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People contemplating a home purchase continue to do so while the health crisis continues. While mortgage delinquencies spiked during the first few months in 2020, they inevitably fell throughout the pandemic.
The Mortgage Bankers Association (MBA) recently announced that the delinquency rate on 1-4 unit residential properties decreased to a rate of 6.73% of all loans outstanding by the end of the 4th quarter in 2020.
Although the COVID-19 economic slowdown has forced so many out of work, the economy and labor market is steadily picking back up. So, does that mean now may be a good time to buy? Or should you still wait to buy your dream home until. The pandemic is over? The subsequent enactment of Coronavirus Aid, Relief and Economic Security (CARES) legislation encouraged lenders to afford mortgage forbearance to those displaced by the pandemic restrictions. What do so many postponed loans on the books mean for people currently shopping for their ideal house?
The Coronavirus Aid, Relief and Economic Security CARES Act promotes mortgage forbearance by lenders and servicers in every state. Every mortgage backed by the federal government qualifies for this pause or reduction in payments for six months or more. Interest still accumulates during this period, so the entire amount owed does not diminish due to forbearance. It is simply pushed off while hard times last.
These measures stave off the usual response to non-payment, including adverse credit reporting and legal action to seize the property. However, such arrangements do not move the loans out of the delinquent column in terms of MBA reporting; rather, they spare distressed borrowers the bitter fruit of delinquency.
Many American homeowners took advantage of this process to help ward off mortgage default while jobs were lost. But the situation is improving over the past few months.
On a comparative basis, owners in Washington behind on mortgage payments represent a very low percentage against the national figures. The most recent figures show Washington state’s mortgage delinquency rate at 3.71%.
Aside from that, the Washington real estate market is one of the hottest in the country, with home prices having skyrocketing year-over-year. Homebuyer hopefuls looking to get into the market may want to consider doing so sooner rather than later to avoid havign to pay even higher prices down the road.
Oregon’s recent delinquency rate, 4.03 percent is not nearly as high as its 2010 record of 9.2 percent in the aftermath of the financial crisis. Granted, non-payments and late payments tend to rise as the mid-year point approaches.
Like Washington State, Oregon’s housing market is very healthy, with home prices having risen 10.9% over the past year.
Idaho distinguishes itself as having one of the lowest delinquency rates in the United States. At 3.18 percent, the Gem State has not suffered to the same degree as her sisters between the seas.
What, then, is the outlook for Idaho? The state’s Division of Financial management is not hopeful, forecasting a return to pre-pandemic economic conditions by 2022. Forbearance grants will not likely extend that far out. The open question is whether real estate will be available for Idaho’s many home seekers.
In the meantime, Idaho’s real estate market has been sizzling over the past year with home prices having risen 20.9%.
Like other Rocky Mountain and Pacific Northwest states, Colorado’s delinquency rate, 3.75 percent, stands in stark relief against national numbers.
Like other states in the Pacific Northwest, Colorado saw a marked increase Experts agree that the market will continue to be healthy througout the remainder of 2021.
Liquidity refers to how much cash banks have on hand to lend. As forbearance cases increase, ready cash necessarily decreases because income is reduced. True, it is owed and expected, eventually. Forbearance amounts to essentially an IOU from customer to lender. A problem arises because so many lenders sell their loans to the secondary market (Fannie Mae, Freddie Mac or other investors).
The servicing of the loans is also farmed out; the assigned servicers are then mandated to pass the collected monies (minus their fees) to the investment entities. When servicers see a dramatic drop-off in receipts, they are still nonetheless on the hook with the investors.
Prospective buyers do well to monitor business news closely in order to determine the right time to proceed with buying a home.
Allowing for all the uncertainty over liquidity, none of the worst-case scenarios have come to pass as of yet. At present, interest rates are low and economies are expanding, albeit very slowly. For those with income unaffected by COVID-19, creditworthy and financially secure, there might never be a better time to make the move and put in an offer. In any event, given the times, it can not hurt to submit a mortgage application that is strong on all fronts, credit, employment, assets, home value etc.
Forbearance is ordinarily good for six months and eligible for an additional six-month extension. It is not reasonable, however, to assume there will be additional extensions. There will come a time when lenders will either have to seize their assets or go out of business.
As that day approaches, what decisions will distressed homeowners make? If still out of work due to coronavirus, some will face the inevitable and put their properties up for sale. With tight inventories now, some seekers may wait to see if this is the case. With a larger pool of available homes, competition in lower and negotiation momentum can shift in a purchaser’s favor.
Another possibility is that foreclosures resume, there is now a moratorium under CARES, and a large number of properties will become bank-owned. There are deals to be made in this particular category that can save a buyer significant cash. Yes, there is a sadness to acquiring a home taken from another, but buyers are not the evicting party in such cases. A desirable home at the right price and legally obtained does not reflect poorly on the purchaser.
Lender representatives are not financial advisors but they can speak for their own institutions. How they evaluate customers and what institutions they sell to are pertinent and timely questions. Speak to one today to see if now is the time to finance a new home.
Since 1992, Sammamish Mortgage has helped many in the Pacific Northwest buy their homes. If you want mortgage financing, Sammamish Mortgage can help. We offer mortgage programs in Washington, Oregon, Idaho and Colorado. If you’d like, you can Contact us with any mortgage-related questions. You can also View Rates directly on our site or Apply Instantly if you’re ready. If you want to get a Rate Quote instantly, we can also help.
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