Maui Real Estate Blog
What Does the end of Forbearance Mean for Borrowers and Maui The Real Estate Market?
The initial economic impacts of Covid-19 included lost jobs and disruption of income for large numbers of people around the globe. With the local Maui economy largely dependent upon tourism, our small island was among the nation’s hardest hit. The original CARES act that passed in the spring of 2020 offered relief to homeowners who struggled to pay their mortgages due to job loss or depressed wages. Those struggling homeowners were able to work with their lender to pause or reduce their mortgage payments for a period time. What started as a 6 month program was extended to 18 months. A total of over 7.25 million borrowers used forbearance as a means of relief for at least some period of time. That number of homeowners in forbearance is down to approximately 2,000,000 by around the end of June.
As of September, some of the borrowers who were among the first to enter the forbearance program will come to the end of their 18 month forbearance period. At this time, it does not appear as if there will be additional extensions of the program. What does the end of forbearance mean for those borrowers and the market as a whole?
The good news is that Fannie, Freddie and FHA are saying the right things about borrowers coming to the end of their forbearance. Recent guidelines released by those entities are focused on loan modifications for borrowers struggling to make their payments due to Covid related financial struggles. If you are a homeowner faced with the end of forbearance in the immediate future, remain proactive in your discussions with your mortgage holder. Ask about loan modification programs.
For those that may not be able to get a loan modification or the terms of a modification are too onerous, selling may be the only option. During the mortgage meltdown of the 2000s, borrowers struggled with the dual challenge of economic hardship and plunging prices. The result was a wave of foreclosures. Current market conditions couldn’t be more different as prices on island and for much of the continent climbed steadily over the last twelve months. The good news is that the recent appreciation should allow the majority of borrowers who need to sell to pay off the balance of their loan. That should significantly curtail the number of foreclosures. Feel free to Contact The Maui Real Estate Team if you are trying to get a sense of the current market value of your property. We would be more than willing to help out with a free broker’s price opinion.
Based on the above, it seems unlikely that the end of forbearance will significantly change the Maui market. The impact of the end of forbearance in the Canadian market seems to reinforce that notion. About 17% of the mortgages in Canada went into forbearance. As of February, 98% of the forbearance programs expired. As of the end of June, the average home price in Canada was up 25.9% year over year.
While the end of forbearance might lead to a small bump in inventory, a drastic influx of distressed property seems less likely. Real Estate economists are predicting a gradual increase in inventories as the year progresses. Post forbearance properties should be one component of that increase.
Maui Real Estate Blog
Maui County Property Tax Rates for the 2021/2022 Fiscal Year
July 1 marks the start of the new fiscal year and that means updated property tax rates for Maui County. While there are quite a few rates that stayed the same this year, there were also a few notable changes.
Here are a couple of things to note about our tax rates before detailing the changes by property classification. Tax rates are impacted by the use and zoning of the property. The county has a tiered tax system based on the value of the property. Tier 1 is for properties assessed at a price of upto $800,000. Tier 2 is for properties assessed between $800,001 to $1,500,000. Tier 3 is for properties assessed for more than $1,500,000.
All tax rates below are per $1,000 of assessed value. Here are the tax rates for 21/22 with notes on any change in rate from the last fiscal year.
- Owner occupied Tier 1 $2.41 (down .10), Tier 2 $2.51 (down .10), Tier 3 $2.71 (up .10)
- Non-owner Occupied Tier 1 $5.45, Tier 2 $6.05, Tier 3 $8.00 (up $1.10)
- Apartment $5.55
- Short Term Rental Tier 1 $11.11 (up .03), Tier 2 $11.15 (up .07), Tier 3 $11.20 (up .12)
- Hotel & Resort $11.75 (up $1.05)
- Agricultural $5.94
- Conservation $6.43
- Timeshare $14.60 (up .20)
- Commercial $6.29
- Industrial $7.20
- Commercialized Residential $4.40
Property taxes are paid biannually in Maui county with payments due on August 20th and February 20th. Check out the Maui County Property Tax Frequently Asked Questions pages if you have additional questions on assessments and classifications.
Maui Real Estate Blog
A Quick Follow Up to Our Mortgage Relief Post
This is just a quick follow up on the mortgage relief post I wrote on April 4th. Yesterday, I read an NPR article about issues with mortgage relief . It featured a couple from Maui. Like many island residents, the couple is experiencing a massive loss of income due to the impact on COVID-19. They are one of the many homeowners pursuing mortgage relief that are finding the terms offered by their lenders to be onerous.
In the case of the Maui couple, their loan is through Freedom Mortgage. While the lender offered to defer their loan payments for three months, Freedom Mortgage required a balloon payment at the end of that period. Even under the most optimistic scenarios, it seems unlikely that the borrowers would be able to come up with that balloon payment.
The Consumer Finance Protection Bureau website indicates that federally backed mortgages should be able request forbearance for up to six months. The CARES Act creates mechanisms to move deferred payments to to the end of the mortgage. Freedom Mortgage originally claimed that the balloon payment was the only option they could offer for deferred payments. They claimed they could not defer the amount of the forbearance to the end of the loan. NPR brought this to the attention of federal regulators. On a subsequent follow up, Freedom Mortgage changed its tune with NPR. The Maui Couple is still trying to get clarification on their options.
To be clear, not all borrowers are running into the roadblocks encountered by this Maui couple. A number of lenders are making adjustments that allow for six month deferments with deferred payments at the end of the mortgage. That said, borrowers should expect prolonged long wait times and filing an application to get the forbearance. Forbearance terms can also vary depending on your loan program.
The biggest takeaway is that borrowers should be cautious if they are seeking mortgage relief. Make sure you read the terms of any relief offer closely. Reach out to a housing councilor (800) 569-4287 if the terms offered by your lender are confusing or not financially feasible.
Maui Real Estate Blog
Potential Mortgage Relief
Maui depends on tourism for a significant part of its economy. Covid-19 and the ensuing shut down means a big loss of income for a number of Maui homeowners. If you are a Maui resident unable to pay your mortgage, there may be some mortgage relief options for you based on the CARES act.
To be eligible, your mortgage needs to be federally owned or backed by a federal agency. Relevant federal agencies include:
- Fannie Mae
- Freddie Mac
It’s pretty clear when your loan is HUD, USDA, FHA or VA. Fannie and Freddie back over 50% of the nation’s mortgages, but not all homeowners know or remember who backs their loan. You can check to see if your loan is backed by Fannie or if it is backed by Freddie.
If you are unable to pay your mortgage due to financial difficulties related to Covid-19, you can contact your mortgage servicer to request forbearance for 180 days. Forbearance allows you to pause or reduce your mortgage for that 180 day period. To be clear, this does not reduce the principal on your loan. You would still need to pay off the missed payments or the difference on the reduced payment in the future. You may apply for an additional 180 day forbearance if your financial situation does not improve by the end of the first 180 days. Your forebearance options may depend in part on your loan program. If you are concerned by impacts on your credit score, servicers must not report to the credit agencies a Borrower who is on an active forbearance, repayment, or trial period plan due to COVID-19 related hardship.
If you are facing foreclosure due to existing loan challenges, your loan servicer or lender may not foreclose on you for 60 days after March 18th. The CARES Act forbids beginning either judicial or non-judicial foreclosure proceedings. The Act also prohibits finalizing a foreclosure judgement or sale during this period.
Still Confused or Need Help?
The Consumer Finance Protection Board offers a guide to Coronavirus mortgage relief options that gives advice and provides a lot more detail. They provide important suggestions like questions to ask your mortgage servicer. You may also find your nearest housing councilor by calling by calling (800) 569-4287. If you don’t have a federally backed mortgage and you are not able to pay your mortgage, you should still contact your mortgage servicer to see what options they may have available to you. Last, but not least be wary of scams. Unscrupulous Sleazeballs will try to take advantage of the current situation. Lean heavily on the advice of the CFPB.
Maui Real Estate Blog
The New Hawaii Purchase Contract and its impact on Buyers and Sellers
The new Hawaii Association of Realtors purchase contract that goes into effect on May 1, 2012 is dramatically different than the current purchase contract. The new purchase contract is meant to flow and read more naturally; groups like contingencies and provisions together; and more clearly defines roles, responsibilities, time frames and obligations of Buyers, Sellers and their Realtors.
I would imagine that the first 30 to 60 days after implementation will involve some back and forth between brokerages as we adapt to the new purchase contracts. The Maui Real Estate Team is taking a proactive approach to understanding how the new purchase contract impacts Buyers and Sellers by taking the following actions:
- Attending the Realtors Association of Maui training session the other day.
- Discussing the implications of the new purchase contract with our corporate attorney.
- Spending several hours this weekend analyzing the changes.
- We will have a company meeting / training session regarding the new purchase contract.
- We will create a Buyer’s Guide to the New Hawaii Purchase Contract and a Seller’s Guide to the New Hawaii Purchase Contract which will be available to registered users of The Maui Real Estate Team’s website in the next 30 days.
As with any document that has undergone a major revision/ re-write, the new document isn’t perfect. In fact, in some ways it is more complex and requires more written communications between Realtors, Buyers and Sellers. The new Hawaii Purchase Contract requires Sellers to be more organized and diligent in their approach to selling their Maui properties. For instance, upon closing, under the “cleaning clause”, carpets are now designated as needing to be professionally cleaned. An odd addition, but one to be aware of. Did someone on the purchase contract committee have a cousin in the carpet cleaning business?
As for Buyers there are potentially additional “Buyer safeguards”, some of which require intimate knowledge of the new purchase contract. However, there are also different “options” for cash transactions which need to be carefully handled. There is also the mention of several types of resources that Buyers should use whenever purchasing a home, condo or land on Maui. We are in the process of updating our list of resources.
If you are thinking of buying or selling Maui property at this time, please consider contacting The Maui Real Estate Team for a free consultation regarding how the new Hawaii Purchase Contract will impact your purchase or sale. Our experience and insights will help you minimize headaches and surprises and help you execute your real estate transaction without a hitch.
Maui Real Estate Blog
Quick Seller’s Tip-Get A Survey Before You List
I will be honest, real estate transactions can be challenging in this market. As a seller, you can take steps before you list that will help mitigate against unexpected escrow drama. If you have the means, we strongly recommend that a seller obtain a survey. We recently closed on a transaction where at first glance you would never expect survey to be problematic. The property was in a subdivision that was new within the last 15 years. There were no outward signs of any significant encroachments. When the survey was completed all parties were shocked to find a three foot encroachment. It turns out there had been an error by the original developer of the subdivision. The error was recognized in the late 1990s, but was not corrected as it was supposed to have been by the developer. While a solution was created to satisfy all parties, closing was delayed almost two months. I may have also lost a few of those scarce hairs on top of my head in the process. Unless it is a short sale or an REO, most sellers are required to do a survey. If you get it done before going under contract, you may have the opportunity to address any encroachments.