Who Can Blame Mortgage Lenders Now?
More than 36 million Americans have lost their jobs in the past eight weeks. Nearly 15% of the US workforce is unemployed, according to the US Bureau of Labor Statistics.
Fed Chairman Jerome Powell warned this week: “The scale and speed of this slowdown is unprecedented in modern times, far worse than any recession since World War II.”
Ah, the good old days!
Mortgage lenders calculated their rich returns on cash mortgages by grossing up the cost of their funds. Now they are starting to worry about whether they will ever see a return on their investment.
Nearly 8% of all mortgages are now forborne, according to the Mortgage Bankers Association. Data from the builders survey shows that new mortgage applications fell 25% from March to April.
Foreclosure moratoriums, mortgage loan deferrals, and loan modifications are good temporary balms for saving time. But sooner or later it will be time to pay.
How quickly will these jobs return? Will it be time to replenish your checking account so that you can cover your mortgage? How much is going to get back before mortgage lenders get cranky and start foreclosing?
The largest lending department in the United States, Wells Fargo Bank, stopped cash refinancings a few weeks ago, and it also put the brakes on home equity lines of credit, or HELOCs, after April 30, said spokesperson Tom Goyda.
The Chase Bank stopped home equity loans before Wells did. Several lesser-known HELOC lenders have stopped offering HELOCs or have severely reduced their offers.
Mortgage banking trends eventually turn into a herd mentality, especially once fire sales and foreclosures begin. Median home prices will predictably start to plunge.
The good news: Some lenders still offer cash refinances and HELOCs.
U.S. owners have $ 6.2 trillion in workable equity, according to Black Knight. Thus, 44.7 million homeowners may be able to withdraw a first mortgage and / or a HELOC.
But most lenders have added additional fees in the form of points and require higher average FICO credit scores, tighter income and debt ratios, and have reduced the amount of money you can withdraw when refinancing. of a loan.
Here are some of the more aggressive options that may still be available when it comes to withdrawal:
- Conventional, FHA and jumbo financings (over $ 765,600) allow collection of up to 80% of the loan / value ratio.
- FHA reverse mortgages can provide up to $ 401,174 withdrawal at age 62 for example or $ 491,515 at age 80. Non-FHA reverse mortgages can lend up to $ 4 million.
- VA loans allow up to 100% cash out.
- Conventional loans for unoccupied homes offer up to 75% loan repayment to value.
- For a HELOC, you can get up to a 95% combined loan-to-value ratio.
The last word: if you think you need the money, get it out now. The longer you wait, the more you risk a complete halt in cash lending of any kind as the mortgage market continues to deteriorate.
If you apply for a HELOC, withdraw the money and put it in your bank account. Lenders have a habit of freezing home equity lines without warning when home values start to plummet.
Freddie Mac Rate News: The 30-year fixed rate averaged 3.28%, up 2 basis points from last week. This is the third lowest rate in 49 years that Freddie Mac has tracked 30-year mortgages, with the lowest (3.23%) occurring two weeks ago.
The 15-year fixed rate averaged 2.72%, down 1 basis point from last week.
The Mortgage Bankers Association said the volume of loan applications was unchanged from the previous week.
At the end of the line : Assuming a borrower gets the 30-year average fixed rate on a compliant loan of $ 510,400, last year’s payment was $ 227 more than this week’s payment of $ 2,230.
What I see: Locally, well-qualified borrowers can obtain the following fixed rate mortgages with 1 point: A 30-year FHA (up to $ 442,750 in the Inland Empire, up to $ 510,400 in Los Angeles counties and Orange) at 2.75%, a conventional at 2.5%, a conventional 30-year mortgage at 2.875%, a conventional high-balance 30-year mortgage ($ 510,401 to $ 765,600) at 3.5 % and a 30-year jumbo variable rate mortgage that is locked in for the first five years at 3.625%.
Eye-catcher loan of the week: A 30-year jumbo mortgage, locked in for the first five years at a 3.5% free rate.