Mortgage Programs Suspended During Coronavirus Pandemic

BREAKING NEWS: Mortgage Programs Suspended During Coronavirus Pandemic

Gustan Cho Associates

The 2020 housing market is still strong. However, mortgage lenders are going through turmoil and chaos due to the economic impact of the coronavirus pandemic.

  • The secondary mortgage bond markets have plummeted
  • Mortgage-backed securities (MBS) have been tanking where investors do not see any value in purchasing mortgage bonds with borrowers with under 640 credit scores
  • Most investors have no interest in purchasing mortgages on borrowers with under 680 credit scores
  • The risks far outweigh the returns
  • This is one reason why borrowers with lower credit scores are having a difficult time qualifying for a mortgage during the coronavirus pandemic
  • Most lenders have changed their business model by implementing many lender overlays such as higher credit score requirements
  • Others have placed strict lender overlays by lowering debt to income ratio caps on government and conventional loans
  • Non-QM lenders have suspended all non-QM loans until further notice
  • Many non-QM lenders have gone out of business and/or filed bankruptcy due to the illiquid secondary mortgage bond markets

In this breaking news article, we will discuss and cover Mortgage Programs Suspended During Coronavirus Pandemic.

Agency Guidelines Versus Lender Overlays

Mortgage lenders have a warehouse of credit to originate and fund mortgages.

  • Lenders use their own money to fund government and conventional loans
  • Once lenders fund mortgages, they sell them to the secondary market, normally Fannie Mae and/or Freddie Mac
  • The secondary mortgage markets will only purchase mortgages that meet the minimum federal agency mortgage guidelines of FHA, VA, USDA, Fannie Mae, Freddie Mac
  • If they do not meet the minimum agency mortgage guidelines, the secondary market will not purchase them
  • Once the secondary markets purchase loans from private lenders, the lender will pay down their warehouse line of credit and reuse the open line of credit to fund more loans
  • In the event the secondary market does not purchase loans from the lender, the lender is stuck with the loan
  • Loans that the secondary market does not purchase, it is often referred to as scratch and dent loans
  • These scratch and dent loans are sold at a discount to investors
  • Therefore, lenders take a huge loss when they cannot sell the loans to the traditional secondary market
  • All lenders require borrowers to meet the minimum agency mortgage guidelines in order to sell their funded loans to the secondary mortgage market
  • However, most lenders will require higher lending guidelines than minimum agency requirements
  • The higher lending guidelines that are above and beyond the minimum agency guidelines are called lender overlays

Lenders have implemented floods of lender overlays due to the crisis in the secondary mortgage bond market.

Non-QM Mortgage Programs Suspended During Coronavirus Pandemic

As of today, all non-QM lenders have suspended all non-QM mortgage programs until further notice.

  • Many non-QM lenders have gone out of business and some are considering filing bankruptcy
  • Angel Oak Mortgage Solutions and Sprout Mortgage are two of the non-QM lenders who announced they will still be in business
  • Angel Oak Mortgage Solutions suspended operations for two weeks
  • Sometime in the next week, the company is going to make an announcement on how they will be conducting business when they reopen operations
  • Analysts think non-QM lenders will be tightening lending guidelines such as requiring higher credit scores and larger down payments on Non-QM loans
  • Sprout Mortgage is taking new mortgage applications
  • However, the company said they are not locking loans or funding loans until further notice
  • Deephaven Mortgage, a heavy player in the non-QM market has gone out of business followed by many others

Gustan Cho Associates will announce once non-QM loans are back in the coming days and/or weeks.

Government Mortgage Programs Suspended During Coronavirus Pandemic

Every lender has its own policy and lender overlays when it comes to government and conventional loans.

  • Just because one lender’s mortgage programs suspended during the coronavirus pandemic mortgage crisis does not mean other lenders will not do them
  • For example, over 98% of lenders have suspended FHA 203k renovation mortgages
  • However, Gustan Cho Associates Mortgage Group is accepting, processing, underwriting, and funding FHA 203k loans
  • Over 90% of mortgage companies have suspended VA and FHA manual underwriting
  • However, Gustan Cho Associates is accepting, processing, underwriting, and closing manual underwriting FHA and VA loans
  • Many lenders have suspended Jumbo mortgages
  • A substantial number of lenders have increased their lender overlays on credit scores and debt to income ratios
  • JP Morgan Chase Mortgage has stopped doing FHA and other government loans
  • Chase Mortgage will only do conventional loans for borrowers with at least a 700 credit score and 20% down payment
  • All down payment assistance mortgage programs are non-existent until further notice
  • Most lenders have stopped doing reverse mortgages until the coronavirus mortgage crisis is resolved

While many lenders are not accepting mortgage borrowers with under 680 credit scores, Gustan Cho Associates can still accept borrowers with credit scores down to 500 FICO.

Qualifying For Government And Conventional Loans During Coronavirus Pandemic Mortgage Crisis

Homebuyers who are turned away by lenders who have increased their lender overlays and need a lender with no overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. GCA Mortgage Group is a national mortgage company with no lender overlays on government and conventional loans. The team at Gustan Cho Associates are available 7 days a week, evenings, weekends, and holidays.

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