Forbearance is Not Forgiveness

Forbearance is a temporary postponement of mortgage payments.  The lender can grant this option to a borrower instead of forcing the property into foreclosure.  The CARES Act provides protections for homeowners with mortgages that are federally or Government Sponsored Enterprise backed or funded such as FHA, VA, USDA, Fannie Mae and Freddie Mac.

A mortgage holder should contact the lender to explain the temporary difficulty they are having making payments and ask for relief under forbearance or other options.  Once the lender grants approval, it is important for the borrower to get the terms of the forbearance agreement in writing to be clear about when the payments will resume and how the missed payments will be recovered.

Generally speaking, homeowners in a forbearance plan will not incur late fees and it should not adversely affect their credit.  Unfortunately, borrowers must be vigilant to see that the lender is protecting them from delinquent credit marks according to their agreement.

Forbearance is easy to receive but not so easy to recover from.  Free credit reports can be obtained on a weekly basis until April 21, 2021 at www.AnnualCreditReport.com.  Reports are available from Experian, Equifax and TransUnion.  This will allow borrowers to monitor whether the lender has inadvertently reported items inaccurately.

Prior to the end of the forbearance period, borrowers should contact their loan servicer, the company that accepts their payments.  Review the terms of the forbearance plan and expectations for repayment.  Verify the unpaid balance and that there are not any payments marked as late or delinquent during the forbearance period.

One more item to discuss with the loan servicer is the payment of the property taxes and insurance.  Since multiple mortgage payments may have been missed and most payments include 1/12 of the annual amounts for these items, there may not be enough to pay for them when they become due.

Since it is estimated that there are over four million borrowers in forbearance currently, it may be difficult to talk to the servicer but starting the process early and being persistent will be helpful. 

At the end of forbearance, the borrower needs to resume regular payments and establish a plan with the lender to repay the missed payments.  The terms are negotiated between the borrower and the lender.

One way is through a loan modification which can restructure the loan.  In some cases, it would add the missed payments to the loan balance and recalculate the payments for the remainder of the term. 

A borrower could pay the forbearance money in cash but the practicality of that is not realistic.  If the person couldn't make the payments during forbearance, they probably don't have the liquidity to pay them afterward.  This option is entirely at the buyer's election.

Forbearance is a temporary way to postpone the mortgage payments with the understanding that you will be able to resume repaying the loan.  If the circumstances that caused the issue initially become permanent, then, other remedies must be considered.  If there is equity in the property, selling the home may be the way to materialize it for the homeowner.

Please contact us at (973) 251-0100 if you need to know what your home is worth and how long it would take to sell it.  We're happy to provide this information as a service without obligation so you can be aware of your options.

Building a Pool Is Just the Beginning

During the first major stay-at-home event that most of us have experienced in this country, a pool can give you and your family enjoyable recreation without leaving the home.  For those without a pool, the NPD group reports that the Covid-19 pandemic has increased pool building by 161% this year.

When your children are small, pools become a magnet for not only your children but their friends as well.  It can also be a great place for the summer holidays, Memorial Day, 4^th of July and Labor Day.  Any day during the summer, especially on the weekends, can be an opportunity to enjoy the pool, cook outside and bask in the sun.

Some of you may have even made the transition from your children enjoying the pool to your grandchildren.  Usually, there is an interim where you may have wished that your home didn't have a pool so you would not have the maintenance and required upkeep.  Then, the new generation of family starts using it regularly and again, you are glad you have a pool, so you'll see the grandchildren more. 

For those people who don't have a pool but are considering one, there are some things that you need to think about.

If you've watched some of the TV shows like Pool Kings, most of those builds look like resorts or water parks and the price tag that comes with them can be staggering.  Even a modest gunite, in-ground pool with a limited amount of decking can be as expensive as a luxury car, especially after including the cost of landscaping and pool furniture.

If you finance the pool as a home improvement, the term will probably be between seven to fifteen years.  If you refinance your current mortgage and wrap the cost of the pool together, you could get a 30-year term.

Pool cleaning and chemicals depend on the size of the pool but will generally start at about $175 a month through a service.  Your utilities will see an increase because you're going to use more electricity and water than you did before you had a pool.

Then, of course, there is food and refreshments to consider for not only your family but your guests.  There are also pool toys, floats, sunscreen, towels and other minor things that do add up.

People going through the pros and cons of building a pool usually tell themselves that the house will go up in value.  It is true but not nearly as much as the cost of the pool.  Long time pool owners will tell you that they have had lots of great memories and it has been a good investment in their family.  It just may not be a good financial investment. 

Once you've made the decision to build a pool, find a reputable pool builder, ask for references and check them out.  Ask friends who have pools, who built them and would they use the company again.  Most pool companies hire and coordinate with subcontractors to do the work.  It is important to know that the builder will be around if something goes wrong and how they'll solve the issue.

The Better Business Bureau has some suggestions about hiring a pool contractor and they warn about scammers who are eager to take advantage of the increased demand for pools.

Three Reasons to Refinance

Three reasons to refinance a home include lowering the cost of housing, shortening the term of the mortgage to pay it off sooner or to using the equity to accomplish another purpose.

Replacing the mortgage at a lower interest rate, which is entirely possible in today's market, would reduce the payment.  On the other hand, shortening the term of the mortgage could make the payments increase but would allow the home to be paid for sooner.  In either case, the equity would not be reduced unless the refinancing costs were rolled into the new mortgage.

Refinancing the home to take money out would increase the mortgage on the property and lower an owner's equity; careful consideration should be made before doing so.

Mortgage rates are considerably lower than credit card rates and usually lower than short term borrowing like student loans or car loans.  For that reason, homeowners will sometimes refinance to payoff higher cost debt.

Some people refinance for more than their current balance to improve their cash position, possibly, to have funds available in case they need it.  Other reasons could be to use it for an investment such as rental property or other things.  Still others may use it to make capital improvements on their home like remodeling or a pool.

Another legitimate reason to refinance may be to combine a first and second lien on the home that might result in lower payments and a savings in interest. 

One more situation that causes a person to refinance a home is to remove a former spouse or co-borrower from the existing mortgage.  In the case of a divorce, a couple may no longer be married and one of the former spouses may have no financial interest in the home any longer but because they signed the note originally, they are still liable along with the other spouse.  This could be an untenable position.

There can be a lot of reasons that cause a homeowner to refinance the home.  The equity is a valuable asset that has powerful borrowing power combined with the good credit and income of the homeowner.  A Refinance Analysis can help you to determine the new payments and how long it will recapture the cost of refinancing.

For the recommendation of a trust lender, give me a call at (973) 251-0100.

Things Have Changed

The soothsayer in Shakespeare's Julius Caesar issued his famous warning "Beware the Ides of March."  Who knew that in 2020, around the middle of March, the world, as we knew it, would force such dramatic changes on us from the Coronavirus.

In America, it has brought our economy to its knees as we sheltered in place for over four months.  During this time, changes have affected our lives and many of those changes could be permanent.

Previously, smaller homes were becoming the trend for not only efficiency but upkeep so owners would have more time to do things including travel.  Now, travel is minimal and our world, in some respects, is reduced to our home.

For families with children, their home has become a school.  With so many people working from home, it has become our office or store or studio.  If there is more than one working adult in a home, it needs to have space for each party to work.  The home fitness industry is experiencing record sales in exercise equipment so the home can become a gym.

Since we're all spending more time at home, it is also the place to recreate.  We're cooking more; a larger kitchen and dining area would be nice.  We want to enjoy the yard, garden, pool or balcony and our current home may not even have them or we'd like to upgrade. 

People are wanting and needing more space to do all of these things at home.  Many experts are anticipating that these changes we thought were temporary may be part of the new normal even after a vaccine and cure have been discovered.

If you have had any of these thoughts and would like to know more about how to buy or sell a home in our current market, we would love to tell you about the many options available while being responsible to stay safe.  Whether it is buying for the first time, moving up or moving on, I would like to help.  Call me at (973) 251-0100.