In this blog, we will cover and discuss the coronavirus pandemic impact on lenders and borrowers. Gustan Cho Associates encourage our readers to take the necessary precautions to keep themselves and their loved ones as safe as possible during these times of uncertainty. This worldwide pandemic is something I have never seen in my lifetime. This blog is written to keep our readers informed on the coronavirus and how it is affecting our mortgage team. It is impossible to fully disconnect from the chaos going on around the world. Every time I watch the news, there is a new COVID-19 update. This blog will bring our readers up to speed on where we stand as of the morning of March 21st, 2020. (updates will continue). In this article, we will discuss and cover the Coronavirus Pandemic Impact On Lenders, especially Gustan Cho Associates Mortgage Group.

Coronavirus Pandemic Impact On Lenders And The Mortgage Process

Gustan Cho Associates is currently leading our operation via telecommunications. We have taken the government’s warning seriously since day one. Our entire operations team has been working remotely for over a week now. Of course, this can slow productivity due to outside distractions. Our team is doing its best to make the adjustment as smooth as possible.

Coronavirus Pandemic Impact on Lenders and Mortgage Industry

Please understand that many of our team members have families of their own and are adjusting to working while being attentive to their loved ones. As you know, the mortgage process has many people involved to get a loan from contract to closing. You have realtors, appraisers, processors, underwriters, loan officers, closers, title companies, and even final investors, all with key tasks to fund a mortgage. This requires everybody working and doing their part., which can be incredibly difficult in times like this. Gustan Cho Associates’ latest COVID-19 announcement.

Coronavirus Pandemic Impact On Lenders, Wholesale Investors, Secondary Markets

A few observations we have seen from our mortgage affiliates. A temporary freeze or change in guidelines is NON-QM mortgage products. As you know, NON-QM mortgage products are very important to our borrowers. We specialize in these mortgage products and offer them to many of our clients. In times like this, when the economy is uncertain, quick adjustments have been put in place.

Non-QM Wholesale Mortgage Lenders Are Uncertain About Their Future

Some of our NON-QM investors have suspended any new NON-QM mortgage applications and others have tightened up their guidelines. For example, one of our investors changed their guidelines overnight to require a minimum 680 credit score with a 20% down payment to qualify for any of their mortgage products. This is a dramatic change from previous guidelines which allowed credit scores all the way down to 500.

Mortgage Operations of Some Non-QM Lenders

Other investors have stopped accepting new applications altogether. Mainly this is because most of the NON-QM mortgage products are geared towards self-employed borrowers who are feeling this chaos in a hard way. With most businesses being closed, it is impossible to generate a revenue stream. This may change how income is calculated on mortgage products moving forward because we do not know how long these borrowers will be unable to work. Moving forward, on a 12-month bank statement loan, a borrower is going to have a few low-income months due to this outbreak. Future NON-QM mortgage guidelines may remove these few months from income calculations. As we learn more, we will continue to keep you updated.

Government Regulations And State Of Emergencies

We have seen states such as California take extreme measures to keep their citizens safe. Governor Gavin Newsom called for a “STAY HOME” order for their nearly 40 million residents. When you see the largest state in the nation (based on population) call for something this traumatic, things are serious. Any effort to curb the spread of COVID-19 needs to be taken seriously.

Coronavirus Pandemic Impact on Lenders and Delay of Funding

This may delay mortgage funding because state and local governments may be forced to stay at home. If a mortgage is not recorded with the county, it does not fund in the state of California. It is unclear if other states will follow suit, but my predictions will show a slowdown in the mortgage market. If title companies close, this will cause a delay in mortgage funding. There is so much uncertainty in these times.

Loan Level Pricing Adjustments And Mortgage Rate Locks

Rate locks:

• Interest rates have been a sensitive subject in these economic times
• With the announcement of the FEDERAL RESERVE cutting the short term interest rate, mortgage rates took a dip and then skyrocketed
• Investors are doing everything they can to stay competitive
• However, many of them are no longer accepting 30-day mortgage locks
• Most of our investors will not allow us to lock your interest rate until you are approved through underwriting and have a completed appraisal
• Announcements like this let us know we are in tough economic times

Something we have not seen in over 10 years!

Coronavirus Pandemic Impact On Lenders And Third-Party Vendors

Most of our affiliates such as appraisal management companies, title companies, investors, and banks have issued similar COVID-19 announcements like Gustan Cho Associates’ above. Every employee who can possibly work from home is currently doing so to help curb the outbreak of the coronavirus. This virus currently has Americans on edge.

Coronavirus Pandemic Impact  on Lenders and Business

It is estimated that our economy has already lost close to 10 trillion dollars and can cost as much as 20 trillion dollars to bounce back. This is an absurd amount of money to think about. With the majority of States closing schools, restaurants, bars, and social gatherings it can be difficult to generate revenue. There is no telling what happens to the mortgage industry and mortgage guidelines going forward. We will continue to keep you updated on any announcement from the major agencies such as FANNIE MAE, FREDDIE MAC,  FHA, and VA.

Is Social Distancing Becoming the New Norm?

We want to remind our readers one last time that safety is our main concern. Please do everything you can to keep your family safe such as social distancing and washing your hand. I know you’ve heard this like a broken record but it is important. We all must do our part to get out of these dark times as soon as possible. Gustan Cho Associates will still be available seven days a week. Feel free to call Mike Gracz on (800) 900-8569 or send an email to gcho@gustancho.com with any COVID-19 or general mortgage questions. Our thoughts and prayers are with those throughout the world who are currently fighting the vicious Coronavirus!

Coronavirus Pandemic Impact on Lenders: Important message from Alex Carlucci:

While our team is working hard to plan and direct their professional and personal lives during this uncertain time, I would like to update you on what we are doing as a business regarding COVID-19. As our part in caring for our staff, community, and customers we recommend all Mortgage Loan Originators work remotely until April 1, 2020. This should not impact you as an employee due to all full-time employees have been provided with company laptops and docking stations. Please refrain from having in-office customer visits. At this uncertain time, we need to keep a minimal amount of people in the office. For all operations staff, Business as usual. Although, if you would like to work a few days a week from home for the next couple of weeks I will approve this, email me direct for approval. Our customers are relying on us to finance the purchase of new homes, refinance current loans, and take advantage of the current low rates. I am happy to report that COVID-19 is not impacting our loan process at this time. Gustan Cho Associates are experiencing an influx of loan volume coming in so we are doing what we can to bring on more staff to help accordingly. If you have specific questions, feel free to reach out to me direct at gcho@gustancho.com.

Our operations and support staff will still be working as usual. However, if they can work from home, it is strongly encouraged. Our offices at Gustan Cho Associates will be open but will limited personnel.

Mortgage Updates During Coronavirus Pandemic On Non-QM Loans

Non-QM lenders have completely shut down originating, processing, and funding non-QM mortgages until further notice. Some have completely gone out of business. Deephaven Mortgage, one of the first non-QM lenders and one of the largest, have announced they have permanently closed all of their operations. All loans in their pipeline including clear to close will not proceed with the mortgage process and will not fund. The company announced they have laid off all of their personnel effectively immediately. Angel Oak Mortgage Solutions, one of the larger non-QM lenders have halted all loans for two weeks. When they reopen in two weeks, there will be new credit guidelines on all of their programs. For example, they may no longer offer 10% down payment bank statement loans for self-employed borrowers and require a 20% to 30% down payment.

Sprout Mortgage, another key player in the non-QM industry, will continue to process and underwrite new non-QM applications but the company announced they will not fund loans until further notice. They may impose higher credit standards. We do not know yet as of what mortgage updates during coronavirus pandemic the company will come up with. Gustan Cho Associates Mortgage Group will post a blog about their new lending guidelines the minute it is released.

Mortgage Updates During Coronavirus Pandemic For Jumbo Loans

The 2 trillion coronavirus stimulus will crash the mortgage industry if the Fed does not step in and help nonbank mortgage lenders. Most lenders have suspended all jumbo loans until further notice. This does not mean that lenders will not offer jumbo mortgages in the future. However, the government’s order in unemployed homeowners being able to get mortgage forbearance has temporarily devastated the mortgage industry. With over 3 million unemployment claims in a week, a large percentage of unemployed homeowners are expected to take up on the offer in requesting a mortgage forbearance up to 12 months. This week’s unemployment claims are expected to be higher than last week.

Mortgage servicers still are responsible to pay principal and interest to investors. Mortgage servicers also need to pay interest, insurance, and property taxes. This will crush nonbank mortgage servicers like Quicken Loans, Mr. Cooper, and other mortgage banking firms. Big banks such as JP Mortgage Chase, Bank of America, Wells Fargo, and others are allowed to borrow funds to pay principal and interest by the US Central Bank. The 2 trillion stimulus bill did not include any government assistance stimulus package for nonbank mortgage lenders. However, nonbank lenders still have to abide by the forbearance rule for their borrowers under the federal phase 3 stimulus package that was passed by the House of Representatives on Friday, March 28th.

Mortgage Rates On Conforming Loans

Conventional mortgage borrowers with higher credit scores and no loan level pricing adjustments are not affected. For example, borrowers with 740 credit scores, 20% down payment, and/or 80% LTV on a single-family home will get prime mortgage rates on conventional loans. There are pricing hits on credit scores, loan to value, type of properties, and other risk factors. However, if there are loan level pricing adjustments (LLPA) or pricing hits, rates can skyrocket. Until further notice on the mortgage markets, any borrowers with under 700 credit scores will get very expensive pricing hits on conventional loans.

Mortgage Updates During Coronavirus Pandemic On FHA Loans

HUD, the parent of FHA, has not made any changes to FHA Agency Mortgage Guidelines. However, lenders are freaking out about the mortgage markets and are making changes of their own. Many lenders increased their minimum credit score requirements and added many lender overlays. Most lenders have completely suspended doing FHA 203k Loans and Reverse Mortgages. Mortgage lenders where their minimum credit score requirements on FHA Loans were 580 FICO increased them to 620 to 640. Other lenders increased their FHA minimum credit score requirements to 660 to 680 FICO.