Mortgage Updates During Coronavirus Pandemic

Mortgage Updates During Coronavirus Pandemic For Borrowers

Gustan Cho Associates are mortgage brokers licensed in 48 states

BREAKING NEWS: Mortgage Updates During Coronavirus Pandemic For Borrowers

The coronavirus pandemic has hit the US economy hard. Most Americans have seen the volatility of the stock market. The Dow Jones Industrial Average is up 1,000 points one day and down 1,000 the next day. The Dow Jones hit an all-time high on February 19th, 2020 where it surpassed 29,000. The Dow Jones entered recession territory last week when the Dow closed under 19,000. The other equity markets followed the negative plummet of the Dow. Prior to the coronavirus outbreak, the US economy was stronger than ever. Unemployment numbers were at 3.5% which is the lowest number in the past 50-years.

HUD and the FHFA have increased FHA and Conforming Loan Limits for the past 4 years due to rising home prices. Job growth has been at 50-year lows. The 2020 housing market forecast has never been stronger. There was more demand than inventory for homes. Life could not have been better for Americans. Then disaster struck. The coronavirus outbreak which started in Wuhan, China has completely shut down the US economy. It has negatively impacted the housing and mortgage markets. As of today, the mortgage markets are completely in chaos. The press is not covering too much on this topic.

Gustan Cho Associates is publishing this article so we can get our viewers up to date on what the Mortgage Updates During Coronavirus Pandemic For Borrowers are. The changes and mortgage updates during coronavirus pandemic are not permanent and anything can change without notice. But things are really brewing among lenders with the uncertainty of the future of the mortgage industry. In this article, we will discuss and cover the Mortgage Updates During Coronavirus Pandemic For Borrowers.

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

What are the mortgage updates during the coronavirus pandemic for large 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

What are the mortgage updates during the 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.

Lenders are imposing the same types of mortgage updates during coronavirus pandemic on VA and USDA Loans just like FHA loans, which is adding additional lender overlays. Please note that these mortgage updates during the coronavirus pandemic on FHA loans are temporary changes by the individual lenders and not FHA. Throughout the week, we will keep our viewers at Gustan Cho Associates updated on any new developments on mortgage updates during the coronavirus pandemic.

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