Unemployment rates generated by coronavirus is worrying home loan lenders and borrowers.by Theresa Hus Content Writer for RealEstateAgent.com
With the outbreak of coronavirus, many people in the USA have lost their jobs. Reports say that in a three week period, more than 16 million jobs were lost and in a single week, about 6.6 million Americans were now unemployed. The good news is that all the people who lost their jobs because of the coronavirus epidemic, qualify for unemployment benefits. However, the economy of the world is suffering and we can see that in many markets.
With the increase in the unemployment rate, home loan lenders are more worried about the fact that many people won’t be able to keep up with their monthly payments. Also, borrowers who lost their jobs might try and find ways to reduce expenses and that might include mortgage payments. Mortgage lenders take all the necessary steps to avoid foreclosure, and that might come in the form of delayed payments.
With the real estate market seeing significant changes lately, some of the best real estate agents worry over the fact that home sales dropped and homebuyers may back out until the crisis is over. Agents have to come up with solutions to the pandemic situation and figure out how to sell a house during the pandemic. Altogether, the increase in unemployment rates due to coronavirus worries both parties involved in the home loan transaction.
Issues home lenders face during the pandemic
The situation became critical in a way that even the government asked lenders to ease some of the loan payments for the time being. Moratoriums are being emitted by local governments, but it doesn’t extend at state level. Because most homeowner’s finances have been battered by the coronavirus, lenders had to start postponing mortgage payments.
For example, the Coronavirus Aid, Relief, and Economic CARES Act, would allow homeowners to apply for a mortgage forbearance plan that allows them to suspend mortgage payments for up to 12 months. This would help relieve some of the financial pressure of homeowners who lost their jobs, but the mortgages are not being forgiven only delayed.
Later mortgage payments will resume and they might see an increase in interest rates, but hopefully in a time of financial stability for borrowers. Missed payments will be folded into future payments, tacked on the end of the mortgage, or adding a couple more months of payments to the mortgage might be some of the ways lenders might handle the situation. Although, all these aspects can be worked out with the lender and the mortgage can be restructured.
Issues faced by borrowers
It is pretty obvious at this point that the main issue for borrowers is the financial situation. That’s why the involvement of the government in some areas is meant to relieve some of that financial pressure for some time.
Most homeowners have to worry about being able to provide basic necessities, for themselves and their families. Mortgage payments can really affect many of these people who have lost their jobs and now are unemployed. Unemployment benefits, although very welcomed during these times, could not cut it off. The moratoriums and mortgage relief really comes in handy for some affected families.
If you haven’t thought about building passive income sources that help avoid paying interest on your home loans, then you might need to contact your mortgage provider to ask for a mortgage forbearance plan. Even with a moratorium in place, at the end of the grace period, payments could resume at a much higher interest rate in order to compensate for the upheld months.
This could also come in as a problem since borrowers will have to find a stable source of income quickly. For most, it will be hard to start with high salaries that would compensate for the higher mortgage payments, because it would take some time for the economy to stabilize.
The coronavirus outbreak brought an increase in unemployment rates through the USA, therefore affecting many families that are struggling financially. Many lenders and lending companies along with local governments, understand these situations and have provided grace periods for those in need. The overall situation will stabilize after the threat is gone, and the economy will slowly stabilize.
Created on May 21st 2020 09:24. Viewed 217 times.