Do You Really Intend to Pay?
Dear borrower, please sign here if you intend to pay your mortgage.
That’s the amusing state of affairs as Covid laws allow borrowers to skip payments for a full year.
New Question: Do You Really Plan to Pay This?
Some mortgage lenders are asking customers taking out a mortgage to confirm they don’t intend to seek forbearance, a move meant to keep losses low during a pandemic that has put millions of Americans on shaky financial footing.
The unusual requirement comes in the form of a new document included in many borrowers’ closing paperwork. While the language varies, the forms generally tell borrowers that they won’t be allowed to skip payments until their loans are backed by the government, according to forms reviewed by The Wall Street Journal. The forms, known among lenders as “Covid-19 borrower certifications,” often ask home buyers to confirm that they don’t expect changes to their income. Some warn of potential penalties if any of the certifications are later proven to be false.
The New Liar Loans
Since it is impossible to prove intent, the question seems moot.
But the wording tells all you need to know.
Lenders do not want borrowers to skip payments until their loans are backed by the government, after which the lender no longer gives a damn.
Meanwhile, it can take days, weeks or sometimes even months for a newly made loan to get government backing.
Delinquencies Soar
I wrote this for my readership tonight pic.twitter.com/QpYKw0nXcf
— Steve, Wise Owl (@Wise_Owl_Trader) August 25, 2020
New Home Surge to a 13-Year High
Despite the concern and the delinquencies, note that New Home Surge to a 13-Year High With the Midwest Leading the Way.
Mish
When the bank agent comes by they find no sign of the ‘owner’, the yard a mud pit piled high in junk cars, every light on, the heat on full blast and every window open with 3 pit bulls sticking out barking and growling.
The mortgages are already free or break even considering real inflation, anyways? To keep the economy going, the rates will have to go more negative. Next will be free houses for everyone.
“From each according to his ability, to each according to his needs”
Thanks, central clowns.
Single biggest factor in keeping a borrower current is skin in the game meaning how big a down payment and how much equity. After that is documented income and ability to pay. Credit score and borrower character are b.s. and not reliable
It’s the down payment and equity. Still, I had a neighbor who bought with a 100% mortgage in 2005. Month one, never paid. Back then, it took about a year for a bank to begin foreclosure. Then, he declared bankruptcy, and filed that “information” with the foreclosure court. That delayed foreclosure another year. Then he withdrew foreclosure, and the bank had to start all over again. A year later, the housing market tanked and the bank didn’t care anymore. Didn’t want to foreclose on an underwater mortgage. Then, five years later the market is coming back. Bank starts foreclosure again. So, he files bankruptcy again, and again delays foreclosure for another year. You get the picture. Finally, in 2017, the court got tired of him and his serial bankruptcy filings, and the bank was allowed to take it. Dude left town, but got free housing for 12 years. Hero or villain? Who’s to say these days?
your response has nothing to do with my point.
Lol, I liked your point and thought you might enjoy learning from others’ experiences with mortgage deadbeats and how they succeed in cheating the system regardless of new rules. But I guess you know everything already. Nice chatting with you.
“your response has nothing to do with my point.”
WHAT!?
Vigorish’s anecdote (and it is that, since it is just a single data point) was both informative and on subject since we were talking about ‘skin in the game’ and this was an example of what happens when there is none. I fully appreciated the contribution.
In today’s world “it’s just business” and “don’t hate the player, hate the game/rules”. Some have come to believe “if it’s not illegal, it’s not immoral”.
Why should “caveat emptor” be any more valid than “caveat venditor”?
Why should either be valid?!
This is very true. The seller, in this case, doesn’t care anymore because there are few if any remaining private mortgage lenders. If they can’t bundle the loan and sell it on to the government backed agencies, they won’t cut the deal. I had another neighbor who was a mortgage broker for Hollywood back in the 80s. Private lenders loved the stars because they paid their mortgages, and it was serious interest rates. You couldn’t shove enough money at their multi-million dollar mansions then. Afterwards, he moved on to low credit score borrowers because he could charge enormous fees to make the loan, only so long as he could still bundle it with other questionable borrowers for resale. That’s the key, bundle crap loans and sell them for fees to some bag holder, probably a pension fund in another country, that trusts the implicit government guarantee. It worked from 2003-2007, so let’s just do that all over again. After all, money is debt now, so create more debt and the economy will boom. But that’s a whole other confidence trick.
Yes, a 20% down payment would certainly discourage a borrower from defaulting. Investors may even be willing to buy the loan from the bank before the gov’t completes paperwork to back the loan.
Stupid question. I hope someone answers “no”, gets processed anyway, doesn’t pay, and gets to stay in their home as “the contract” clearly stated there was no intention of making any payments.
Idiots. If I could afford it I wouldn’t be here. Of course not.
“Do you really intend to pay?”
I wonder how many people they really expect to answer that question with an answer other than yes? LMAO.
The residential housing market seems quite strong here in Austin…..the Cali exodus is still ongoing….and Tesla and Apple are still making big commitments here, it seems. If there is a buying opportunity coming for small investors, I don’t expect to see it this year…..good time to reduce leverage anyway, if I can…maybe look at refinancing…..
You’d be surprised how effective a simple asking people if they intend to pay their mortgage can be. With servicing calling and reminding delinquent borrowers to pay can make a difference
The problem Sechel is if they had the money TO pay they would have paid. Of course there will be some few who buy intending to get CARES ACT Covid forbearance for a year then walk away, or who really do lose jobs or get sick, but the vast majority of people not paying do so because they cannot.
Mortgage debt is senior debt but for people behind and in trouble they prioritize credit card and auto debt, because they use the car to get around or want access to the credit card for funds. If they have equity they’ll find a way to pay and sell the home or borrow from relatives. If there is no equity, they walk
That is true, so it makes me wonder why the banks are asking such a question, I mean, when they close they should have equity since they just did make a downpayment, they have essentially paid a year of “rent” in advance on the house even if they did buy with no intention of making payments. Unless they overpaid for the house but even then they did pay that down to the bank.
Of course ew live in the Trump era now where rules just do not matter and mothing makes sense.
But, I say inflation has gone out of control so most people can sit back and allow price appreciation to make their payments for them. Only a slight exaggeration.
I went to Publix yesterday thinking to do tacos so wanted a pound of hamburger, $7.99 per pound and that was for the fatter 93% which is not even 93% as of this week but 92%. EIGHT bucks per pound, more than double since Covid started. I also will be needing a new hot water heater since mine is about 30 years old and making noises when it trips on. I had to buy one in 2009 for $400 (installed). The Home Depot guy estimate was $1,709! For a freaking hot water heater with no moving parts.
We are in for a wild ride that is going to make early 2020 look tame. A rigged contested election, economic collapse, racial outrage, and still dealing with Covid.
I honestly think the US will not survive at this point. And I do not see how a breakup can possibly remain amicable. So banks asking absurd questions is just another symptom that is a pointed reminder that we are going down.
The mortgage market is almost completely nationalized already, with FNMA and FHLMC securitizing and “guaranteeing” the vast, vast majority of all originations.
The coming tsunami of defaults will only complete the process. What exact form that will take, is the only question.
Bam it will suck but only about half as many are seriously delinquent as in the subprime meltdown. And a lot of those will not even present a problem till after the forbearance period. The raeal problem is going to be in rentals I think with 40% of renters owing back rent and few able to make that up. Being a landlord is going to really suck for about a decade.
Sure I do, barring some dire and unseeable consequence!
Such as disappointing income…
Bubbles, bubbles, bubbles…