Saturday, April 25, 2020

The Government's good intentions is setting people up to lose their home.

 A mortgage forbearance is easy to get but think twice. 

by Rod Williams - The economic hardship resulting from the Coronavirus will result in a lot of people unable to make their mortgage payments.  As a result, all homeowners with a  government backed mortgages are to be offering a forbearance if they have an economic hardship "directly or indirectly" caused by the Cova 19 epidemic.  This applies to VA, FHA, Fannie Mae, and Freddie Mac which is about 65% of all home loans.  Futhermore, one does not have to prove their hardship is caused by the epidemic;  the mortgage servicer is to take the word of the borrower. No documentation is required.

This sounds good and for many people it is but what does it mean?  A forbearance is simply a temporary suspension of payments for a short period of time.  During that period of time, the payments simply accumulate and at the end of the forbearance period the lump sum amount of the missed payment and the next month's payment becomes due. 

Obviously, it is not realistic to expect that someone who could not make their payments, will at the end of the forbearance period be able to bring their loan current. At the end of the forbearance period the mortgage company is to consider other options to bring the loan current. The name of what they call it and the details may differ depending on which entity insures your loan but they are similar options. Here they are:
  • Extending the forbearance. The initial forbearance is for six months. It may be extended for another six months. If the borrower ask for it, the servicer is to give it.
  • Repayment Plan. At the end of the forbearance period if the borrower can afford to resume full payments and a set amount per month toward the arrearage they will be offered a repayment plan.  I have not been able to determine the length of the repayment plan but based on prior experience, I would be surprised if I would last more than a year.  If that is the case and one had the forbearance for six months then one would have a repayment of one an half payments each month.  Few people can afford that. 
  • Partial Claim. The month before the end of the forbearance period the servicer (mortgage company) is to evaluate the borrower for a "COVID-19 National Emergency Standalone Partial Claim." The way the public thinks of a "partial claim," is "moving the missed payments to the end of the note." The reason it is called a "partial claim" is that what actually happens, in the case of FHA loans, is that the mortgage lender files a claim for the missed payments with the insurer of the loan (for instance FHA), the insurer pays the missed payments and the borrower then owes the insurer (FHA if an FHA loan) the amount paid on their behalf to the lender. That amount does not become due until the first mortgage is paid off. 
  • Modification. If one is not eligible for a stand alone partial claim then one is to be evaluated for other options. Which means, basically a modification combined with a partial claim.  So, the partial claim would be applied, that is, the missed payments put to the end of the note. Then, if the owner could not afford the regular payment, the loan could be recast stretching the loan back out to thirty years.  That might lower the payment enough to make it affordable. Any other options are options in which one loses the house.
The extension of the forbearance will be easy to get. However, all that does is create a bigger problem to solve at the end of the forbearance period. The repayment plan, the partial cliam or the motification are not automatic; one has to qualify. To be eligible for the repayment plan you have to be able to afford it and to be eligible for a partial claim or modification you must meet these requirements:
  • Have been current or less than 30 days past due as of March 1, 2020.
  • Be able to resume making on-time payments.
  • Live in the home.
So, if you were behind on your house payment prior to this crisis, you won't be eligible any options for keeping your home except a repayment plan. 

To "be able to resume making on-time payments," has specific meaning. You may think you are able to do so but you may not meet a lender's definition.  You have to qualify. Ratios as to housing debt and total debt as a percentage of income apply.  So, if you return to work but are making considerably less than you were before you lost your job, you may not qualify as being able to afford the house payments.  If you have excessive debt you may not be able to qualify. If you have two car payments, that may be too much debt. 

My advice to homeowner's struggling to pay your house payment is don't apply for a forbearance if there is any way to make your house payment instead.  For many people the extra $600 a week on top of Tennessee's $250 a week unemployments comes close to matching what they were earning prior to losing their job. When applying for the unemployment, I would suggest not having taxes withheld.  You can worry about the taxes on that money latter.  You need the money now.  

Also, get on a crisis budget. Cut! Cut! Cut! Maybe staying at home you and your spouce could get by with one cell phone instead of two.  Evaluate every debt and decide which is most important.  In my view, if income is reduced paying the house payment is more important than paying student loans. Establish priorities.  If you have two car payments if may be time to stop making the payments on one of the cars and let it get repossessed and keep the house instead. Don't be intimidated by bill collectors. Don't let the bill collector who threatens the loudest make you change your priorities.

If getting a forbearance is the only way to survive this period of reduced income, then get it. Realize however, that the debt continues to pile up and you have to repay it. Make sure you understand the ramifications of getting the forbearance. Research it or better yet talk to a HUD-approved housing counselor.

For more see these links: link, link, link.

Rod Williams is recently retired but worked for over 25 years as a housing counselor with a HUD-approved housing counseling organization. 

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Thursday, April 23, 2020

Mayor Cooper announces Roadmap for Reopening

From Mayor John Cooper - We know you are concerned about coronavirus (COVID-19) and what it means for you and your loved ones.

The Metropolitan Government of Nashville has created this website to help you understand the disease and answer your questions. We will update it regularly as new information becomes available.

Nashville is known as a city that cares for each other in difficult times, and we will do the same now. The sooner we take action to prevent the spread of this virus, the sooner we can return to normal life in Nashville.

I urge everyone to visit this website regularly for the latest coronavirus information and to stay
updated on Metro’s coordinated response to keep all Nashvillians healthy and safe.

Roadmap for Reopening Nashville
The City of Nashville has created a plan to reopen. This plan has been created in cooperation with health, business and community partners in Nashville.

The hard truth is that our city will be living with COVID-19 until there is an effective vaccine for the virus. Living with COVID-19 means returning to work with COVID-19.

We must proceed carefully to ensure we do not create a surge that will send us all back home. Nashville’s economy will open in four phases. We will only move to the next phase if there is positive improvement/stability in the metrics for 14 days.

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Wednesday, April 22, 2020

Democrats bash Gov. Bill Lee's 'risky' decision to reopen Tennessee's businesses

Democrats bash Gov. Bill Lee's 'risky' decision to reopen Tennessee's businesses

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Tuesday, April 21, 2020

Protestors in Nashville demand "re-open Tennssee."

by Rod Williams - I did not attend the protest to end the lock down and reopen the economy on Sunday.  Apparently there were two days of protest with "hundreds" the first day and "dozens" the second day.  I did not even know about it until it was over. This surprises me because I thought I was well connected to the conservative activist community. I have a lot of conservative friends on Facebook and subscribe to several email list from organizations and activist. I didn't see any Facebook chatter about it prior to the event. I have not been listening to talk radio recently however, so maybe that is how I missed it. Nevertheless, if I didn't know about it, I would think a lot of other people did not know about it. If this many showed up for a not well publicized event, probably thousands would have shown up if it had been well publicized.

If I would have known about it I would not have attended.  I am taking this social distancing thing seriously. It is pretty simple really. I believe it is real and I am in that vulnerable age group.

The older you are the more likely you are to die from this virus, if you get it. If I was thirty and would have known about it, I would have been there.  If I would have known about it, I might would have driven by and given a thumbs up and honked a horn. I would not have been mingling with other people. Even if this lock down is lifted, I am going to remain in isolation until there is a vaccine or it looks like it has ran its course.

I believe we must reopen the economy, however. Let those most vulnerable isolate and everyone else go to work.  Our county is now $24 trillion in debt. As GDP falls that debt is a greater percentage of GDP. That debt can freeze out other borrowing, take a greater percentage of tax receipts to service and may lead to massive inflation. Also, wealth is disappearing. The stock market has tumbled. That wealth is not hid under mattresses but is capital available for borrowing. Savings = Investment. When money disappears, then money available to start new businesses, to expand business and for consumer consumption disappears. Also, many businesses have already gone under never to reopen. Every day we stay closed down, more businesses will close. Some liberals, including a member of my own family, have characterized the concern with the economic impact of this virus as "putting
profits before people." This is not about the size of one's portfolio.  If the economy does collapse, people will die of starvation. The threat of an economic collapse, I think, is real. It does happen in other countries. There is no reason it cannot happen here.

One of the major concerns of protestors is the suppression of liberties. I am not as convinced as some that the Federal,, State and local actions to impose a lockdown are a violation of our rights. I have studied some of this and address it this post, Legal Authorities for Isolation and Quarantine. I do think, however, that when police arrest people for attended a drive-in church service that is over the line.  I also question if the police have the right to demand of one that they show some papers that they are exempt from lockdown requirements.  The tendency of government is to take power and use it arbitrarily.  What rights do governments have to classify some business as "essential" and others not?

I would welcome clarity and think some lawsuits ought to be brought to actually determine the limits and sources of government authority in this matter. Liberty is as fragile as health. We do not want to get accustomed to government micromanaging our lives. For more on the issue of government authority in this crisis see link, link, and link.

According to Channel 2 news, a protestor told them their next protest is scheduled for April 27 at 10 a.m.

To see a Channel 5 video clip of the protest follow this link.
To see 53 pictures of the event published by The Tennessean, follow this link.
To see Channel 2 video clip follow this link.

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Monday, April 20, 2020

Gov. Lee Announces Safer at Home' Order Will Expire April 30, Tennessee Begins Phased Reopening Next Week.

Monday, April 20, 2020, TN State Gov. press release, Nashville, Tenn. -- Today, Governor Bill Lee announced the order for Tennesseans to remain at home will expire April 30, with the vast majority of businesses in 89 counties allowed to re-open on May 1.

“Our Economic Recovery Group is working with industry leaders around the clock so that some businesses can open as soon as Monday, April 27,” said Gov. Lee.  “These businesses will open according to specific guidance that we will provide in accordance with state and national experts in both medicine and business.”

The Lee Administration will work with Shelby, Madison, Davidson, Hamilton, Knox and Sullivan counties and their health departments as they plan their own re-open strategies. “While I am not extending the safer at home order past the end of April, we are working directly with our major metropolitan areas to ensure they are in a position to reopen as soon and safely as possible,” said Lee.

“Social distancing works, and as we open up our economy it will be more important than ever that we keep social distancing as lives and livelihoods depend on it.” The Economic Recovery Group (ERG), composed of 30 leaders from the public and private sector is crafting guidance to assist businesses in a safe reopening. The industry representatives participating in the ERG collectively represent over 140,000 Tennessee businesses that employ over 2.5M Tennesseans. More information about ERG is available here.

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It's OK to be all three

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