The Magic of Low Rates

Volume 14 Issue 7 July 2020

T

he government has injected

trillions of stimu-

lus dollars into the

economy. This is

causing the federal budget

deficit to soar as we deal with

the devastating effects of

COVID-19 upon our econo-

my. At the same time, the

Federal Reserve Board

moved short-term interest

rates down near zero and pur-

chased mortgage backed securities to

ensure that rates on home loans also

were at historic lows. At a recent meet-

ing, they also indicated that these rates

will most likely stay near zero through

2021.

Indeed, according to the

Freddie Mac weekly sur-

vey, rates on home loans

have hit the lowest level in

history in the middle of

June. And these historic low

interest rates are poised to

boost our economic recov-

ery just as much as the stimu-

lus dollars spent. Refinances of home

loans are saving homeowners thousands

of dollars.

In This Issue P2 Buyers Are Ready To Purchase! || P2 What Happens When a Homeowner Dies?

P3 The Magic of Low Rates || P4 Housing to Lead the Way

Selected Interest Rates June 25, 2020

30 Year Mortgages——–3.13%

2019 High (Jan 3 %

2019 Low (Sept 5) ——–—3.49%

15 Year Mortgages——-2.59%

5/1 Hybrid ARMs——–—–3.08%

10 Year Treasuries—–—–0.67%

Sources—Fed Reserve, Freddie Mac

Note: Average rates do not include fees and points. Information is provided for indicating trends only and should not be used for comparison purposes.

Continued on Page 3

THIS NEWSLETTER IS BROUGHT TO YOU BY:

Did You Know… Builder sentiment jumped a strik-ing 21 points in June to 58, the largest monthly increase ever in the National Association of Home Builders/Wells Fargo Housing Market Index. Any reading above 50 indicates a positive market.

Source: NAMB

What Happens When a Homeowner Dies...

Page Two

“…ensure an

outstanding mortgage doesn’t become

a burden…”

Buyers Are Ready To Purchase! W

hen home buyers go to the closing, it’s unlikely they’re thinking about what happens

if they die before their mortgage gets paid off.

“It’s the last thing on their minds,” says Bernard A. Krooks, founding partner and elder law specialist with New York-based Littman Krooks LLP. “They’re thinking about whether or not an inspection went well or when the contractors will get repairs done.”

But while nobody wants to think about dying, borrowers should take advance steps to ensure an outstanding mort-gage doesn’t become a burden for loved ones. Unlike credit-card debt, the home loan is secured by the house, says Nanci L. Weissgold, a partner in the Washing-ton, D.C., office of Alston & Bird. Un-less heirs are cosigned on a home loan, nonpayment can’t damage their credit score, but they should continue to pay the loan if they are able, since missed payments could incur penalties and/or lead to foreclosure, Ms. Weissgold says. She adds that when lenders are prompt-ly notified of the borrower’s death, they usually are understanding about time needed to resolve estate issues to avoid foreclosure.

Policies about what happens when a borrower dies can vary widely among lenders, and terms are usually buried in the fine print of mortgage contracts, Mr. Krooks says. One of the first things to

check is whether a lender will even al-low anyone else to assume the loan up-on the borrower’s death. When the de-

ceased is the only borrow-er, most lenders won’t, says Ric Edelman, CEO of Fairfax, Va.-based Edel-man Financial Services. Also noteworthy: If two peo-ple, typically spouses, are co-

borrowers, don’t assume that the surviving spouse can auto-

matically take over the same note and terms if it’s the sole breadwinner who dies.

“If that person dies, the lender may call the loan due,” Mr. Edelman says. “At the very least, they will want the surviv-ing spouse to demonstrate equal credit-worthiness.” That may not be a problem for nonworking survivors if the bread-winner bought life insurance or left a 401(k) or other inheritance. But many lenders still will require a refinance to confirm that the heir can afford pay-ments.

One other potential snag: Once lenders are informed of a borrower’s death, they may be reluctant to release loan infor-mation because of privacy restrictions, Ms. Weissgold says. In addition to a death certificate, survivors and adminis-trators may be required to provide addi-tional information confirming their le-gal status, she adds. Required documen-tation will vary depending on lender rules and the location of the property, among other things, Ms. Weissgold says.

T

he pandemic isn’t

scaring off home buy-

ers. More than half—

or 53% of about 1,000

home buyers recently sur-

veyed—say they are more likely

to buy a home in the next year

due to the coronavirus outbreak.

First-time home buyers and mil-

lennials may be the most eager to

buy within the next 12 months,

the survey from LendingTree

shows. The top two motivators

for buying soon are to take ad-

vantage of record low mortgage

rates (67%) and being able to

save for a larger down payment

due to reduced spending (32%).

Also being confined in a smaller

space during stay-at-home orders

have made homeownership more

appealing, the survey finds.

The pandemic is not only

prompting more people to pursue

homeownership, it's also influ-

encing their home shopping. The

majority of respondents say the

coronavirus pandemic has affect-

ed how much money they plant

to spend on a new home. Forty-

four percent plan to buy a less

expensive home while 21% are

targeting a pricier home...

Source: NAR

Page Three

...Before The Mortgage Is Paid Off? The Magic of Low Rates

Continued from Page 1

Stimulus checks provide a one-time

shot in the arm--but refinancing at a

lower rate will save consumers

money every month until they pay

off their home loan. Even the gov-

ernment will save money on financ-

ing the burgeoning deficits at these

lower rates -- at least in the short-

term.

Lower rates are also providing a lift

for the real estate market as well.

There has been surprisingly strong

real estate demand after the first

few weeks of this crisis. For the

year, it is expected that this strong-

er than expected real estate activity

will provide another lift for the

economy. This stands in contrast to

the last recession in which real es-

tate was a drag on the economy for

many years, causing a very slow

recovery. This year, we could really

use any lift we can get...

“…stronger than

expected real estate activity…”

©2020, All rights reserved

The Hershman Group www.originationpro.com

1-800/581-5678

To smooth this process, the Consumer Financial Protection Bureau in 2014 introduced new borrower protections to make it easier for heirs to acquire account information, pay off the loan, or request a loan modification after the death of a homeowner. “The new rules require servicers to promptly com-municate with heirs after being notified of a borrower’s death, with the ultimate goal of avoiding unnecessary defaults and foreclo-sures,” says Samuel Gilford, a CFPB spokesman.

Here are a few more considerations when estate-planning involves real estate:

• Entitled or not. Whether or not a borrower is on the property ti-tle also matters. For example, a spouse listed only on the title wouldn’t see his or her credit score affected if payments ceased, but a spouse on the loan paper-work and not on the title would have liability, Mr. Edelman says. He recommends all borrowers be on both.

• Safeguarding against family squabbles. If homeowners antici-pate disagreement among heirs over the fate of the property, they should put their wishes as to who inherits and/or gets to stay in the house in the will or other estate planning document, such as a trust or partnership agreement, Mr. Krooks says. For example, a will could stipulate that a second wife can live in the house for the rest of her life, and only upon her death would the property be sold and proceeds divided among the chil-dren of the first marriage, he adds.

• Professional guidance. Because estate laws are complex and differ across states, consulting an estate attorney on all matters related to wills and inheritance is highly recommended.

Source: The Wall Street Journal

Housing to Lead the Way

Address Correction Requested

In This Issue:

The Magic of Low Rates

U

nlike the role it played in the Great Recession that started in 2008,

the housing industry may help lead us out of today’s pandemic-

induced economic recession, according to Daniel McCue, Senior

Research Associate at Harvard University’s Joint Center for Hous-

ing Studies. While housing was more of a barrier than a balm in the last econom-

ic recovery, it is more typical for the housing industry to serve as a source of

strength during an economic recovery. In fact, this has been the case in nearly

every recession over the past five decades, according to McCue.

One of the main points of difference between the housing market leading into the

Great Recession and the market heading into today’s economic downturn is that

the housing market prior to 2008 had a “substantial overhang of distressed and

foreclosed properties,” which “needed to be absorbed before housing construc-

tion could be a driver of recovery,” McCue said. The housing market early this

year, however, had tight supply and low vacancies.

The share of vacant homes for sale is 58% lower than in 2007 and the share of

vacant rental properties available is 21% lower. “Hopefully, what these vacancy

numbers do suggest is that, in terms of supply, housing construction is not likely

to be a barrier to recovery and instead may once again be a source of strength

that helps the economy turn around once the worst is over,” McCue said...

Source: DS News