Homeowners are already in a bind. The bind is tightening, both on homeowners and on lenders. The current lockdown has stopped income because it has stopped all paid work except employment that is deemed essential. While Congress continues to refuse to provide income supports for regular people, its monetary support of corporations will be useless to homeowners although in some cases it might help parties holding residential mortgages.
Homeowners have not stopped paying mortgages in record numbers because they have suddenly been infected with fraud. Homeowners have stopped paying mortgages in record numbers because they don't have the money. See Kathy Orton, Homeowners Stopped Paying Mortgages in Record Numbers in April, WASHINGTON POST online Friday, May 22, 2020.
Parenthetically, landlords renting both residential and commercial properties report "that companies with offices or retail spaces" have skipped their rent payments in greater numbers than individual renters. The landlords report that over 66% of all commercial tenants did not pay their rent either in April or in May. That compares with less than 25% of residential tenants who skipped rent in April and in May. The CEO of one major real estate company said this about the rent-skipping 'office and retail tenants with healthy finances': "They think of this as some sort of field day. I'm shocked, candidly." See Matthew Haag, Commercial Rent Revenue is Sliding, and Landlords Predict a Catastrophe, NEW YORK TIMES, Friday, May 22, 2020, at A12.
The Census Bureau itself has confirmed that homeowners have stopped paying their mortgages in record numbers because they simply do not have the money. The Census Bureau released a report on the 2020 mortgage crisis last Wednesday, May 19, 2020. 47% of adults across the nation told the Census Bureau when asked that they or another adult in their household had lost income since March 13. Loss of income has hit the poorest and low-income wage earners the hardest. 56% of the respondents who had not earned a high school diploma, and 51% who hold a high school diploma but did not go on to college, have lost work and so have lost income. Only 38% of respondents with a college degree or higher, reported that they have lost income in the same period.
The income forecast for the rest of the year is abysmal. Most businesses responding to the Census Bureau's survey expect it will take at least 6 months to resume operations. More than 20% of adult individuals who responded to the survey have little or no confidence in their ability to pay rent or mortgage that come due next month. See Sarah D. Wire, One-Fifth of Americans Fear They Can't Pay June Rent or Mortgage, Federal Survey Finds, LOS ANGELES TIMES online Wednesday, May 20, 2020.
Foreclosures have already begun in many cases, particularly for homeowners struggling to pay on so-called distressed mortgages, and despite widespread publicity of possible forbearance options at this time. See Matthew Goldstein, Goldman Forecloses on More Than 10,000 Homes, NEW YORK TIMES, Friday, May 22, 2020, at B6.
So when the tales of fraud come tripping in, as they will, the lived experience of landlords and lenders is that wealthy business tenants have stopped paying rent by more than 2.5 times the rate of residential tenants. And for their part, homeowners in large numbers have stopped paying their monthly mortgage payments for a good reason that has nothing to do with maximizing profit: Homeowners just don't have the money.
Nonetheless the stories of fraud will come. They will be broadcast across the land. What is true, however, is that evictions will rise, unauthorized add-ons such as insurance premiums placed by force will increase, and foreclosures will climb. We have been here before. We have seen this movie, as they say. Here's hoping that this time it will be all right in the end, or it won't be the end.
Find out more about the Causes and Claims behind Lender Force-Placed Insurance Practices. See the Introduction by Dennis Wall to what's in the Loan Documents you sign when you or your clients buy a house, Section 2:1 in LENDER FORCE-PLACED INSURANCE PRACTICES published by American Bar Association Publishing, accessible at no charge to you and your clients at https://www.dennisjwall.com.
Please read the disclaimer. ©2020 Dennis J. Wall. All rights reserved.
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