Tag Archives: mortgage default

How Much Toronto Condo Apartment Prices Dropped Since COVID-19 Measures: 35 Neighbourhoods in Review

In February 2020, Toronto real estate was gearing up for what may have been a record-breaking spring season, with home sales up a staggering 45 per cent year-over-year (y-o-y), and home prices forecasted to grow 10 per cent in 2020.

Fast-forward to April 2020, at which point COVID-19 public health and safety measures had been in effect for a full month and a number of home buyers and sellers opted to remain on the sidelines. Home sale activity slowed considerably, with double digit sales declines in the City of Toronto in April. For the condo apartment segment in particular, the dip in y-o-y sales in April was a steep 70 per cent.

To understand how COVID-19 measures impacted real estate market dynamics, particularly condo apartment prices in the City of Toronto, Zoocasa used data from the Toronto Regional Real Estate Board (TRREB) to compare how median prices changed between February and April 2020 for 35 city neighbourhoods. For neighbourhoods with at least 10 condo apartment sales in April, Zoocasa calculated the dollar and percentage change in the median sold price to get a snapshot of how the market evolved one month after COVID-19 measures were introduced.

The median condo apartment price is defined as the price at which half the condo apartments in an area sold at a higher price than the median, and the other half sold at a price lower than the median price.

City of Toronto Median Condo Price Fell by $65,000 Since February 2020

For the City of Toronto as a whole, the median condo apartment price declined a steep $65,000 (-10 per cent) between February and April 2020 to $574,000. In a true reflection of economic and healthcare measures in place for COVID-19, condo apartment sales dropped 64 per cent since February, with just 482 transactions taking place across the city in April compared to 1,335 in February.

A closer look at all 35 City of Toronto neighbourhoods revealed that 21 city neighbourhoods had fewer than 10 sales during the month of April, which is three times the number of neighbourhoods with a low sales volume in February. In the 14 neighbourhoods with at least 10 sales, the median condo price rose in just one neighbourhood, and fell in all the others. More specifically, the median condo apartment price:

  • Dropped more than $100,000 in two neighbourhoods
  • Fell between $50,000 – $100,000 in four neighbourhoods
  • Declined between $1 – $50,000 in seven neighbourhoods
  • Rose $34,000 in one neighbourhood to $506,500

Toronto Centre Neighbourhoods Saw Largest Price Declines 

Condo apartment prices were significantly impacted in Toronto Centre, with the top five neighbourhoods with the greatest price declines (and at least 10 sales) located in this part of the city. C10 (Mount Pleasant East) topped the list with the median condo apartment price declining $131,500 (-18 per cent) to $617,500.

This was followed by C08 (Regent ParkSt. James Town, and Corktown), where the median price dropped $103,400 (-14 per cent) to $611,600. In C14 (Newtonbrooke East, Willowdale East), the median condo apartment price declined 12 per cent to $597,950, marking an $85,050 drop since February. C07 (Willowdale West, Lansing-Wesrgate) and C01 (Downtown, CityPlace, Trinity-Bellwoods, and Harbord Village) rounded out the top five neighbourhoods with price declines of $70,000 and $60,500 respectively.

Emma Pace, a Zoocasa agent in the City of Toronto, noted that new market conditions since COVID-19 have created opportunities for buyers who may have previously remained on the sidelines. Pace said, “due to the competitive nature of the market subsiding, qualified buyers who may have otherwise forgone an attempt at a home search even four to eight weeks ago are now reviewing how they can participate and starting to enter the market.”

Median Condo Apartment Price Rose in One Toronto East Neighbourhood; Prices Fell in Two

When considering neighbourhoods with at least 10 condo apartment sales in April, Toronto East neighbourhoods fall in the middle of the pack when it comes to price declines. The median condo apartment price in E09 (Morningside, Woburn, Bendale) declined exactly $50,000 (-10 per cent) since February to $465,000, and dropped $47,750 (-10 per cent) in E04 (Dorset Park, Kennedy Park).

In E07 (Milliken, Agincourt North) on the other hand, the median price rose by $34,500 (+7 per cent) to $506,000. Of all City of Toronto neighbourhoods with at least 10 condo apartment sales in April, this was the only area that experienced a median price increase. Here, condo apartment sales were down 49 per cent compared to February, representing a less severe sales drop when compared to the City of Toronto’s overall sales decline of 64 per cent for condo apartments.

According to Jelani Smith, a Toronto Zoocasa agent with experience working in Scarborough, showings began to pick up toward the end of April as more buyers started to return to the market. “Properties that were sitting on the market for almost a month started to get sold relatively faster, since showings started to pick up. In some cases, I’ve been involved in bidding wars similar to what we saw before COVID-19,” said Smith.

Median Condo Apartment Prices in Toronto West Neighbourhoods Declined Between $15,000-$45,000 

In Toronto West, median condo apartment prices dropped between four per cent and 10 percent since February 2020 in the following neighborhoods with at least 10 sales:

  • W10 (Rexdale-Kipling, West Humber-Claireville) prices declined $44,500 (-10 per cent) to $418,000
  • W06 (Mimico, Alderwood) prices dropped $35,500 (-6 per cent) to $577,500
  • W08 (Islington-City Centre West, Eringate-Centennial-West Deane) prices fell by $25,500 (-4 per cent) to $570,000
  • W04 (Yorkdale-Glen Park, Weston) prices declined $18,450 (-4 per cent) to $479,000
  • W05 (Black Creek, York University Heights) prices fell $15,451 (-4 per cent) to $409,999

Carlos Moniz, a Zoocasa agent with Etobicoke and Toronto West expertise noted that when COVID-19 hit, many buyers in the very early stages of their home searches took a step back and slowed down their searches to get a better sense of the impact on the market. According to Moniz, buyers who were further along in their home search recognized this as an opportunity to regain some negotiating power in these new market conditions where there were fewer buyers and less competition.

Here’s a snapshot of how median condo apartment prices changed in Toronto’s 35 neighbourhoods between February and April 2020, including a list of the neighbourhoods with the largest declines. Note: the percentage change in median price is only calculated for neighbourhoods with at least 10 condo apartment sales.

COVID-19 and Toronto condo prices, April vs. Feb 2020

Toronto Neighbourhoods with the Largest Declines in Median Condo Apartment Prices

Based on neighbourhoods with at least 10 condo apartment sales in April 2020.

1. C10 – Mount Pleasant East

  • Condo apt median price, Apr 2020: $617,500
  • Condo apt median price change from Feb 2020: -$131,500 (-18%)
  • Condo apt sales, Apr vs. Feb 2020: 16 vs. 37 (-57%)

2. C08 – Regent Park, St. James Town, Corktown

  • Condo apt median price, Apr 2020: $611,600
  • Condo apt median price change from Feb 2020: -$103,400 (-14%)
  • Condo apt sales, Apr vs. Feb 2020: 74 vs. 127 (-42%)

3. C14 – Newtonbrooke East, Willowdale East

  • Condo apt median price, Apr 2020: $597,950
  • Condo apt median price change from Feb 2020: -$85,050 (-12%)
  • Condo apt sales, Apr vs. Feb 2020: 28 vs. 70 (-60%)

4. C07 – Willowdale West, Lansing-Westgate

  • Condo apt median price, Apr 2020: $580,000
  • Condo apt median price change from Feb 2020: -$70,000 (-11%)
  • Condo apt sales, Apr vs. Feb 2020: 11 vs. 57 (-81%)

5. C01 – Downtown, Entertainment District, CityPlace, Trinity-Bellwoods

  • Condo apt median price, Apr 2020: $677,500
  • Condo apt median price change from Feb 2020: -$60,500 (-8%)
  • Condo apt sales, Apr vs. Feb 2020: 106 vs. 330 (-68%)

Methodology

Median condo apartment prices and sales for April 2020 and February 2020 were sourced from the Toronto Regional Real Estate Board.

The median price is the price at which half the homes in an area were sold at a higher price and half the homes were sold at a lower price.

The percentage change in median price is only calculated for areas with 10 or more condo apartment sales.

Source:

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The coronavirus is causing more missed mortgage payments – survey

The coronavirus is causing more missed mortgage payments – survey 

Up to 6% of Canadian home owners said they missed a mortgage payment recently as a consequence of the COVID-19 pandemic, according to a mid-April poll by Forum Research.

The survey also found that 76% will fail to pay another loan instalment before the crisis ends. Meanwhile, 46% were unable to secure mortgage deferrals and other similar forms of aid from their lenders, CMT reported.

Renters were hit especially hard, with 14% saying that they missed a payment recently.

Mobility restrictions and work stoppages since late March have severely affected households and landlords alike. The global outbreak has upended the national economy as a result, said Todd Skinner, TransUnion’s regional president for Canada, Latin America, and Caribbean.

“Whether it’s their health, financial well-being or changes in day-to-day living, the lives of millions of people in Canada and abroad have been dramatically changed,” Skinner said.

Data from TransUnion indicated that 57% of Canadians saw their incomes fall over the past few weeks. Another 10% are bracing themselves for further declines in the near future, with the possible losses pegged at an average of $935.

The most acute effects were seen among millennials and Gen Z-ers, TransUnion said. Approximately 78% and 74%, respectively, of these cohorts expressed fears about not being able to fulfil their monthly bills.

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Is the U.S. Hurtling Toward Another Housing Crash?

All of us have a mind-boggling range of challenges to deal with in these stressful and uncharted times of COVID-19. But for many home owners, sellers, and buyers, one concern rises to the top: Are we heading straight into another housing crash?

Little is assured these days, and our current situation is without precedent. But most housing experts believe the wave of across-the-board home-price slashing and desperate sell-offs that characterized the aftermath of the Great Recession are far less likely to materialize this time around.

Why will things be different? Because bad mortgages, rampant home flipping and speculation, and overbuilding all contributed to the last financial meltdown. This time around, the much-stronger housing market isn’t the driver of the crisis—it’s one of COVID-19’s many victims.

That could provide something of a cushion for real estate to prevent another repeat of the late aughts.

“There’s no way we get through this unscathed. But I don’t think the world will fall apart in the housing market the way it did in the last recession,” says realtor.com®’s chief economist, Danielle Hale. “We won’t see prices driven down out of necessity because people were forced to sell like before.”

In fact, the fundamentals of the housing market couldn’t be more different from the economic meltdown of 2007–09. In the lead-up to the Great Recession, it seemed like just about anyone could get a mortgage—or two or three. Today, only buyers deemed less of a risk can score a loan. Credit scores need to be higher, debt-to-income ratios need to be lower, and lenders verify incomes much more carefully.

Additionally, in the mid- to late-aughts, there was a vast oversupply of homes. So when the market crashed, there simply weren’t enough qualified buyers to purchase them. And with all of the foreclosures going up for sale, a result of bad loans, home prices plummeted.

But today, there’s a severe housing shortage that’s keeping prices high.

The biggest wildcards in this current mess are just how long it takes to get the virus under control—and then how quickly the economy takes to bounce back. About 22 million people, or 13% of the U.S. workforce, filed for unemployment in a month’s time. Experts predict unemployment could rise to 15% or even 20% before the pain subsides.

Those financial struggles have made it increasingly difficult for folks to pay their rents and mortgages—let alone purchase starter homes or trade-up residences. Roughly 6% of mortgages were in forbearance as of April 12, according to the most recent data released from the Mortgage Bankers Association.

This has sparked fears of another foreclosure crisis—one of the hallmarks of the Great Recession and its aftermath.

“We’re [not going to] get through this recession without any challenges for the housing market,” says Hale.

Will there be another housing fire sale? Probably not

Deep price cuts are the dream of many cash-strapped buyers—and dread of home sellers. They may not happen this time around, but a slowdown in the price hikes of the past decade are likely, most housing experts say. Home prices may dip—but just slightly, says Hale. (The median home price was $320,000 in March, according to the most recent realtor.com data.)

Prices are driven by the rules of supply and demand. On the supply side there is a record-low inventory of homes on the market, as sellers have been steadily yanking them off. Many don’t want potentially infected strangers walking through their homes and want to wait for the economy to improve so they can fetch top dollar for their properties. Others don’t want their homes to linger on the market unsold during a time when fewer transactions are taking place.

Still, demand for new homes hasn’t evaporated. There are simply too many would-be buyers out there: millennials eager to put down roots and start families, folks who lost their homes during the last recession and want to buy another property, and boomers looking to downsize.

“People need a place to live, and at some point we’re going to get past the virus,” says Robert Dietz, chief economist of the National Association of Home Builders.

And while many potential buyers will grapple with job losses or the prospect of them, others will be lured in by the prospect of superlow mortgage interest rates. Rates were just 3.31% for 30-year fixed-rate loans as of the week ending April 16, according to Freddie Mac.

“I don’t think we’ll see significant price cuts,” says Dietz. “There’s a lot of young people who want to attain homeownership.”

There will likely be a “sharp decline” in home sales until the threat of the virus and its economic toll have waned, says Lawrence Yun, chief economist of the National Association of Realtors®. But he anticipates sales will pick right back up as soon as things return to some semblance of normalcy. That will also keep prices high.

The luxury market could take the biggest blows, however.

Even in the best of times, these ultraexpensive homes can be harder to unload. But it will likely be harder to find buyers willing to pay top dollar with the economy and stock market in shambles. Wealthier buyers often have more invested in financial markets, which are being buffeted by wild fluctuations.

“The higher-priced homes are the ones that are being withdrawn [from the market] more often,” says Frank Nothaft, chief economist of the real estate data firm CoreLogic. “The lower-priced homes continue to be in really strong demand.”

But not everyone has such confidence that home prices will remain strong.

Ken Johnson, a real estate economist at Florida Atlantic University in Boca Raton, FL, expects that prices will fall much more along the lines of what many bargain-hunting buyers have been hoping to see.

If the economy reopens quickly, prices may decrease only by 5% to 10% nationally, says Johnson. They could be more or less depending on the individual market. But if the crisis and stay-at-home orders go on for another 60 to 90 days, he anticipates prices will plummet up to 50% as there won’t be many folks shopping for homes.

“I expect sales to dry up. I expect listings to dry up. I expect showings to dry up,” says Johnson. “I hope for the best and fear the worst.”

We’ve underbuilt rather than overbuilt in the run-up to this crisis

The glut of new construction was a calling card of the Great Recession. Newly built homes and communities sat vacant, or mostly empty, after the crash. Cities and suburbs were pocked with stalled construction sites. There were too many homes for too few buyers.

But things are quite different now.  Last year, builders put up just under 900,000 single-family homes, shy of the nearly 1.1 million homes considered necessary to alleviate the housing shortage and accommodate the growing population.

“We entered this [new] recession underbuilt rather than overbuilt,” says NAHB’s Dietz.

But a reduced demand from buyers will likely translate to fewer homes being erected in the near future. And the financial crisis is already making it more difficult for builders to secure the financing needed to put up new homes and developments.

Housing starts, construction that’s begun but not completed, were down 22.3% from February to March, according to the seasonally adjusted numbers in the most recent U.S. Census Bureau and the U.S. Department of Housing and Urban Development report. Traditionally, this is a time when construction generally picks up alongside the warmer weather heading into the busy spring and summer season.

“Building has been far below average for 10 consecutive years, which is the reason why we’ve faced housing shortages,” says NAR’s Yun. “Today during the pandemic, there are even fewer listings.”

Bad mortgages are largely a thing of the past

One of the biggest culprits of the last economic downturn were riskier subprime mortgages and “liar loans.” Since the housing bubble popped, these loans have largely ceased to exist.

Subprime loans were doled out to less qualified and often uninformed buyers, typically lower-income minorities with lower credit scores. After a set period of time, the interest rates on these loans ballooned higher—well out of reach of the borrowers. They defaulted on their mortgages, which set off the housing bust resulting in scores of foreclosures and short sales.

Liar loans were those given to folks whose lenders didn’t verify their income. That slipshod practice has largely vanished.

“The mortgages made today have much lower risk. Lenders have tightened up their standards for making loans,” says CoreLogic’s Nothaft. “They verify income, they verify employment. Subprime lending and liar loans are gone from the market.”

Of course, it’s still likely to be difficult for even the most qualified homeowners to make their mortgage payments if they’ve lost their jobs or a portion of income to the coronavirus. So the federal government is stepping in.

Mortgage forbearance, as well as loan modifications in many cases, are being offered on government-backed mortgages for up to 12 months for those affected by the coronavirus. Many lenders are offering similar assistance to those who don’t have a Fannie Mae or Freddie Mac loan.

“The mortgage forbearance is going to prevent foreclosures,” says Yun.

But that doesn’t mean there won’t be some down the line.

“We will probably see some delinquencies rise,” says realtor.com’s Hale. “And once the moratoriums are lifted, some people are going to struggle to pay their mortgages.”

In addition, investors aren’t running rampant like they were in the aughts. Instead of buying properties to hold them and jack up the prices, they’ve been investing in and upgrading the properties they’re buying. And they’ve had a tougher time of it as the number of foreclosures, short sales, and other cheap and auctioned-off homes have become harder to find as the economy had rebounded.

What does the future of the housing market look like?

How the housing market will fare over the coming months and years is still a mystery, since no one knows just how long this public health pandemic will last and how long the economy will take to rebound. Real estate is likely to suffer until the economy improves and folks feel more confident in buying and selling homes again.

The stimulus bill and extra $600 a week in additional unemployment funding are likely to buoy the economy and “relieve some of the anxiety,” says Yun.

Even in a worst-case scenario, the majority of Americans are still employed. And mortgage interest rates are at record lows. They’re hovering around 3%, unlike the more than 6% they were at at the beginning of the Great Recession.

“This [crisis] is short-term,” says Yun. “We will come out of this.”

Even those with less rosy views believe that a strong rebound for housing may be in the cards.

“If we go for an extended period where we’re under stay-at-home orders, then we can expect a crash on par with the previous one,” says real estate economist Johnson. “But the comeback could be quicker.”

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The next financial crisis: A collapse of the mortgage system

Federal Reserve

The U.S. mortgage finance system could collapse if the Federal Reserve doesn’t step in with emergency loans to offset a coming wave of missed payments from borrowers crippled by the coronavirus pandemic.

Congress did not include relief for the mortgage industry in its $2 trillion rescue package — even as lawmakers required mortgage companies to allow homeowners up to a year’s delay in making payments on federally backed loans.

When individuals stop making payments on their home mortgages, the companies that handle the loans and process those payments, so-called mortgage servicers, are still on the hook: They’re legally obligated to keep sending money to insurers and investors in mortgage-backed securities, the giant bundles of home loans that are packaged and sold on the securities markets.

Now industry executives and regulators are worried that Congress’s generosity toward homeowners could wipe out those companies, causing investors not to get paid and potentially bankrupting the entire mortgage finance system — a domino effect that would make it much harder for borrowers to access credit to buy homes.

Housing lobbyists sounded the alarm to Senate staff about the potential danger, but the sheer scale of the rescue bill and the focus on communicating the industry’s other big concerns — such as the details of how long mortgages would be suspended — meant their warnings were unheeded in the rush to finish the massive legislation.

Yet while the final bill allocates $454 billion for the Treasury Department to support the Federal Reserve’s emergency lending programs, including for large corporations, there is no overt requirement for lending to mortgage companies, despite a weeklong lobbying push by the industry.

“There was a strong desire on the part of housing lobbyists to have the bill explicitly direct the Fed and Treasury to use some of that money to finance servicing advances,” said Michael Bright, CEO of the Structured Finance Association, which represents 370 financial institutions in the bond market.

Now industry lobbyists are turning their efforts to Trump administration officials.

“We have been in constant contact with many parts of the administration to ensure that they understand the urgency of this liquidity facility being set up,” said Bob Broeksmit, president and CEO of the Mortgage Bankers Association, a trade group.

Concerns about liquidity in the mortgage finance system have been building for years, as the companies that service mortgage loans are increasingly nonbanks — which don’t have banks’ access to Fed loans or their strict capital requirements and deposits to fall back on. Banks, which once dominated the business, have steadily pulled back since the 2008 housing market meltdown.

Usually, a mortgage company can withstand a few borrowers failing to make payments, but the breadth of the coronavirus pandemic has sparked industry estimates of between 25 and 50 percent of borrowers being unable to pay.

That “could threaten the ability of a mortgage servicer, particularly nonbank servicers, to remain a going concern,” the Conference of State Bank Supervisors warned Fed Chair Jerome Powell and Mnuchin in a March 25 letter.

State regulators wanted to weigh in because “our members are the primary regulators of the nonbank servicers,” said Margaret Liu, CSBS senior vice president and deputy general counsel.

If 25 percent of borrowers fail to make their mortgage payments, the industry would need $40 billion to cover three months of payments, according to Jay Bray, CEO of the servicing company Mr. Cooper. Depending on how long the situation lasts, Broeksmit said demands on servicers “could exceed $75 billion and could climb well above $100 billion.”

And if mortgage companies fail across the board, “the system breaks down,” said Andrew Jakabovics, vice president for policy development at Enterprise Community Partners, an affordable housing nonprofit.

“The kinds of relief we did during the foreclosure crisis — all of that had to do with the fact that we wanted to ensure that investors from across the world would continue to treat U.S. mortgage-backed securities as an incredibly safe investment,” Jakabovics said. “That would have very serious ramifications for the availability and price of mortgage credit.”

Bright, who formerly managed the $2 trillion portfolio of government-run mortgage financier Ginnie Mae, said he believes the Fed will come through with an emergency lending program for the industry.

“Even though that language wasn’t included [in the Senate bill], I do think it’s likely that this could be part of [the Fed’s Term Asset-Backed Loan Facility Program] in the end,” he said.

Federal Housing Finance Agency Director Mark Calabria — who regulates Fannie Mae and Freddie Mac, the two government-sponsored mortgage giants that prop up about half of the nation’s $11 trillion market — said this week in a Bloomberg TV interview that he was confident that large banks would continue to extend credit to mortgage servicers for the time being.

Stillhe said, “if we get to a situation where this goes longer than two months, absolutely there’s going to need to be a bigger solution.”

Broeksmit said some mortgage companies won’t make it that long, depending on the share of loans in their portfolios located in areas of the country where the virus has hit particularly hard.

“Some servicers will need the liquidity sooner than others, so we’re hoping that the facility will be set up immediately,” Broeksmit said.

Liu also said the credit lines from banks wouldn’t be enough to keep the system afloat.

“The mortgage market is one of the many multiple complexly interconnected pieces of our financial system, so those assurances are really important, but I think the role of the government in being a reliable and available source of credit for the mortgage market and mortgage servicers during a crisis is even more important,” she said.

In the meantime, the industry is crossing its fingers that the individual cash relief in the Senate bill will lead to fewer people needing to request forbearance on their payments.

“We’re hoping that the take-up rate won’t be too high and that the duration is not extended, but we have to prepare for both,” Broeksmit said.

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Deferred Mortgage Payments: A Credit Score Gamble?

Last week, the President of the Canadian Bankers Association announced that all six major banks would offer deferral payments on their mortgages and other credit products. Just like many public announcements over the last couple of months, many were left with more questions than answers.

One question that still has yet to be answered is, how deferred mortgage payments might affect your credit score? Equifax recently announced, “In the event that a [lender] makes a credit relief or payment deferral program available to its consumers to opt out of making monthly payments during the pandemic, Equifax’s expectation is that the [lender] would take actions on its system to ensure that it does not report any derogatory/missed payment information to the credit bureaus that is misaligned with the program it has implemented.”

millennials in debtScott Hannah, B.C.-based CEO of the non-profit Credit Counselling Society, was quoted in the Globe and Mail as saying, “I don’t see creditors punishing consumers for being as responsible as they can under circumstances beyond their control.”

Many financial professionals have been posting messages online and sending emails to reassure the public and their clients that a deferral payment will not affect their credit score.

I agree that Canadians should not have their credit affected by deferred payments, although I predict a much different reality for consumers starting April 1. Lenders update the payment history of each credit account electronically to Equifax and TransUnion.

In order for these deferred payments to not be reported to the credit reporting agencies as late, as Equifax alluded too, the lender would need to “take actions on its system to ensure that it does not report any derogatory/missed payment information to the credit bureaus.”

Lenders big and small have been bombarded with phone calls that have put pressure on their personal and electronic systems. Are you willing to gamble your credit score and assume that every lender has updated its reporting system?

Millions of Canadians have found errors in their credit reports. For over a decade, I personally have received thousands of calls from consumers stating that a customer service rep told them one thing, only to find out that it was reported incorrect on their credit report.

In reality, it doesn’t matter what the customer service rep, the government, or what the industry experts tell you. If the lender’s internal system sees it as a late payment, that is how it will report. No one will know for sure if all these deferred payments will report correctly or not.

might a mortgage payment deferral affect your credit scoreWe can all agree that the amount of deferred payments over the coming months is unprecedented. For this reason, I expect an increase in the amount of mortgage, loan and credit card payments reporting incorrectly on Canadian credit reports.

Even with the chance that a deferred payment will show up as a late payment, many Canadians will still need to take advantage of such programs being offered by banks.

For those that don’t really need to defer their payments this month, I suggest you wait until it is necessary. A deferred payment is not free money. You will have to pay the lender back with interest.

Any delay is just going to increase the amount on future required payments. My hope is that, going forward, underwriters or those reviewing credit applications will be lenient on any late payments during the COVID-19 pandemic.

However, I am positive that the credit scoring system will not show much sympathy. On average, one late payment will drop your score 20 to 40 points.

A low credit score, regardless if it was caused by an error or not, will make it much more difficult to qualify for best-rate financing, renting, some employment opportunities and discounted insurance premiums. This is not to say your life will be over, but it will take at least 6 to 12 months for your credit to recover.

For those who have no choice but to request a deferred payment, here are some ways to protect your credit.

  1. Request electronic or written confirmation that the payment is being deferred.
  2. Ask for the employee number or service rep’s name that confirmed your deferred payment.
  3. Write down the day and time you talked to the customer service rep.
  4. Place all supporting documentation and record keeping in a safe place where you will actually remember where to find it.
  5. Track both your Equifax and TransUnion credit reports for at least the next few months
  6. If you do see an error, reach out to your lender and the credit reporting agencies to open up a dispute.

mortgage payment relief announcedI’m sure the thought of making another call might be overwhelming for the hundreds of thousands of Canadians who have already spent hours on the phone to request the deferred payment.

For anyone who has something better to do than to spend hours listening to the annoying automated voice and elevator music, I suggest you start with suggestion number three.

I don’t want to create panic or be like Chicken Little saying the sky is falling. The point I sincerely want to get across is that reporting errors are common and always have been.

It is unrealistic to think there won’t be any errors as a result of the increased demand for deferred payments. Regardless of what happens, now is the perfect time to monitor and learn how to better protect your credit.

Source: Mortgage Broker New
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Consumers could face hit to credit scores, jump in payments from mortgage deferrals

‘You’re going to get hiccups in this process; it’s never happened before,’ expert says

Details of RBC’s mortgage deferral program, obtained by CBC News, reveal the option will be available to all mortgage holders but in a way that appears to ensure the bank will not lose money in the short term and may even come out ahead. (David Donnelly/CBC)

Canadians couldn’t get answers on mortgage deferrals at Canada’s biggest bank because information and eligibility requirements kept changing almost by the hour, a source who works for RBC tells CBC News.

When the first details were eventually given out to frontline employees at RBC’s Mississauga call centre, they revealed deferrals would be available to all mortgage holders, but in a way that appears to ensure the bank would not lose money in the short term and may even come out ahead.

“Deferrals actually meant that interest accrued from each deferred payment was being added back into the principal balance of the mortgage,” said the source.

“Technically clients would then be [charged] interest on top of interest for those payments [that were] deferred,” they said.

In effect, it’s as though the bank is loaning you the amount that you would have paid in interest during the deferral period and then charging you interest on that loan as well.

“They’re going to make more money because they’ve just loaned you more,” said Peter Gorham, an actuary with JDM Actuarial Expert Services.

“I don’t know that I want to say it’s profiting. I would say it’s not costing them a penny.” he said.

“People are increasing their debt load. If you are not desperate for the financial relief, don’t take it,” Gorham said, adding RBC and other banks are taking on increased risk from deferrals, a risk that could grow significantly if the COVID-19 crisis runs from months into years.

When it comes to repaying the increased debt load from a deferral, there may be other complications for mortgage holders.

“This also means an increase in clients’ payments at their next renewal period due to the increase in mortgage balance,” the source at RBC said.

RBC frontline employees at one of the Bank’s call centres were overwhelmed with calls and had no information to provide customers, a source tells CBC News. (Michael Wilson/CBC)

If the client doesn’t want a bigger payment, they can extend the amortization period, the source added. But that typically requires a full credit application which may affect their credit score.

The other option is making extra payments after the deferral period ends to bring the mortgage back down as quickly as possible to its original amount.

Two other big banks have mortgage deferral polices similar to RBC’s.

In an updated set of deferral FAQs posted on its website, Scotiabank too says interest will continue to accrue.

“You will pay more interest over the life of your mortgage, but a deferral will also help you with your short-term cash flow,” the banks states on its website. Scotiabank is also offering deferrals on personal and auto loans, lines of credit, and credit cards.

On its website, BMO also states interest will continue to accrue on mortgages.

The Canadian Bankers Association issued a statement late Sunday night saying, “Customers should understand that [a deferral] is not mortgage forgiveness. Mortgage deferral means that payments are skipped for a defined period of time, during which interest which would otherwise be part of the deferred payments is added to the outstanding balance of the mortgage.”

Credit card deferrals

RBC is also offering six-month deferrals on credit card payments, according to an email obtained by CBC News. But once that period ends the minimum payment would include all accrued interest from the deferred payments. Meaning the minimum payment could jump significantly.

A section of an email obtained by CBC News which was sent to RBC employees with instructions of how to respond to customers seeking a deferral on credit card payments. The email was sent on March 18 at 1:16pm EDT. (Obtained by CBC News)

Most minimum payments on credit cards are interest plus $10. But Quebec passed a law in 2017 changing minimum payment requirements in an effort to counter rising household debt by making people pay off more than just accumulated interest.

Minimum payment on credit cards in Quebec is 2.5 per cent of the balance owing and will eventually rise to five per cent.

Confusion

Last week, all of Canada’s big banks agreed to a request from Federal Finance Minister Bill Morneau to defer mortgage payments for up to six months for people suffering financially due to COVID-19.

The banks issued a joint statement saying they “have made a commitment to work with personal and small business banking customers on a case-by-case basis to provide flexible solutions to help them manage through challenges such as pay disruption due to COVID-19; child-care disruption due to school closures; or those facing illness from COVID-19.”

 

But initially many Canadians looking for deferrals said, after waiting for hours on hold, they were told they didn’t qualify. One BMO customer — who is actually a former BMO branch manager — said he was told he needed a full credit check and credit application and even then the bank would not tell him their criteria for approval.

It turns out the person he spoke with may not have known the criteria themselves at that point.

By midday Wednesday, workers at RBC’s Mississauga call centre still hadn’t been informed.

WATCH | Consumer frustrated at lack of information about mortgage deferrals

Watch

Confusion surrounds COVID-19 mortgage deferrals

Many Canadians looking for relief from mortgage payments during the COVID-19 pandemic are met with a confusing process. 2:00

“Anyone calling in to RBC between 8 a.m. and noon was directed to call back ‘later’ as we had been given no direction or timeframe as to when relief procedures would be implemented, other than ‘soon,'” a source told CBC News.

On March 13, the finance minister said that he had already spoken with the CEOs of the big banks. The banks issued their statement promising to work with Canadians on a case by case basis on the evening of March 17, around 7 p.m. ET.

Canadians began calling their banks the morning of March 18.

But, as late as March 20, Canadians were still being told no information was available.

“I was on hold for 11 hours [March 19] and then five hours [March 20],” said Lindsay Gillespie, who has a mortgage and a line of credit with FirstLine Mortgages, a division of CIBC.

Canada’s Minister of Finance Bill Morneau at a news conference in Ottawa, Ontario, Canada March 13, the day he told reporters he had spoken with the CEOs of Canada’s big banks. (Blair Gable/Reuters)

“I finally got through and was told there’s nothing that can be done right now, they don’t have anything set up. I was told to call back another time,” she said.

Also as late as March 20, some RBC customers were still being told they didn’t qualify for a six-month deferral.

“We called RBC and were told that deferrals are being assessed on a case-by-case basis and that our eligibility for a deferral is limited to six weeks,” said Jeff Hecker, a principal at a Toronto Marketing research firm.

“No explanation was provided,” he said.

In a statement issued Sunday evening, RBC said “the developments around COVID-19 are moving quickly and we understand that clients have questions. Our frontline employees are doing incredible work to respond to clients quickly and effectively, and we are staying close to them to ensure they have the information they need to support clients.”

Hiccups

Some in the mortgage industry say the confusion over deferrals is understandable, given the unprecedented and rapidly changing nature of the COVID-19 crisis.

“You’re going to get hiccups in this process; it’s never happened before,” said Robert McLister, mortgage expert and founder of RateSpy.com.

 

“It’s case-by-case, it’s completely at the lender’s discretion as far as I understand it. Even though the big banks have agreed with the federal government to offer these programs, there’s no mandatory federal guidelines that I’m aware of,” he said.

McLister says it’s possible some people are being declined mortgage deferrals because they can’t prove their income has dropped.

“But generally speaking if you are in legitimate need and you’re about to default on a mortgage payment the lender is going to work with you,” he said.

Source: CBC.ca – Aaron Saltzman – March 22, 2020

Senior Reporter, Consumer Affairs

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Frustrated Canadians looking for mortgage deferrals from big banks facing delays, denials

Mortgage holders say the process, criteria are unclear

With some people out of work during the COVID-19 outbreak, many are waiting for clear answers from their banks to see if they qualify for mortgage payment deferrals. (CBC)

Some Canadians looking to defer mortgage payments due to COVID-19 say they are facing delays, confusion and outright denials from the country’s big banks.

“My wife called the 1-800 number for Bank of Montreal, talked to an adviser on the line to see what we are eligible for,” said Evan McFatridge of Dartmouth, N.S., whose family is down to a single income because his wife has been laid off from her job at a restaurant.

“She was told that our mortgage was too new to qualify for a deferral,” he said.

As part of the government’s pledge to help Canadians suffering financially due to COVID-19, Finance Minister Bill Morneau asked the heads of Canada’s big banks to allow people to defer mortgage payments for up to six months.

The banks responded by issuing a statement saying they “have made a commitment to work with personal and small business banking customers on a case-by-case basis to provide flexible solutions to help them manage through challenges such as pay disruption due to COVID-19; child-care disruption due to school closures; or those facing illness from COVID-19.”

Evan and Janna McFatridge of Dartmouth, N.S., were told their mortgage was too new to qualify for a deferral. (Evan McFatridge)

But some Canadians looking for relief from mortgage payments say they’re encountering a confusing, opaque and seemingly arbitrary process that is only adding to the stress of illness, isolation and lost income.

“I called in yesterday, spent two hours on the phone, and they required a full credit check and credit application in order to even see if I was qualified [for a deferral] and then didn’t even give me a time frame,” said one former BMO branch manager.

CBC has agreed to keep his name confidential because of his concerns that his comments could jeopardize his current employment situation.

“So, they had to speak to both me and my wife over the phone, get all our income, our jobs, our assets, our liabilities, said they had to send it to the credit department for review and that someone would contact us,” he said.

“They had no criteria for what they’re looking for. If they said to me, ‘One of you has to be laid off. One of you has to be in isolation. You have to sign a disclosure statement.’ Fine.”

The man’s wife is on reduced hours at home because she has to care for their kids, whose schools have been shut. Facing the loss of a large chunk of their family income, he said ,he wanted to get ahead of the problem and defer two or three months of payments.

When a BMO mortgage holder — who is actually a former BMO manager — called BMO to see if he could get a mortgage payment deferral, he was told it required a full credit check and credit application in order to even see if he qualified. (Jonathan Hayward/The Canadian Press)

“Even if I had to pay the interest payments during that time and they deferred the principal amount so the balance stayed the same, so be it, that’s fine,” he said.

“I’ve been through things in Alberta like the Fort McMurray fires where basically [all that was required then] was a call in to defer payments.”

Questions for banks unanswered

CBC News asked each of the big five banks for more information on the criteria for the case-by-case-based decisions on mortgage and credit deferrals.

We asked:

  • Who would qualify?
  • Is there an application process?
  • Does the entire household have to be off work?
  • Will they require documentation?

None of the banks answered any of those questions.

TD, CIBC and Scotiabank all responded by repeating their commitment to work with personal and small-business banking customers on a case-by-case basis. Each encouraged customers to contact their call centres directly or visit their websites.

BMO and RBC did not respond to emails from CBC News.

‘My family will run out of money’

RBC customer Elsie Mamaradlo of Edmonton said she was also denied a deferral because her mortgage was too new.

“I got so frustrated and at the same time worried,” said Mamaradlo, who lost her job when the public recreation centre she works at was shut down due to coronavirus concerns.

Mamaradlo said that without the mortgage deferral, she faces a grim future.

“My family will run out of money for food and essentials,” she said.

Mamaradlo’s mortgage is insured with the Canada Mortgage and Housing Corporation (CMHC). The government is purchasing up to $50 billion of insured mortgage pools through the CMHC, which says that stable funding for the banks and mortgage lenders is meant to ensure continued lending to Canadian consumers.

Minister of Finance Bill Morneau speaks during a press conference on economic support for Canadians impacted by COVID-19, at West Block on Parliament Hill in Ottawa, on Wednesday. The federal government is rolling out $27 billion in new spending and $55 billion in credit to help families and businesses. (Justin Tang/The Canadian Press)

In a tweet, CMHC said it “will support lenders in allowing deferral of mortgage payments for up to six months for those impacted [by the coronavirus].”

Alyson Whittle of Cochrane, Alta., said her bank, B2B, which is a subsidiary of Laurentian Bank, told her she could defer her next mortgage payment but then the following payment would be double.

“I was super frustrated,” she said.

Whittle, who works in sales for a home builder, and her husband, a utilities driller, are both out of work.

“My mom came to visit us and she had just come back from Las Vegas and developed a respiratory illness,” she said.

After that visit, Whittle says both she and her husband started feeling similar symptoms. They’re now both off work in isolation but haven’t been tested yet.

Laurentian Financial Group’s assistant vice-president of communications, Hélène Soulard, said it’s possible Whittle called before they were able to inform their call centre representatives about the deferral options.

“Rest assured we are committed to helping our customers who are facing hardships if they are not able to work due to illness, job loss or other reasons related to the COVID-19 crisis,” she said.

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New York orders 90-day grace period on mortgage payments in response to COVID-19

The state of New York will allow some homeowners to skip their mortgage payments for three months in response to the spread of COVID-19.

On Thursday, the New York Department of Financial Services (DFS) sent a letter to mortgage servicers directing them to provide several relief options in response to the outbreak, including suspending mortgage payments for up to 90 days.

“As the outbreak continues to spread, a growing number of companies have started to warn markets about the adverse impact of COVID-19 on their financial conditions,” DFS said in the letter. “Companies in certain sectors are already laying off employees and taking other drastic actions in response to the crisis which is likely to cause more financial stress on local communities and consumers.”

As a result, DFS said it was issuing guidance to mortgage servicers to “do their part” to alleviate the impact of the outbreak on borrowers who can demonstrate that they cannot make timely payments. DFS has instructed mortgage servicers to support New York borrowers by:

  • Forbearing mortgage payments for 90 days from their due dates
  • Not reporting late payments to credit-rating agencies for 90 days
  • Offering borrowers an additional 90-day grace period to complete trial loan modifications, and ensuring that late payments during the COVID-19 outbreak do not affect borrowers’ ability to obtain permanent modifications
  • Waiving late fees and any online-payment fees for 90 days
  • Postponing foreclosures and evictions for 90 days
  • Ensuring that borrowers don’t experience a disruption of service in the event the servicer closes its office, including making available other ways to manage their accounts and make account inquiries
  • Proactively reaching out to borrowers through app announcements, text message, email or other means to explain the assistance being offered to borrowers

“The Department believes that reasonable and prudent efforts by your institutions during this outbreak to assist mortgagors under these unusual and extreme circumstances are consistent with safe and sound banking practices as well as in the public interest and not subject to examiner criticism,” DFS said in the letter.

Earlier this week, the Department of Housing and Urban Development and the Federal Housing Finance Agency issued a 60-day moratorium on foreclosures and evictions in response to the COVID-19 outbreak.

Source: Mortgage Professional America – by Ryan Smith20 Mar 2020

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Mortgage Fraud In Canada: What Millennials Should Know

When striving to achieve a big goal, like buying a home, it’s not uncommon to submit to a temptation to cut corners, find loopholes, and even tell white lies. If we think such dubious tactics will help our chances, we will rationalize our behaviour as a victimless crime or even an act of admirable perseverance in an unforgiving financial system and hostile real estate market.

Equifax, the global data, analytics and technology company, released a survey on mortgage fraud and the results were startling, particularly among millennials. Nearly 23% of millennials “believe it’s acceptable to inflate your income when applying for a mortgage,” according to the survey. That’s a shocking admission of dishonesty and almost double the percentage of the general population when asked the same question (12%).

So why are young people so inclined to embellish their financial qualifications as a means to attaining a mortgage? Perhaps it has to do with Canada’s increasing impenetrable real estate markets in big cities like Toronto and Vancouver, where getting your foot in the door can take years if not decades. By that view, it’s hard not to be sympathetic with those looking for an edge.

But mortgage fraud – defined as a deliberate misrepresentation of information to obtain mortgage financing that would not have been granted if the truth had been known – is a dangerous game. It can lead to overextended credit situations, causing you stress and the potential to default on payments, which will impact your credit score.

As Julie Kuzmic, Director of Consumer Advocacy at Equifax Canada, says, “What some may see as a little white lie during the mortgage application process could have legal consequences or become a very hard lesson for people to learn if they cannot keep up with their mortgage payments.”

Is mortgage fraud a victimless crime?

With 23% of millennials, and 16% of all respondents, saying mortgage fraud is a victimless crime, the Equifax survey tells us that this technically illegal act is being viewed in a similar light to jaywalking or highjacking your neighbour’s Wi-Fi signal. Nobody is getting hurt right? Wrong.

The reality is the victim will usually be the one committing the fraud. Inflating your income or withholding important financial information might get you a bigger mortgage, but you’re going to be on the hook for repayments that might be beyond your means. This could cause daily stress on you and your family. Not to mention impacting your overall financial health for a long time.

Don’t be persuaded by shady lenders or brokers who want your business and don’t care about your long-term future. If they encourage you to be less than truthful in a mortgage application, walk away or report them to your province’s financial regulatory body. Conversely, if a broker or lender suspects you of fraud, you could be reported and have your credit tarnished, affecting future applications. You don’t want that Scarlett letter, so to speak.

How to avoid mortgage fraud – start with your credit score

The Equifax survey also revealed a high number of mortgage applicants are not checking their credit scores going into the application process. That’s a mistake to think that claiming an inflated income is enough to secure a mortgage; you usually need a decent credit rating too. The survey had 60% of respondents saying they did not check their credit scores before approaching a lender.

Doing due diligence on your credit score will give you insight into how successful your mortgage application will be. Ideally, a lender or broker wants to see good credit behaviour, which is represented by a number between 300-900. According to Equifax, a credit score rated above 660 is considered good by most lenders. You can check your Equifax credit score for FREE using Borrowell.

Credit Score Range Canada

Build your credit profile

As discussed, it usually takes more than the required income level to successfully obtain a mortgage – you also will usually need a history of good credit behaviour. That may not be realistic for everyone, but there are always ways to rehab your credit rating. In fact, Fresh Start Finance has written a guide to

Basically, you start the process by obtaining your credit report and checking it for errors. You never know what mistakes were made in the bureaucratic world of credit ratings. Some other quick wins include increasing the credit limit on a credit card or line of credit. That might seem counterintuitive, but it improves what’s called credit utilization, meaning the more credit you are not using, the better it looks. Try to keep balances at about 30% of your total credit limit.

Another tactic is to keep credit cards open even if you’re aren’t using them (putting credit cards in the freezer, for example, is good way to put them out of use). Credit history is a key factor that affects your credit score – 15% to be exact.

Those are the quick and easy ways to improve your credit score. Now here’s the long hard road – pay down debt and don’t ever, ever miss bill payments. Punctuality is vital in building a solid credit profile. In fact, it accounts for a whopping 35% of your credit score.

Pro tip: Set up automatic payments where possible, so you’ll never forget to pay a bill again.

How is your credit score calculated?

Consider a side hustle to improve your mortgage chances

Instead of lying on mortgage applications and living like a criminal in the shadows of society consider pumping up your income the legit way. More and more young people are turning to side hustles to augment their incomes.

Although it is the primary reason, the advantage of a side hustle isn’t just added revenue. It also breaks up the monotony of your main source of income. If it’s something you’re passionate about, even better, because it can elevate your spirit to know your energy is being invested in something that matters to you. Plus, it will make you feel less “trapped” in your workaday life.

Can’t afford a home right now? Give it time.

Even if you’re not immediately ready to qualify for a mortgage, a broker will work with you and help you prepare for homeownership when the time is right. Just remember to be honest with your mortgage broker. A home could be the biggest purchase of your life – you don’t want it crashing down on you like a leaky roof.

 


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Millions of Americans still trapped in debt-logged homes ten years after crisis

EAST STROUDSBURG, Pa., 2018 (Reuters) – School bus driver Michael Payne was renting an apartment on the 30th floor of a New York City high-rise, where the landlord’s idea of fixing broken windows was to cover them with boards.

Click here to hear Payne’s story. 

So when Payne and his wife Gail saw ads in the tabloids for brand-new houses in the Pennsylvania mountains for under $200,000, they saw an escape. The middle-aged couple took out a mortgage on a $168,000, four-bedroom home in a gated community with swimming pools, tennis courts and a clubhouse.

“It was going for the American Dream,” Payne, now 61, said recently as he sat in his living room. “We felt rich.”

Today the powder-blue split-level is worth less than half of what they paid for it 12 years ago at the peak of the nation’s housing bubble.

Located about 80 miles northwest of New York City in Monroe County, Pennsylvania, their home resides in one of the sickest real estate markets in the United States, according to a Reuters analysis of data provided by a leading realty tracking firm. More than one-quarter of homeowners in Monroe County are deeply “underwater,” meaning they still owe more to their lenders than their houses are worth.

The world has moved on from the global financial crisis. Hard-hit areas such as Las Vegas and the Rust Belt cities of Pittsburgh and Cleveland have seen their fortunes improve.

But the Paynes and about 5.1 million other U.S. homeowners are still living with the fallout from the real estate bust that triggered the epic downturn.

As of June 30, nearly one in 10 American homes with mortgages were “seriously” underwater, according to Irvine, California-based ATTOM Data Solutions, meaning that their market values were at least 25 percent lower than the balance remaining on their mortgages.

It is an improvement from 2012, when average prices hit bottom and properties with severe negative equity topped out at 29 percent, or 12.8 million homes. Still, it is double the rate considered healthy by real estate analysts.

“These are the housing markets that the recovery forgot,” said Daren Blomquist, a senior vice president at ATTOM.

Lingering pain from the crash is deep. But it has fallen disproportionately on commuter towns and distant exurbs in the eastern half of the United States, a Reuters analysis of county real estate data shows. Among the hardest hit are bedroom communities in the Midwest, mid-Atlantic and Southeast regions, where income and job growth have been weaker than the national norm.

Reuters Graphic

Developments in outlying communities typically suffer in downturns. But a comeback has been harder this time around, analysts say, because the home-price run-ups were so extreme, and the economies of many of these Midwestern and Eastern metro areas have lagged those of more vibrant areas of the country.

A home is seen in the Penn Estates development where most of the homeowners are underwater on their mortgages in East Straudsburg, Pennsylvania, U.S., June 20, 2018. REUTERS/Mike Segar

“The markets that came roaring back are the coastal markets,” said Mark Zandi, chief economist at Moody’s Analytics. He said land restrictions and sales to international buyers have helped buoy demand in those areas. “In the middle of the country, you have more flat-lined economies. There’s no supply constraints. All of these things have weighed on prices.”

In addition to exurbs, military communities showed high concentrations of underwater homes, the Reuters analysis showed. Five of the Top 10 underwater counties are near military bases and boast large populations of active-duty soldiers and veterans.

Many of these families obtained financing through the U.S. Department of Veterans Affairs. The VA makes it easy for service members to qualify for mortgages, but goes to great lengths to prevent defaults. It is a big reason many military borrowers have held on to their negative-equity homes even as millions of civilians walked away.

A poor credit history can threaten a soldier’s security clearance. And those who default risk never getting another VA loan, said Jackie Haliburton, a Veterans Service Officer in Hoke County, North Carolina, home to part of the giant Fort Bragg military installation and one of the most underwater counties in the country.

“You will keep paying, no matter what, because you want to make sure you can hang on to that benefit,” Haliburton said.

These and other casualties of the real estate meltdown are easy to overlook as homes in much of the country are again fetching record prices.

 

But in Underwater America, homeowners face painful choices. To sell at current prices would mean accepting huge losses and laying out cash to pay off mortgage debt. Leasing these properties often won’t cover the owners’ monthly costs. Those who default will trash their credit scores for years to come.

DREAMS DEFERRED

Special education teacher Gail Payne noses her Toyota Rav 4 out of the driveway most workdays by 5 a.m. for the two-hour ride to her job in New York City’s Bronx borough.

“I hate the commute, I really, really do,” Payne said. “I’m tired.”

Now 66, she and husband Michael were counting on equity from the sale of their house to fund their retirement in Florida. For now, that remains a dream.

The Paynes’ gated community of Penn Estates, in East Stroudsburg, Pennsylvania, is among scores that sprang up in Monroe County during the housing boom.

Prices looked appealing to city dwellers suffering from urban sticker shock. But newcomers didn’t grasp how irrational things had become: At the peak, prices on some homes ballooned by more than 25 percent within months.

Slideshow (19 Images)

Today, homes that once fetched north of $300,000 now sell for as little as $72,000. But even at those prices, empty houses languish on the market. When the easy credit vanished, so did a huge pool of potential buyers.

Eight hundred miles to the west, in an unincorporated area of Boone County, Illinois, the Candlewick Lake Homeowners Association begins its monthly board meeting with the Pledge of Allegiance and a prayer.

Nearly 40 percent of the 9,800 homes with mortgages in this county about 80 miles northwest of Chicago are underwater, according to the ATTOM data. Some houses that went for $225,000 during the boom are now worth about $85,000, property records show.

By early 2010, unemployment topped 18 percent after a local auto assembly plant laid off hundreds of workers. At Candlewick Lake, so many people walked away from their homes that as many as a third of its houses were vacant, said Karl Johnson, chairman of the Boone County board of supervisors.

“It just got ugly, real ugly, and we are still battling to come back from it,” Johnson said.

While the local job market has recovered, signs of financial strain are still evident at Candlewick Lake.

The community’s roads are beat up. The entryway, meeting center and fence could all use a facelift, residents say. The lake has become a weed-choked “mess,” “a cesspool,” according to residents who spoke out at an association meeting earlier this year. Association manager Theresa Balk says a recent chemical treatment is helping.

 

“A gated community like this, with our rules and fees, it may be just less attractive now to the general public,” he said.

Source: Reuters.com – Reporting by Michelle Conlin and Robin Respaut; Editing by Marla Dickerson SEPTEMBER 14, 2018

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