LLPA On Credit Scores During The COVID-19 Pandemic Crisis
This ARTICLE On LLPA On Credit Scores During The COVID-19 Pandemic Crisis Was PUBLISHED On June 7th, 2020
Most lenders have increased LLPA On Credit Scores during the coronavirus pandemic.
- The COVID-19 pandemic has not just devastated the U.S. economy but sent the mortgage industry into turmoil and chaos
- The Central Bank has lowered interest rates to zero percent in order to avoid further economic damage from the pandemic
- The Feds lowering interest rates to zero percent sent mortgage rates at historic lows
- However, only prime borrowers can benefit from the historic low mortgage rates
- Borrowers with credit scores under 700 FICO have huge LLPA
- Loan Level Pricing Adjustments are often referred to as LLPAs
- LLPA On Credit Scores for borrowers under 700 FICO is not the only penalty
- Under 700 credit score, borrowers will most likely be charged discount points
In this article, we will discuss and cover LLPA On Credit Scores during the coronavirus pandemic crisis.
The Coronavirus Pandemic Impact On Mortgage Loan Programs
The pandemic has caused turmoil for investors in the secondary mortgage bond market.
- Investors of mortgage-backed securities do not have any interest in buying MBS for borrowers with under 700 credit scores
- There is no liquidity in the secondary mortgage bond markets
- Non-QM lenders have ceased taking Non-QM mortgage loan applications until further notice
- Many non-QM lenders have closed their operations indefinitely and/or have gone bankrupt
- Jumbo lenders have ceased taking Jumbo loans until further notice
- Jumbo loans are considered higher risk loans
- Lenders do not want to take on any layered risks
- This is why many lenders have suspended all manual underwriting on FHA and VA loans
- Many lenders have stopped doing FHA 203k loans until further loans
- All FHA and VA construction loans have been suspended until the mortgage crisis stabilizes
- Down Payment Assistance mortgage programs have also been halted due to risk factors by many lenders
Investors in the secondary mortgage bond markets have absolutely no appetite for mortgages with borrowers with under 700 credit scores.
What Does LLPA On Credit Scores Mean
Everyone gets a different mortgage rate.
- Lenders start out with a par rate. Lenders then do pricing hits on the risk level they have
- The higher the risk of the borrower, the higher the mortgage rates
- Loan Level Pricing Adjustments are pricing hits charged by lenders due to layered risks
- Pricing adjustments or LLPAs have drastically increased for borrowers with under 700 credit scores during the coronavirus pandemic
- Not only are mortgage rates higher on lower credit score borrowers, but most lenders are now charging discount points for borrowers with under 700 FICO
- The COVID-19 pandemic crisis has forced many lenders to increase and/or implement more lender overlays
- Lender overlays are additional lending guidelines that are above and beyond the minimum agency mortgage guidelines by HUD, FHA, VA, USDA, Fannie Mae, Freddie Mac
- For example, to qualify for a 3.5% down payment home purchase FHA loan, the minimum credit score required by HUD is 580 FICO
However, lenders can have their own credit score requirements that are above and beyond HUD’s minimum credit score requirements.
Agency Mortgage Guidelines Versus Lender Overlays
These higher lending guidelines by lenders are called lender overlays.
- Due to the liquidity issues on the secondary mortgage bond markets, most lenders have increased their minimum credit score requirements to 660 to 680 credit scores plus discount points
- Not only have they increased their credit score requirements, but they also increased mortgage rates as well as discount rates
- Many lenders do not want to originate and fund FHA and VA loans
- For example, JP Morgan Chase suspended taking any loan applications on government loans
- Chase Mortgage will only do conventional loans for borrowers with at least 700 credit scores and 20% down payment
- The VA does not have a minimum credit score requirement on VA loans
- However, most lenders have implemented a minimum credit score requirement of 640 to 680 FICO on VA loans
- The great news is Gustan Cho Associates Mortgage Group has not imposed any lender overlays on government and conventional loans during the coronavirus pandemic crisis
GCA Mortgage Group still takes loan applications for borrowers with under 620 credit scores on VA and FHA loans. GCA Mortgage still originates and funds manual underwriting on VA and FHA loans.
Hurdles With Qualifying For A Mortgage With Lower Credit Scores During The Pandemic
Many of our viewers at GCA Mortgage Group is reading this article due to having a hard time qualifying for a mortgage with lower credit scores during the pandemic. Gustan Cho Associates have been very successful in helping borrowers with lower credit scores during the pandemic. Our experienced team of loan officers at GCA Mortgage are experts in structuring sellers concession credits so borrowers can cover their closing costs. This holds especially true with having the seller pay discount points. Gustan Cho Associates Mortgage Group has no lender overlays on FHA, VA, USDA, and Conventional Loans. GCA Mortgage Group has reopened non-QM loan programs such as bank statement loans for self-employed borrowers with no income tax returns and the asset depletion mortgage loan program. To qualify for a mortgage with a five-star national mortgage company with no lender overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at GCA Mortgage Group is available 7 days a week, evenings, weekends, and holidays.