All Forum Posts by: Dan Schwartz

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! 

@Jay Hinrichs good share about polio.  A friend had shared with me a photo of his dad and uncle as young boys, crouching on their property line, talking to the boy next door from a safe distance, because it was "Polio Summer" and no one was allowed to actually play with each other.  He had also mentioned the pools being closed.

@Chris Mason and any others, would you characterize higher interest rates as a symptom of the credit market freezing (or hiccuping), and higher fees as lack of staffing?  Or is it all showing up as higher interest rates, take it or leave it?

There won’t be more staffing in a day, but $700 B of MBS should unlock the market, right?

No, I don’t.  The Great Depression and Great Financial Crisis were both results of speculative debt bubbles (and other things, but mostly the speculative debt bubbles). 

Recessions are resets in output.  That’s what we are seeing now.  China shut down for two months.  Production of goods are way down. Shipping is way down. The market panic is related to the uncertainty of how long it will take to recover. 

Stock prices will reset, in large part because the buybacks that goose EPS to the upside will similarly destroy EPS to the downside.  But this is a destruction of paper wealth, just like the dotcom bubble.  The GFC of 2008 was a destruction of debt, or money itself.  There’s a difference between having less of something (stock losses) and none of something (destroyed debt via default)

Make no doubt, this one’s gonna hurt.  It already has for most people.  But I don’t see a depression given the current circumstances.  

@Cody L. Airbnb is the (a) brand for short term rentals. Homeowners own the property. Hilton is a brand for hotels. Seven out of eight times, someone other than Hilton usually owns the property. If they want to fly the Hilton flag, they follow Hilton's rules, which now include free cancellations for all reservations up to 24 prior to arrival. It's not Hilton eating those losses so much as the property owners and managers, just like we are talking about here. Again, I've been posting in this thread to point out that STR investors who are relying on Airbnb/VRBO/etc for bookings (which is most, but not everyone) has inserted themselves into the hospitality industry, which has major players calling the shots. There is no such analog in the long-term rental industry.

@Collin Hays the beef with insurance is a valid one. Airbnb/VRBO sell the insurance as agents for the big insurers. The big insurers are getting hammered (as expected). I have people going on three weeks waiting for any acknowledgment of cancellation from one large insurer. As with any insurance, the more claims made, the lower the purchaser is rated. If Airbnb sends all of their customers to insurance to make claims, their loss rate will skyrocket and the insurer will make future insurance sales far less profitable for Airbnb. It's often a wiser decision for the travel company to refund money vs send them to make an insurance claim. Again, I point back to the comment above; this is common practice in the travel industry, and it's Airbnb/VRBO who gets to call the shots on their platform. Hotels switch flags all the time, and I won't be surprised to see people leave certain STR platforms based on these emergency policies.

Again, I hope everyone makes it through this!!

@Collin Hays, I didn't realize you were the property manager and not the owner. I could connect you with my friend who is the GM of a hotel that saw $2M in revenue evaporate overnight. Fully cancelled without contracted penalties. He doesn't own the place either. His brand and ownership are dictating the rules, just like the online marketplace providers are for STR owners.

As for mom and pops in the travel industry...well that’d be me. I own and operate a specialty agency.  A college professor called me late in the evening two Fridays ago to say, “the University pulled the plug.  All international travel is cancelled.”   $250K in revenue goes poof.  I shake his hand verbally and start working on refunds and insurance claims.  But I’ve been with him for over 25 years.  My client.   Not Airbnb’s or VRBO’s. 

This morning a Superintendent of a public school district calls my cell phone and asks me to spell out the options for an upcoming HS trip.  The money’s been paid to the vendors.  The contract says 100% non-refundable.  He readily admits all of that. But without hesitation, I write a report that shows we can recover close to 80% for them now if we cancel and that I’ll fight to get the other 20%. Or we can postpone and lose nothing (based on the strong cooperation in the industry among hotels, airlines, etc to save business). I could have kept all $100K and told them to pound sand while trying to recover the money on the other end.  I’m sure there are people doing just that in my industry.  I just got a call back that they are going before the school board to ask for special dispensation to take seniors on a trip after graduation.  If it passes, I’ll keep the $100K in revenue....and the client.  

I call my bus partner this morning to check in.  He is extremely tied up in the NCAA tournament, and has been for years.  It’s been, shall we say, an interesting 18 hours on that front.  “Everything is cancelling.  Everything.  I’ll zero your group out, too” meaning he’ll refund it and eat the entire cost.    I told him, “no, I’m still working to get them on the road, and I’m not going to let you eat the whole thing by yourself if they don’t travel.”  If he goes under, I lose one of my absolute most valuable partners (and don’t get me started about my tour guide friends in Italy who have watched months of bookings vanish with no compensation, and the operators in Ireland who had thousands of people cancel this week when the country closed down the Patrick’s Day celebrations, and so forth).  We are all in it together, and we help each other live to see another day.  

I’m not telling any of you that you should eat your losses, and do it with a smile.  I’m pointing out the business model (I too own an Airbnb) is built on a hospitality industry model, not the real estate model.  That’s why Airbnb is doing what it’s doing.  And while your homes might be an alternative experience to hotels (which is awesome!!!!), there is a reason Airbnb has fought with the hotel industry tooth and nail about everything from taxes to licenses, etc.  

I once advised the President and try e CEO of a company I was working for about a project they were interested in.  I had a deep background in it, and while it was tangential to their core business, they were finding a lot of value in it.  It was the President’s pet project, in fact.  At the end of the report, the CEO said, “that’s ridiculous.   I have to spend a year on this project and risk all of that money to maybe make what we make in a week of our core business?”  Different industries, different processes.  

I wish you all luck.  I really do.  But here’s why you’re seeing what you see from the hospitality industry.  And if you didn’t realize that’s what industry you were in, you might think about whether it’s the right one for you, long term.  

Good to know, @Guy Gimenez

@Guy Gimenez how many of the 14 instances of indemnity in those closing documents did you have removed?

It’s clear which of the commenters  are in, or at least understand the hospitality business, and which ones don’t. 

I’m not surprised by the preponderance of responses here.  They aren’t your clients; they are Airbnb’s clients.  That’s why Airbnb is refunding affected travelers, same as nearly everyone else in the  tourism/hospitality business is. 

@Samuel Merrick have you set up a business for your music and registered it with any state? As a fictitious name and/or an LLC, as you prefer? My loan underwriter recently told me that if the business has been around for more than five years, they might be able to look at only one tax return instead of averaging the last two. We haven't gone this route yet, but I find this underwriter to be very reliable. Being a business also helps musicians now that you can't deduct your gear on Schedule A anymore. Business formation could be an easy, low-cost tool in your belt for the future.