$2T Stimulus… How does that affect my mortgage?

You may have heard on the news about the $2Trillion dollar stimulus package recently announced. You may also be asking how that will affect my mortgage. Well as a mortgage lender with over 22 years of experience I can honestly say the current environment has hit the financial industry with a perfect storm.

Several weeks ago the fed announced an emergency cut to the Federal interbanking ranking offering rate. This was done to encourage landing and stabilize the economy. However, for a brief 30-minute window, we did see historic low-interest rates. Unfortunately, the market reacted in a way we have never seen before.

Mortgage refinance levels, already a high level, surged while purchase mortgages continued at a high level. This causes capacity problems for most lenders who are unable to deal with the volume. Lenders are seeing their mortgage servicing portfolios payoff in unusually short terms dramatically in the same profit levels. In the meantime demand for new mortgages, more specifically mortgage-backed securities plummeted.

The fed announced they would be purchasing mortgage-backed securities which normally would help lower interest rates but that has yet to occur. Lenders and economists are predicting a recession. In a recession, government-backed loans such as FHA, VA, and USDA, are some of the first loans to default. When these borrowers miss payments, under the current guidelines, the mortgage servicer is responsible for making those payments to GINNIE Mae, the end holder of government-backed loans. If lenders have to make these payments, they could quickly become insolvent. Therefore, mortgage servicers are not wanting to make these loans and since no one is buying the securities, their rates on these loans overhead normally high with most of them requiring 3-5 discount points.

For borrowers under 680 that are using FHA, VA, or USDA to purchase homes, the new norm should be for the seller to pay 3-6% of the purchase price in seller concessions towards discount points. This will be the only way for these buyers to purchase homes. Realtors should prepare their sellers for this realty.

Most non-traditional lenders such as bank statement loans, just missed credits for loans, and no income verification Investment Property loans have lost the ability to fund loans during this crisis. I believe these will come back but it may be some time before investors have the appetite for this type of mortgage-backed securities.

Service First Mortgage update

LEGISLATIVE UPDATE:

On Friday, March 27^th Congress passed a $2T stimulus package, which the President signed the same day. While many details are still being worked through, below are a few points that affect Service First Mortgage directly.

Credit Reporting:

If a Mortgage Servicer provides an accommodation and the customer makes their payment or if no payment is required, then the Servicer must report the customer as current.
If the customer was delinquent before the accommodation but brings the account current, the Servicer must report the customer as current.

Forbearance:

Borrowers of mortgages backed by Fannie Mae, Freddie Mac, HUD, VA and USDA can request up to 360-day payment forbearance without proof of hardship.
No additional fees, interest, or penalties can be assessed for the forbearance. Except for abandoned or vacant property, there may be no foreclosure actions for 60 days from 3/18/2020.

AGENCY UPDATE:

The Treasury Secretary put together a task force to address liquidity concerns voiced by GNMA issuers and servicers. While some details remain unaddressed, there was an acknowledgment that the industry is seeing challenges to government loans, and the Secretary committed to addressing these challenges within 2-weeks.

PRODUCT UPDATE: Service First Mortgage

FHA/VA/USDA Loans

Credit Scores of 580-639 Monday 3/30/2020. We are still going to be funding these loans while many companies are not.

Bond Loans

We are temporarily suspending Bond Loans until we receive more information from the Master Servicers and Agencies. We hope to reinstate Bond Loans ASAP.

Richard Woodward, NMLS 217454
Your Local, Direct, 5 Star Rated Mortgage Lender, Specialty Lending Manager
Office: (214) 945-1066
mortgageprosus.com/5-star-reviews
Service First Mortgage NMLS 166487
6800 Weiskopf Ave #200, McKinney, TX 75070

Licensed by the Texas Department of Savings and Mortgage Lending (SML) Mortgage Banker Registration. Service First Mortgage is an Equal Housing Lender. This is not an offer of credit or commitment to lend. Loans are subject to buyer and property qualification. Rates and fees are subject to change without notice. The views expressed on this site are those of the individual author and do not necessarily reflect the positions, strategies or opinions of Service First Mortgage or its affiliates.