It’s a typical move on the side of the Feds to lower interest rates whenever there are signs of a looming recession. This is done to temporarily ease the pressure on the economy as it struggles to get back on its feet.
You think this move will be good news for those taking advantage of mortgages to buy their homes as interest rates do have a significant effect on mortgage rates. On the contrary – especially in this COVID-19 pandemic.
Unemployment rate soaring
When the spring of 2020 arrived, so did the coronavirus. To contain its spread, most U.S. states went into lockdown and kept the populace sheltered at home.
Most industries ground to a halt. Some sectors like real estate managed to keep their head above water by altering their processes and bringing everything online. However, there were several other sectors that were severely hit, primarily those that depended on human traffic and face-to-face interaction. That said, many companies had to shut down operations indefinitely, some permanently.
With the spike in unemployment came the issue of people defaulting on their monthly home mortgage and risking foreclosure. This situation is currently crippling many lending institutions who, prior to the pandemic, have been enjoying significant gains from home buyers who were eager to snag one of the many houses for sale in North Charlotte, NC, and in other areas.
Cutting on losses
Mortgage lenders are now trying to cut on losses brought about by the economic and employment repercussions of the pandemic by coming up with more stringent standards for approving loans. Those applying for refinancing to ease the pressure on their pockets may also find it more difficult to do so.
Thankfully, the government has come up with a mortgage payment forbearance program under the CARES Act. Those eligible for this said program are those who took advantage of government-backed loans to pay their home mortgage.
They can have their monthly mortgage payments temporarily suspended or reduced without the risk of foreclosure.
Some private lending companies may also have their own version of mortgage forbearance. In Charlotte, banking institutions like the Bank of America and Trust Bank have prepared programs that essentially defer payments of instruments like credit cards, mortgage, and auto loans.
Forbearance, not forgiveness
It must be clarified, however, that mortgage forbearance is different from mortgage forgiveness. Forbearance merely suspends payments up to a certain time. After that period, payments have to resume, including dues incurred during the suspended months/days. Forgiveness erases those dues from the said period.
The mortgage provider has a number of payment options for those who sought forbearance. These are the most common options:
- Paying the entirety of dues at the end of the forbearance period;
- Increased monthly payments until dues from the forbearance period have been completely paid; or
- Paying dues from the forbearance period at the end of the mortgage.
Know more about these updates on mortgage programs designed to make your life a little easier in this time of COVID-19 from local real estate experts like the team of Valarie R. Brooks Real Estate. We can provide you with developments on the movement of the Charlotte, NC real estate market, as well as great real estate options in the area. Call us at 704.488.5458 or send us an email at [email protected].