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Posted on 01/17/2025 7:19:19 AM PST by ChicagoConservative27
As deadly wildfires continue scorching their way through Los Angeles and the surrounding area for the second straight week, homeowners are worried about the prospect of defaulting on their mortgages in the wake of the unprecedented disaster were offered some reprieve from the nation’s major lenders.
On Monday, Fannie Mae and Freddie Mac unveiled mortgage assistance and relief options for customers reeling from the historic Southern California fires.
Both government-backed corporations are offering 12-month forbearance plans, meaning that struggling homeowners could either reduce or suspend their mortgage payments for up to a year without incurring late fees, foreclosure, or other types of legal proceedings.
(Excerpt) Read more at nypost.com ...
Just watched a video a few days ago about how the COVID forbearance is about to tank the real estate industry nationwide because it is expiring. Forbearance mitigates late fees and foreclosures, but it does NOT stop interest from being accrued. A 10 year forbearance sounds great as you work to get the insurance company to rebuild your house, but once it is rebuilt, it is as if you still had the old house and had not been making payments for years. You probably owe more than when you first bought it, even if you started with equity.
As you said though the bank wont allow the borrower to drop the PMI until they feel like there is enough equity there to pay off what the borrower owes easily.
The loan will include the total value of the property (land + improvements) So yes, the bank might allow for the borrower to drop their PMI after they get to 20% equity, but much of that equity is in the land which will always retain its value regardless of what happens to the home.
If you have a $500,000 home sitting on a million dollar lot, and the home burns and you didn’t have PMI and instead had some regular insurance, whatever insurance you had will go to the true home owner, the bank first.
What a conundrum for those poor people. In high-price places like Pacific Palisades, most of your equity is in the land, not the structure. The land didn’t burn is still there, and is still owned by the mortgagee. But the landscape is now a dreadful moonscape, so the value of the land has diminished. And who are the buyers that would buoy the value of the land? Unscrupulous speculators who will pay you 25% of what the land used to be worth?
Will the land once again be valuable? Will the government swoop in and take it all to erect hideous, brutalist 30 story low-income towers?
If I were a Pacific Palisades “homeowner” wiped out by the fire, I honestly don’t know what I’d do. There are no good options:
1. Keep paying the mortgage in the hope the land will retain its value?
2. Walk away?
3. Cut and run by selling out to speculators?
4. Wait for the government to condemn all of it and offer me a Fifth Amendment Takings Clause buy-so so they house the poor, the homeless, and the illegals?
How can you continue to pay the mortgage AND your new housing costs elsewhere? Whose budget can afford that?
What to do?
That gave them two weeks to find another insurer... If you lose insurance on something you own today, you better get new insurance by tomorrow. That’s on you... And nobody else.
You can blame liberal California politicians for that. The people there got what they voted for.
Actually, they can sell the property for $10 or allow the mortgage companies to repo it. As to taxes, what assessor will be able to assign a value to a chimney surrounded by ashes. Can you say “negative valuation”?
Look. I know that. Could you afford to pay 40% more for insurance for your home? It does come down to people being priced out.
But I guess where you sit you feel above all that because you are so smart.
You’re pretty smug, aren’t you.
Purchase a used motor home or trailer, and keep the wheels on so it is temporary and not needing a permit, and live in it while the yard gets cleaned up, then plan on the new digs. With eased restrictions, likley will nt take years to approve the new building. Might consier hitting up the mortage holder for a loa, as their collateral also improves.
That was then. This is now.
At the moment, those lots are worth ZERO. You cannot build on them. You cannot even demolish and clear away the rubble. Water, sewer, and electric services have been disconnected or destroyed for many of the properties.
And the former homeowners are effectively bankrupt. The money is gone!
Sorting out that mess will be a huge effort, with a great deal of screaming behind closed doors in conference rooms. In the end, the banks, insurance companies, and the LA government are going to grab bailouts from taxpayers in all the other states to cover the losses.
The grifting opportunity in state-sponsored "redevelopment" projects ought to be truly spectacular. But the cities will not come back to what they were. Whatever recovery does happen will take a century or so to complete in forms that are unimaginable today.
The house have to be insured don’t they? I don’t think banks give out mortgage loans without any homeowners insurance. In the mean time they should give some grace period until he owners get on their feet. I think that if some insurance company demanded a payment right after my place burned to the ground, I would send the mortgage company an envelope of ashes.
That is why the old adage of "neither a borrower nor a lender be" comes back to haunt many. Being out of debt is a better stance, when calamity of this sort strikes, than being "second" when a lender comes first.
Why don’t people who have a mortgage on a house have home insurance?? That is a requirement- by the mortgage company. If they can’t get it or don’t have it the mortgage company forces it on them.
Loss of use coverage, also known as additional living expenses (ALE) insurance, is a standard part of most homeowners insurance policies. It helps pay for living expenses if your home is damaged and you can’t live there.
BTW- shouldn’t the property taxes drop like a rock now that the value of these homes have dropped?
“many homeowners will just walk away from their property, default on their mortgage and leave the mortgage holder with a scorched piece of land.”
And the mortgage holder will end up with the land and the insurance payout and will promptly resell the lot to the highest bidder.
The homeowners will end up with nothing, not even their equity.
Only if they didn't buy quality homeowners insurance.
Insurance companies can’t just drop your coverage. They have to give you 30 days notice. Might be longer in CA.
People who got letters of non-renewal two weeks ago would still be covered under their original unexpired policy.
Quality homeowners insurance solves some problems—but not all.
One major issue (particularly in Pacific Palisades) is that the community infrastructure has been destroyed which lowers the value of all land in that community—at least for some period of time (definitely measured in years, not months).
Do you really want to rebuilt your fully insured home surrounded by piles of rubble on all sides?
What a mess.
This is exactly what Newscum wants. He just issued an EOrder banning anyone but the state from issuing an unsolicited bid for any such property. This 90 day hold on letting a friendly 3rd party buy in and rebuild will allow the state to exercise eminent domain and seize land at a price they set. This will allow CaCaLand politicos to “invest” in the apts that Newscum will support with a rezoning of the residential areas.
I’ve always wondered why such commie trash would support leaving brush in forested areas. How do they personally benefit?
I looked it up. CA requires a 75 day non renewal period. The insurance companies are required to notify you 75 days in advance of your insurance renewal date that they are not renewing.
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