Lender Overlays Due To Coronavirus Crisis On Mortgage Loans

BREAKING NEWS: Lender Overlays Due To Coronavirus Crisis On Mortgage Loans

The economic shut down due to the coronavirus pandemic is affecting the US economy like never before.

  • The US economy is shut down due to the unexpected pandemic
  • Millions of businesses have closed, either laying off workers and/or firing them
  • Many closed businesses are not going to come back
  • Other businesses and companies are getting prepared to file bankruptcy
  • The economic downturn due to the coronavirus has hit home hard. In a period of weeks, millions of hard workers became unemployed
  • The economy prior to the coronavirus pandemic was stronger than ever
  • The Trump Administration has boasted the lowest unemployment rate in 50 years
  • US unemployment rate was under 3.5%. Inflation and recession fears were almost non-existent
  • The housing market was stronger than ever
  • Mortgage rates were nearing historic lows
  • Mortgage loan applications were increasing week after week
  • The 2020 housing market forecast was stronger than ever
  • Lenders were creating and launching new loan programs such as non-QM loans
  • Then disaster struck
  • The coronavirus outbreak, first reported in Wuhan China, hit the United States
  • It devastated the US economy in a matter of a few weeks
  • Most state governors have declared a state of emergency and issued stay at home order
  • The coronavirus pandemic did not just sink the US economy but it crushed the mortgage markets

In this breaking news article, we will discuss and cover Lender Overlays Due To Coronavirus Crisis On Mortgage Loans.

Agency Mortgage Guidelines Versus Lender Overlays Due To Coronavirus Crisis

The coronavirus pandemic has turned the mortgage industry upside down.

  • GCA Mortgage Group is getting countless calls daily by borrowers who are getting conflicting answers by lenders on mortgage guidelines
  • Many are told by lenders that the minimum credit scores on a 3.5% down payment FHA loan are 680 FICO
  • Others are told by lenders that the minimum credit score on VA loans is 660 FICO
  • HUD, VA, USDA, FANNIE MAE, FREDDIE MAC did not change agency mortgage guidelines
  • However, due to mortgage liquidity issues on the secondary mortgage bond markets, lenders have increased their own lending requirements which are called overlays
  • Lender overlays are additional lending guidelines required by the individual lender that is above and beyond the minimum agency guidelines by FHA, VA, USDA, Fannie Mae, Freddie Mac
  • All mortgage agencies have not changed any guidelines
  • However, most lenders have increased credit score requirements and debt to income ratio caps on government and conventional loans

One great news is Gustan Cho Associates Mortgage Group is still approving mortgages under 620 credit scores and still do not have any lender overlays.

How The Coronavirus Pandemic Is Impacting The US Economy And Mortgage Markets

Over 16 Million Americans applied for unemployment benefits in the past three weeks.

  • The aftermath of the coronavirus pandemic economic crisis is causing lenders to anticipate a higher number of defaults if these economic conditions continue to progress
  • Experts, analysts, and economists say the collapse in jobs signals an unemployment rate of 12 percent or more, which would be the highest since the Great Depression
  • Others expect the unemployment rate can exceed over 30 percent

To control the risk below is what some of the bigger lenders are doing :

  • Wells Fargo adjusted its minimum score requirement to 680 for all government loans (FHA, VA, and USDA)
  • US Bank requires a 680 credit score for FHA, VA, and USDA loans, and 640 for conventional loans
  • LoanDepot is requiring a 620 minimum FICO score for VA and FHA loans with a higher score (660+) for cash-out or streamline refinancing
  • Flagstar is requiring a 640 score for both purchase transactions and non-cash out refinances
  • Chase does not do FHA loans or LPMI conforming loans
  • Mr. Cooper is charging up to 10% discount points on borrowers with 800 FICO and 50% LTV
  • United Wholesale Mortgage (UWM) are charging up to 7% discount points on high credit borrowers due to liquidity issues

Let your referral partners know as of now we are still doing these loans. This is a great way to start a conversation and to reach out to your agents and referral partners.

Loan Programs Affected By The Coronavirus Economic Crisis

Non-QM lenders have temporarily shut down taking non-QM loan applications until further notice. Some non-QM lenders have gone out of business while others are talking about filing for bankruptcy. Many lenders have stopped taking FHA loan applications on borrowers with under 640 credit scores. Most lenders have stopped taking on manual underwriting loans on FHA and VA loans. Others have stopped taking loan applications on FHA 203k loans and reverse mortgages. Many down payment assistance loan programs have been suspended until further notice. One time construction loans have been suspended until further notice by most lenders. Jumbo mortgages are at a standstill until further notice as well.

The great news is Gustan Cho Associates is still taking mortgage applications on the following:

  1. FHA and VA loans under 620 FICO and down to 500 credit scores
  2. FHA and VA manual underwriting
  3. FHA 203k loans
  4. Government and conventional loans with under 680 credit scores
  5. Jumbo loans

GCA Mortgage Group still has its no lender overlay policy on government and conventional loans. If you are being turned down for a government and/or conventional loan due to lender overlays, please contact us at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates are available 7 days a week, evenings, weekends, and holidays.

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