Conservative Guidelines, Stable Bond Market, Jobless Claims Double

Guidelines – First the positives: e-notarization should be coming soon in Oregon. A written bill has been languishing and the opportunity is finally ripe! Sometimes it takes a crisis to spark cooperation. Currently it is easier to get an appraisal waiver and in certain areas it is also possible to go with a Desktop or ‘Exterior-only’ appraisal. Fannie and Freddie are allowing this temporarily until 5/17.

There continues to be updates to guidelines and loan programs in the secondary market. Many jumbo options have dried up as well as non-conventional loans. Most lenders have become more conservative, especially on government loans demanding: higher credit scores, lower debt-to-income ratios, and even reserves on primary purchases to compensate for lower credit scores. Many lenders are also demanding verification of income on day of closing. Some major lenders aren’t even allowing locks until a file has been fully appraised and underwritten. The main cause for this is the risk of foreclosure. With jobless claims spiking owning mortgage debt suddenly becomes less valuable to investors and servicers as a certain percent of borrowers are now likely to default on payments. In particular lenders want to make sure borrowers make their first payment as a missed first payment causes a loan to become unsaleable to most buyers which in turn ties up capital, net worth, and restricts the ability of lenders to write more loans and generate more income.

Covid Resources – when will my stimulus check come and what can I do to get more $$ / get my check faster? How can I get health insurance right now? If you are considering forbearance on your mortgage payment, first – consider it as a risk to your credit, your equity, and a last resort option, second – call your servicer and make sure you get any terms with them in writing (in case you need to prove your case later – I’ve worked with clients that are still recovering from ‘forbearance’ from their bank from 10 years ago). Expect long wait times. Hopefully this is an overly cautious and conservative viewpoint but right now there is more equity in homes than there was during the last recession. Usually foreclosing on someone is an expensive option but when equity is available it looks more attractive to banks.

Rates – moved sideways this week. The market stabilized but we aren’t seeing the nice gains in pricing as the risk of foreclosure & forbearance are currently baked into pricing as the secondary market is concerned with having unsaleable loans and portfolios that aren’t as valuable.

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Jobs – the jobs report for March is out but it doesn’t really tell the full story. Unemployment was reported at 4.4% (1.3% increase from last month) but we know that in the last two weeks over 10M people filed for unemployment for the first time which makes up approximately 5% of the work force (which would put the number closer to 8-9%). Weekly earnings (take home pay) are up 2.2% from the previous year but down from February’s report by 0.8%

6.5 Million Initial Jobless Claims Tomorrow? | Zero Hedge
Graph of the Number of People filing for unemployment for the first time. 6.6M this week

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