Mortgage forebearance EXTENDED, no crash in sight

42 Replies

I just read the Housing Wire article stating they are going to extend FHA Forbearance into December 2021 for "certain borrowers."

Stuff like this is why in my humble opinion everyone holding their breath for 2021 to look like 2009 is going to be dissatisfied.

If the pent up foreclosure situation is a backed up damn, it will likely slowly trickle, not come flooding in. Aka a deal here, a deal there, 1 reasonable seller knowing they need to exit their ownership but that dynamic juxtaposed with a continued sellers market everywhere requires perhaps some extra tact & servitude to get the deal.

For me, recognizing that in the wholesaling space is why I’ve made a pivot to get my license, and work on getting some things together for flips and long term / short term holds.

Call me crazy, but I feel like the wave is going up, not crashing down, and there might still be time ride it.

Not to mention sub-markets like Tulsa, Oklahoma City, Little Rock, Indianapolis, Dee Moines, etc — anything slow, strong and steady — might not see a crazy crash at all.

If anything the greater concerns are increasing wage & class gaps, the artificial creation of dollars by the US, shifting policies that artificially create favorable market conditions, and things that if I think about it too long make my IQ of at least 1 start to hurt my head.

All I’m saying is if you’re newer and waiting on the “perfect” time - especially if someone is telling you to - you might be waiting long past this next year.

Thoughts?

OK, I'll give you the flip side.

Let's use NYC retail (worse of the worse) as an example.  Plenty of empty space at $80/sqft sitting for long periods.

Landlord cannot lower rent since he told lender its $80/sqft and that may trigger default at a lower rent.

This debt ain't going away and with CMBS it's buried in a big portfolio and can't be separated out, therefore tainting the whole portfolio.

I'm not saying it'll crash RE prices since, like in 2010, owners will just refuse to sell unless forced.  However, many starving brokers :(  As the kids say, sadz.

@Steve Morris

Good point. I sort of forget about those areas and factors.

We certainly have a lot more commercial properties becoming available here too, sadly.

It points me back to markets being macro and micro.

Thanks for sharing.

 True, the commercial (non-residential segments) properties SEEM like the future is forever changed.  Who knows what it will be, but it's clear that some of the most valuable office and retail space, which investors have chased up to the top over the past 10 years, may be an anchor around the neck for many personal investors and bigger portfolios.

True, housing is showing no signs of an impending collapse.  The government has shown an unwillingness to "let another 2008 happen" and a correlated willingness to do whatever it takes (including a lot of meddling and virtue signaling) to keep the economy afloat, at least in the individual arena (with personal paychecks, housing security, etc)

How will these, and a dozen other factors interplay?  It's downright unknowable and It will be fascinating to see how this all shakes out from a down-the-road perspective.  As far as investing goes, I think if the numbers make sense now there's not a strong reason not to buy.  The trick will be finding deals in which the numbers, done well, actually work.

I imagine they will continue these forbearances until the unemployment rate gets back down to a reasonable level. Had a bad feeling this two week "slow the spread" was going to turn into two years..

Forrest Faulconer

Originally posted by @Nate Sanow :

@Steve Morris

We certainly have a lot more commercial properties becoming available here too, sadly.

I think its a lot more common than anyone is admitting.   Downtown Portland looks like Berlin after the war and plywood city.  Yet none of these politicians have a clue on how to make things better.

 

@Nate Sanow I do think you are correct in that the crash many are waiting for may not actually happen. Seems like everything is shifting. Small towns are getting larger, big cities are getting smaller, businesses are pursuing online platforms instead of physical when possible, and government is getting involved in every step.

Still real estate is a get rich slow game.

Mortgage forbearance is like pushing a snowball up hill. You can only push it so far before it gets too big and rolls back down.

Even if the payments are added to the end of the loan, just the act of skipping payments has consequences. Mortgage servicers and mortgage backed securities are affected. Loans are most profitable in the early years, before inflation erodes the value of the pay back dollars.

Keep in mind the housing crash was the result of high default, which is just lack of payments. So although these loans are not in default, they are also not paying. It is like if a tenant stops paying rent and tells you they will pay it back in a few years. For the months they are not paying, the damage is done to the landlord.

Originally posted by @Will Fraser :

 True, the commercial (non-residential segments) properties SEEM like the future is forever changed.  Who knows what it will be, but it's clear that some of the most valuable office and retail space, which investors have chased up to the top over the past 10 years, may be an anchor around the neck for many personal investors and bigger portfolios.

True, housing is showing no signs of an impending collapse.  The government has shown an unwillingness to "let another 2008 happen" and a correlated willingness to do whatever it takes (including a lot of meddling and virtue signaling) to keep the economy afloat, at least in the individual arena (with personal paychecks, housing security, etc)

How will these, and a dozen other factors interplay?  It's downright unknowable and It will be fascinating to see how this all shakes out from a down-the-road perspective.  As far as investing goes, I think if the numbers make sense now there's not a strong reason not to buy.  The trick will be finding deals in which the numbers, done well, actually work.

Will, 

I just went over yesterday to our MLS offices here in PDX to pick up 4 new lock box's for Ms. Lori its a two story A B class building elevator . no cars in parking lot save a few.. I thought OK peeps working from home. I go in and the ONLY office that was occupied was the MLS.. I looked in 3 other offices and no one in there and no furniture so they have decamped. so to me it looked like about 80% vacancy.

Same thing with a few strip centers you know the ones with maybe 7 to 10 stores and no real anchor.. I saw a few of those basically one store left..   this was in a suburb of PDX.  and of course down town between blm protests that got hijacked by Antifa thugs its a ghost town.

3 weeks ago I was in PHilly and Baltimore there was more going on there than PDX by a long shot I suspect the residence there in the inner cities dont really have the options as many in the PDX market might have to find alternate work space and living.

Our new homes we are building 20 miles south of downtown. we have a few that are moving out of PDX to less crowded safer ( no question) areas.

 

@Joe Splitrock

I concur but what are the indicators of massive defaults all at once? I’ve heard & read of some forbearance borrowers actually making some payments to kick the can down the road.

Originally posted by @Steve Morris :
Originally posted by @Nate Sanow:

@Steve Morris

We certainly have a lot more commercial properties becoming available here too, sadly.

I think its a lot more common than anyone is admitting.   Downtown Portland looks like Berlin after the war and plywood city.  Yet none of these politicians have a clue on how to make things better.



 

BLM got hijacked by Antifa and the thugs .. then it became the thing to do  Protest every night .. its the same 300 to 400 people .. ruining a city of 800k..  its amazing that the citizens of Portland have not stood up to them.. and just sit there and let it happen.

 

Originally posted by @Nate Sanow :

@Joe Splitrock

I concur but what are the indicators of massive defaults all at once? I’ve heard & read of some forbearance borrowers actually making some payments to kick the can down the road.

 It is hard to predict the breaking point and there are wild cards like government assistance that can delay or prevent serious problems. My state is allocating substantial COVID relief funds to mortgage and rent relief programs, so that will reduce defaults in my market. I am not sure what other states are doing with their COVID money and there is the unknown of future federal funds or bail outs.

@Nate Sanow

I process forbearances everyday for COVID 19 impacted borrowers. Latest forbearance I've seen so far is into October of next year. But I don't doubt it'll continue further even into 2022. Maximum allowed days is 360. If you were current March 2020 before the pandemic really settled you can have the whole balance of missed payments deferred to the end of the loan as a subordinate lien or modify the loan. Many people will keep their homes. The people who are scared are the ones selling their homes now or who have bad credit reporting prior to COVID. I'm not waiting for a crash. Maybe a correction but nothing major.

FHA and other GSE's are delaying foreclosures. Many will offer streamlined modifications likely to help clean up the mess for people who can still pay their mortgage.

Some private investors follow suit and others are still foreclosing.

At the end of the day, people who remain unemployed or get big pay cuts likely will end up screwed.
Damage will still be done but IMO not as much as some people are expecting.  There will be an uptick that will trickle out over the next several years for a new wave of foreclosures and distressed owners.




Private investors are still foreclosing.

@Steve Morris

Modern democracies elect politicians based off a glorified popularity contest with almost zero emphasis on skill set, qualifications, background etc... do you really expect junior college dropouts to save the world in some way? For likely half of voters or better you could run a potatoe with a hat on for ____ party and as long as it was the “right” party they would vote for it.

"do you really expect junior college dropouts to save the world in some way?"

I'd be happy with a JuCo dropout, 2 out of 5 council members in Portland barely have a GED (I don't know if they can even spell it).

I think the sadder thing is the voting population here and how easily duped they are.

among general people(not typical investors),who can work remotely are minimum affected  and able to invest right now, but companies have already started realizing that if remote work is successful then why limit to country, why not outsource to cheaper countries...future doesn't seem good. 

Originally posted by @Nate Sanow :

I just read the Housing Wire article stating they are going to extend FHA Forbearance into December 2021 for "certain borrowers."

Stuff like this is why in my humble opinion everyone holding their breath for 2021 to look like 2009 is going to be dissatisfied.

If the pent up foreclosure situation is a backed up damn, it will likely slowly trickle, not come flooding in. Aka a deal here, a deal there, 1 reasonable seller knowing they need to exit their ownership but that dynamic juxtaposed with a continued sellers market everywhere requires perhaps some extra tact & servitude to get the deal.

For me, recognizing that in the wholesaling space is why I’ve made a pivot to get my license, and work on getting some things together for flips and long term / short term holds.

Call me crazy, but I feel like the wave is going up, not crashing down, and there might still be time ride it.

Not to mention sub-markets like Tulsa, Oklahoma City, Little Rock, Indianapolis, Dee Moines, etc — anything slow, strong and steady — might not see a crazy crash at all.

If anything the greater concerns are increasing wage & class gaps, the artificial creation of dollars by the US, shifting policies that artificially create favorable market conditions, and things that if I think about it too long make my IQ of at least 1 start to hurt my head.

All I’m saying is if you’re newer and waiting on the “perfect” time - especially if someone is telling you to - you might be waiting long past this next year.

Thoughts?

Completely agree with you. I wholeheartedly believe a crash will come....did I say "crash"? I meant correction...then again, if prices continue up 20% and then drop 10-20%.....what does that really mean? Other than possible missed opportunities with mortgage pay down, time to gain experience/confidence, low interest rates, etc. And if you are buying actual deals with equity, good cash flow and growth, I truly do not see anything to worry about. In my area we are heavily underbuilt and there is strong demand. At some point this will change, but unless something drastic happens to jobs and overall economy the market will continue to increase. Unfortunately, some families were negatively impacted, but I do not see it as something that will drag down the RE market. You never know what can happen....we just have to do the best we can with the information we have.

@Nate Sanow

I think the intentions were good - however it’s created inventory from freeing up. Until supply increases - sellers will be in complete control especially in affordable/desirable markets.

Unfortunately this and low rates have created a real affordability crises and debt that is the stickiest type of debt (besides student loans)

New government solution of the day incentive for selling your house 😆😆

They subsidize credit. Subsidize the lenders when a borrower doesn’t pay. Deposit money in the bank when there’s a crises.

Next up pay the sellers?

negative interest rates?

MMT?

IMO fed and govt is basically backing real estate as much as they are a dollar, one historically depreciates. One historically appreciates.

Honestly the inventory shortage crises doesn’t shock me. I’m playing til they say your on your own.