Stimulus And Fed Almost Crashed Mortgage/Housing Industry
Here is a great article that partially explains what happened. Long story short: many major lenders face bankruptcy because servicing values are now close to zero (because of the risk of missed payments) and because lenders face massive margin calls because of the Fed’s bond-buying.
Still Funding Loans/Vanilla Loans Only
The mortgage industry is still funding loans, so agents can still make offers knowing that financed transactions will close IF: (1) the borrower has an FHA or VA loan with a FICO above 640 or 680 (depending on the lender); or (2) a relatively clean conforming (Fannie/Freddie) loan. Jumbo loans are at risk now, depending on circumstances, as are all other marginal loans (Non-QM, low FICO, low reserves, high LTV, etc.).
Agents and borrowers should check with their lenders for updates.
Tax Transcripts/4506-Ts Stalled
Many lenders will not fund loans unless they have independently verified federal income tax transcripts. This includes most jumbo lenders so most jumbo loans are stalled right now, pending new policy or the IRS’s return to work (slated for April 7th).
Many lenders allow borrowers to obtain tax transcripts themselves via the IRS website, but some jumbo investors require that the transcript is obtained by a verified third party rather than from the borrower. Additionally, some borrowers do not have access to their transcripts via the IRS website, and must call the IRS for them. Further, the IRS will typically only snail-mail the transcripts to the borrower rather than fax or email them.
We are waiting to see if some Jumbo investors (who buy our jumbo loans) are going to change their policies in regard to the type of transcripts required.
India Shutdown – Expect Delays
The shutdown of the Indian economy is significantly affecting the mortgage industry, as most major firms have operations in India. This is causing further delays for most companies, including JVM.
This is because many of the investors that buy our loans have Indian operations that assist with the process, and they are unable to function. As a result, we are not able to sell many of our loans, making it difficult to clear our warehouse lines and fund more loans.
In any case, everyone should continue to expect delays with every escrow simply because there are so many COVID-19 related issues affecting our industry.
Rates Up And All Over The Place – 2% Differences Among Lenders
Most lenders are showing higher rates today again for a variety of reasons that I have been discussing for a few weeks now.
We are doing our internal rate-surveys with other lenders too and seeing differences of as much as 2% among different lenders. This shows how much turmoil there is in the industry right now.
We remain one of the lower-rate lenders but we still recommend that borrowers take what they can get right now from any lender and then look to refinance in four months when things settle down somewhat. Trying to find the “lowest rate” lender right now will just result in major delays and more frustrations, as lenders can and will pull out of our markets (by pushing up rates) at any given time and they still face major capacity issues.
