Mortgage Deferral for ALL residential Real Estate

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Mortgage Deferral for ALL residential Real Estate

Scott TrenchPro Member
Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes

There's a lot of press going around about HUD suspending foreclosures on homeowners and many states and cities no longer processing evictions. I can't agree or disagree with the politics and/or health reasons for this.

As landlords and investors this is why we invest for cash flow, and invest with reserves. We should all be able to temporarily withstand even a few months with no rents. 

But, longer-term, it seems crazy to think that multiple months will pass in a row where landlords are unable to legally enforce rent collections or evict AND have to pay mortgages and that this will be an ongoing reality. We of course need to work with our tenants through this, but the only way to sustain this over a period of more than a few months is for landlords to be able to likewise defer their fixed overhead - taxes, insurance, and principal/interest. 

It seems to me that a very simple answer to this situation, if things are prolonged, is to simply allow landlords to defer mortgage payments, similar to what is already being done for homeowners. 

To me, this seems like the logical outcome. Sure, landlords may still be on the hook for property taxes and insurance, but they may also collect some rents as some tenants remain employed.

With mortgage deferment, everyone loses together in a more relatively appropriate way. 

What do others think? 

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Anthony Wick
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y

@Scott Trench

And then what about mortgage companies and their shareholders and employees? They will lose money, lay-off employees, go under. In the end, somebody ends up paying.

I don’t like a blanket policy for anybody to stop paying their bills. That is why I am not reaching out to my tenants. Yes, we will have a policy if they do reach out, but I’ve posted in many forums that I will not ask my tenants if they need help before they need help. And my mortgage company is not reaching out to me to offer zero payments as of yet either.

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  • Dave MeyerPro Member
    Head of Real Estate Investing at BiggerPockets · Seattle, WA · Member since 2015 · 355 posts · 829 votes
    6y

    I totally agree @Scott Trench. I have already had a few tenants contact me stating that they have been laid off. I really feel bad for them and want to help, and knowing that I could defer my mortgage would give me a lot of flexibility in helping my tenants navigate a difficult time without exposing myself to massive finance risk. 

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  • Zachary Gwin
    Rental Property Investor · Denver, CO · Member since 2015 · 154 posts · 266 votes
    6y

    100%

    If landlords/ rental property investors can defer their mortgage payments, both property owners ADN TENANTS won't have to worry (at least not as much). We can then truly work together through this difficult time.

    Do I feel a petition coming on?!

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  • David AcostaPro Member
    Wilmington, NC · Member since 2014 · 208 posts · 144 votes
    6y

    @Scott Trench - Fully agree here.  It's hard to imagine multiple months with no rent collection enforcement AND no financial relief.

    I believe the qualifying condition for forbearance is that landlords actually suspend all evictions for renters unable to pay rent due to the impact of coronavirus. The eviction suspensions remain in place for the entire duration of time that a landlord remains in forbearance.

    As you put it, it seems to be the most logical option.  

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  • Brian Ploszay
    Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
    6y

    Eviction moratorium in my area.  I'm not up to speed if there is federal guidelines for this.  Month One:  I survive.  Month Two:  I survive.   Month three:  Landlords will be screaming for help.

    1Reply
  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    6y

    @Scott Trench

    And then what about mortgage companies and their shareholders and employees? They will lose money, lay-off employees, go under. In the end, somebody ends up paying.

    I don’t like a blanket policy for anybody to stop paying their bills. That is why I am not reaching out to my tenants. Yes, we will have a policy if they do reach out, but I’ve posted in many forums that I will not ask my tenants if they need help before they need help. And my mortgage company is not reaching out to me to offer zero payments as of yet either.

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  • Dan Schwartz
    Real Estate Investor · Tempe, AZ · Member since 2012 · 874 posts · 648 votes
    6y

    There is guidance on the FHFA site for mortgage modifications and forbearance:

    https://www.fhfa.gov/Homeownersbuyer/MortgageAssistance/Pages/Coronavirus-Assistance-Information.aspx

    This appears to be the revamped HAMP program.  If your income has been reduced because of COVID-19, you may be eligible for mortgage relief.  

    Your servicer will probably have some variation of this Fannie/Freddie Form 710 to apply for the modification:

    http://www.freddiemac.com/singlefamily/service/docs/form710.pdf

    Ask them for it, or google your service provider + form 710.  This application process is open to everyone.  There are pages and pages of guidance documentation and matricies on what the servicer is required to do and offer.

    No documentation is needed for the hardship itself (the coronavirus), but you do need to document your income and reserves.

    I have not been through this process, nor do I work for a loan servicer, so do your own homework on this.  I pointed a few musician friends this way, as their incomes have been decimated as well.

    Good luck! 

    2Reply
  • Adam TafelBusiness Member
    Real Estate Agent · St. Paul, MN · Member since 2017 · 592 posts · 403 votes
    6y

    Can anyone with an economics degree weigh in on the long/medium-term effects of all this deferment? Rent, mortgages, other business/personal loans, various industries "bailed out", the fed "injecting" money into various markets. I have a basic understanding of macro economics, but my brain cannot wrap itself around the potential consequences. 

    Is money just a make-believe social construct, and we can essentially take a holiday from responsibilities and everything will turn out fine, assuming the smartest guys in the room are babysitting everyone? If so I'm 100% on board. 

    I realize this is a bit off topic, I've been drinking too much coffee and reading too much WSJ for my own good. 

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  • Aaron Montague
    Rental Property Investor · Brookline, MA · Member since 2013 · 1k+ posts · 777 votes
    6y

    Reach out folks now.  Be they legislators, your mortgage company, or your tenants.  

    Here in Mass we have a bill coming forth that has folks freaking out a bit: MA Bill

    It forbids evictions and foreclosures essentially.  MA landlords are worried about the same things everyone else is, the ability for tenants to not pay and landlords having no recourse now, or later.  These are highly legitimate worries for everyone.

    Personally I have emailed each MA rep (yay email blast programs!) and asked them to consider landlord/owner protections for 12 months beyond the passing of the bill.

    I have also asked my mortgage companies to move my mortgages to interest only for the duration of the MA declaration of emergency plus 2 months.  So far I have been told "no" by all of them.  But my hope is that a persistent bug in their ear will start to have an effect.

    I do not have any tenants in economic peril, yet.  My plan to keep them paying involves specific numbers that keep my business afloat, even at reduced rents.  I have no intention of letting them slide on the total due, just to try and keep them in place and paying enough to get me through.

    Again, please reach out to the people you want action from now with ideas.  

    2Reply
  • Ray Johnson
    Irvine, CA · Member since 2016 · 545 posts · 614 votes
    6y
    @Scott Trench I believe the key for most landlords will be finding out which resources are available to you as a small business, and how to obtain those resources. I received an email from Washington, DC notifying all DC small business owners that DC will start taking applications for the $25 Million Microgrants fund starting today March 24, 2020. Requirements to apply: 1) 2017 & 2018 tax Returns 2) 2019 P&L Statement 3) Schedule of Liabilities 4) Business is located in DC 5) Business License is up to date 6) At least 25% of your revenue must be lost due to COVID-19 More info: WWW.CORONAVIRUS.DC.GOV/RECOVERY I won't need this resource but posting in case someone in DC does. Luckily all but one of my properties in DC is leased by a Federal government employee and they are all still working. SBA also sent out an email to DC Small Business about their SBA Disaster Relief Loan for COVID-19.
    5Reply
  • Michael King
    Rental Property Investor · Navarre, FL · Member since 2019 · 913 posts · 640 votes
    6y

    @Scott Trench I agree with you. In my area, the county are complete imbeciles that will not listen to residents that are hard hit by their taxes. Last time I had a question for them about a $2000 tax increase over last year, they told me to get a lawyer, but it will do me no good anyway and will just cost me more money. So unless the Fed tells them to back off, it's business as usual because these morons don't care how you get the money. I'm sure most counties are the same, they need the money to pay for community programs that don't benefit the vast majority of the community. 

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  • George Pauley
    Chandler, AZ · Member since 2017 · 174 posts · 269 votes
    6y

    Mortgage deferal just feels like we're passing the buck. Presumably there are investors (possibly retired people living on fixed incomes) that are in need of their own ROI on the notes they are holding?

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  • Account Closed
    Member since 2020 · 1 post · 0 votes
    6y

    Good information. It is hard as a new landlord who just invested and depend on rent for life expenses it may be hard.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    there are going to be some work outs will depend on the lender. I do not beleive the mortgage industry wants a repeat of the GFC mortgage meltdown.. and from what I am reading on BP most land lords are OK for a few months then its not OK

    I think you will have to prove a need.. IE you used your reserve funds ( if you actually have them ) and your cap ex funds ( if you actually have them)  they will want to see you putting all effort in..

    Homeowners are going to get a different deal. Than for profit landlords I suspect
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  • Matthew T.
    Investor · Springfield, MA · Member since 2010 · 277 posts · 84 votes
    6y
    I agree with @Scott Trench in general that we as investors should be not over leveraging ourselves so that we can not withstand 3 months of no rents coming in. Where I think it maybe it is a personal business decision is when you have say 100+ properties and on average that is 9k in reserves each so you are talking 900k sitting on the sidelines in a bank account paying little to no interest and then with inflation you are essentially having your cash lose value month after month.  The chances of all 100+ properties not paying are slim and I would rather have some of that capital redeployed into other investments.  You could also do a LOC instead of keeping that cash sitting allowing you to pull on when you need it, but there have been times in economic downturns where banks have pulled those LOCs which could put you into a cash crunch.  

    I agree that we need to work with our tenants, my fear where I am is it is a very "tenant friendly" state and often I find we need to make these long drawn out payment agreements with the court system which often never get paid.  And if all of a sudden there is a huge flood on the court system how will that all play out?  My guess is that they will look to the landlord to carry most of the burden ( I could be wrong ).  In our state we can require a last months and security and we have those all held in escrow accounts for the tenants; so one idea we are looking to implement is to have those tenants that say they can not pay come April 1st, is to have them sign over their last months rents for April rental payment and maybe a payment plan to replenish that last month's rent.  

    We are also in talks with all our local banks we work with and it seems most are going to be allowing us to defer payments for two months with no fees and tack on those payments at the end of our loans.  I would recommend everyone to start talking to their banks now.



    Originally posted by @Scott Trench
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  • Henish Pulickal
    Flipper/Rehabber · San Diego, CA · Member since 2020 · 33 posts · 20 votes
    6y

    I've heard from my network that commercial lenders have a deferred payments for their borrowers for 60 days already!  I haven't heard of any residential deferrals yet.  

    0Reply
  • Ibrahim Hughes
    Real Estate Consultant · Bloomfield, NJ · Member since 2010 · 2k+ posts · 1k+ votes
    6y

    It's in EVERYONE'S best interest to implement some type of mortgage deferal. If tenants don't pay but landlords have to, they will eventually lose these homes. The houses eventually become vacant/abandoned (esp. in inner cities) and we're back to accumulating blighted neighborhoods.

    2Reply
  • Kenneth Blacow
    Peachtree City, GA · Member since 2016 · 41 posts · 17 votes
    6y

    In addition to mortgage deferral/forbearance I have also applied for the SBA economic disaster assistance. On the application I requested two months of lost rent and stated that I have not suffered an economic lose at this point, but I wanted to get in the pipeline. I do not know what is going to happen, but my rentals are in a tourist town that is closed down and most of my tenants work in the service industry. I have not gotten word on either program yet. Just waiting to see how it plays out. I can handle two months with no rent, but do not plan on not getting some stopgap for anything after that.

    2Reply
  • Account Closed
    Contractor · Eureka, CA · Member since 2015 · 101 posts · 64 votes
    6y

    @Adam Tafel

    The Fed printing funny-money and spilling it into useless sectors of the economy leads to severe inflation or hyperinflation. My bet is on that happening within the year. No joke. People think it's an impossibility bc it's never happened in the US. But if we've all learned anything in the last few weeks that is no excuse to not see obvious signs all around.

    Preventing it relies on someone believing there is someone else in a position of power who could see that coming and prevent it. Let me know when you spot them!

    0Reply
  • Gregory Stanley
    Attorney · AL · Member since 2018 · 54 posts · 36 votes
    6y

    My concern is that tenants seem to think they won't have to pay their rent.  Even in NYS it is just a moratorium on evictions...rent is still accruing, late payments and fees are still growing.  After the 90-day eviction moratorium these folks will be evicted for owing three months' rent and won't be able to rent a new place because...there is an eviction and possibly a money judgment in their record.  Its a trap for people looking for a miracle.

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  • Gregory Stanley
    Attorney · AL · Member since 2018 · 54 posts · 36 votes
    6y

    Scott, if mortgage payments are suspended, the interest is still accruing.  Looks like another upside down bubble in a year or two.  Property will depreciate because the investors will be getting out for lack of rents, and the loans will be going up by basically a payment a month plus interest.  Bad public policy to decrease value of an investment while the debt increases.  But, I do foreclosure defense, so I'll be busy in a year.

    2Reply
  • Andy Brown
    Rental Property Investor · Tampa, FL · Member since 2017 · 70 posts · 115 votes
    6y
    "Capitalism without bankruptcy is like Christianity without hell." - Frank Borman

    I understand that these are unprecedented times, but it is difficult for me to get behind a mortgage moratorium for RE investors. Unlike many of our tenants who live paycheck to paycheck and could care less about financial fundamentals, this is our business, this is what we do--and many of us for a living. And if you're on THIS site and listened to the BP podcasts at all, you know--or should know-- the essentials of keeping reserves for the predictable unpredictables (e.g., 6 months reserves because you just never know...). We're rewriting the rules now on basic finance and incentivizing a weak and unstable economy. I fully appreciate that many of us may rely on or advocate for a moratorium just to not lose our shirt, and to each their own right now, but I would just strongly encourage all of us to learn from this and get our houses in order, in every sense of the term, moving forward.

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  • Nicole Heasley Beitenman
    Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
    6y

    Fortunately, none of my tenants have expressed hardship (yet; the 1st of the month is near). Thinking proactively, I'm calling my creditors and loan servicers to find out what relief programs they're offering.

    One of my servicers will forbear payments up to 3 months, but the full amount is due at the end of the forbearance. I have no idea how they think the average Joe is going to have 3 months of payments ready if they're having issues making payments now. Everyone else is willing to extend of the term of the loan (which is more profitable for them in the long term anyways).

    Thank God I have reserves and tenants who have good jobs, but those may only hold out so long. And if I was someone who was totally out of work? Forget it. If your loan ever ends up with CMC Funding, refi ASAP. This isn't the first time they've been total a-holes. 

    0Reply
  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    6y
    Originally posted by @Andy Brown:
    "Capitalism without bankruptcy is like Christianity without hell." - Frank Borman

    I like this quote. 

    This whole thing reminds me of the stripper scene in the Big Short where she talks about the 5 houses she owns. This site pumps RE as an investment, but it generally lacks showing the downside of such ventures. 

    There are a lot of "newbies" that weren't around for the 2008 crash buying "house hacks" etc, without understanding what can happen in a down market. What happens when your roommates are out of work? Did you plan on that when putting 5% down and buying your home? We've been blinded by the huge bull run we've been on and now the day of reckoning is coming. I hope I'm wrong.

    Everyone getting a bailout will hurt us in the long run. Someone has to pay for the TRILLIONS that the fed is printing. 

    3Reply
  • Armando Gomez
    Member since 2019 · 24 posts · 6 votes
    6y

    @Scott Trench I already called BOA and they did give me a Forbearance on my property . It did take about 90 min on hold but got thru to them and told the on hardship on my tenant due to Covid-19 .got 3 month deferred with no penalty or dings on my credit. Be calling your mortgage servicers. Look on website where to call for Hardship.

    You will be on hold for 2hrs , but well worth it and no documentation needed just your acct. And no document to sign they just gave me a confirmation number.

    Got it on my personal house also.

    2Reply
  • Elizabeth Lee
    Torrance, CA · Member since 2017 · 17 posts · 3 votes
    6y

    @Jay Hinrichs How does this feel different than the last cycle? I feel like we are on repeat.

    0Reply
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