How will the Coronavirus Impact the National Mortgage Market and Housing

For the past couple weeks we have been hearing from the National Association of Realtors and other media outlets about how the coronavirus will have a limited to moderate impact on housing as homeowners and their lenders are in a much better financial position than during the last economic downturn.

During that time our firm was a very active participant in the distressed real estate market representing lenders and servicers including Freddie Mac, JP Morgan Chase, Nationstar Mortgage, Bank of America and CitiMortgage so we saw first hand how these institutions were dealing with the vast number of mortgage defaults.  While a significant number of properties were foreclosed and resold, there was still a large number of mortgages that were modified or sold to a non-bank investor like private equity or a hedge fund.

Since there is virtually no regulation of these non-bank entities, there is a gap in the overall data about the number of possible loans that could be at risk for default. 

Possible Cracks in the System

MarketWatch.com just published an opinion piece about the mortgage market and housing by Dr. Keith Jurow titled Opinion: This hard truth about the mortgage markets isn’t being told  where the author talks about the housing recovery and what the lenders / servicer did, or didn’t, do at that time. 

Dr. Jurow is quite critical of the housing recovery and sheds some light what happened to many of those delinquent mortgages and foreclosures properties stating, “In truth, the so-called housing recovery since 2010 has been little more than a carefully constructed illusion. The belief in a strong housing recovery was carefully devised using a strategy of misleading information, withheld data and false impressions.”

“In truth, the so-called housing recovery since 2010 has been little more than a carefully constructed illusion. The belief in a strong housing recovery was carefully devised using a strategy of misleading information, withheld data and false impressions.” 

 

He even goes further by stating, “….the strategy to turn around collapsing housing markets unfolded in three parts: (1) restrict the number of foreclosed properties placed on the market; (2) radically reduce the number of seriously delinquent homes actually foreclosed and repossessed, and (3) provide millions of delinquent homeowners a mortgage modification as an alternative to foreclosure. This strategy fooled nearly everyone into believing that the disaster has been overcome”.

While we hope that what this author has indicated is hyperbole, there could be some cause for concern.  Still to this day our company is aware of “shadow inventory” on residential homes that have been delinquent for more than five years. Just recently we were engaged to represent a servicer on a property where the original foreclosure case was filed in July 2012.  During that timeframe the servicer advanced funds of approximately 20% of the mortgage principal balance for property taxes, insurance and legal fees.

Forbearance for Coronavirus Impacted Homeowners

On a more positive note, Fannie Mae and Freddie Mac have instructed the servicers of their mortgages to provide up to 12-months to coronavirus impacted borrowers.  Additionally, HUD just announced that mortgage services of FHA insured loans for single-family homeowners stating “mortgage servicers must extend deferred or reduced mortgage payment options – called forbearance – for up to six months, and must provide an additional six months of forbearance if requested by the borrower”.  In addition to the forbearance program, FHA will also do the following:

  • Delay submitting Due and Payable requests for Home Equity Conversion Mortgages by six months, with an additional six-month delay available with HUD approval
  • Extend any flexibility they may have under the Fair Credit Reporting Act relative to negative credit reporting actions.

South Florida Housing Market

While South Florida has experienced significant growth and appreciation in the housing market during the last five+ years, it was some of the most severely impacted markets during the last economic downtown.

At this time we have observed a reduction in buyer traffic along with a large number of residential home sellers removing their properties from the market, but sales volume has been somewhat consistent since today’s closing represented contacts from 30 to 60 days ago.  Since the real estate market moves considerably slower than stocks and bonds, it might take months to determine the full impact of the coronavirus pandemic.

In the interim, we will continue to keep our clients up to date with the latest market information.  To view the most recent published reports on the South Florida housing market, please CLICK HERE. 

 

 

Are You in Need of Help?

If you are a residential homeowner, small to medium-sized business or commercial property investor that has been adversely impacted by the coronavirus, there are things that you can do to alleviate some of the burden during this trying time. 

Residential and commercial property owners can inquire about possible forbearance programs from their lender while businesses can attempt to negotiate lease payments deferrals from their landlords as well as apply for Small Business Administration (SBA) loans through the recently passed CARES Act.  

Our team at Quantum Realty Advisors has assisted clients through a number of economic downturns since the early 1990’s.  If you would like to discuss options and alternatives for your personal real estate or commercial property obligations, please contact Chris or Amy Losquadro at your earliest convenience.

 

Disclaimer:  This information is provided for educational purposes only and obtained form sources deemed reliable but not guaranteed.  This information does not represent legal advice. We do not provide tax, legal or accounting advice. You should seek independent representation.  If you need assistance finding representation we would be happy to help refer you to a qualified professional.