The SCOOP! Blog by ChangeMyRate.com®

The coronavirus pandemic is radically reshaping the economy with business closures and job losses. But what about the housing market and mortgages? Is now the time to finance or refinance?

To get some answers Bankrate spoke with David H. Stevens, one of the nation’s leading mortgage authorities. Stevens is the former CEO of the Mortgage Bankers Association (MBA) and was the Federal Housing Commissioner under President Obama. He is the CEO of Mountain Lake Consulting, Inc., a financial services consulting firm focused on the real estate finance sector.

The interview which follows has been edited for length and clarity.

Is now a good time to get a mortgage?

Stevens: Right now, short term, may not be the best time to get a mortgage. The issues stemming from the virus have impacted the economy in a variety of ways, but one of the harder-hit sectors is the mortgage market.

Mortgage-backed securities prices have fallen in the past two weeks and rates are higher than they might be in the weeks to come should things begin to settle down. That being said, if you are buying a home this could be an opportune time before the housing market comes back, and while mortgage rates are a little higher than they were, they are still near their record lows historically.

Has the mortgage application process been disrupted? Are there special steps borrowers should take to get financing?

Stevens: Fortunately, the industry is far more automated than in previous times. Almost all of the lending process can be done online. From the application which is almost certainly online for any lender, to being able to scan and email key support documents needed to approve the mortgage, the vast majority of the work can be done without the need for face-to-face contact.

Freddie Mac and Fannie Mae also have property inspection waivers that they offer on a significant percentage of refinance loans and are committed to expanding the use of alternatives to physical on-site appraisal requirements. Depending on the lender and the state where the property is located, the use of e-signatures and other remote signatures may allow you to skip the closing altogether and simply do the process virtually.

Can we expect home prices to stall or decline after eight years of steady increases?

Stevens: The National Association of Realtors reported that February’s existing home price increase marked the 96th straight month of year-over-year gains.

While the coronavirus is a significant event and one that is adversely impacting both the health of the nation and also the economy, the long-term reality of demographics and housing supply won’t change.

As we look forward to getting past the curve and a return to work and school we will return to a nation that is creating 12 to 14 million new households over the next decade, according to the Harvard Joint Center for Housing Studies. This suggests a significant shortage in available inventory. So, while the economic recovery resulting from the virus may slow things down for the short term, the long-term prospect for home price gains remains optimistic.

Where do you see mortgage rates headed in the coming month?

Stevens: In the short run the impacts of the virus are affecting a variety of components that make a mortgage rate. Mortgage-backed securities are out of balance, causing rates to rise, servicing valuations are declining, and investors that participate in this arena are trying to determine what this might mean for default rates and more.

That being said, the Federal Reserve announced a significant increase in their participation in the market, which will help remove some of this imbalance. I expect rates to once again start coming down as we move beyond this period. The fundamentals for lower rates are good, the technical conditions are shorter term and making rates rise, but this too should pass.

Looking out over the next month, it comes down to the timing and impact of the legislative efforts and actions by the federal agencies and that is still not entirely clear.

With the steep unemployment increases we’re seeing, can residential properties hold their value?

Stevens: This all depends on the duration of this period and the impact from the legislative and regulatory efforts being considered right now.

Keep in mind that while most Americans are being told to work from home, there are millions working remotely. We are seeing growth in select service industries with companies like Amazon, Insta-Cart, UPS, and more trying to hire thousands of workers.

Workers employed in travel, events, small retail, and restaurants are among those that may face the biggest impact. A significant portion of these employees may not own homes.

So, while there will be a default spike from this, how it will penetrate home values is still a question. More importantly, forbearance plans and foreclosure enforcement stoppages have been announced which will hopefully help cushion the impact, especially as these plans are targeting support for renters as well as homeowners. This all comes down to how long this lasts and whether we can flatten the curve of the virus so that America can return to work sooner.

With a foreclosure moratorium for Freddie Mac, Fannie Mae and FHA mortgages what happens to servicers if non-payments grow significantly?

Stevens: Servicers are the companies that collect monthly payments for mortgage investors. They are also the companies that deal with late payments, non-payments and foreclosures on behalf of the investors.

This is a huge issue. Servicers reserve funds for “expected default” and even hold a reserve above that. But when an entire nation is told to go home and these forbearance programs and foreclosure moratoriums are put in place, the cumulative burden falls on servicers. If a borrower does not pay his or her loan, yet the servicer must still pay the holder of the mortgage security, that cash has to come from these reserves.

If the payments stop coming from a huge percentage of your customers, like one-fourth, one-fifth, or more of borrowers, the entire system could collapse. This is why there has been so much effort to create a liquidity platform at the Federal Reserve, at Ginnie Mae (the Government National Mortgage Association or GNMA), and with the GSEs (Government-sponsored Enterprises such as Fannie Mae and Freddie Mac) to fill in the gap and insure that servicer can function.

A proposal has been sent to Fed Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin to address this need and legislation is also being introduced in Congress. It is supported by the key industry groups as well as some key consumer advocates. It is an absolutely critical need to create this liquidity platform.

Source: To view the original article click here

 

Posted by Jackie A. Graves, President on April 1st, 2020 10:49 AM

Help for homeowners and renters during the coronavirus pandemic has arrived via a variety of state and federal orders and programs.

President Trump on Saturday ordered foreclosures and evictions to cease for 60 days across the U.S. in response to the coronavirus pandemic that has idled millions of workers.

In a news conference, Ben Carson, the secretary of Housing and Urban Development, said Trump ordered the “immediate cessations” of foreclosure and eviction proceedings. Officials urged those who are affected by the health crisis and struggling to make their mortgage payments to contact their loan services about forbearance on loans.

From Capitol Hill to Wall Street to state offices, help for struggling homeowners affected by the novel coronavirus ramped up last week. Ally Bank announced its 120-day mortgage payment moratorium and Bank of America said it would suspend mortgage payments for eligible borrowers, though no time limit is yet known.

The Federal Housing Finance Agency (FHFA), Housing and Urban Development (HUD), United States Department of Agriculture (USDA), Fannie Mae and Freddie Mac all have announced a freeze on foreclosures and evictions for at least 60 days as well as forbearance or disaster relief options for homeowners who can’t afford their mortgage payments.

Fannie Mae, Freddie Mac forbearance

Freddie Mac and Fannie Mae have also said they would allow forbearance options to borrowers affected by the pandemic. Forbearance means your mortgage payments can be suspended for up to 12 months because of economic hardship that was caused by the coronavirus outbreak. The two agencies back about half of all mortgages in the U.S.

This collective move to secure the housing of Americans facing financial hardship is not only ethical but financially wise, says Jeff Friedman, partner and shareholder at Hall Estill law firm. If this were a typical economic downturn, there would be a daisy-chain reaction that would lead to evictions, landlords collecting less rent, lenders losing money, and foreclosures. But with officials working in concert on a plan that makes sense for everyone, this kind of chain reaction can be avoided.

“Here, however, the CFPB, HUD, and FHFA have stopped this process before it starts, giving renters and financial institutions the opportunity to address claims through a dispute resolution mechanism administered by the CFPB,” Friedman says. “Furthermore, local sheriffs throughout the country are ceasing eviction enforcement, and courts are refraining from taking foreclosure cases. Without this, many people would lose their apartments and buildings in the age of coronavirus. The CFPB, HUD, and FHFA are to be applauded for their swift and decisive action.”

Working on a streamlined national program

Part of the reason the swift action is possible is because lenders are using existing programs as stopgap solutions, such as disaster relief. However, lenders and mortgage industry professionals don’t want to rely on these programs in the longer-term. Currently, they’re working on a more streamlined assistance program that would help borrowers as long as COVID-19 is disrupting business and ending paychecks for millions of Americans.

Heading this effort is Ed DeMarco, president of the Housing Policy Council and the former head of the FHFA.

“We know many people have had their income disrupted and, as leaders in the industry, we all hope this disruption is temporary as we fight off the virus,” DeMarco says. “We want to give borrowers, regardless of what type of loan, access to a simple, temporary payment deferment to offer some assistance during this challenging time.”

The group is currently coordinating with government agencies, but DeMarco believes they can have the plan in place quickly. They’re also working on a solution to help people with pending mortgage applications, as workplace disruptions can rattle the loan process.

Although lenders are overwhelmed with work, DeMarco urges homeowners and buyers alike to not walk away from borrowing.

“It is critical that we continue to process new mortgage applications, including refinance, in the face of the low-rate environment,” DeMarco says. “That itself is an economic stimulus.”

Cities and states are taking action

There are COVID-19 cases in every state in the U.S., but some are reporting higher rates of infection than others. New York leads the country, with approximately 4,597 reported cases, according to the Centers for Disease Control and Prevention. Next in line are Washington and California; each have 1,187 and 652 reported cases, respectively.

This number is expected to grow, which means the increased potential of job loss and other financial burdens that can make it impossible for some folks to keep up with their mortgage.

The measures put in place by government-backed loans and GSEs protect about 65 percent of mortgages in the U.S., according to a recent report by the Urban Institute. Protecting homeowners who aren’t covered by these measures is left to individual jurisdictions.

State list of help for people who can’t pay their mortgage

Here is a list of what some states are doing to help homeowners, this list will be updated as new information comes in.

New York

New York Gov. Andrew Cuomo offered assistance to homeowners by announcing that he will delay mortgage payments for 90 days. Eligible homeowners include those who lose their job due to the coronavirus.

“This is a real-life benefit,” Cuomo said at a press conference on March 19. “People are under tremendous economic pressure. Making a mortgage payment can be one of the number one stressors. Eliminating that stressor for 90 days, I think, will go a long way.”

Participation in the program will not negatively impact credit scores.

California

California Gov. Gavin Newsom signed an executive order on March 16 to stop evictions and foreclosures for people who are affected by COVID-19 through May 31, unless otherwise directed.

Texas

The Texas Department of Housing and Community Affairs (TDHCA) will suspend evictions and foreclosures for residents impacted by the coronavirus who are part of any of the programs the TDHCA oversees, including: Homebuyer Assistance Program, Bootstrap Loan Program, and the Homebuyer Rehabilitation Assistance Program.

“Our current practice is to take each on a case-by-case basis,” says Kristina Tirloni, senior communications advisor for TDHCA. “Forbearance, the suspension of all or a part of the mortgage payment for a specified period of months, is likely the predominant means of mortgage aid that will be provided to our borrowers and perhaps all borrowers in need of assistance.”

Homeowners who took part in TDHCA’s Texas Homebuyer Programs (My First Texas Home or My Choice Texas Home) are encouraged to contact their mortgage lender if they are experiencing challenges to pay their mortgage. TDHCA does not have any oversight for mortgage loans taken out through those programs.

North Carolina

North Carolina is postponing all court cases (including foreclosures cases) for at least 30 days as a way to decrease courthouse traffic and reduce exposure to the virus.

Massachusetts

Massachusetts proposes legislation to stop eviction and foreclosure proceedings.

Virginia

Virginia officials urge mortgage holders and servicers to offer hardship forbearances and refrain from credit reporting.

Kansas

Kansas halts foreclosures and evictions through May 1, 2020.

Louisiana

Louisiana halts foreclosures and evictions.

Maryland

Maryland courts stay foreclosure and eviction actions indefinitely.

New Hampshire

New Hampshire suspends foreclosures and evictions indefinitely.

Pennsylvania

Pennsylvania courts pause foreclosures and evictions through April 3.

Indiana

Indiana suspends the initiation of foreclosures and evictions through May 5.

New Jersey

New Jersey halts evictions and foreclosures which would last no longer than two months after the state of emergency (which Governor Phil Murphy put in place due to the coronavirus) ends.

What should stressed borrowers do next

Because new mortgage rules around the coronavirus change so quickly, it’s important for borrowers to communicate with their servicer about the latest options available to them, says Jennifer Keys, senior vice president of compliance at Covius.

So far, Keys says, the government has done a good job implementing existing programs, which has helped expedite assistance. The first line of defense for homeowners is halting foreclosure proceedings.

“I think the foreclosure halts are more immediate. That gives the most immediate relief to the most urgent needs that need to be addressed,” Keys says. “The forbearance lasts for about a year and then, after that, you have loan modification which is the next step and that changes the loan permanently,” Keys says.

Keep in mind, that the deferred amount will have to be repaid, in most cases, so be sure you work with your lender to come up with a plan that makes sense for you. People facing unemployment are likely eligible for benefits, so reach out to your state unemployment office if you’re in need of assistance.

Source: To view the original article click here

Posted by Jackie A. Graves, President on March 31st, 2020 12:47 PM

Closing on a house marks the beginning of a new lifestyle for homeowners since ownership of the home is transferred. Here’s what to expect at the closing and how long it takes to close on a house.

What are closing costs?

Closing costs are the fees and expenses that the homeowner must pay before he/she becomes the legal owner of the house, condo or townhome. Expect to pay 2 percent to 5 percent of the mortgage loan in closing costs. Fees vary in each state and some have additional ones.

The closing costs include setting up escrow accounts to paying for a title search appraisal and checking a consumer’s credit history. Whether you are purchasing a new home or refinancing a mortgage to receive a home equity line of credit or home equity loan, closing costs need to be paid.

Length of time to close on a house

Ellie Mae, a software company that processes mortgage applications, reports that the average time it takes for homebuyers to close on their home purchase was 47 days as of October 2019.

Closing on a house can be a lengthy process and planning is crucial, especially if you are currently renting a home or an apartment and your lease is almost up.

A closing usually takes 30 to 60 days, but a number of factors can change this timeline. Renters should aim to close toward the middle to end of the month, says Jared Maxwell, vice president of consumer direct lending at Embrace Home Loans in Middletown, Rhode Island.

“This will help prevent paying your final month of rent for an apartment or house you aren’t using,” he says.

On the flip side, the closing date would also depend on how quickly the seller can move out of the home, so the buyer may be in a hurry, but the seller may have a different timetable.

A rule of thumb is to expect at least 30 days to closing because it gives the buyer and the lender an opportunity to complete all the paperwork.

“There are certainly instances where lenders can close in as fast as 15 to 20 days, but this assumes documents are returned quickly and there are no unforeseen hurdles that occur with the condition of the home or the title report,” Maxwell says.

Applying for a loan preapproval before you start shopping for a home can help people close sooner since a few of the verification processes will be completed ahead of time, says John Schleck, a senior vice president in consumer lending at Bank of America in Charlotte, N.C.

What to bring to closing and what you’ll sign

At closing, your participation will involve a couple of steps:

  • Sign legal documents. This falls into two categories: the agreement between you and your lender regarding the terms and conditions of the mortgage, and the agreement between you and the seller transferring ownership of the property. Be sure to read all documents carefully before signing them, and do not sign forms with blank lines or spaces.
  • Pay closing costs and escrow items. There are numerous fees associated with getting a mortgage and transferring property ownership. You might also be able to wrap the closing fees into the loan balance.

Funds are usually a cashier’s check made out to the escrow company or a wire transfer funds to the banking institution.

Be sure to find out what type of identification is required. Usually, only one type of identification is needed, though some companies require two. Government-issued identification, such as driver’s licenses and passports, are normally accepted.

Costs of a home closing

Closing costs are typically thousands of dollars and homeowners should plan on paying 2 percent to 5 percent of the mortgage loan. The costs can be rolled into the mortgage amount (known as a no-closing cost mortgage) or paid up front, and some components of closing costs can be negotiated.

These costs also vary by state. Some states and localities charge mortgage and transfer taxes that increase the costs in that state, Maxwell says. Lenders are required to provide an estimate of your closing costs early in the loan process and closer to the closing date an amount you can expect to bring to closing.

For example, the sale of a $200,000 home in Illinois means the buyers will pay title fees that begin at $1,700, escrow fees at $1,500, survey fees of $400 and attorney fees that average $400, says Neil Narut, senior underwriting counsel for Proper Title, a Chicago-based title company. There are many more items on top of that.

How to prepare for a closing

Homeowners can prepare for a closing to help speed the process. Buyers should obtain beforehand all the  documents that the loan officer will request, Maxwell says.

“You should refrain from making any large undocumented deposits such as cash deposits and opening any new credit card accounts,” he says.

Buyers will want to make sure nothing in their finances changes before the closing day because the lender does make last-minute checks of vital information.

Who is present at closing

Closing procedures vary from state to state and even county to county, but the following parties will generally be present at the closing or settlement meeting:

  • Closing agent, who might work for the lender or the title company.
  • Attorney: The closing agent might be an attorney representing you or the lender. Both sides may have attorneys. It’s always a good idea to have an attorney present who represents you and only you.
  • Title company representative, who provides written evidence of the ownership of the property.
  • Home seller.
  • Seller’s real estate agent.
  • You, also known as the mortgagor.
  • Lender, also known as the mortgagee.

The closing agent conducts the settlement meeting and makes sure that all documents are signed and recorded and that closing fees and escrow payments are paid and properly distributed.

What to expect on the day of closing

Several things occur on the day you close. Prepare to spend a few hours on this process.

The buyer will conduct a walkthrough with their realtor to confirm the home is in the condition promised. Plan to obtain a certified check from the bank that is made out to the title company for the closing costs and the remainder of your down payment, Maxwell says.

There are three main documents to sign during closing, including a deed of trust or mortgage, which is a document that puts a lien on your property as collateral for your loan, Schleck says. The second document is the promissory note, a legal agreement to pay the lender, including when you will make your payments and where you will send them. The last one is the closing disclosure, an itemized list of your final credits and charges

“The sellers will sign a few documents and you will receive the keys to your new home,” Maxwell says.

Factors that can lead to closing delays

Many factors can cause delays to the closing. One common item that can cause a delay is if there is a repair that the appraiser believes needs to be addressed, Maxwell says.

Another factor is a lien on the title that the seller is unaware of that must be satisfied before the closing can take place. A homeowner can cause the delay if he/she lacks some of the documents that the lender needs to conduct the closing.

Delays beyond three months are rare, says Mike Tassone, co-founder and COO of Own Up, a Boston-based mortgage company. The causes include finding issues with obtaining a clean title to the home such as tax liens, and previous owners unreleased from title as well as negotiations related to appraisals that come in below the purchase price.

“Throughout the mortgage process, it’s important to complete applications accurately and upload documents in a timely manner to ensure things move smoothly,” Schleck says. “Depending on market activity, there may be some delays as third-party providers such as appraisers tend to get very busy during peak homebuying season.”

Closing documents

You will receive the following key documents:

The loan estimate. This document contains important information about your loan, including terms, interest rate and closing costs. Make sure all the information is correct, including the spelling of your name.

The closing disclosure. Like the loan estimate, the closing disclosure outlines details of your mortgage. You should receive this form at least three days before closing. This window of time gives you a chance to compare what’s on the loan estimate to the closing disclosure.

The initial escrow statement. This form contains any payments the lender will pay from your escrow account during the first year of your mortgage. These charges include taxes and insurance.

Mortgage note. This document states your promise to repay the mortgage. It indicates the amount and terms of the loan and what the lender can do if you fail to make payments.

Mortgage or deed of trust. This document secures the note and gives your lender a claim against the home if you fail to live up to the terms of the mortgage note.

Certificate of occupancy. If you are buying a newly constructed house, you need this legal document to move in.

Once you’ve reviewed and signed all closing documents, the house keys are yours and you will officially be a new homeowner.

Source: To view the original article click here

Posted by Jackie A. Graves, President on March 30th, 2020 12:13 PM

The Federal Reserve on Sunday made its second emergency rate cut in response to economic concerns related to the coronavirus, opting to slash rates to a range of 0-0.25 percent.

The central bank of the U.S. – also known as the Fed – is charged by Congress with maintaining economic and financial stability. Mainly, it tries to keep the economy afloat by raising or lowering the cost of borrowing money, and its actions have a great deal of influence on your wallet.

Officials on the Fed’s rate-setting Federal Open Market Committee (FOMC) typically meet eight times a year. The Fed looks at a broad range of economic indicators, but most notably, it pays attention to employment and inflation data. The Fed was scheduled to have its next meeting this week on March 17-18. The meeting will no longer happen coming off the Fed’s emergency cut.

Why does the Fed raise or lower interest rates?

The logic goes like this: When the economy slows – or merely even looks like it could – the Fed may choose to lower interest rates. This action incentivizes businesses to invest and hire more, and it encourages consumers to spend more freely, helping to propel growth. On the contrary, when the economy looks like it may be growing too fast, the Fed may decide to hike rates, causing employers and consumers to tap the brakes on their financial decisions.

“When the Fed raises or reduces the cost of money, it affects interest rates across the board,” says Greg McBride, CFA, Bankrate chief financial analyst. “One way or another, it’s going to impact savers and borrowers.”

Even if you’ve only been tangentially following the Fed, you’ve probably noticed that it’s been a bumpy past few months. Officials cut interest rates three times in 2019, months after signaling to investors that they’d intended to hike at least two more times. U.S. central bankers now say they’re comfortable with waiting on the sidelines over the next 12 months, as they wait for evidence on just how much the three reductions impacted the economy.

Still, policy isn’t set in stone, and there’s a lot that could happen over the next year that might yank the Fed in a different direction. Here are five ways that you can expect the Fed to impact your wallet.

1. The Fed affects credit card rates

Most credit cards have variable interest rates, and they’re tied to the prime rate, or the rate that banks charge to their preferred customers with good credit. But the prime rate is based off of the Fed’s key benchmark policy tool: the federal funds rate.

In other words, when the Fed lowers or raises its benchmark interest rate, the prime rate typically falls or rises with it.

“What the Federal Reserve does normally affects short-term interest rates, so that affects the rates that people pay on credit cards,” says Gus Faucher, chief economist at PNC Financial Services Group.

Leading up to the July rate cut, the prime rate was 5.50 percent, 3 percentage points higher than the top end of the fed funds rate’s target range of between 2.25 percent and 2.5 percent. It typically stays at that level — even as the Fed cuts rates.

By December, after the Fed’s three cuts were already enacted, the prime rate had fallen by 75 basis points. That’s how much the Fed reduced rates in total.

But credit card borrowers will be hard pressed to find an interest rate that’s actually that low. After the Fed’s three cuts, average credit card rates only fell slightly, to 17.36 percent from 17.8 percent, according to Bankrate data that tracked rate changes between Sept. 4 and Dec. 18. In reality, credit card rates are much higher because companies charge the prime rate plus another margin that they determine themselves.

2. The Fed affects savings and CD rates

If you’re a saver, you’ll likely have the opposite reaction of a credit card borrower. Savers benefit from rate hikes and take a hit when the Fed decides to cut them.

That’s because banks typically choose to lower the annual percentage yields (APYs) that they offer on their consumer products — such as savings accounts — when the Fed cuts interest rates. For example, banks in June 2019 lowered their yields in anticipation of a rate cut.

But when and by how much banks choose to lower yields after a rate cut depends on those broader conditions, as well as competition in the space, McBride says. It’s also worth remembering that most high-yield savings accounts on the market have annual returns that outpace inflation.

“If the Fed cuts rates, yields will fall, but you’re still going to be far ahead from where you were a few years ago,” McBride says. “Even if they unwind one of the nine rate hikes that they’ve made since 2015, the top-yielding accounts are still going to be paying a rate above inflation.”

Yields on certificates of deposit (CD) generally fall when the Fed cuts rates as well, but broader macroeconomic conditions also have an influence on them, such as the 10-year Treasury yield.

But individuals should focus on the inflation-adjusted rate of return on CDs, says Casey Mervine, vice president and a senior financial consultant at Charles Schwab. In the late 1970s, for instance, yields on CDs were in the double digits; inflation, however, was as well. That means consumers’ actual earnings were much lower, due to the erosion of their purchasing power.

If you’re worried about a Fed rate cut impacting your returns, consider locking down a CD now.

“Sometimes people start lowering their rates in anticipation of a cut,” says Katie Miller, senior vice president of savings products at Navy Federal Credit Union. “That’s why I say, if you see some good CD rates, take them.”

3. The Fed’s influence over mortgage rates is complicated

Mortgage rates aren’t likely going to respond quickly to a Fed rate adjustment. Interest rates on home loans are more closely tied to the 10-year Treasury yield, which serves as a benchmark to the 30-year fixed mortgage rate.

That’s evident when you look into the past. Each time the Fed has adjusted rates, mortgage rates haven’t always responded in parallel. For example, the Fed hiked rates four times in 2018, but mortgage rates continued to edge downward in late December.

But even though the Fed has little direct control over mortgage rates, both end up being influenced by similar market forces, McBride says.

“While not directly related to a Fed cut, the two are sort of a reflection of the same concern: the expectation that the economy is going to slow,” McBride says.

Right now, that’s been the fear about both the domestic and global economy. U.S. hiring slowed in 2019, while manufacturing is outright contracting. Growth around the world is also decelerating, and it’s prompting many other central banks around the world to start cutting rates as well.

It’s highly likely that you’ll start to see those long-term rates slip lower in tandem with short-term borrowing costs, Miller says.

“It’s long-term expectations that tend to dictate where mortgage rates go more than short-term, but even long-term expectations are getting a little bit lower here,” according to Miller. “You’ll probably see mortgage rates come down as well. The more that comes down, the better off you are, especially if you’ve gotten you a mortgage in the last couple of years.”

That means refinancing could be a smart option for your pocketbook. A reduction in even just a quarter of a percentage point could potentially shave off a couple hundred dollars from your monthly payments.

“Mortgage debt tends not to be high cost; it’s just high interest because of the value of the actual mortgage itself,” Miller says, “which is why small changes in rates can make a big difference.”

4. The Fed impacts HELOCs

However, if you have a mortgage with a variable rate or a home equity line of credit – also known as a HELOC – you’ll feel more influence from the Fed. Interest rates on HELOCs are often pegged to the prime rate, meaning those rates will fall if the Fed does indeed lower borrowing costs.

Modest Fed moves, however, likely aren’t going to steer those rates in a drastic direction either, McBride says.

5. The Fed drives auto loan rates

If you’re thinking about buying a car, you might see slight relief on your auto loan rate. Even though the fed funds rate is a short-term rate, auto loans are still often tied to the prime rate.

It might, however, be a modest impact. The average rate on a five-year new car loan is 4.56 percent, down from 4.72 before the Fed cut rates in July, according to Bankrate data.

Bottom line

When the Fed cuts rates, it’s easy to think of it as discouraging savings, McBride says. “It’s reducing the price of money. It incentivizes borrowing and dis-incentivizes savings. Essentially, it gets money out of bank accounts and into the economy.”

On the other hand, a Fed rate hike discourages borrowing, as the cost of money is now more expensive.

But that doesn’t mean it’s a bad time to save. Building an emergency savings cushion, and saving in general, is a prudent financial step.

“Good savings habits are important independent of the interest-rate environment,” Miller says. “Your transmission in your car, if it breaks, it doesn’t realize if rates are low.”

Stay ahead of any Fed rate moves by keeping an eye on your bank’s APY. Regularly checking your bank statement can also help you determine whether you’re earning a rate that’s competitive with other options on the market.

If the Fed looks like it’s going to hike rates, paying off high-cost debt ahead of time could create some breathing room in your budget before a Fed rate hike. Use Bankrate’s tools to find the best auto loan or mortgage for you.

Source: To view the original article click here

 

Posted by Jackie A. Graves, President on March 29th, 2020 11:15 AM

Mortgage rates remain low by historical standards, but volatility in the market means rates are fluctuating significantly. So prospective borrowers looking for a home loan need to shop carefully for the best rate, since it could change markedly in a short period, not unlike airline tickets back when folks were still flying.

Borrowers also need to expect delays, as bottlenecks in the process are slowing down the ability of lenders – as well as borrowers themselves – to close loans as fast as they usually do.

“Two weeks ago we saw rates really drop, and things were already busy before that,” says Joel Kahn, associate vice president of economic and industry forecasting at the Mortgage Bankers Association.

Kahn says lenders are continuing to feel the squeeze, as low and volatile rates draw tons of would-be buyers and refinancers to the market. That’s creating issues with lenders’ staffing.

“Staffing at lenders was already tight,” says Kahn. And with the influx of new customers, lenders are struggling to keep up. “It’s an issue of finding the staff they need, onboarding them, and it’s a long and technical process to get new employees up to speed.”

Business is so brisk, some lenders are even raising their mortgage rates in order to discourage new business, despite the Federal Reserve lowering its lending rates to zero percent. In addition, lenders have also been pulling back because of disruptions in the mortgage-backed securities market where they buy and sell the bonds that back mortgages.

It’s not just lenders slowing the process

Beyond all this, the coronavirus and the government’s responses to it are crimping the ability of all sides of the market to close loans. The closure of many municipal and county offices across the nation is slowing or altogether stopping mortgage loans from being closed, creating bottlenecks.

And even if an office is open, it may have few people on site, says Kahn.

“A lot of closing has traditionally been done in person, so the lack of personnel is slowing the process,” says Kahn. He suggests that remote online notarization, already pushed by industry for some time, may be able to pick up some slack here and mitigate the bottleneck somewhat.

Borrowers may also be slowing the process, too, through no fault of their own. In response to the coronavirus, many employers have employees working from home, may temporarily be understaffed or otherwise unable to verify an employee’s income. So, many borrowers may not receive a timely verification, which is needed in the underwriting process.

To speed the process, the Federal Housing Finance Agency (FHFA) is allowing lenders to obtain an email verification of the borrower’s employment, a year-to-date pay stub or a bank statement with a recent payroll deposit, in lieu of verbal verification.

Appraisers can be another bottleneck, Kahn says, because there was already a shortage of them over the last year before rates plummeted in 2020 and spiked an interest in refinancing.

Fears surrounding the coronavirus are also hurting the appraisal process.

“Homeowners might be concerned about letting an appraiser into the house,” says Kahn. “And some appraisers are reluctant to go into a house without knowing the situation there.”

However, to deal with some of the problems caused by the appraisal process, the FHFA has instructed Fannie Mae and Freddie Mac to accept “appraisal alternatives” to inspecting the interior of a home, though without specifying what those were.

It all adds up to a longer time to close for borrowers. Lenders are extending their rate locks from 30 days or 60 days out to as much as 90 days. In some cases, borrowers might be asking for the extended lock due to the ability to obtain necessary information, for example, but in other cases lenders just don’t have the capacity to close more quickly.

What can borrowers do?

“The big bump in refinances has been a silver lining, but it’s a challenging time all the way around,” says Kahn.

Those challenges mean borrowers need to set their expectations correctly when they enter the mortgage process. They shouldn’t expect to close on the loan as quickly as they might have in years past, as multiple factors – many of which are beyond their control – combine to slow the process.

Of course, this slowdown may cause further backups in the entire market, too. As the closing process comes to a crawl, it can have knock-on effects down the line, because home sellers are often homebuyers at the same time. Sellers who are unable to close in a timely fashion on a mortgage may have to defer the sale of their own home, for example, causing a domino effect.

Given all these constraints, borrowers need to approach the process with some patience, which is perhaps not the easiest thing to do when you spot a mortgage rate that could save you tens of thousands of dollars over the life of your loan and you want to secure it.

Still, buyers can use any slowness in the market as time to shop around for the best mortgage rates, potentially scoring an even better deal by being patient.

Source: To view the original article click here

Posted by Jackie A. Graves, President on March 28th, 2020 11:06 AM

Today’s homebuyers have the advantage of shopping in a low mortgage-rate environment, as current mortgage rates have fallen to around 3.73 percent. But not everyone qualifies for the lowest rates available, or can even qualify at all for a mortgage or a refinance.

Credit score, down payment and even comparison shopping are all important factors that play into the rate you receive. Here’s a breakdown of why these things can prevent you from scoring the lowest rate available and what you can do to change it.

1. Improve your credit score

A credit score is one way lenders try to predict whether borrowers will pay their loan on time and be able to afford the mortgage payments. Borrowers with excellent credit scores are rewarded with the best rates because they’re perceived to be less likely to default or make late payments. Lenders hedge their risks by increasing rates for borrowers with lower credit scores.

To get an idea of the interest rate you might qualify for, start by checking your FICO score, which is the score lenders use that is based on your credit report. Consumers are entitled to one free credit report per year from each of the three major credit reporting agencies: Experian, TransUnion and Equifax. It usually costs extra to get your FICO score, though many credit card issuers provide it for free.

In addition to the score, consumers will get insight into the five components that make up the score and how those factors are impacting it. These components, which are weighted differently according to FICO, include:
  • Payment history (35 percent).
  • Amounts owed (30 percent).
  • Length of credit history (15 percent).
  • New credit (10 percent).
  • Credit mix (10 percent).

“For example, if you maintain a balance on your credit cards, it will appear on your report as ‘revolving credit utilization;’ lowering that amount will raise your credit score,” says Judith Corprew, executive vice president of chief compliance and risk at Patriot Bank. “Also consider late payments. Remembering to pay bills on time and in full will help your credit score (not to mention reduce late fees).”

Hard inquiries on your credit report can also lower your FICO score. Hard inquiries include loan and credit card applications, and might indicate that you need money or are at risk of overextending yourself.

“Don’t apply for credit unless you need it. And definitely don’t apply in the six months preceding your loan application,” says Adrian Nazari, founder and CEO at Credit Sesame. “However, you can shop for mortgage rates without worrying about multiple inquiries because the only way to compare loan offers is to apply with more than one lender.”

Finally, if you see an error on your credit report, you can dispute it. Clearing up mistakes will also help you improve your score. Credit scores are updated every 30 to 45 days, according to TransUnion, and credit bureaus usually update your file as soon as they get new information from creditors. So, if you pay off debts and avoid opening new lines of credit, you might see your score increase in as little as a month.

2. Make a bigger down payment (or look for low down payment options)

Bigger down payments can often help borrowers secure a lower interest rate. The reason is that the loan-to-value ratio, or LTV, is lower with larger down payments, which reduces how much the lender would lose in case of default.

This is another instance of risk-based pricing. Lenders reward low-risk customers with lower interest rates.

“The larger the down payment you put forth, the better the odds of lowering your interest rate and monthly payment,” says Chris de la Motte, co-founder and president at Simplist. “If you’re not quite at your target number yet, there are plenty of ways to trim additional expenses — and they can really add up. Whether it’s pausing the gym membership to run outside and participate free local classes, or forgoing the daily office cafeteria run in favor of a little meal prep action, little things can make a big difference. You’ll be there in no time.”

That said, there are plenty of loans available at low interest rates with as little as a 3 percent down payment. Look into FHA loans and programs through banks that specialize in low down payments. And if you want to refinance your current mortgage, no down payment is generally needed as long as you have sufficient equity in the home.

3. Compare offers from multiple lenders

Research shows that shopping around for a mortgage can save consumers hundreds or even thousands of dollars. According to a 2018 report from Freddie Mac, borrowers can save “an average of $1,500 over the life of the loan by getting one additional rate quote and an average of about $3,000 for five quotes.”

Bankrate’s mortgage rate tables are updated regularly, so you can start by doing your research online. Be sure to shop at your bank and even online lenders.

Consider that the difference between 8 basis points can save you $140 per month. A $300,000 mortgage with a 4.5 percent rate will cost $1,520 in principal and interest per month compared with a 3.7 percent interest which comes to $1,380 per month. That difference adds up over time, so it’s worth taking the time to improve your score, save for a bigger down payment and shop around for a better rate.

If your credit is less than stellar, it pays even more to shop. Some lenders will welcome your business with competitive rates while others may not. Mortgage brokers are another good way to find a lender if your situation is out of the ordinary.

Source: To view the original article click here

Posted by Jackie A. Graves, President on March 27th, 2020 10:49 AM

The housing market is about to enter the spring selling season, and mortgage rates are near record lows. With rates slipping over the past year, and especially over the past few months, it may be a fine time to lock in your mortgage rate and forget about getting the rock-bottom rate.

So potential buyers sitting on the sidelines waiting for a better rate may want to reconsider. Their buying power has seldom been higher, especially if you compare where rates are to recent economic booms in 1999-2000 and 2006-2007.

The all-time low for rates

Average rates on 30-year mortgages are now at 3.7 percent, according to Bankrate’s weekly survey of the nation’s largest lenders. Would-be borrowers might consider whether rates can fall much further. The all-time low for the benchmark 30-year is 3.5 percent, achieved on Dec. 5, 2012, according to Bankrate data.

For now, many economists expect the Federal Reserve to keep interest rates steady, holding off one key source of the downward pressure on rates. However, potential short-term concerns that may hit global growth, such as the coronavirus, may push rates lower.

But regardless of where rates go from here, they’re already only a smidge higher than the lowest we’ve seen for some time.

“The substantial drop in mortgage rates compared to last year has put more buying power behind would-be buyers, though the continued appreciation of home prices in many markets does dilute the savings,” says Greg McBride, CFA, Bankrate chief financial analyst.

Buying power remains high

With the decline in rates, consumers’ buying power continues to increase, and the ability to lock in long-term financing may prove too attractive for many to resist, even with higher home prices.

“Borrowing $250,000 at 3.5 percent now costs $144 less per month than at 4.5 percent one year ago, but 5 percent home price appreciation means borrowing $262,500 now,” McBride says. “The payment is still $88 per month lower at today’s rates than the smaller loan at last year’s higher rates.”

And rates are already well below what occurred in recent economic booms. In 2000, rates on 30-year mortgages topped out at 8.69 percent on May 17, 2000, according to Bankrate data. In the last boom, rates topped at 6.93 percent on June 28, 2006. So historically, consumers are already seeing incredibly low rates.

The decline in rates has drastically affected the ability to afford a house at a given price. For an income of $100,000 and a lender that requires mortgage payments to be no more than 28 percent of your income, here’s the buying power and the interest paid over the life of the loan.

INTEREST RATE

MAXIMUM MORTGAGE

PROPERTY VALUE

INTEREST PAID

3.64 percent (2020)

$510,692

$638,365

$329,307

6.93 percent (2006)

$353,210

$441,512

$486,789

8.69 percent (2000)

$298,220

$372,775

$541,779

At that income, you’ll be able to afford a mortgage of $510,692, according to Bankrate’s maximum mortgage calculator. Factor in a 20 percent down payment, and you could buy a property valued at $638,365. Interest payments total $329,307 over the life of the loan.

In the 2006 boom, when 30-year rates hit 6.93 percent, that same salary would have afforded a mortgage of $353,210 and a property of $441,512, assuming the same 20 percent down payment. Interest payments would come to $486,789 over the life of the loan.

In the 2000 boom, with rates maxing 8.69 percent, that $100,000 salary could get you a mortgage of $298,220 and a property of $372,775. Total interest payments would come to $541,779.

So with the decline in rates, consumers’ buying power has been rising substantially and the amount going to interest expenses has been declining markedly. And despite much higher property values, the amount of interest actually declines sharply.

Focus on price, then find a great rate

Of course, consumers shouldn’t buy a house just because rates are good. Rather, they should find a house that they want to own, negotiate hard for the price they want and only then use the market to lock in the rate they want.

And if you lock in a rate now and rates fall further during a recession, you may be able to refinance at that time, taking advantage of the even more favorable situation.

Source: To view the original article click here

Posted by Jackie A. Graves, President on March 26th, 2020 12:28 PM

American homeowners are leaving a ton of money on the table, as mortgage rates plummet.

Mortgage rates are now hovering near all-time lows, causing a spike in refinancing in January. Yet while many Americans are rushing to cash in, reducing their monthly payments and the amount of interest they’ll pay over the life of the loan, millions of others are paying above-market rates.

A 30-year mortgage now runs about 3.7 percent nationwide, but the average borrower is paying 4.41 percent, a new survey from Bankrate reveals. That difference leaves a potentially huge opportunity for homeowners to refinance and save thousands on their loan.

Even more astounding, however, is that about 27 percent of borrowers don’t know what their mortgage rate is, according to the Bankrate survey. Overall, about 7 in 10 borrowers are paying above the current average interest rate or don’t know what they’re paying.

And about 7.8 million homeowners have the opportunity to refinance and save money, according to data from Black Knight, a mortgage analytics company. Figure how how much you could save with this mortgage refinance calculator.

The savings opportunity is huge

The potential to refinance and save is significant, especially if you own a home in one of the larger metro areas, where home prices are typically much higher.

The table below shows how much new borrowers could save on the maximum 30-year FHA loan, assuming they moved from the 4.41 percent mortgage average in the Bankrate survey and the current average of 3.71 percent.

METRO AREAS

MAX FHA LOAN

INTEREST PAID @ 4.41%

INTEREST PAID @ 3.71%

SAVINGS

Los Angeles

$765,600

$616,206

$504,573

$111,633

New York City

$765,600

$616,206

$504,573

$111,633

Chicago

$368,000

$296,191

$242,532

$53,659

Houston

$331,760

$267,022

$218,648

$48,374

San Francisco

$765,600

$616,206

$504,573

$111,633

Atlanta

$401,350

$323,033

$264,512

$58,521

Washington, D.C.

$679,650

$547,027

$447,927

$99,100

Poughkeepsie-Newburgh-Middletown, NY

$356,500

$286,935

$234,953

$51,982

The potential savings on a maximum conforming FHA loan for the most expensive cities surpasses $100,000.

The limit for FHA loans in highest-priced cities, including New York, Los Angeles and San Francisco, is $765,600. Homebuyers in these locales would save more than $111,000 over the life of a 30-year loan if they moved from 4.41 percent to 3.71 percent, the current average rate.

In Chicago, the FHA limit is about that of the highest tier, at $368,000. Correspondingly, the interest savings of moving to the current average interest rate is about half, at $53,659.

Other major metros, such as Houston and Atlanta, had comparable FHA loan limits as Chicago, and offered similar loan savings, at $48,374 and $58,521, respectively.

Meanwhile, the Poughkeepsie-Newburgh-Middletown area saw its FHA loan limit slashed in half in 2020. A new 30-year loan at current average rates would save nearly $52,000.

Find a great mortgage rate

With mortgage rates at near-historic lows, you’ll want to run the numbers to see if it makes sense for you to refinance into a cheaper option. But if rates continue to slide, it’s going to be harder and harder to justify staying in your higher-priced mortgage.

Source: To view the original article click here

Posted by Jackie A. Graves, President on March 25th, 2020 11:06 AM

Mortgage rates have sunk to near record lows in early 2020, as a series of interest rate cuts from the Federal Reserve and recent jitters in the bond market have made borrowing more attractive. Our expert has some timely advice on what this means for homeowners and would-be borrowers.

Bankrate’s data show that the current average 30-year mortgage has fallen to around 3.7 percent, so it seems like an ideal time for new borrowers as well as those looking to refinance.

And with the average borrower paying more than 4.4 percent, according to a recent Bankrate survey, it looks like many homeowners can save thousands by refinancing. And of course, new borrowers may be able to lock in a rate that’s among the lowest ever offered.

We spoke with Greg McBride, CFA, Bankrate chief financial analyst, to understand more about what’s going on in the mortgage market, where rates are headed and what borrowers can do.

Wow, this mortgage market has really taken off when rates dropped. What’s going on?  

McBride: Nothing spurs mortgages, and refinancing activity in particular, like low rates. The coronavirus scare has prompted a flight to quality among investors that has brought bond yields and mortgage rates to the lowest levels in more than three years. But the surge in refinancing can be fleeting – a rebound in rates back to levels where we started the year would temper the application flow real quick.

So the mortgage market is shaping up for a good 2020?

McBride: Things are lined up to be a great year. The surprise plunge in rates to start the year has spurred a surge in refinancing activity that wasn’t expected and with unemployment at 50-year lows, there are plenty of would-be home buyers in the market. Both purchase and refinance originations will be strong this year – oftentimes it’s only one or the other.

Housing supply seems pretty tight in many markets right now – will that hurt mortgages?

McBride: The lack of supply means a low ceiling for the housing market and by extension, the purchase mortgage market. Fortunately, refinancing has started off 2020 with a bang – much more than expected – so it’s still a good time in the mortgage market.

And what are the best moves for homeowners to make this year? 

McBride: Homeowners would be wise to evaluate whether or not they’re candidates for refinancing. Check your credit reports, fix any errors, and pull together your bank statements, paystubs, tax returns, and documents needed so that you’re ready to roll. I’d do that now so that you can take advantage of low rates. Procrastinating runs the risk that the opportunity passes you by with a modest rebound in rates, or puts you at the back of the line if rates drop further, refinancing applications keep growing, and only then are you scrambling to pull things together.

What about potential borrowers?

McBride: Would-be homebuyers should take the steps necessary to improve their credit like fixing errors and paying down debt, but also boosting savings and positioning yourself to put your best foot forward when you are ready to apply for a mortgage. And use some of the online calculators to figure out how much house you can afford and what the costs of a mortgage and homeownership mean to your monthly budget. Do that before you start home shopping.

So rates are low and credit is available – are we in a “goldilocks moment” for homebuyers?

McBride: A “goldilocks moment” is a good way to put it, at least from the standpoint of qualifying for a mortgage and getting a low rate. Not so much from the actual home purchase standpoint, given the limited inventory within affordable price ranges in many markets. But low unemployment, increasing household income, and really low mortgage rates are definitely a great backdrop for those looking for a mortgage to buy a home.

Anything else borrowers should focus on?

McBride: Don’t bite off more than you can chew by buying a house that is only affordable if your income and employability never decline. We will get an economic downturn at some point – I don’t know when, but we will – and you want to make sure you can still afford the house if your income declines, or you go through a period where your two-income household is a one-income household.

I also cannot overstate the importance of savings – not just for the down payment and closing costs, but for your emergency fund and the ability to continue saving for emergencies and retirement even after you buy the home. Leave yourself some margin of safety. Being house poor is no place to be.

Source: To view the original article click here

Posted by Jackie A. Graves, President on March 24th, 2020 10:35 AM

With the Federal Reserve cutting interest rates to near-zero, some consumers may have gotten the idea that mortgage rates are heading there, too. But that’s just not the case, though mortgage rates remain near historic lows, making a new mortgage or refinancing attractive for many.

In response to the coronavirus, the Fed cut rates over the weekend, dropping the fed funds rate one full percentage point to a range of 0-0.25 percent, the largest emergency reduction in the bank’s more than 100 years of existence. Investors’ expectations of a rate cut as well as the actual cut helped drive the 10-year Treasury note below 1 percent. The 10-year note is key, because it’s a benchmark for 30-year mortgage rates, and often the two move in similar directions.

You can think of the 30-year mortgage rate as a combination of the 10-year Treasury rate plus an additional markup called a spread. That spread makes it worthwhile for the bank to lend the money, covering the bank’s operating costs and generating a profit. Without a spread over its own cost of funds, a lender could not continue to operate and fund loans.

And that’s why mortgage rates are consistently well above the rate on the 10-year note. Typically the spread is around 1.8 percentage points or so, say experts, but that can and does change with market conditions. The chart below shows mortgage rates and the 10-year note over the last year as well as the spread between the two. Note how the spread has actually risen as the 10-year fell.

The 10-year has dropped substantially in the last month, while 30-year mortgage rates have fallen, too, but not as much. The net difference – the spread – has actually widened in that timeframe, as you can see with the upward climbing line in the graphic. The spread now sits at 2.54 percent. In periods where the 10-year notes dips a lot, the spread may climb somewhat.

So while the Fed lowers rates to zero, putting downward pressure on mortgage rates, potential borrowers shouldn’t expect their borrowing costs to move toward “free money” any time soon.

Where are mortgage rates now?

Bankrate just released its latest weekly average mortgage rates, and the results show rates have actually climbed over the last couple weeks, even as the 10-year Treasury yield has mostly fallen. The average 30-year rate in Bankrate’s survey rose 11 basis points to 3.88 percent this week, after moving up 19 basis points the previous week.

What’s driving that shift higher when other rates are actually falling? One reason is that low rates have encouraged a massive wave of refinancing, including cash-out refinances, which are at an 11-year high. That spike in popularity has overwhelmed the ability of banks to keep up. So in some cases lenders are actually raising their rates to make it more profitable. Others raise rates to discourage new business because their underwriters are too busy.

In still other cases, loan originators are overwhelmed by the volatility of the market and need to raise their own rates in order to ensure that the loan remains profitable for them.

Still, now remains a good time for many borrowers – millions, actually – to refinance their mortgage and reduce their monthly costs, especially as some economic uncertainty looms.

Source: To view the original article click here

Posted by Jackie A. Graves, President on March 23rd, 2020 9:28 AM

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