Maybe it’s the canary in the coal mine. I get a steady stream of calls from borrowers, especially older mortgagers on fixed incomes, trying to figure out how to make ends meet.
Skimping more, not retiring and going back to work, consolidating debt, taking out a reverse mortgage, or maybe even selling and moving to cheaper neighborhoods have been a priority for some Southern California homeowners.
This week, consumer price inflation jumped to 9.1%, the biggest 12-month increase since November 1981. That was 41 long years ago. Bank of America expects a recession in 2022, not 2023. An investment group Wells Fargo thinks the recession is already here, according to Bloomberg. Unemployment always rises in times of recession.
And, COVID-19 is on the rise, dominated by the BA.5 subvariant, according to the Center for Disease Control and Prevention. This could certainly worsen a person’s economic health, in addition to inflation.
Data trends are a mixed bag.
Nationally, foreclosure filings increased 219% in the first six months of 2022, according to Attom Data Solutions this week.
“While overall lockdown activity is still significantly below historical averages, the dramatic increase in lockdown starts suggests we could be back to normal levels by early 2023,” said Rick Sharga, vice- Executive President of Market Intelligence at Attom.
On the other hand, mortgage forbearance — that is, payment pauses recognized by the service — is down 69% nationally from last July and 78% in California, according to Black Knight. Just over 1% of all mortgages in the United States, or 569,000, are currently in forbearance. In California, 45,000, or 0.7%, of all mortgages are currently in forbearance.
Forbearances fell to 0.85% of all loans, from a high of 8.39% two years ago, the Mortgage Bankers Association reported. Certainly a dramatic drop.
If you’re struggling to find ways to make your mortgage payment or are worried about the short term or your job, do it now. Do not wait. Don’t bury your head in the sand.
Options include debt consolidation loans against your home, borrowing from your retirement account, borrowing from a trusted family member or friend, or selling other assets to find cash. silver.
A reverse mortgage or the sale of your home are choices of last resort.
Before you go to these extremes, be aware that there is a significant menu of mortgage forbearance programs and payment deferral programs that you may qualify for.
The US government deserves a lot of credit for the safety net it has put in place for struggling borrowers. No one wants to look back on the mortgage foreclosure crisis of the Great Recession era.
In addition to general borrower assistance programs, COVID-focused programs are also available.
For example, in addition to the standard US Department of Veterans Affairs loss mitigation program, VA has implemented a new partial claim program.
In this program, the agency purchases up to 30% of the outstanding principal balance of a VA-backed loan from the loan servicing agent and establishes a junior lien on the property, according to Gina Jackson, Business Representative public of the VA. The interest rate on this junior lien: 0%.
The program will only be available until October 28.
Freddie Mac has a great program. Provided all eligibility criteria are met, borrowers impacted by COVID could be granted mortgage forbearance for 18 months and then switch to a COVID-19 payment deferral which gives you up to an additional 18 months to make payments.
The borrower must have followed an active forbearance plan since February 2021 to benefit fully. If the borrower has never signed up for a COVID-19 plan, they would only be eligible for a maximum of 12 months of COVID-19 forbearance, instead of 18 months.
Dave Stevens, Commissioner of the Obama Administration’s Federal Housing Administration, points to the FHA’s “cascade approach” to loan modifications and arrears. That is, add the outstanding balance to a new payment of principal, interest, taxes and insurance spread over a new 30-year period.
For more information, visit nationalmortgageassistance.com.
Whatever you’re considering, get professional advice from your financial planner, mortgage advisor or tax preparer. Then share this advice with your smartest and most trusted family member or friend.
Make sure the second person you refer to is someone who has no financial interest in your plan to resolve your mortgage difficulties.
Freddie Mac rates the news: The 30-year fixed rate averaged 5.51%, jumping 21 basis points from last week. The 15-year fixed rate averaged 4.67%, or 22 basis points higher.
The Mortgage Bankers Association reported a 1.7% drop in mortgage applications from the previous week.
At the end of the line : Assuming a borrower gets the average 30-year fixed rate on a conforming loan of $647,200, last year’s payment was $992 less than this week’s payment of $3,679.
What I see: Locally, well-qualified borrowers can get the following fixed rate mortgages without points: A 30-year FHA at 5.125%, a 15-year conventional at 4.875%, a 30-year conventional at 5.5%, a -balance ($647,201 to $970,800) at 5.25%, a 30-year conventional high balance at 5.82%, and a 30-year buy jumbo at 5.375%.
Eye-Catching Loan of the Week: A 30-year jumbo purchase mortgage, locked in for the first 10 years at 4.375%, with a cost of 0.75 points.