With the recent passage of the historic $2 trillion COVID-19 stimulus package, now is a good time to consider how the law’s provisions will affect current homeowners and prospective homebuyers over the coming months.
While the sweeping $2.2 trillion package – formally the Coronavirus Aid, Relief, and Economic Security (CARES) Act – is the largest economic stimulus enacted in U.S. history, the impact on the housing market may be harder to gauge in the short term.
Several provisions of the new law will ease the impact of the economic downturn sparked by the spread of the novel coronavirus on businesses and individuals.
HOW THE COVID-19 CARES ACT STIMULUS PROTECTS HOMEOWNERS
The mortgage stimulus program benefits apply to borrowers with first and second mortgage loans on single-family homes, condominiums and cooperative units. The relief provisions also apply to borrowers with reverse mortgage loans.
- The law prohibits foreclosures and evictions on all federally-backed mortgage loans – those guaranteed by Fannie Mae, Freddie Mac, FHA, USDA, or VA – for 60 days.
- Borrowers can request up to four extensions of 30 additional days each.
- The law includes an additional $600 per week of unemployment benefits for employees who are out of work due to the crisis, which can help borrowers meet their mortgage obligations if they lose their job.
- Servicers of government-backed loans must offer up to six months of mortgage loan forbearance – reduced or deferred payments – for borrowers who have experienced financial hardships or job loss related to COVID-19.
- $560 billion in relief benefits are set aside for individuals—including a one-time $1,200 check for those that qualify. The checks will be distributed automatically and no action needs to be taken to ensure that you receive your check.
Current homeowners who are experiencing difficulty making their mortgage payments due to job loss or a reduction in income brought about by the coronavirus pandemic are urged to contact their mortgage servicer – where you send your loan payments – to ask about forbearance options available to them.
We urge any homeowner considering entering into forbearance to fully understand how their finances and credit may be impacted, and to make sure they can manage the terms of repayment before finalizing a forbearance agreement.
WILL THE COVID-19 CARES ACT STIMULUS BILL AFFECT THE SPRING HOUSING MARKET?
As we mentioned in a previous blog post, the Federal Reserve has implemented two emergency interest rate cuts since the COVID-19 virus started spreading throughout the U.S., pushing interest rates on funds it lends to financial institutions to near zero percent. The Fed is trying to ensure that interest rates for home mortgages will likely remain low for some time.
What impact will that have, though, in a housing market where businesses and government offices that support real estate have closed, or their employees are working from home?
Virtual real estate platforms and self-guided home tours for prospective buyers may offer a viable option during this situation. But for now, the housing market may be in a holding pattern until there is consensus on how businesses and individuals will operate during this crisis.
In short, the spring home buying market – already set to be competitive – now likely will be even tougher for prospective homebuyers and sellers.
SHOULD I BUY NOW OR WAIT?
Housing prices historically have risen over time, and despite the uncertainty, now could be a great time to buy. According to realtor.com, after analyzing the impact of the 2009 H1N1 flu pandemic, the impact to housing of COVID-19 could be “palpable and momentarily disruptive, but less likely to be long-lasting at a national level.” The Realtor group’s analysis says the impact of coronavirus “…has the potential to accelerate economic corrections and, with some lag, contribute to sharper but temporary drags on housing activity. However, if the virus threat remains relatively contained and within the boundaries of a short-lived pandemic, housing activity is likely to follow its current decelerating yet controlled trajectory.”
Most people buy a house to meet a life need, not as a traditional investment, so if you need a home, continue your search. If you already own a home and are confident in your current employment and continuity of income, you might consider refinancing while interest rates are low.
WHAT DO I DO NEXT?
Our experienced team is poised to help you make the most of current mortgage opportunities. In today’s competitive housing market, being pre-qualified or pre-approved for a mortgage gives a potential homebuyer the best chance of success when deciding to make a purchase offer after finding the home of their dreams.
If your job situation is stable, and you already have set aside funds for a down payment and closing costs, the current uncertainty and reduction in traffic to properties on the market could give well-qualified buyers additional leverage.
If you have questions about the CARES Act or how you may be impacted, reach out to one of our certified mortgage experts today.