, either to live in or resell, these properties will typically come with issues, and the financial rewards of buying one only come after a significant amount of hard work. 

Bank-owned properties are sometimes very dirty because of the amount of time sitting empty,  neglect by the previous owner, or vagrant occupancy. A Home that has been sitting locked up with no air circulating for months can have built-up dirt that causes the entire home to smell. 

Many properties in foreclosure have been poorly maintained and may have water or mold damage, structural issues, or be in violation of codes or other standards. A small leak under the kitchen sink can lead to a mold problem, and a roof leak or burst pipe can lead to major water damage when there is no one in the home to fix it. 

Banks are unlikely to have any knowledge of existing problems with the property since one there has lived in the home. That means you will have to uncover everything yourself, either during the home inspection or through experience after you become the homeowner.  

Vandalism such as graffiti, broken windows, and other damage can also be an issue. After the occupants leave, foreclosures sit abandoned, often inviting criminal activity. Even the prior owners may take fixtures, appliances, windows, crown molding, or anything else of value from the home.

Despite all of the above potential problems, a foreclosed home in Oakland County MI can still be a good deal. If you are up for fixing problems that most people don’t want to deal with, you can purchase a home at a significant discount. 

Financing options for Oakland County MI foreclosed homes and lenders

Buyers should do some research on financing options before shopping for Oakland County MI foreclosed homes. Although you can go the traditional route of using a private lender as you would for a conventional home, some lenders are reluctant to finance a foreclosed home, making the purchase with all cash your only option.

Lenders will typically not give a home buyer money for a home they consider uninhabitable or that appraises below the purchase price. Of course, if you are paying cash, this will not be an issue. If you are not in the position to pay all cash, It’s worth looking into loans from the Federal Housing Administration (FHA) or Freddie Mac.

The HUD Section 203(k) loan program can help in some circumstances. The total amount of your mortgage is based on the projected value of the home after the renovation is completed while also taking into account the cost of the work.  

Keep in mind that when purchasing a foreclosure, negotiating with a bank is very different than negotiating with an individual. A real estate agent who has worked with banks before understands the bank’s processes and can anticipate the bank’s needs to make the transaction go smoother.

Even if you’ve purchased a foreclosure before, it’s still to your advantage to enlist the services of a qualified agent as each bank has its own procedures and timelines. Working with someone who can help navigate the nuances can alleviate a lot of stress. 

Partner with highly-rated Oakland County MI REALTOR® – Tom Gilliam   

Buyers have the opportunity to pay below market value for homes that wouldn’t be available to them under normal circumstances. If done responsibly, and with the guidance of a reputable real estate agent, purchasing a foreclosed home can allow a homebuyer to reap a myriad of benefits.

Inexperienced foreclosure buyers might want to hire a real estate agent for guidance and assistance. Agents have direct access to tools like the Multiple Listing Service (MLS), which they use to share information about properties. 

Oakland County MI REALTOR® – Tom Gilliam has over 20 years of local experience and provides the kind of knowledge, skills, commitment, and professionalism you need when buying or selling a home. As your agent, Tom will protect your interests, advocate for you, negotiate on your behalf, and be your trusted guide and advisor every step of the way.

If you or someone you know is interested in purchasing foreclosed homes in Oakland County MI, please give Tom Gilliam a call today at (248) 790-5594 or you can get in touch here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578  

Novi Investment Property Owners Top 6 Repairs

Novi Investment Property Owners Top 6 Repairs

What’s not to like? But there is one area that may hover as a wildcard: the maintenance issue. Because tenants are part of the picture, your Novi investment property undergo varying Novi Investment property projects amounts of wear and tear, so keeping them in top shape does require at least some degree of attention. Veteran landlords learn how to handle maintenance and repairs with a minimum of turmoil—sometimes by simply farming them out to professional property managers. In that, we are fortunate—Novi has some great ones!

Novi Investment Property Owners Eye Top Repair Calls

However you choose to address the issue, it’s useful to know which repairs investment property owners say are most frequently needed. Here are six leaders:

  1. Leaks. Under sinks, under windows and in the ceiling, leaks require the swiftest action to forestall expensive repercussions. Even the smallest leaks can result in mold growth, so any hint of water where it doesn’t belong rates immediate attention.
  2. Appliances. They have the greatest number of working parts, so it’s no surprise that they wind up having the greatest number of non-working parts. Repairmen are whispering that current models in almost all brands are not holding up as well as they used to…so when replacements are necessary, consider that higher-quality models may be worth the initial expense.
  3. Water heater. Tenants deserve hot water, so when it peters out, having the attention of a veteran plumber can be the difference between a repair (often all that’s needed) or a more expensive replacement.
  4. Rodents and bugs. Sealing up holes is the first line of defense for discouraging all manner of creepy-crawlies. If they show up anyway, Novi pest control experts can usually rid infestations for at most a few hundred dollars.
  5. Furnace. If the heat goes out during cold spells, unless it’s only a pilot light going out, it can quickly become an emergency situation. You’ll want to have the emergency phone number for one of Novi’s experienced furnace repairmen at the ready.
  6. Running toilet. We’re all familiar with the sound of a toilet that won’t shut up. It’s usually (in fact, virtually always) due to a “flapper” that doesn’t quite seat properly. These are inexpensive parts that are easily replaced—but there are also a hundred different varieties. All the expertise that’s required to fix this common tenant complaint can be found in YouTube videos demonstrating the various 10-minutes solutions.

Check out this article for more information Are Investment Rentals Right For you

Some terrific Novi investment property possibilities are among this fall’s listings. Call me to explore them!

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