Tag Archives: mortgage payment

Thinking about deferring your mortgage?

Payment due

News that Canadian financial institutions were offering some mortgage deferrals sent investors running to the banks in early April, asking for a stay on their payments as personal incomes and investment portfolios were being wiped out by the coronavirus pandemic. Those deferrals seem like a lifeline for investors facing a liquidity crisis, but one leading mortgage broker thinks the impacts of a deferral need to be considered closely.

Dalia Barsoum, president and principal broker at Streetwise Mortgages, says that investors should consider alternatives to mortgage deferrals. She explained that these deferrals aren’t gifts or grants, as they come with a cost, a likely increase to future payments, an impact on future financing availability and a wider implication for an investor’s credit. Barsoum says despite the pain investors are feeling, they shouldn’t just take mortgage deferment as their first line of support.

“We look at mortgage deferrals as a last resort tool for investors to utilize to help ease financial destress,” Barsoum says.

Barsoum outlined what some of those sources of financial distress are. The primary pressure on real estate investors stems from unemployment, both the loss of their own job or, if they own a rental property, the loss of a tenant’s income. The temporary collapse of Airbnb, too, has resulted in an increase to rental stock in some Canadian markets, putting downward pressure on rents. Further, softening property valuations in some markets, have made it more challenging to extract equity when it is needed most. Even committed deals, not yet closed, might be torpedoed by a borrower’s inability to get a mortgage. The financial pressures on a real estate investor are widespread, perhaps enough to make mortgage deferral seem like the right option. Barsoum says investors need to look at the long-term implications of that short-term fix.

Her first concern is cost, explaining that interest will accrue on the deferred amount for the duration of the period. Each lender, too, applies its only methodology of repayment for the accrued amount after the deferral period. Investors need to know what that post-deferral arrangement will look like before they sign off on anything.

That methodology could also result in an increase to future monthly payments. That increase will vary based on the mortgage size, interest, and duration of the deferral. An increase in the debt load will, as well, likely impact an investor’s ability to qualify for future financing, especially if their new  payments are higher across several properties within the portfolio.

Though a deferral is different from a default, and should not have any negative impact on credit, that requires an adjustment to lenders’ systems allowing them to report deferrals in the right way. Barsoum thinks that the sheer volume of deferral requests has increased the risk of reporting errors.

“If you are considering a deferral and can wait on it another month, then please do so to allow time for the first round of deferrals to go through the systems and see how that turns out,” Barsoum says. “Further, if you have chosen to defer by now, then please monitor your credit report for the next 3 months.”

Current financing arrangements, too, could prove challenging to obtain for investors with an active deferred payment. The logic, as Barsoum sees it, is that in taking a deferment an investor has told the lender whether they “can or can’t” afford the payment. In such a binary situation, taking the deferment puts you in the “can’t pay” camp, which carried long-term implications.

“My suggestion is to first examine your finances, challenges and plans with your current mortgage advisor,” Barsoum says. “Come up with an action plan before jumping on mortgage deferrals as the first line of support because of panic, fear of the unknown, or fear of missing out on this support tool.”

Source: Canadian Real Estate News – by David Kitai 06 May 2020

 

Tagged , , , ,

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.

Tagged , , , , ,

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

Tagged , , , , , , , ,