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Moving The Terms Of The Loans To Places Where It Might Not Be Tolerable For Borrowers

A report from the Wall Street Journal. “A government effort to give Americans a break on their mortgage payments during the coronavirus pandemic hasn’t provided the relief many homeowners were hoping for. The stimulus package that Congress passed in March allows homeowners with federally-backed loans to suspend monthly payments for up to a year without penalty, if they face financial hardship. But the law doesn’t specify what happens after the so-called forbearance period ends. Many borrowers say they are being told they will have to make lump-sum ‘balloon’ payments.”

“‘They want to make it as difficult as possible for people not to give them their money,’ said Vincent Russo, a 43-year-old waiter at a steakhouse in Tampa who was laid off last month. His mortgage servicer, AmeriHome Mortgage Co., told him on April 14 that it would assess his situation after a three-month forbearance period but that a balloon payment was possible. ‘I said, if someone doesn’t have income, how do you expect them to pay three or four months all in one big chunk?’ Mr. Russo recalled.”

From Forbes. “Mortgage rates are still hovering near record lows. According to Freddie Mac, the average rate on a 30-year, fixed-rate mortgage was a mere 3.33% last week—just barely above the record-setting 3.29% seen in early March. While this is certainly welcome news for those looking to get a deal on a new home purchase, it’s not necessarily cause for celebration. In fact, those low rates probably aren’t even feasible for a large bulk of the population thanks to tightening lender standards.”

“In recent weeks, mortgage lenders have been adopting stricter eligibility requirements, fearing a wave of foreclosures in the wake of COVID-19. Chase even raised its minimum credit score to 700 for all new home loans earlier this month. Online lender Better.com raised its to 680. But these are just two of the hundreds of lenders that are raising the bar in light of the current health crisis.”

The Philadelphia Inquirer in Pennsylvania. “Navy Federal Credit Union also stopped offering FHA loans, with the hopes that it will resume that product in early 2021, ‘but that’s not fully confirmed at this point,” said a spokesperson for the credit union. ‘Credit requirements have gotten tighter across the board. Lenders are raising credit score requirements by 100 points,’ said David Lazowski, regional senior vice president at Fairway Independent Mortgage Corp. in Boston. ‘We used to do loans down to 520, now we’re up to a minimum 580 credit score; there’s a chance they might go to 700. We hope that doesn’t happen because it will put people at a disadvantage.'”

“‘There was a reduction in the availability of loans with lower credit scores and higher LTV ratios, and the largest pullback came from the jumbo and non-QM space,’ said Joel Kan, associate vice president of economic and industry forecasting at MBA, said of non-qualified mortgages, which have relaxed lending standards. ‘This month’s release highlights the large retreat from jumbo and non-QM investors due to a sharp drop in liquidity. Lenders are making credit criteria changes to account for the increased likelihood of forbearance and defaults, as well as higher costs.'”

The Sacramento Bee in California. “In just three months – April, May and June – California renters could be a whopping $2 billion in the hole on unpaid rent, dragging some landlords into greater debt as well as they risk losing their properties if they can’t make the mortgage. Soon, Tom Bannon, head of the California Apartment Association predicts, ‘You will hear a lot more from landlords who are going to be desperate.'”

“Cyrus Youssefi, a major Sacramento landlord with 3,700 units, said 8 percent of his renters didn’t pay the April rent. Most landlords, lenders and renters interviewed by The Bee said they expect the percent of unpaid rents to increase in May, and increase even more in June if the economy doesn’t reopen and jobs don’t come back. ‘It is not going to be a picnic,’ Youssefi said.”

The Los Angeles Times in California. “The Times spoke with eight landlords and tenants across Los Angeles County to understand how they’re coping with the fallout from the coronavirus. Diana Bustamante owns a property in City Terrace. ‘I was fortunate enough to buy a house and that area where my property is — City Terrace — has really taken off. So I decided to take the equity in that house to purchase another home. I live in La Puente now and decided to use that as a rental, the City Terrace one.'”

“‘It’s horrible for everyone. I feel a lot for my renters. The last message I received was that they had to spend their rent money for food. I don’t own that property outright. I still have a mortgage on it. So when they can’t pay rent, I have to cover that mortgage. I think I can go for four months if I just use my savings. I have been trying to cut back on things that are not essential and try to figure out a way to pay all the bills that are coming in. The salary I make pays both mortgages. It just takes the entire salary. There would be like $200 left. The reality, however, is that I might be forced to sell the house and that they may end up without a place to live anyway. So how is that a safety net for the renters?'”

From DJC Oregon. “HFO Investment Real Estate has also researched nonpayment rates and found similar data. Most properties in April had 8 percent to 15 percent renter nonpayment rates, said Greg Frick, partner at the Portland brokerage. The rate of tenants not paying seemed to vary widely by building, he said. ‘Some buildings were lower, (but) we had some buildings that were 25, 30 percent,’ Frick said.”

“Most landlords are in a position to take a financial hit for a month, brokers said. But it could be a much bigger issue if a larger percentage of renters – 30 or 40 percent – cannot pay their May rents. ‘Everybody’s kind of bracing for what’s May going to look like,’ Frick said.”

“Deals for multifamily properties are still going through, but lenders are increasingly cautious, said Clay Newton, executive vice president for Kidder Mathews in Portland. said. Some banks say they’re focused on small-business loans and don’t have the bandwidth to underwrite property transactions right now, Newton said. Others are asking for larger down payments or requiring greater holdbacks on commercial loans.”

“‘We haven’t seen a lot of canceling loans,’ he said. ‘What we have seen is moving the terms of the loans to places where it might not be tolerable (for borrowers).'”

From Multi-Housing News. “‘We’re all pleasantly surprised with the April numbers, but I think May will be a tougher month,’ said Robert Hart, CEO of Los Angeles-based TruAmerica Multifamily, which owns 40,000 units nationally. ‘Tenants paid April rent with March earnings. I don’t think May will be as robust.’ Lili Dunn of Bell Partners, a Raleigh, N.C., firm that manages 60,000 units nationally, said that only about 10 percent of residents at Bell-managed communities have sought payment schedules.”

“Dunn said that renovations on value-add projects will lag due to a slowdown in construction, delays in supplies, worker shortages and tenant demand. ‘We have some concern about the ability and desire (of residents) to pay for upgrades,’ Dunn said.”

From Bloomberg on New York. “SL Green Realty Corp. is in advanced talks to sell at least three loans attached to New York properties to bolster its cash balance, according to people with knowledge of the matter. The real estate investment trust is in talks to sell a mezzanine loan position backing Brooklyn’s Industry City to CIM Group and a loan tied to a Manhattan office building to Rockwood Capital, the people said. It is also in advanced discussions with Kushner Cos. about debt on a residential property in Brooklyn.”

“The pricing of the loan sales couldn’t be learned but the levels being discussed are below par, some of the people said. SL Green, a major New York landlord, has seen its shares battered this year amid concerns that the coronavirus pandemic will weigh on real estate values, particularly in big cities hit hard by the virus. The company announced last month that a $815 million deal to sell the former Daily News building in Manhattan collapsed and said it was suspending share buybacks. The firm has a market value of roughly $3.5 billion. Its stock has fallen more than 50% this year,”

This Post Has 52 Comments
  1. ‘You will hear a lot more from landlords who are going to be desperate’

    How do those 5% cap rates look now California landlords?

  2. ‘Dunn said that renovations on value-add projects will lag due to a slowdown in construction, delays in supplies, worker shortages and tenant demand. ‘We have some concern about the ability and desire (of residents) to pay for upgrades’

    Annnnd the value ad crap blows up in their faces.

    I got an email from somebody flogging a bunch of SF rentals in Dallas. The numbers were great! But it said they were based on getting an 8.5% increase in rents.

    1. 8.5%??!? I remember the rental-backed securities — that Blackrock rental ones — depending on 5% increase and I thought even that was too high. No renter is going to sustain 8.5%/year.

      1. This after rents have gone up higher and more as a percentage of income than ever before in US history. Throw in a recession and it’s delusional.

        1. Well, that’s what my spreadsheet said. But keep in mind I have a very stable good-pay job. For me, it’s worth it to stay in an area with high house prices. But I were one of these restaurant workers with no prospects for a better job, I would seriously consider moving to an Oil City trailer park and work at Wal-Mart, with a roommate if necessary. Not great, but it’s sustainable.

        2. Or do like a noted economist said…. “Why buy a house when you can rent one for half the monthly cost?”

  3. Ahem…

    ‘I was fortunate enough to buy a house and that area where my property is — City Terrace — has really taken off. So I decided to take the equity in that house to purchase another home’

    1. This is the language of Ramsey-bots and FIRE dupes. “I scrimped and saved and with my savings from not buying my $5 Sbux [🙄] every morning I purchased my first rental property and now I’m gonna retire rich when I’m 38!”

      1. We’re on the receiving end of the $5 coffees. Son gets to save money in the SBUX Roth IRA plan, and brings his dad free beans weekly.

      2. “now I’m gonna retire rich when I’m 38!”

        Bugs: “maybee doc, how many knobs & handles do you touch?”

        👾 munch, munch, munch

        Bugs: “eh good thing carrots grows underground!” 🥕munch, munch

      3. Not a Dave Ramsey fan, but i will say that is the only part of his message that makes sense. Get out of debt and cut back your expenses until you are debt free.

  4. ‘‘We used to do loans down to 520’

    Yes, risk layering.

    ‘…now we’re up to a minimum 580 credit score; there’s a chance they might go to 700’

    DONG!

  5. “‘It’s horrible for everyone. I feel a lot for my renters. The last message I received was that they had to spend their rent money for food. I don’t own that property outright. I still have a mortgage on it. So when they can’t pay rent, I have to cover that mortgage. I think I can go for four months if I just use my savings. I have been trying to cut back on things that are not essential and try to figure out a way to pay all the bills that are coming in. The salary I make pays both mortgages. It just takes the entire salary. There would be like $200 left. The reality, however, is that I might be forced to sell the house and that they may end up without a place to live anyway. So how is that a safety net for the renters?’”

    Diane, don’t worry. You don’t need to sell. Just ask Tom! Just keep both properties and take that ass pounding for the REIC shills. Whatever you do, DO NOT GIVE THE PROPERTY AWAY. One comp will set the price for the whole neighbor so everyone will be taking ass pounding if you do!!! Don’t worry, I also sell lubrication lotion too.

    1. ‘The salary I make pays both mortgages. It just takes the entire salary. There would be like $200 left. The reality, however, is that I might be forced to sell the house’

      On the bright side Diane, USH says the market is red hot!

    2. I’m going to go out on a limb and guess that, being in urban CA, she always votes Democratic, and guess which party is the one that wants to keep the economy shut down (and is also telling workers not to go back to their jobs after it reopens).

      Reap what you sow.

      1. She’s probably expecting a bailout, just like how another Dem core demographic once expected the president to pay their monthly bills.

        Unless we reopen the economy we’re gonna end up going Wiemar. The House just passed another half trillion dollar”stimulus” bill, and there will be more to come.

  6. I’m having trouble keeping up with all this crater.

    Thanks to Redpilled Redhead for passing on some more information about HCQ/Az and maybe zinc. My guess is that many of these patients had sufficient zinc in the body that the HCQ could work without adidtional zinc? Still, it wouldn’t hurt to give some patients a zicam or two just to see if it’s even more effective.

    Apologies to Ben for continuing to talk about the HCQ war. But this protocol is already very easy and generally safe and can be rapidly administered to millions of people for almost no cost, right at the point of first symptoms and testing. IF HCQ really stops this disease in its tracks, we could be back to “normal” within 3 months instead of 18. (still might need masks for a while)

    1. this protocol is already very easy and generally safe and can be rapidly administered to millions of people for almost no cost

      “It’s a civil war, being fought on TV.” – BlueSkye

    1. I’ll watch it tonight. But I’d bet the typical HBB reader knows more. Does housing wire know about the tens of thousands of pre-foreclosures rolling into the system last fall?

      1. Going forward, the REIC will try their hardest to link the onset of the latest wave of foreclosures to COVID-19.

        And we’ll keep reminding them that they are lying.

        1. COVID didn’t cause all this, it just pulled the pain forward.

          When this virus started hitting the streets, I predicted that the DOW would hit 30,000 by late summer. I was counting on the virus to fade during summer like flu does. Of course, that was a wrong prediction because this thing survives in hot weather. However, it appears that social distancing — and with any luck, HCQ cocktails — might give us a similar summer lull. I don’t think we’ll hit 30,000, but 26,000 or so is a distinct possibly. But it’s still going to go to the crapper after the election no matter who wins.

          1. I was counting on the virus to fade during summer like flu does.

            New data presented at today’s presser. I wasn’t paying close attention so you may want to look for it.

          2. It (the virus) didn’t even pull the pain forward. The virus wasn’t the cause of any of this. The real cause was our reaction to it. We didn’t need to fully close down. We could have chosen the path of Sweden instead.

            If we choose to close down the economy FOR ANY REASON, then this is the consequence we can expect. And the consequences are just beginning. It will get much worse in the months to come.

          3. “And the consequence$ are just beginning. It will get much wor$e in the month$ to come.”

            Ya think future terrorist have “learned” anything$ from this deeth.👾.germ$ $cenario?

            Like where to get “educated” & what to $tudy?

  7. “But the law doesn’t specify what happens after the so-called forbearance period ends. Many borrowers say they are being told they will have to make lump-sum ‘balloon’ payments.”

    Something’s gotta give at the point when balloon payments come due. People who bought with low downpayments and no savings better pray for a ballot box miracle in November.

    1. I’ve seen this balloon payment in Canadian and Australian articles too. It seems the Mayor of Pallokaville can’t change millions of contracts at a whim after all.

      1. “Mayor of Pallokaville”
        So, iffin’ month$ & month$ AFTER all thee lairyer$ & Courts delay$ get confirmed for “eviction$” … how exactly does one get the folks “who.will.knot.yet.abandon$” their repo$$essed $helter.$hack to actually … gets them to $cram / depart?

        Police?
        Does the State Governor have any authority over their “eviction$.action$”?

  8. “In fact, those low rates probably aren’t even feasible for a large bulk of the population thanks to tightening lender standards.”

    Translation: Rates are low for those with good credit scores and secure income streams to make payments. For anyone else, the rates are infinitely high.

  9. I think this is a 4 plex:

    $299,900 2 bd– ba3,688 sqft
    3689 Van Dyke Ave, Las Vegas, NV 89103

    https://www.zillow.com/homedetails/3689-Van-Dyke-Ave-Las-Vegas-NV-89103/7093963_zpid/

    Price history
    DATE EVENT PRICE
    4/22/2020 Back on market $299,900
    Date: 4/22/2020, Event: Back on market, Price: $299,900 (0%)

    4/12/2020 Pending sale $299,900
    Date: 4/12/2020, Event: Pending sale, Price: $299,900 (0%)

    4/5/2020 Listed for sale $299,900 (-21.1%)
    Date: 4/5/2020, Event: Listed for sale, Price: $299,900 (-21.1%)

    5/16/2019 Listing removed $379,900
    Date: 5/16/2019, Event: Listing removed, Price: $379,900 (0%)

    1/23/2019 Price change $379,900 (-1.3%)
    Date: 1/23/2019, Event: Price change, Price: $379,900 (-1.3%)

    11/15/2018 Price change $384,900 (-2.5%)
    Date: 11/15/2018, Event: Price change, Price: $384,900 (-2.5%)

    5/15/2018 Listed for sale $394,900 (+163.3%)
    Date: 5/15/2018, Event: Listed for sale, Price: $394,900 (+163.3%)

    1/5/2015 Sold $150,000
    Date: 1/5/2015, Event: Sold, Price: $150,000 (0%)
    Source: Public Record
    6/16/2014 Listing removed $650
    Date: 6/16/2014, Event: Listing removed, Price: $650 (0%)
    Source: Go Section8
    1/29/2014 Listed for rent $650
    Date: 1/29/2014, Event: Listed for rent, Price: $650 (0%)
    Source: Go Section8
    2/28/2013 Sold $120,000 (-70.7%)
    Date: 2/28/2013, Event: Sold, Price: $120,000 (-70.7%)
    Source: Public Record
    1/14/2005 Sold $410,000
    Date: 1/14/2005, Event: Sold, Price: $410,000 (0%)
    Source: Public Record

    Looks like the 410k buyer walked away.

  10. YouTuber Graham Stephan of Santa Monica, CA apparently owns a lot of leveraged rental properties and did a video last year explaining how he was $1.8 million in debt … but it was GOOD debt. He’s about 28 years old, so was in middle school the last time the economy locked up and lots of leveraged landlords lost everything. Here’s waiting for Graham’s bankruptcy filing…

    1. I watched a lot of Graham Stephan. Individually, he makes so much money from YouTube that he’s probably fine. But other LLs, not so much.

  11. The reality, however, is that I might be forced to sell the house and that they may end up without a place to live anyway’

    Sell to who ? That house is going back to the bank they can be the landlord now.

    1. I recall the last time everything blew up that REO’s, after the occupants were evicted, became the target of squatters.

      1. It’s going to be a lot worse this time, IMO. People like those women in Oakland were already trying to squat last year while times were still relatively good. And people are thinking a lot more “seize the means of production” now than 12 years ago…or maybe it’s just where I live? But I expect the squatting to hit hard and fast this time.

        1. And people are thinking a lot more “seize the means of production” now than 12 years ago

          Of course, once they get seized, they won’t be very productive. But I get it, people are tired of getting the short end of the stick. And in the people’s republic of California, if you aren’t rather above average in skills and smarts, you’re gonna be poor.

  12. Coincidence?

    Housing demand may have started to bounce back from coronavirus impact

    https://www.cnbc.com/2020/04/23/coronavirus-housing-demand-may-be-bouncing-back.html

    Housing market could be making a comeback after drop in March due to coronavirus pandemic

    https://www.king5.com/article/money/markets/real-estate/seattle-housing-market-rebound-after-coronavirus-pandemic/281-5f0edb3e-0e78-4a58-8f98-6bc3b791e348

    San Diego’s Housing Market May Be Recovering

    https://www.msn.com/en-us/money/realestate/san-diegos-housing-market-may-be-recovering/ar-BB136YvJ

    It’s a dead giveaway when they recycle the same quotes. The REIC is a real, big ugly, powerful monster that never stops

        1. The sun is out in San Jose today, expecting 80s later today. So yes, it a great time to buy a house; better hurry!

    1. Didn’t housing get whacked a bit in mid April last year due to the fallout of the Trump tax cuts? I feel like I heard all about that. Might explain the improvement in new listing rates from -44% YOY to -38%. More good news is that new listing rates are only down 14% week on week. So happy to see things improving so much!

  13. >>Cyrus Youssefi, a major Sacramento landlord with 3,700 units,

    Cyrus the Virus? (from the movie, “Con Air”)

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