Yesterday, Italy’s deputy economy minister announced that mortgage payments would be suspended across the entire country in light of the coronavirus (COVID-19) outbreak.
While plenty of Italian homeowners might not actually contract the virus, the economic implications of a countrywide shutdown could affect their ability to make timely housing payments.
For example, with Italy effectively coming to a standstill, many homeowners may not be able to work until the lockdown is lifted.
It’s unclear who will be paid during this time. There are also longer-term layoffs to consider if businesses are permanently affected.
In the UK, similar measures are already being extended by individual banks, including TSB Bank, which is offering a “repayment holiday for up to two months.”
My understanding is this gives homeowners a two-month break before they must resume making timely monthly mortgage payments.
Similar moratoriums are being offered to mortgage borrowers by other British banks, and they’re also making it easier for customers to get access to their cash if need be.
U.S. Mortgage Lenders May Not Be Far Behind
- Italian banks have already suspended mortgage payments nationwide
- UK banks are now offering mortgage holidays to affected customers
- Matter of time before U.S. banks and lenders extend similar assistance
- If you need help paying your mortgage, contact your loan servicer and look out for news bulletins
While no major coronavirus restrictions have made it to the United States just yet, at least beyond some universities and other private institutions, there’s a chance we could experience a similar clampdown soon.
Really, it sounds more like a matter of when than if, despite no mandatory freedom of movement likely.
This is known as “social distancing,” designed to limit human-to-human contact and stop the spread of the fast-moving COVID-19.
Assuming that happens, there’s a good chance mortgage lenders will step in and offer temporarily relief for those affected.
Again, while the virus itself may not directly affect an individual homeowner’s health, disruptions in multiple industries could lead to layoffs or the inability to perform job duties.
Generally, when a natural disaster occurs, Fannie Mae, Freddie Mac, and HUD offer some level of assistance and/or guidance to loan servicers to ensure borrowers can get back on their feet, or avoid falling behind to begin with.
This may involve the suspension or reduction of mortgage payments for 90 days up to six months, depending on the circumstances.
They may also suspend eviction lock-outs on real estate owned (REO) inventory to avoid displacing tenants during what could be a sensitive time.
Tip: If you need assistance paying your mortgage at this time, be sure to keep an eye on the FHFA or HUD websites, along with Fannie Mae and Freddie Mac’s, for any pertinent announcements.
Homeowners Are Helping Themselves to Lower Mortgage Rates
- Record low interest rates lead to 55.4% increase in weekly mortgage applications, per MBA
- Refinance share surged to 76.5% of total loan volume from 66.2% a week earlier
- 2020 mortgage origination forecast revised up to $2.61 trillion
- Industry group now expects refis to account for $1.23 trillion in volume, up 36.7% from earlier estimates
In the meantime, homeowners seem to be helping themselves by taking advantage of the record low mortgage rates also on offer at the moment.
Instead of asking for a payment holiday, borrowers are lowering their mortgage rates in droves via a traditional mortgage refinance.
This morning, the MBA reported that home loan applications surged 55.4% from a week earlier as refis jumped 79% to their highest level since April 2009.
Home purchase applications also rose six percent from a week earlier, a good sign in an otherwise uncertain time.
That pushed the refinance share of mortgage activity to 76.5% of total applications from 66.2% a week earlier.
The record low interest rate environment prompted the MBA to revise its origination forecast, forecasting total mortgage volume of $2.61 trillion this year, a 20.3% increase from 2019’s volume ($2.17 trillion).
Additionally, they expect home refinance originations to double their earlier projections, surging 36.7% to around $1.23 trillion.
Despite the unknowns in this ever-evolving situation, home purchase originations are still slated to climb 8.3% this year to $1.38 trillion.
While this is generally good news for the mortgage industry, it’s probably wreaking havoc on loan servicers and mortgage investors who are seeing prepayment speeds go through the roof.
Additionally, it’s going to make it difficult for mortgage companies to get their staffing right if mortgage rates all of a sudden U-turn, and in any case, once the party comes to an end.
Read more: How soon can I refinance my mortgage?
