Rhyan Diller

What Forbearance Means for You

Over 4 million Americans have put their loans into forbearance.

Up until recently, there has been a lot of uncertainty about what it means when a borrower’s loan goes into forbearance. Will there be a huge lump sum owed at the end of the forbearance period? Will it have an impact on credit? Will people be able to purchase or refinance in the future if a loan has gone into forbearance? Initially, the CARES Act did not provide clear guidelines or statements regarding any of those questions, resulting in many borrowers unable to take advantage of record low rates and uncertain if the forbearance policies in place would cause more harm than good.

Now for the good news. On Tuesday, May 19th, the Federal Housing Agency (Fannie Mae and Freddie Mac) provided clarity regarding what forbearance means to borrowers, and gave guidance on how Fannie Mae and Freddie Mac loans will handle repayment, as well as how it will affect a borrower in the future.

Here’s what it means for you.

Let us start by saying, if you’ve not been impacted financially by COVID-19 and can keep paying your payments on time and in full, you should. Forbearance or deferment is not forgiveness, and that money does not go away. So, if you can still pay, that is your best option.

Can you purchase or refinance in the future? Yes! Fannie Mae and Freddie Mac borrowers will be allowed to purchase a new home or refinance their current mortgage even if a loan has gone into forbearance. The borrower must show three consecutive months of payments after the forbearance period has ended. Additionally, if your loan has gone into forbearance accidentally (many Fannie Mae and Freddie Mac loans were being placed into forbearance, if a borrower even breathed the word), you can purchase or refinance immediately if your payments are up to date, without having to wait the three-month period.

Will you have to owe a lump sum at the end of your forbearance period? Not unless you want to. Here are a few ways borrowers can exit a forbearance plan:

  • A borrower can pay the sum of the missed payments in full when their forbearance period ends.
  • A borrower can defer the payments to the end of the loan. For example, if you were in forbearance for six months, you could tack those six months onto the end of your loan, adding an additional six months of payments before maturity. You can do this for up to 12 months, per the Federal Housing Finance Agency.
  • A borrower can use a repayment plan. They can pay the amount due or missed payments, over the course of 36 months or until they are up to date on their payments.

 

At Love Your Hood, we’re committed to being a resource for you and all of your housing needs. Please don’t hesitate to reach out to one of our trusted realtors if you have any questions regarding forbearance, or buying and selling in the current climate.

How the Pandemic is Affecting the Denver Real Estate Market

Our New Normal

COVID-19 has sent our market into uncharted territory. Since the start of increased COVID-19 precautions a few weeks ago, we have seen a significant decrease in showings in the Denver Metro area. This is in part due to buyers, sellers, and agents alike staying home to help slow the spread of the virus. With individuals and families facing financial hardships, we are also seeing buyers have to put their home-buying process on hold or even terminate on homes that were under contract due to loss of job or income.

Many sellers are also pausing all business until this subsides in the hope of slowing the spread, but also out of concern that showings will decrease given the situation at hand.

Governor Polis has issued “Stay at Home” orders for all non-essential businesses in the State of Colorado. For those of you who either have to buy or sell immediately, all real estate professionals have been deemed “essential” and are allowed to continue operating business while maintaining COVID-19 precautions.

There are many new guidelines being implemented by companies to ensure the buying and selling process can keep moving forward while also maintaining social distancing. Fannie Mae and Freddie Mac have issued new temporary appraisal requirements, allowing for desktop or drive-by appraisals. Many title companies are also implementing ways to close at home and electronically, or even “drive up” closings where there’s no need to get out of your car.

A Light at the End of the Tunnel

The federal reserve learned a hard lesson back in 2008, and that was the need to act quickly during times like this. Luckily, they did this time. The federal reserve is currently throwing everything they have to combat this. They have dropped the federal rate to 0, added another $700 billion in purchases, and have announced that they are going limitless. This means they will spend as much as it takes to keep businesses afloat. However, the most important factor is the containment of the virus. The sooner that happens, the sooner the economy can begin to recover and all of society can return to normal.

While we certainly don’t have a crystal ball, through all of this the Denver real estate market seems to remain strong. Many sellers are still receiving multiple offers, buyers are still actively searching, and Denver still has incredibly low inventory. These factors, alongside incredibly low rates, are still pushing Denver’s market forward.

What You Can Do

If you have to buy or sell due to personal circumstances (death, divorce, finances, etc.), if you are a renter who has received notice to vacate, if you have already bought a home and need to sell your current home, or if you have already sold your home and need to purchase your next home, you are still able to move forward with your buying or selling plans. Please feel free to reach out to any Love Your Hood broker to discuss your buying or selling needs and how to best navigate them at this time.

And of course, please stay home, and abide by government-issued precautions if you must leave your home.

If you or someone you know is struggling financially during this time and own a home, it is possible you have equity in your home that you could tap into. Talk to your financial advisor, lender and realtor about your options to refinance, take out a HELOC, or to sell if you need to. If you are having trouble making payments, talk to your mortgagee about payment forbearance as soon as possible.

Rest assured, Love Your Hood is taking COVID-19 precautions very seriously. Our heart goes out to all of the individuals and families who have been personally affected by this. At Love Your Hood, we truly love our neighborhood and those within it. If there is any way that we can support you or someone you know during this time, please reach out. We are happy to help.

All the best,

Your neighbors at Love Your Hood

COVID-19 and the Denver Real Estate Market

Let’s address the elephant in the real-estate-market-room: the Federal Reserve dropped interest rates to zero.

So… What does that mean?

The reason the Fed has dropped rates to zero is to support the economy during the nation’s current self-quarantine. It’s looking like COVID-19 is not going away anytime soon, and the economy is feeling that impact in several ways.

With everyone holed up to avoid the virus, consumer spending is down. Making up 70% of the GDP, consumer spending’s dip is negatively affecting industries such as travel, entertainment, hospitality, and dining. This loss of business may lead to the laying off of workers in those industries, in turn creating a further lack of spending. Last week, we shifted from a bull market to a bear market, meaning stock markets are down at least 20% from recent highs. Investors are converting to cash and to other, safer investments due to this consumer spending concern.

The drop to zero is also to provide easier access to business and personal borrowing to weather this financial storm. It will provide businesses the opportunity to acquire short-term loans to help maintain payroll, keep employees, and keep doors open. 

It’s important to note that mortgage interest rates are not necessarily directly correlated with the Fed’s rates. While mortgage rates are still at an all-time low, this doesn’t mean they will continue decreasing (however, this is still possible).

The good news in this is that the housing market remains strong. We ended February with a supply of 4,835 homes on the market (attached and detached). To add context to this, the record high for February was back in 2006, where we ended with 25,484 active homes on the market, while heading into a recession! So, demand is still high, and supply is still very low.

The buyer side of the market continues to be competitive, often with multiple offers over list price. With COVID-19 spreading, we anticipate a buyer slowdown as buyers avoid public places, like open house tours. However, this also presents an opportunity to continue (or begin) your home search in a less competitive environment, at least temporarily. Once the virus begins to stabilize and financial markets start to recover, you can bet it will be a mad dash to start touring listings. 

Sellers remain in the power seat in this market in almost all price points — this is with the exception of homes over one million, where buyers are able to take back the process a bit more. 

So, with the safety of our clients and our employees as our priority at this time, all Love Your Hood Brokers will be taking the recommended precautions against COVID-19. If anyone at Love Your Hood becomes sick, you can rest easy knowing they will be home, and another one of our amazing (and healthy!) team members will assist you with any property tours. We are also available to do virtual video tours of properties for you while you stay safely at home — please reach out to us to schedule one.

Here are the precautionary measures we will be taking to ensure that your home buying and/or selling journey is not affected:

  1. We will carry disinfectant wipes to clean all surface areas — particularly lockboxes, keys, and doorknobs.
  2. We will ask you to please refrain from touching any surfaces when touring homes. 
  3. If you’re showing signs of illness, please let us know. We can do a video tour on any available home.
  4. Our entire team will be working from home as much as possible to do our part in slowing the spread of the virus and flattening the curve.
  5. All meetings will be done via conference calls or virtual video chat.

 

We encourage you to visit the Centers for Disease Control and Prevention website for additional information regarding COVID-19.

With regards (and washed hands),

Your neighbors at Love Your Hood