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Lenders coming to aid of workers affected by government shutdown

By Jeff Lazerson

1/10/19

What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.

Rate news summary 

From Freddie Mac’s weekly survey:  The 15-year fixed improved a whopping 10 basis points from last week, landing at 3.89 percent – the lowest rate in eight months. The 30-year fixed rate improved to 4.45 percent, down 6 basis point from last week and also an eight-month low.

The Mortgage Bankers Association reported a bonanza 23.5 percent increase in loan application volume from the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $484,350 loan, last year’s payment was $130 lower than this week’s payment of $2,440.

What I see: Locally, well-qualified borrowers can get the following fixed rate mortgages at  a zero point cost: A 15-year FHA at 3.625 percent, a 30-year FHA at 3.75 percent, a 15-year conventional at 3.75 percent, a 30-year conventional at 4.25 percent, a 30-year high-balance FHA ($484,351 to $726,525) at 4.125 percent, a 15-year high-balance conventional ($484,351 to $726,525) at 4.125 percent, a 30-year high-balance conventional at 4.50 percent, a 15-year jumbo (over $726,525) at 4.25 percent and a 30-year jumbo at 4.875 percent.

What I think: Refreshing is the word that comes to mind as the lending industry prepares for a possible wave of unpaid and furloughed federal workers in need of mortgage payment forbearance, late charge waivers and a pass on reporting mortgage late payments to the credit bureaus.

It’s a complete attitude turnaround from the mortgage meltdown days of the Great Recession when lenders often told borrowers to pound sand when they were desperately seeking support.

Federal employees affected by the government shutdown are on the hook for an estimated $249 million in monthly mortgage payments, online real estate site Zillow reported Monday, Jan. 7.

Press contacts from Wells Fargo Bank, Chase Bank, Bank of America, U.S. Bank and Citi Bank have all communicated various options for federal workers who are struggling to make their mortgage payments.

Freddie Mac instructed servicing lenders to offer payment forbearance.

Federal Housing Administration Commissioner Brian Montgomery said in a strongly worded statement to FHA lenders they’re obligated to offer special forbearance to government workers and contractors affected by the shutdown.

For Veterans Affairs loans, forbearance plans, reporting mortgage late payments and charging for late payments is up to the lender, according to VA spokesman Randal Noller.

Call your lender if need be.

“It’s not a payment holiday,” said Pete Mills, senior vice president of residential policy at the Mortgage Bankers Association. “(You have to) make arrangements to repay at some point.”

Your servicer may have no legal obligation to help you. So, use your best judgment and be on your best manners when you contact your lender. Have your facts and circumstances at hand.

Based on reader questions I’ve received over the years, I get the impression lenders’ customer service team members have a lot of discretion about providing assistance to you and the amount of assistance (loan modification, payment deferrals, waiver of late fees, on-time payment reporting only to the credit bureaus).

If you are in danger of not being able to make your house payment, the worst thing you can do is not communicate with your lender.

Legally speaking, lenders can set the foreclosure process in motion with even one late payment, according to real estate attorney Dennis Doss of Doss Law.

“Lenders typically don’t take action until it gets worse. Lenders tend to get very alarmed once you are late beyond 30 days,” said Doss.

According to Doss, federal law requires a 120-day advance warning that you are in default. The California Homeowners Bill of Rights similarly requires the lender to contact the borrower in an effort to resolve a mortgage payment issue in a 120 day period.

After the federal 120 days are up, the lender can file a notice of default against you, giving you 90 days to cure the default.

“NOD’s are credit destroying,” said Doss. Then, there is a required 21-day notice of foreclosure.

Options: The best thing you can do if you don’t have the liquid assets to make your house payment is go to the bank of mom and dad or other family members or friends for assistance. Or consider borrowing from your retirement fund.

If that doesn’t work, contact the loan servicer.

Keep Your Home California is no longer accepting applicants, according to its website.

Carrying six months of cash reserves or having a home equity line of credit at the ready are always best practices because we just never know for certain what is around our income corner.