Child Tax Credit, Median Price, Loan Program Updates!

Many folks received a check from the IRS this month – benefits can total up to $3,600 per child annually. This tax credit is currently set to last 1 year and projected to cut childhood poverty by 50%. The cost of this credit is $100B but the current annual cost of child poverty is estimated at $1T. Nearly 20% of children in the US live in poverty making America one of the worst countries in the West for child poverty rates. There will be a move to make this credit permanent as previous studies have shown significant returns on investing dollars in children to lift them out of poverty.

Rates –fluctuated marginally this week as the price of Mortgage Backed Securities ended the week very near to where they started. Rates are down approximately 1/8% from this time last year.

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Jobs – the number of people filing for unemployment for the first time increased from pandemic lows by 51K people last week. The total number of individuals receiving benefits is down 1.3M to 12.6M (down from 20M pandemic highs).

Existing Home Sales – the media is talking about the massive year over year median price increase of 23.4% – the largest since January 1999. Remember that medium price increase is not equal to appreciation – median price is simply the middle price in a list of homes sold arranged by value. The second graph shows how the number of sales on higher priced and luxury homes has increased dramatically due to inventory shortages at lower price points which skews median values.

Mortgage Applications for purchase fell 6% from the previous week and are down 18% year over year. Refinances declined 3% week over week and are down 18% year over year. The average conventional interest rate on contracts is 3.11% which includes 0.43 discount pts.

Forbearance – the share of mortgage loans in forbearance dropped 0.26% to a total of only 3.5%. Of the folks exiting forbearance 23% were making their payments, 28% deferred the balance, and 7.4% paid their loan off through selling or refinancing.

LOAN PROGAM UPDATES!!

  • FHFA recently (Fannie & Freddie) dropped the 0.50% adverse market fee on refinances for conventional loans. We have already updated pricing and passed this savings on to current customers and new customers. The change goes in to effect for FHFA Aug 1st (for loans they are purchasing).
  • FHFA also announced RefiNow – program designed to target low-income borrowers with single-family conventional mortgages . There are two big wins with this product (1) the maximum DTI is 65% and (2) there is a $500 lender credit applied at closing if an appraisal is obtained on the loan. This will be huge for folks who have lost a wage earner due to Covid or had one wage earner move to gig economy/1099 work and can’t qualify with their work history. The refinance must reduce the borrowers payment by $50 and interest rate by 0.5%
  • Jumbo guidelines: are continuing to loosen – DTI ratios for self-employed folks have relaxed as have restrictions for first time homebuyers!
  • FHA – has significantly improved their calculations for student loans. Instead of using a mandatory 1% of the balance you can now either use the actual payment showing on credit report (which can be quite low with income based repayment programs) or 0.5% of the loan balance if loans are in deferment. Please make sure your clients know this as it can easily make a difference of $20K-100K in qualifying power.

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