C-19, finances and Mpl/So budgets

Cv-19 financial assistance includes delays in mortgage payments for those who can demonstrate financial hardship. That will likely include many people. I support this. However, many mortgages include tax escrow which is forwarded to municipalities on behalf of the mortgagee. Since mortgages won't be collected, taxes won't be coming into towns.

Furthermore, municipal courts have been suspended. They are also a source of revenue to municipalities.

Do our towns have rainy day funds? What services can they support and for how long?  What services will be reduced or suspended if funds dry out?

I know these are questions, the answers to which depend on the amount of delinquencies, duration of the pandemic and the ability of affected homeowners to resume careers.

The mortgage holders collect and forward the property tax payments, to ensure that the properties don't go into arrears on taxes.  So, can we expect that they will continue to pay those taxes, even if the escrows aren't being refreshed?

Formerlyjerseyjack said:

I know these are questions, the answers to which depend on the amount of delinquencies, duration of the pandemic and the ability of affected homeowners to resume careers.

There are no silly questions right now. 

Formerlyjerseyjack said:

Cv-19 financial assistance includes delays in mortgage payments for those who can demonstrate financial hardship. That will likely include many people. I support this. However, many mortgages include tax escrow which is forwarded to municipalities on behalf of the mortgagee. Since mortgages won't be collected, taxes won't be coming into towns.

Not necessarily. Tax payments may still be required. Your escrow balance will go down, and possibly go negative. Which may be resolved when the delayed payments are received or at your end-of-fiscal-year escrow reconciliation.

ps - I knew a hardship case where the mortgage company deferred payments for six months. The deferral wasn't even reported to credit agencies. But he had to pay the monthly escrow and I believe the interest.

BG9 said:

Not necessarily. Tax payments may still be required. Your escrow balance will go down, and possibly go negative. Which may be resolved when the delayed payments are received or at your end-of-fiscal-year escrow reconciliation.

 Payments may still be required but if you do not have income, "require" all you want. The money won't be paid. So..

back to the question: Then what?

Formerlyjerseyjack said:

BG9 said:

Not necessarily. Tax payments may still be required. Your escrow balance will go down, and possibly go negative. Which may be resolved when the delayed payments are received or at your end-of-fiscal-year escrow reconciliation.

 Payments may still be required but if you do not have income, "require" all you want. The money won't be paid. So..

back to the question: Then what?

You try to work out your own six month deal or whatever deal they offer or you default. Normally, they try to work with you. Default is not in your or their interest.

between unemployment and the stimulus check, i would hope most people would be able to pay the bills......some people are getting MORE income being unemployed.  Unemployment benefits are being increased by $600 (i heard by week, but may be by month)...a family of 4 (with 2 adults) or more is getting 3400 on top of that.  A single parent home with 2 kids should get 2200 (if they meet the income requirements).  Even gig workers are getting unemployment.  businesses may have loss of business insurance to cover expenses (i'm not sure about this).

the group that would be financially hit hard would be the ones who are sick or quarantined....technically they can't collect unemployment...BUT IN NJ, there is temp disability (i don't remember what week it kicks in--maybe 2nd week?) and there isn't there paid family leave....most people if quarantined or sick would then become eligible for unemployment in a couple weeks.

The income limits for those stimulus checks are based on 2018 or 2019 AGI, so many people may not be eligible, even if they have NO income now due to job loss.

Let me restate the question: What is the status of municipal finances?

The next TC meeting is on March 31 at 7:30 pm.  It will be broadcast on YouTube.  There will be an email address you can use to send public comment during the meeting.  If you don't want to wait until then, why not email one or more members of the TC and ask them?

In my experience back in 2008/2009, the bank will continue to pay taxes and insurance if the homeowner is unable to make payments, even if the escrow account is empty. Not out of compassion to the homeowner (lol), but to protect the asset from damage or being taken by the municipality and leaving the bank with no way to recover on its loan. 

If anyone is in this unfortunate circumstance and isn't escrowing taxes and insurance, do your best to keep up the homeowners insurance payments. If you let the policy lapse, the bank will issue a force-placed policy that will cost many times the amount of a normal policy and you'll be responsible for reimbursing them at some point.

https://www.dfs.ny.gov/consumer/forced-placed.htm

BG9 said:

ps - I knew a hardship case where the mortgage company deferred payments for six months. The deferral wasn't even reported to credit agencies. But he had to pay the monthly escrow and I believe the interest.

Escrow maybe, but probably not interest. For a typical mortgage in M/SO, taxes + insurance + interest is the vast majority of the loan. The  principle payment is pocket change, especially in the early years of the loan.

kthnry said:

In my experience back in 2008/2009, the bank will continue to pay taxes and insurance if the homeowner is unable to make payments, even if the escrow account is empty. Not out of compassion to the homeowner (lol), but to protect the asset from damage or being taken by the municipality and leaving the bank with no way to recover on its loan. 

I don't think the bank is initially concerned of the property being taken.

It can take awhile before a tax lien is executed against a property. I know someone who is almost a year late in paying his NJ property tax. His only expense is the late payment interest.

Even after a tax lien is sold, the buyer of the tax lien does not get title or use of the property. The homeowner still owns it and can redeem the property for up to six months or two years, depending on who bought the lien.

The process of losing title can take three years.

BG9 said:

kthnry said:

In my experience back in 2008/2009, the bank will continue to pay taxes and insurance if the homeowner is unable to make payments, even if the escrow account is empty. Not out of compassion to the homeowner (lol), but to protect the asset from damage or being taken by the municipality and leaving the bank with no way to recover on its loan. 

I don't think the bank is initially concerned of the property being taken.

It can take awhile before a tax lien is executed against a property. I know someone who is almost a year late in paying his NJ property tax. His only expense is the late payment interest.

Even after a tax lien is sold, the buyer of the tax lien does not get title or use of the property. The homeowner still owns it and can redeem the property for up to six months or two years, depending on who bought the lien.

The process of losing title can take three years.

That's true in NJ, but in other states the property can be taken in a few months. A lot of these lenders/servicers operate nationwide and have standard policies across the country. 

Also, Fannie and Freddie have policies that must be followed for loans that they secure. For example:

https://servicing-guide.fanniemae.com/1040879711

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When the mortgage loan has an escrow account, the servicer must

• ensure the timely payment of all escrow and related charges before any applicable penalty or termination date, and ...

Advancing Funds to Cover Expenses

The servicer must promptly advance the funds to cover an expense when an escrow account has insufficient funds to pay an expense in a timely manner. The servicer must require the borrower to reimburse it for advances because the escrow deposit account did not have sufficient funds to cover an expense or emergency repairs to the property. Any funds the servicer advances must stay in the T&I custodial account until the borrower remits funds sufficient to cure the deficit.