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Deferment of Mortgage Payments May Affect Borrowers in the Long Run


When Congress passed Section 4021 of the CARES Act in response to the effects of COVID-19, their intent was to help borrowers who were having problems making their mortgage payments. Little did Congress realize that they were potentially setting up borrowers for trouble in the future when it comes to credit worthiness as assessed by the lending community.

According to Mark Hanf, president of Pacific Private Money, “Section 4021 of the CARES Act contained a regulation that loan servicers “shall report the credit obligation or account for those participating in forbearance as current”.  In other words, those participating in a forbearance program should not see their credit scores drop. However, there is a loophole that allows lenders to discover whether or not a borrower is actually making payments. It is the “comments” section of a credit report.  The CARES Act does not mention the comments section of credit reports, and that’s where forbearance notations are going.”  What borrowers are not being told is that any reference in a credit report to forbearance can be a Scarlet Letter for an applicant seeking a new mortgage, according to Kathleen Howley in an article she wrote in early May 2020.

According to Hanf, within a week of Howley’s article, his company received a loan request from a home buyer who was denied credit from a major bank for just this very situation. Although the bank sees the existing mortgage as “current” the forbearance has let the world know via the comment section that this borrower has requested a deferment. The major bank involved would most likely not deny the loan on its face due to the deferment, as this would violate the law; however, banks are notorious for coming up with a myriad of reasons for denying a loan and still stay within the guidelines set out for them.

Conventional lenders desire to have plain vanilla borrowers who pay back loans in a timely manner. When a borrower changes terms of the loan by requesting principal forgiveness or other aspects of the 

loan, the lenders generally do not usually extend credit again to these borrowers and can negatively affect the borrower’s ability to borrow again from unrelated lenders. Such is the case back during the Great Recession wherein some borrowers took advantage of the economic climate by asking their lender to reduce the principal of their loan [total forgiveness rather than just a deferment]. The borrowers may have gotten a reprieve, but the long-term effects may have been more drastic. Similarly, to when a borrower files bankruptcy. The borrower may get out of paying creditors, but their ability to borrow in the future is usually severely hampered. 

In one case, back in 2009, during the heart of the Greta Recession, one banker tells a story of how a wealthy borrower first asked for a principal loan reduction of $500,000 because his collateralized real estate had decreased and his request was granted. But, when this borrower was faced with the prospects of having this reduction reported on his credit report or the fact that he would have to inform any new lender that he requested a principal reduction [as this question is usually on bank applications], he voluntarily requested that the $500,000 abatement be reinstated. He decided his ability to borrow in the future was worth more than the $500,000 principal reduction.

Borrowers will have to decide if requesting deferments is worth the risk of potential future lending restrictions based upon the lender desire to lend to borrowers who choose to defer mortgage payments when the opportunity arises. Whoever said, “there’s no free lunch” must have been talking about these very situations.

Message me if your thinking about buying or selling a Fort Collins or Loveland home at m.me/EdPowersRealEstate

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Ed Powers Real Estate 970-690-3113 ed@EdPowersRealEstate.com www.EdPowersRealEstate.com

Ed Powers Real Estate August 2020 Newsletter

Get the latest news in the August 2020 Ed Powers Newsletter Real Estate Update

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It’s All About The ’Burbs: In A Time Of Pandemic, More Young Families Are Fleeing The City For The Country

Scoffers label it, ‘panic-moving.’ Others call it common sense. Wherever you stand, there is little doubt that, as the pandemic continues to surge, the flight of families from city to suburbs is picking up steam across the nation.
      “Young New York couples typically put off a move to the suburbs until after the birth of their second child,” said Elizabeth Nunan, president of Houlihan Lawrence, a leading New York residential brokerage. “It gives them time to save some money and enjoy the perks of city living until the need for space and the cost of childcare make the family-friendly suburbs a better choice.”  
      But circumstances

have flipped the concept on its ear.
      “Living in the epicenter of the coronavirus pandemic left most New Yorkers justifiably fearful,” Nunan said. CONTINUED >>>

Preparing Your Home for Sale During the Pandemic

Despite the ongoing coronavirus pandemic, the real estate market must go on. Homeowners still need to sell, house-hunters still need to buy, and real estate agents still need to make a living. But the typical home selling process involves frequent contact with strangers—which is not recommended during this time of social distancing.
      By now, you’re probably getting pretty good at making adjustments in your everyday life to protect the health and safety of yourself and those around you. Along the same lines, there are steps you can take to show your home to potential buyers without risking your health or hurting your chances of a sale. Here are some tips to prepare your home for sale in the coronavirus CONTINUED >>>

Thinking of a Remodel? Here Are Your Financing Options

Should You Refinance From An FHA Loan To A Conventional Loan?

For many first-time buyers, a Federal Housing Administration (FHA) loan is the prudent—and often the only—choice for a mortgage. With the flexible credit and low down payment requirements, an FHA loan makes it easier to qualify than almost any loan out there.  
      However, the ongoing private mortgage insurance (PMI) you have to pay when you have an FHA loan makes your monthly payments more expensive. And, unlike a conventional loan, which allows you to remove your PMI at a certain point, you can never get rid of it with an FHA loan—even when you have tons of equity in your home. So, with rates at historic lows, should you refi out of your FHA loan to a conventional loan? We’re looking at the pros and cons.
Pro: You can get rid of private mortgage insurance (PMI) “FHA loans require certain provisions which sometimes place a heavy burden on a homeowner’s budget, often in the form of premiums paid for mortgage insurance,” said PennyMac. 
      That mortgage insurance on an FHA loan ranges from .45–1.05% of your home loan amount every year. On a

Daily News and Advice

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Mortgage Rates 

U.S. averages as of August 2020: 30 Year Mortgage Rates Push Lower

30 yr. fixed: 2.99%
15 yr. fixed: 2.51%
5/1 yr. adj: 2.94%

Mortgage Rates Oct 2020
Mortgage Rates Oct 2020

Message me if your thinking about buying or selling a Fort Collins or Loveland home at m.me/EdPowersRealEstate

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Ed Powers Real Estate 970-690-3113 ed@EdPowersRealEstate.com www.EdPowersRealEstate.com

Ed Powers Real Estate July 2020 Newsletter

Get the latest news in the July 2020 Ed Powers Newsletter Real Estate Update

For the complete July 2020 Newsletter Click here

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Thinking of Investing in Rentals With Others?

Investing in rental property is a way for many to take advantage of monthly cash flow while seeing the asset increase in value over time. There really isn’t any type of investment that provides both benefits as rental property can. That’s why many diversify their portfolios to include real estate. However, sometimes it can be a bit expensive to come up with the necessary down payment and closing costs as well as identify a property that will cash flow each month. With rates still flirting with record lows, now might be as good a time as ever to make the leap and purchase your very first property. Some real estate investors like to partner with others to spread the risk around a bit while at the same time being

able to afford a property that might just be out of reach. Think of a fourplex or an apartment building. If you’re thinking of investing in real estate with others, there are some things you CONTINUED >>>

Home Equity Lines Of Credit On The Rise…But Can You Qualify?

The Coronavirus quarantine has you thinking about making upgrades to your home, and that has you thinking about tapping your equity to take out as a home equity loan (HELOC), right? If so, you’re part of a real estate trend that’s sweeping the nation right now.
      A new report from LendingTree found that, “While the total number of home equity loan applications has fallen since January…those who do apply for a home equity loan are more likely to use it to pay for home improvements than they might’ve been at the start of the year.”
      Across the nation’s 50 largest metro areas, “An average of 45.9% of home equity loans are being used to make home improvements,” they said. That’s up from 37.3% in CONTINUED >>>

What Will Homes Look Like In A Post-pandemic World?

Better family gathering space. More comfortable bedroom space. Peaceful and private outdoor space. If those items tick your preferred “quarantine home” boxes, we get it. 
      The truth is that being stuck at home—in a home you don’t necessarily love—stinks. So, we don’t blame you if, while you’ve been sheltering, you’ve been dreaming of what you would change and where you would move given the choice. 
      The good news is that this pandemic is already having an impact on how builders operate, and the very things that are frustrating you about your existing home will likely drive changes to design and architecture in the future.
      “While the coronavirus still rages on, it’s hard to predict what post-pandemic abodes might look like,” said Barrons. “Yet, developers around the U.S. are already rethinking projects, anticipating residents’ needs and CONTINUED >>>

How To Support Anti-racism With Your Home Buying Or Homeowner Dollars

The country was rocked by the murder of George Floyd on May 26, and protests have been erupting all over the world ever since. In the aftermath of Floyd’s death, many companies have spoken out to decry racism and commit their dollars—and their activism—to equality. 
      In that vein, we’re posting a list of companies who have been outspoken in their support of racial equality. For the purpose of this article, we’re focusing on those that are in some way related to buying or selling a home, renovating, decorating, and even celebrating a purchase or home-related milestone. But you can track corporate donations and see a growing list of companies across nearly every type of industry who have taken a stand here.
      This is not meant to be a comprehensive list, and we invite you to add anyone we missed in the comments.
Look to your lender Choosing between financial institutions for a purchase or refi? “Bank of America pledged $1 billion over four years to help communities across the country address economic and racial inequality and said the commitment

Daily News and Advice

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Mortgage Rates 
U.S. averages as of July 2020:
30 yr. fixed: 3.13%
15 yr. fixed: 2.59%
5/1 yr. adj: 3.08%

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Ed Powers Real Estate June 2020 Newsletter

Get the latest news in the June 2020 Ed Powers Newsletter Real Estate Update

For the complete June 2020 Newsletter Click here

Newsletter Content Index:

Should I Sell Now?

The pandemic has put the world on pause. Should you put your real estate plans on pause, too?
      This article reaches a sizable online audience, so there’s not just one answer to this question. In direct conversation with you—one-on-one—this question could be answered with specific reference to your location, property, finances, and desired outcomes, but there would still not only be one answer to this question.
      Real estate, by its nature and its tremendous location-driven diversity, makes that question open-ended, with many possible answers:
      • Each option has many perspectives.
• Each property is is unique.
• The reasons homeowners love, or are ready to leave, their real estate are unique, too.
      The greatest challenge can be uncovering and CONTINUED >>>

Credit and Coronavirus: What You Need to Know

If you’re one of the thousands of homeowners who is struggling to pay your mortgage and bills right now, safeguarding your credit probably isn’t high on your must-do list. But if you want to make sure your credit stays good—or even improves—despite any economic difficulties, read on for some important updates and tips. 
Government safeguarding credit? There have already been steps taken to safeguard credit for those who enter into a forbearance program. Typically, “Payments that are skipped or only partially paid during a mortgage forbearance period technically violate the original terms of your mortgage loan agreement, so even though your lender agrees to the forbearance plan, they may report your payments as delinquent to the CONTINUED >>>

Are You Ready to Divorce Your House After the Quarantine?

A number of things have happened during this unprecedented time:
      People have had more time to spend together. They’ve also spent that time at home. 
      All that time together has not necessarily helped some relationships. Perhaps not surprisingly, the divorce rate is skyrocketing in countries like China, and now it’s been reported that, “Cooped-up New Yorkers are flooding lawyer phone lines with divorce inquiries — with an avalanche of filings expected once the courts re-open,” said the New York Post.
      But it’s our relationship with our homes that may be the most stressed. A home may function perfectly fine when you’re only there a few hours a day, but this quarantine has shined a light on many a flaw. Here’s how to tell if you’re just done or if your relationship with your house can recover.
It’s not something a CONTINUED >>>

Tele-Maintenance: The Newest Thing in Virtual Service

Medical appointments have gone virtual. Zoom has all but replaced workplace meetings. And now, there’s a new can’t-live-without-it, at-home service we’re loving. Hippo Home Care is now offering free tele-maintenance to help owners keep their home functioning while we’re all hunkered down.
      “Using our free tele-maintenance service, you can talk directly with a Home Pro whenever you have questions or issues around your home,” said Hippo. “We can help. Schedule a complimentary virtual ‘house call’ with a Hippo Home Care Pro who can help you with home maintenance by phone or video.”
      The company has completely shifted to a virtual model for the time being as a service to customers who might not be comfortable having strangers in their house during the pandemic. Customers can schedule a Virtual House Call to troubleshoot specific issues and also use the tele-maintenance service for a complimentary guided Hippo Home Care Home Checkup. “Think of it like getting a car tune-up or a physical, only this one is for your house,” they said. 
      The free

Daily News and Advice

Read about the events shaping the Real Estate market today, find current interest rates, or browse the extensive library of advice and how-to articles written by some of the top experts in Real Estate. Updated each weekday.

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Can Home Flippers Still Make Money on Their Investment?

Can Home Flippers Still Make Money on Their Investment

Once upon a time, less than two or three decades ago, buying a run-down Fort Collins or Loveland home, revamping the building, and reselling the property was a very lucrative business for tens of thousands of individuals across the United States. As more of the less-desirable homes have been purchased and flipped in the past 20 to 30 years, the market has become more restricted, and investors are often forced to buy homes that require significant work, rather than the easy face-lift properties. Here are a few ways home flippers can still make money on their investments.

Buy on a Budget

Any builder can give you an estimate of what it will cost to make the necessary renovations to a property. But they are only estimating what they can see. Within the budget, you must include the marketing costs, repair expenses, standing costs while you repair it, insurance prices, and selling commissions. On top of that, don’t forget to add a buffer for the unseen and unforeseeable, such as discovering mold or bringing wires and pipes up to standard building code.

Buying Without Borrowing

For those investors that can purchase a property without the extra pressure that a mortgage payment can bring, success is much easier. Although your hard-money lender may present you with a short-term loan, it can be a costly partnership – often more than 10 percent. Investors can also find themselves in a bind when a property tear-out discovers costly needed repairs, and an acquisition and repair loan is required. The extra $30,000 to $100,000 in repairs can easily put the investor into the red.

Buying the Right Property

When you purchase a home that is run down, and you expect to put $3,000 into the renovations with just two weeks turn-around time, it probably won’t happen that way. The problem is you never know what the foundation is hiding, what is behind the walls, and if there is hidden water damage.

Buying at the Right Price

One of the long-time experts in the field of real estate, Steven Taylor landlord was asked, “What are the most important factors that need to be assessed when becoming a real estate investor?” After a thoughtful pause, he replied, “There are several, but I would say access to deals is critical and access to capital of course, but understanding your market and recognizing opportunities are factors that create successful real estate investors.”

Buying in a Good Neighborhood

It’s no secret that homes in some neighborhoods are highly prized and can sell for thousands of dollars over asking price. Sometimes there may even be a bidding war in a selected neighborhood that brings in $25,000 to $50,000 over market price. If you are lucky enough to locate a home in one of those prized neighborhoods, your chances of having a successful flip are high. Knowing the area is safe, schools are excellent, and values are rising can mean the home is a great deal and will be an easy flip.

Buying When You Have a Great Contractor

It may sound trite, but your contractor can make or break your project. Finding a professional that has a crew of his or her own, takes responsibility for crew reliability, and brings in a project when saying it will be done, is priceless. You will not find many of them in your lifetime, so if you know one, treat them like gold – because they are valuable.

Getting the money you put into the home back out of it quickly is always the main goal of a flipper. Doing so with an eye on quality can give you a reputation that excels. So, do a quality job, get it done quickly, and sell it for a reasonable price. That is the secret to flipping homes and making money – in a nutshell.

Message me if your thinking about selling or buying a Fort Collins or Loveland home at m.me/EdPowersRealEstate

Ed Powers Real Estate 970-690-3113 ed@EdPowersRealEstate.com www.EdPowersRealEstate.com