a couple sit in their backyard with dinner and drinks as they enjoy dinner with their two dogs

FORBEARANCES, CREDIT, & ABILITY TO GET MORTGAGE FINANCING

I recently blogged about how forbearances will affect credit and a borrower’s ability to obtain mortgages, pointing out how borrowers just out of forbearance will have to “season” their forbearance for 3 months before they can get new mortgage financing if they still have a past due balance owing.

I was unaware, however, that if borrowers both end their forbearance period AND make up all past due or skipped payments, they will be eligible for new mortgage financing immediately.

This is important info for borrowers in forbearance who might want to take advantage of both refi and purchase opportunities in today’s extremely low rate environment.

INTEREST RATES HIT RECORD LOWS

Freddie Mac has been publishing Weekly Rate Surveys since 1971. We love the data b/c it is fascinating (I highly recommend perusing charts in the previous link) and b/c our rates are always lower than the “national average” reported by Freddie Mac each week.

What we don’t like are headlines like what Freddie Mac used this week and like I used for this blog – “Rates Hit Record Lows” 😊.

This is the third time this year that rates have “hit record lows” in fact.

So, while rates are almost 1% lower than where they were last year at this time, they are only 1/10 of 1% lower than where they were at their previous “record low” in April.

On the one hand, we like “rates-hit-record-low” headlines b/c they spur people to consider refinancing and/or buying.

But, we don’t like “record-low” headlines b/c they often badly mislead borrowers into thinking rates have dropped significantly – when they have actually been pretty flat (1/10 of 1% is a negligible change in any market).

WILL RATES GO LOWER?

Many experts expect rates to fall lower b/c the spread between the 10 Year Treasury yield and mortgage rates remains about 1% higher than normal.

But the mortgage industry remains very precarious for a variety of reasons, including the inability to handle all of the current demand; the inability to find buyers for weaker loans; the presence of much more risk in the market overall b/c of the COVID-19 crisis and related economic issues; and the lack of capital b/c of huge losses in recent months. These issues in the aggregate keep rates higher.

There is also the risk of more “black swans” like I have been blogging about repeatedly.

So, while the Jumbo Market has come back to some extent, there is no way of knowing for sure that interest rates overall will continue to fall b/c of all the issues the mortgage industry currently faces.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

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