The new hot topic and ‘trigger-word’ in the coming months for the real estate and mortgage industry is the word Forbearance. The reason for the shift in the economic lexicon is due to the effects of the two historic hurricanes to hit the south: Harvey and Irma.
It is most likely that thousands of mortgages held by homeowners in the hurricane-stricken areas of Texas and now Florida hit by flood waters, could be hit by the financial waters. Many homeowners will be focused on survival and shelter, rather than paying their monthly bills which includes paying their mortgages.
There is a possibility that Fannie Mae and Freddie Mac and the Federal Housing Administration will offer forbearance for at least 90 days to borrow is in Texas and now what seems to be Florida following the Hurricane Irma.
The economic recovery of Texas will center around reestablishing the day-to-day life or family, home and school. At the bottom of the list will be paying their mortgage. But the billions of dollars of mortgages are a stark reality. Where will the money come from and how soon will it arrive will be pressing issues.
According to sources Fannie Mae Freddie Mac and the Federal Housing Authority which backs of vast majority of mortgages today will offer forbearance for at least 90 days to borrowers in the Houston area and they potentially could extend that for up to a year.
The forbearance means that borrowers will not have to make their monthly payments without a penalty period interest however will still accrue. The offer is not a solution but a stopgap.
It is estimated that up to 75,000 Houston borrowers could become unable to pay their mortgage over the next few months. In addition to that it is also believed that 45000 other mortgage holders would become seriously delinquent on their loans over the next few months according to Black Knight Financial.
This issue in Texas is only compounded by the problems experienced by the homeowners in Florida due to the arrival of Hurricane Irma.
In 2005, approximately 20% of borrowers in the Katrina area had less than 10% equity in their homes. Today in Houston the percentage is barely 4% which presents a real new problem, should I stay or should I go?
But where will the homeowners in Houston go? And now, where will the homeowners in Florida go to?
No one knows exactly what will occur because this has never happened to the country with two major hurricanes doing so much damage.
These two natural disasters coupled with the looming national debt can possibly represent a tipping point that no one wants to consider.
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