Necessary action was taken because of the COVID19 crisis and the Federal Government is working to stabilize the economy. The choices made will have a direct impact on lending.
MORTGAGE RATES
- The Federal Government announced their intentions to stabilize the economy and will be purchasing US debt as necessary to accomplish this. This will include buying mortgage debt, in order to keep the rates lower.
PAYMENT DEFERMENT
- Fannie Mae and Freddie Mac plan to initiate a mortgage forbearance program. This will allow some borrowers relief of up to 12 months of mortgage payments. The plan will reduce, or delay payments, and will depend on the borrower’s loss of income during the COVID 19 outbreak.
- NOTE: This does not eliminate the debt payments. It only defers them. Borrowers should continue to make their usual payments until granted the relief. This plan will not affect the borrower’s credit. Do not stop making payments!! For more information, contact your current lender.
APPRAISALS
- Fannie and Freddie are changing the requirements for physical inspections for some appraisals. If an appraiser cannot go inside the home, for any reason, they will allow desktop and exterior-only appraisals on primary residence purchases (no min. down payment) and second homes/investment purchases (15% down or more).
VERIFICATION OF EMPLOYMENT
- Fannie Mae and Freddie Mac came out with guidelines that allow for more flexibility and alternatives in verifying employment for customers whose workplaces are temporarily closed. They also allowed for some flexibility for those on leave but did caution lenders to use their best judgment when making loan decisions to ensure the borrower clearly has the ability to repay the loan.
CONGRESS STIMULUS AND RELIEF BILL
- Congress is currently in a stalemate over the administration’s proposed stimulus plan. Democrats don’t believe it has enough direct funding for the relief of workers. Some economists have said it’s also not substantial enough, despite being over $1 trillion. Although it’s expected they will find common ground very soon this debate will continue to affect markets.
NON QM AND JUMBO LOANS
- Due to extreme market volatility, most Non-QM and, even some jumbo lenders, have suspended all loan applications, locks, closings and funding’s at this time. Non-QM loans are non-traditional loans like bank statement loans, no doc investment loans and some other asset-based loans. These loans are not backed by Fannie Mae and Freddie Mac, nor the government, so loan investors have pulled the plug, or substantially raised the rates, out of economic uncertainty.
IMPORTANT: During the mortgage meltdown of 2008, loan guidelines changed nearly every day, for months, as loan investors tried to get their arms around the crisis. We are in a similar place. What’s true today could be untrue tomorrow.
The content was originally published by the local lender, Trisha Jackson.
