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Mortgages have become a bit more complicated than they were just a few short months ago. Economic uncertainty surrounding the COVID-19 pandemic combined with government mandates have turned the mortgage industry upside down virtually overnight. Borrowers and lenders alike are finding it difficult to make sense of this new environment, and the mortgage industry stands to suffer due to a lack of foresight.

The CARES Act Leaves Mortgage Servicers Behind

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which President Trump signed into law on March 27, offers up to a 12-month reprieve to some homeowners. Borrowers with Government Sponsored Enterprise (GSE) or federally-backed mortga...

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From a financial perspective, we're experiencing a perfect storm of catastrophic proportions. Most countries, including the U.S., are expecting a COVID-19-driven recession. Even though the government has taken some countermeasures to stimulate the economy, loss mitigation will almost certainly increase in every industry, but particularly in the mortgage sector.

Government Response to COVID-19

In response to difficulties faced by U.S. mortgage borrowers due to the coronavirus, the Department of Housing and Urban Development (HUD), including the Federal Housing Administration (FHA), as well as Fannie Mae and Freddie Mac have provided increased access to existing forbearance programs for borrowe...

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As the U.S. and other world nations begin considering ways to reopen their economies, businesses are taking a closer look at the way they work. When COVID-19 was declared a global pandemic, many companies were forced to do something they had been resisting for years - move to remote working arrangements. Several aspects of COVID-19 could have an impact on the future of commercial real estate.

More People Working from Home

When states began issuing shelter-in-place orders back in March, an increasing number of workers found themselves pushed out of their offices and asked to work from home. Not surprisingly, this is a situation that many employees had desired for years.

According to Owl Labs, ab...

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We fear zombies because they sit between two distinct worlds, neither living nor dead. But while undead people are thankfully limited to pop culture, plenty of homes are neither living nor dead, and disputes over how to free them may already be affecting the mortgage industry.

Aim For The Head

How do homes become zombies? The foreclosure process is a long and difficult one, as lenders and homeowners have to take several steps before a home is repossessed by a financial institution, including attempting a loan modification, mediating disputes, and of course resorting to the legal system.

As a result, there are approximately 1.5 million single-family homes and condos in the foreclosure process wi...

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To keep the medical system from being overwhelmed, the economy has, in many sectors, gone into stasis. The real estate industry has seen inventory drop substantially as open houses and other sales tactics become taboo and seller interest dwindles, balancing supply and demand. Yet there may be problems lurking in the future.

The Present: No Demand, But Also No Supply

Right now, the problem is less pricing than sales. There's little demand, as people stay home and take stock of the economy. Yet since there was already too little supply in many markets, and potential sellers have taken their homes off the market, the result has been an economic balance. This is cold comfort to the real estate ind...

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Every recession is different, and the 2007-2008 Great Recession, driven by a collapse in home prices, was no exception. The current economic situation, though, is completely different, and the impact of COVID-19 on mortgage delinquency is a tricky thing to predict.

2008 Vs. 2020

First, consider what happened in 2008. Leading up to the crisis, there was such a demand for mortgage-backed securities that banks issued far riskier mortgages than they should have. Once those risks stopped paying off, the bills that came due couldn't be paid, and that cascaded throughout the system.

2020 is, essentially, large chunks of the economy simply stopping. While roughly a third of the workforce has the option...

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In 2017, as part of the Tax Cuts and Jobs Act (TCJA), state governments were allowed to designate certain low-income Census tracts, up to 25% of those tracts in the state, as “opportunity zones.” This allowed certain tax benefits, provided certain standards were met. The problem was that the plan, as passed, was very much a work in progress, and clarity hasn't arrived until relatively recently. So, how has that clarity affected investors?

The Rules

To get the tax benefits, investors have to set up what's called an Qualified Opportunity Fund, which must invest more than 90% of its assets into a Qualified Opportunity Zone Property. The property has to be “significantly” i...

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Homeownership is so quintessentially American, one of our most beloved holiday traditions involves watching George Bailey, loan officer, discover that if he weren't around to build houses, his beloved little town would be a swamp of vice. Yet that may be changing. A 2018 study found that only 38% of Millennials think buying a home is a good investment, and vast majorities state that renting is cheaper than owning. What's behind the shift?

Millennials Aren't Buying

Many Millennials entered the job market right around the Great Recession, and dpending on what metrics you use, it's never completely ended for them, as wages are still recovering. Besides, it's hard to tell somebody a house is a goo...

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There was a time, not so long ago, where if you wanted to buy or sell a house, you had to find a realtor. Buying and selling real estate required specialized knowledge, both legal and financial, not to mention access to the listings, which only realtors enjoyed. And then the internet arrived, and realtors find their role is changing, and faster than anyone expected.

Caught In The Middle

The first problem is the simplest: If an owner wants to sell, they can do so directly, no brokerage fees required. While FSBO (for sale by owner) sales are still complicated, it's much easier to find buyers now than it was before the internet. In some cases, all a seller needs to do is fill out a form and a ser...

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Politics aside, the United States holds a presidential election every four years, and we’ll be going through that process once again in 2020. There’s little argument that the upcoming election will be a contentious one. But, what does that mean for the mortgage industry and an already uncertain housing market? Here is what we know based on past experience.

Election Years Can Put a Damper on Home Price Appreciation

Several years back, the online real estate site Movoto endeavored to figure out what happens to home prices during a presidential election year. Their study of home price data from the California Association of Realtors concluded several things:

  • Home prices rose by an aver...
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