Articles

COVID – 19 – Perspective, Mortgage Payments and Market Recap

May 5, 2020

Perspective

With many states moving towards a slow reopening and phased approaches to opening businesses, we should start to see the economy shift over the next few weeks to months. As we know, it is in America’s best interest to get the economy back up and running.

COVID 19 Update

United States

  • Cases: 1.07M
  • Recovered cases: 127K
  • Deaths: 61,700

Worldwide

  • Cases: 3.21M
  • Recovered Cases: 986K
  • Deaths: 228K

To give you some perspective, the leading cause of death in America is heart disease killing one American every 34 seconds and resulting in 647,000 deaths a year or on average, 53,917 people a month. Something to think about.

Mortgage Payments – To Pay or Not to Pay

Forbearance

What is it: A mortgage servicer or lender allows you to temporarily pause your payments or make smaller payments. You will have to pay a payment difference or any paused payments back.

Things to think about: You could owe a large bill that comes all at once. If your servicer allowed you to pause your mortgage for a specified period of time, you may owe all of those months missed at once.

Unfortunately, interest on any paused amounts continues to accrue until you repay the entire amount.

Payment Reduction Option: The servicer allows you to reduce your mortgage by half for a specified period of time. When that time is up, you will have one year to pay back the amount of that reduction.

What to consider: Any reduction in payments would be spread over the course of 12 months and the difference is then added to your mortgage payment, increasing your monthly payments during that year. Using a mortgage of $1,000 as an example, you would pay $500 for three months, and starting on the fourth month you would pay $1125.00 ($1,000 + $1500/12) monthly for the next year. Interest on any reduced amounts will continue to accrue until they are paid in full.

Recommendation: We would encourage everyone to continue to pay their bills if at all possible. As nice as it sounds right now to not pay your mortgage or to cut that payment in half, you will owe this back and in some circumstances will have to pay more each month.  It is ideal to keep paying.

Much like the idea of Forbearance, right now you can have 6 months of pausing your Federal student loan. Borrowers will see pauses automatically and according to the stimulus, there will be no interest for six months. This is for federal loans only and does not apply to private loans.

Market Recap

There were 3.8 million Americans who filed for unemployment last week. This brings the total new claims to over 30 million in the last 6 weeks. The speed with which the unemployment situation has transpired and its gravity are breathtaking.

The good news is that the number of first-time jobless claims continues to fall week-over-week since mid-March. The bad news is that we are becoming desensitized to the size of these numbers. There were more than 3,800,000 people who lost their jobs and filed for unemployment insurance last week. That would have been more than a 50% increase in national unemployment back in February, but now we view this as an encouraging number.

The unofficial numbers for unemployment are likely to be over 20% at this point. Some of these people will hopefully find relief in the coming weeks as various cities begin to re-open.  We expect continued weakness and instability in equity markets as reality starts to set in for Wall Street and investors.

As always, please reach out if there is any way we can help.  We are in this together, and together we will make it through.