Each Monday, I join members of Hawaii Island REALTORS® for a weekly update. Instead of outside appointments, my week is now filled with online training and virtual meetings conducted by lenders and economists (among others). My take-away from this past week is that things change daily. The constant is what you don’t know to ask could hurt you. Here we go!
I’ve been advising local buyers to get ready. We are entering what should be a short window of time when local buyers will rule. Generally speaking, lenders want to see a 2 year un-broken employment history. While there is some latitude in job history (similar jobs in the same profession are ok), periods of unemployment are generally disqualifying. For now, it seems that once a furloughed buyer returns to their previous position, COVID related unemployment will be fine. Reserves (savings) will likely increase. Expect that self-employed buyers will be scrutinized closely. Lenders are discounting their qualifying income to 75% of a 2-3 year job history.
Buyers & Sellers
Drive by appraisals are now acceptable, which is lovely for “cookie-cutter” neighborhoods…do we have any? I think not in East Hawaii!
While it seems that a forbearance of up to 90 days is generally available, what happens at the end could bite you. Remember, payments are not forgiven; the money is still owed. As I mentioned in my last blog, some lenders are looking for a lump sum catch-up payment which makes no sense because, for goodness sake, if you can’t pay one month, how are you gonna pay three at once?
The website www.forbearancereport.com offers a lender list outlining policies from most mainstream lenders. Some may work-out a repayment plan. If you can’t make immediate repayment, your lender may put you into loan modification, which could include spreading out your payments or putting the forbearance amount at the end of the loan. Modifications are generally considered “other than paid as agreed”. Once a modification begins, you may begin getting nasty letters from your loan servicer. They normally begin a parallel foreclosure, which is suspended once a modification is approved. Any late payment or default in an amended payment plan will re-start the foreclosure. Loan modification can affect your credit. Be sure to ask.
Tenants (and Owners)
Tenants, talk to your landlord early and often. Like the foreclosure freeze, the eviction freeze is not permanent. Neither forgives monies owed. If you are in arrears (behind in your payments), you still need to pay. A gracious landlord might forgive a portion of the rent or work out a gentle repayment plan. Not all are able to do so. Once COVID passes, a landlord could begin an eviction, so it’s time to be a model tenant. Make your landlord want to keep you. With the courts potentially becoming inundated (not only foreclosures, eviction but also divorces), mediation might be the best option.
During the 2008 mortgage crisis, mediation was generally required as part of many foreclosure actions. Kuikahi Mediation offers several solutions and negotiation options. Any party can initiate resolution discussions. So, until next week, stay home, be well, do your homework and remember, your Realtor can be a great resource. Trust me; we are all ready to get back to “normal,” even if it changes daily!