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Americans in Pandemic: Cancel Rent, Suspend Mortgage

Jessica Corbett

New polling from the think tank Data for Progress shows that a majority of Americans across the political spectrum support canceling rent payments and suspending home mortgage payments during the coronavirus pandemic—results that bolster the argument for legislation introduced Friday by Rep. Ilhan Omar to provide relief to “the millions of Americans currently at risk of housing instability and homelessness.”

Under the Minnesota Democrat’s bill, a summary from her office explains , “payments on all rental homes will be canceled and landlords will be able to apply to have their losses covered by the federal government through a Rental Property Relief Fund to be administered by the Department of Housing and Urban Development (HUD). Additionally, all home mortgage payments will be suspended with mortgage holders being eligible to apply to a similar, HUD-operated Home Lenders Relief Fund.”

As Omar unveiled the Rent and Mortgage Cancelation Act, backed by fellow progressives in Congress and several advocacy groups, Data for Progress, People’s Action, and Justice Democrats on Friday released a memo about the polling results. “With millions of renters in a desperate situation, bold legislation to relieve renters is imperative,” the memo says. “Eviction moratoriums—which postpone rent payments, but don’t cancel them—are only a first step, but they are not enough.”

Data for Progress found that 55% of all voters somewhat or strongly support a policy that would suspend mortgage payments and cancel rent payments, and not require renters to pay rent that accumulated during the the pandemic. Broken down by political parties, that policy is supported by 67% of Democrats, 48% of Independents, and 42% of Republicans.

A similar policy that would require renters to eventually pay back all rent accumulated during the pandemic garnered even higher support. Across all voters, 63% supported that policy. The party breakdown was: 77% of Democrats, 56% of Independents, and 50% of Republicans.

The memo points out that “some in government are beginning to act,” highlighting housing relief efforts in New York and that “a growing number of states and cities have placed a moratorium on evictions.” However, the document adds, “this isn’t enough. Rent hasn’t been canceled—it’s simply been postponed.”

“As the coronavirus pandemic continues to place millions of Americans in a difficult economic situation,” the memo concludes, “lawmakers should pursue the cancelation and forgiveness of rent for all tenants in the U.S., knowing that a clear majority of Americans are on their side.”

 

In a statement Saturday about the new polling, Justice Democrats noted:

Before the COVID-19 pandemic, a Harvard University report found that nearly half of renters in the U.S. are “cost-burdened,” spending more than 30% of their income on housing, and a quarter of renters are “severely cost-burdened,” meaning they spend more than half of their income to make the rent. The pandemic has exacerbated America’s housing crisis, leaving millions of renters in desperate circumstances and in dire need of bold legislation that goes beyond eviction moratoriums.

Justice Democrats executive director Alexandra Rojas urged members of Congress to urgently pass legislation that is ambitious enough to meet the needs of those negatively affected by the virus outbreak that continues to ravage communities across the country.

“We need to keep money in the pockets of working people in this country and a moratorium on rent and evictions is a major step in the right direction,” Rojas said. “The focus of additional COVID-19 emergency relief packages should match the scale of the crisis that millions of Americans are facing.”

 

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Wealthy Mortgage Borrowers Face Cold Shoulder From Lenders

April 22, 2020 at 9:44 a.m. PDT

The wealthiest, most-reliable mortgage borrowers in the U.S. are hearing an unfamiliar word from lenders: No.

The global pandemic has flipped the mortgage market upside down, turning the industry’s most-valued customers into risky bets. When the rich lose income and stop paying, costs for lenders are magnified because the loans — known as jumbos since they are bigger than most conventional mortgages — don’t have the government to backstop losses.

“Before this crisis hit us, jumbo loans were pretty attractive,” Tendayi Kapfidze, chief economist at LendingTree Inc., said. “But because they don’t have the government guarantee, a lot of those loans end up on the bank balance sheet.”

Lenders are charging more for jumbos, relative to conventional mortgages, than at any time in almost seven years, according to Optimal Blue, a Plano, Texas-based company that tracks mortgage rates. They’ve also tightened lending standards, making it harder for households, even those with pristine credit, to qualify for new loans.

No Logic

David Adler, an aerospace executive in Irvine, California, thought it would be easy to lower the 3.7% rate on his $700,000 home loan. Adler, 60, has excellent credit and plenty of equity in the Spanish Mission-style house he bought new eight years ago.

He had watched the Federal Reserve drop its benchmark rate to near zero, but when he called his lender, U.S. Bank, the company’s rates were too high to help.

“I told the guy at the bank, ‘I’m trying to use logic here,’” Adler said in an interview. “And he said, ‘That’s your problem.’”

The availability of jumbo mortgages plunged by 37% in March, more than double the drop in the overall home-loan market, according to the Mortgage Bankers Association. Jumbo loans exceed the limit for government-backed mortgages, which is $510,400 in most of the country, but can be as large as $765,500 in high-cost real estate markets, such as New York City and coastal California.

Jumbo mortgage rates for 30-year fixed loans early last week were 3.68%, almost 30 basis points higher than the average conventional rate. The spread over the past month has been the highest since 2013, according to data from Optimal Blue.

Before the pandemic, lenders were falling over each other to welcome jumbo borrowers, who generated fat profits even though they were the least likely to default. The borrowers — with great credit, money in the bank, valuable collateral and solid income — were also viewed as lucrative customers for other financial products. That’s why they got the best rates.

Now, banks are concerned about home prices falling in markets that rely on jumbo mortgages to finance property purchases, such as New York, San Francisco and Seattle — all of which have been hard hit by the coronavirus, said Vishal Garg, chief executive officer of Better.com, a home-lending startup backed by Citigroup Inc. and Goldman Sachs Group Inc.

Few banks better illustrate the souring appetite for jumbos than Wells Fargo & Co. The bank ranks among the biggest jumbo mortgage holders, making the loans itself and buying them from outside partners through what the mortgage industry refers to as correspondent lenders. Last year, the bank produced $70 billion of jumbo mortgages, more than any lender in the country, according to Inside Mortgage Finance.

Wells Retreats

In recent weeks, the lender, the nation’s fourth-largest bank by assets, has halted purchases from other mortgage banks and limited refinancings of jumbos to customers who currently have at least $250,000 parked at the bank, an executive said.

Banks including Truist Financial Corp. and Flagstar Bancorp Inc. also have pulled back by limiting refinancings, suspending their purchases of new loans made by correspondent lenders or pulling short-term credit lines from smaller mortgage companies they fund that make jumbo loans.

Much of this pullback is because investors who’d normally buy these loans no longer want them, said Stanley Middleman, chief executive officer of Freedom Mortgage Corp., one of the nation’s biggest home-lending companies.

“Whether the assets are good or not good is irrelevant because there’s no liquidity to buy them,” he said.

Investors have been spooked by the economic fallout from the pandemic, which is cascading from restaurant and retail workers to small business owners, lawyers and corporate executives.

Wealthier buyers are proving to be just as likely to stop paying their mortgages. Approximately 5.5% of jumbo loans — 131,000 borrowers — have asked to postpone payments due to a loss of income, compared with 6% of all loans, according to Black Knight Inc.

While lenders aren’t required to allow missed payments on loans that aren’t government-guaranteed, such as jumbos, they’re following the government’s lead. For one thing, they don’t want to alienate customers that they want to recruit back after the crisis. And foreclosing on Americans during a pandemic risks hurting lenders’ reputations, LendingTree’s Kapfidze said.

‘A Lot of Loans’

Jumbo financing hasn’t totally gone away. It was up at Better.com in March and it’s held steady south of San Francisco in wealthy San Mateo County, said Timothy Gilmartin, president of property firm Gilmartin Group.

In Southern California, Damon Germanides, a broker at Beverly Hills-based Insignia Mortgage, said he is still closing a lot of loans. It’s just getting harder to get them across the finish line.

A Los Angeles homebuyer he’s working with may fall short of qualifying for a mortgage, despite good credit and owning a business that’s doing well during the pandemic because it’s deemed “essential,” Germanides said. The borrower was ready to pony up 20% of the home’s value for the down payment, but he now probably needs to offer 30%.

“A month ago, he was a no-brainer,” Germanides said. “Now he’s 50-50.”

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Mortgages are still cheap, if you can get one

Millie Ruiz-Wagner is a mortgage lender in the Chicago area. Just weeks ago, a 580 credit score, out of a maximum 850, was good enough to qualify for a mortgage. These days she’s not seeing many loans approved under 640.

“I got caught with people who were preapproved with credit scores under 640, and I had to stop, regroup, help them fix their credit so they can get back in the buying market,” she said.

People do still want to buy homes, and even more people want to refinance existing mortgages, to take advantage of near-record-low interest rates. As of last week, the average interest rate on a 30-year mortgage was 3.31%, according to Freddie Mac.

But Joel Kan, an economic forecaster at the Mortgage Bankers Association, said that’s getting harder to do. The group’s Mortgage Credit Availability Index fell last month to its lowest level in five years, and it’s likely to get worse.

“The March numbers were really only a reflection of tightening in the last two weeks of the month,” Kan said. “With the gloomier economic outlook and a full month’s worth of data in April, I think we can expect more conservative lending and thus a decline in credit supply.”

According to data firm Black Knight, nearly 3 million borrowers have delayed their mortgage payments through COVID-19-related forbearance plans. That leaves lenders with less money — and less confidence — to make new loans, said Michael Neal, a senior research associate with the Urban Institute.

For potential borrowers, he said, “You’re less able to secure a mortgage, and if you are, you’re going to pay a much higher mortgage rate.” That could especially hurt minority and younger borrowers “because they typically have lower credit scores.”

It’s not just credit scores getting a closer look, said Lana Jern, a broker at Uptown Mortgage in Denver. Lenders are rejecting certain sources of income and asking for additional documentation, she said. One lender recently required a client to prove that his tenants had paid their rent in March and April, something Jern had never seen.

“It’s their prerogative, of course, but some of it I think is a little overreactive,” she said. “Then again, it’s not my money.”

Tighter credit standards are likely to further slow home sales, already under strain from stay-at-home orders and mounting job losses. Maryland-based builder Jeff Caruso, owner of Caruso Homes, said some of his clients have run into trouble getting financing.

“I would say 8 to 10 percent now are looking at credit issues, trying to increase their credit scores because of these new requirements,” he said. “That’s definitely affecting our homes under construction and our new home sales.”

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Millions of homeowners are now delaying their mortgage payments

As the coronavirus continues to wreak havoc on the US economy, millions of homeowners have taken advantage of a government program that enables them to reduce or delay their mortgage payments.

The payment relief, or forbearance, enables homeowners with federally-backed loans who are impacted by the pandemic to delay or reduce their mortgage payment and to get a break on the accumulating interest for up to a year.
In the week ending April 12, the share of loans in forbearance jumped to 5.95%. That’s a 60% increase from the prior week, according to a Mortgage Bankers Association survey of more than three quarters of home loans, or about 38.3 million loans. At the beginning of March, before the coronavirus pandemic caused widespread shutdowns across the US, only 0.25% of all loans were in forbearance.
“Homeowners are contacting their mortgage servicers seeking relief, leading to a sharp increase in the share of loans in forbearance across all loan types,” said Mike Fratantoni, MBA’s chief economist in a statement.
He said that while mortgage servicers continue to receive a very high number of forbearance requests, they were down somewhat compared to the prior week. Call times went down, too, with hold times dropping in half from 10 minutes to five.
But, with more than 22 million people filing for unemployment
during the past four weeks, the numbers are expected to rise again.
“The numbers [are] big, but are going to get even bigger,” said David M. Dworkin, president and CEO of the National Housing Conference, a nonprofit advocating for affordable housing. “We are only two mortgage payments into this crisis, and already 6% of the people paying mortgages are asking for help. Others can’t pay but haven’t asked for help yet. By May, we will have millions more unemployed and unable to pay.”
Bearing the cost of all those delayed mortgage payments could put a strain on some servicers — particularly some smaller mortgage companies that do not directly make loans.
The federal mandate to allow millions of desperate homeowners to delay their mortgages “has the great potential to be too great a strain for non-bank servicers,” said Ed DeMarco, president of the Housing Policy Council.
Ultimately, this could make it more difficult for people to access mortgages, with some lenders already announcing the tightening of credit standards, DeMarco said.

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Mortgage rates were already at record lows. Now they could go even lower

 Anna Bahney, CNN Business Updated 7:43 PM ET, Tue March 3, 2020

An emergency rate cut from the Federal Reserve, the 10-year Treasury bond yield at historic lows — if you’ve been waiting to refinance or buy a home, it appears your time has come.

The half a percentage point cut by the Fed on Tuesday brings the benchmark interest rate range down to 1% to 1.25%. That cut, along with a rock-bottom 10-year Treasury yield, means mortgage rates are poised to head even lower.
Mortgage rates have already been hovering near historic lows. Last week, rates fell to an average of 3.45% for a 30-year fixed rate mortgage and 2.95% for a 15-year fixed rate mortgage, according to Freddie Mac.
“It’s definitely a good time for someone looking to buy a home to get financing,” said Mark Hamrick, senior economic analyst for Bankrate. “Home prices have risen, and it is rough for those looking for a bargain, but the financing has gotten better.”
And there is an opportunity for rates to go lower still, he said.

“If you’re trying to look for the silver lining in the midst of the current climate,” said Hamrick, “the mortgage interest rate is close to the top of the list.”
Spring real estate market gets a boost
Volatility in the stock market and uncertainty in the economy doesn’t bolster a home buyer’s confidence, but knocking money off a monthly payment by getting a lower mortgage rate or refinancing can certainly help.
On the cusp of the spring home buying season, these rates are well timed, said Hamrick. But favorable rates alone aren’t necessarily going to bring new buyers into the fold.
“Buying a home is a practical purchase,” he said. “You buy because you’re ready and you know how much you want to spend, the timing of the purchase and the location.”
But this shift may bring those who were considering buying a home into the market more quickly.
“Hesitant home buyers will be enticed to take advantage of low interest rates,” said Lawrence Yun, chief economist at the National Association of Realtors, in a statement.
He said the rate cut not only helps individual buyers, but also the entire real estate sector.
“The coronavirus has quickly upended global economic expansion and introduced the significant uncertainty of a possible recession,” said Yun. “Today’s interest rate cut is an appropriate response to changing events.”
Move now or wait for lower rates?
Knowing when to make the move can be tricky.

If you’re looking to refinance or secure a new mortgage, evaluate the immediate impact it will have on your finances, said Mike Hennessy, a certified financial planner with Harbor Crest Wealth Advisors in Fort Lauderdale. “If you can meaningfully save on your interest costs, build equity quicker, or extract equity at a reasonable cost to fund a renovation project, then take the bird in hand today.”
For a mortgage refinance, start comparing the numbers that are being offered with what you currently have, said Cynthia Meyer, a certified financial planner with Real Life Planning in New Jersey.
“If the new rate is 75 basis points (0.75%) lower than the current rate, that it’s generally going to be worth it to refinance after the costs of the refi,” said Meyer.
“If you’re planning to stay in your home, run the numbers to see if it makes sense to refi from a 30- to a 15-year mortgage as well,” she said. “You may be able to pay around the same amount every month and get your house paid off a lot sooner, with lower total interest costs.”
Shop around

Even before today’s rate cut, lenders had been offering competitive rates and even including some closing costs, said Danielle Seurkamp, a certified financial planner with Well Spent Wealth Planning in Cincinnati, Ohio.
Still, it’s always a good idea to shop around, she said. “You shouldn’t assume you’re going to get a good deal from a big bank just because you have your checking and saving account with them,” she said. “Often the smaller, community banks offer the best deals.”

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What color is your credit score?

Nationwide Mortgage nonprime

Do you have a poor credit rating because of financial problems you have had in the past?

Perhaps you went through a bad divorce or you owned a small business that went bankrupt or a consumer proposal.

You might have lost your job and ended up defaulting on your loans and credit cards.

There are many circumstances that could have caused you to have poor credit.

This does not necessarily mean that obtaining a mortgage to purchase a home is out of the question and regardless of the circumstances speaking with a mortgage broker could help you with a course of action toward owning a home.

Does this mean your only option is a hard money loan?  What about non prime loans?  What are they and how can they help me?

Ensuring that you take the right steps whether you have bad credit or even no credit is very important. There may be some options available to you but they will come with a cost.

Here’s a guide to what we are going to take a look at to determine what options might be available for mortgage financing.

  • Check your credit score — You can do this yourself at either www.equifax.ca or www.transunion.ca or if you contact a mortgage broker, they can check it for free. Your credit score will be somewhere between 300 and 900. If you have a credit score below 600 most of the major bank lenders in Canada will not consider you for mortgage financing and you will be looking at an alternative mortgage lender. If you have gone through a bankruptcy or consumer proposal recently, the options available may include private lenders.
  • Save for a larger down payment — If you have good credit, then you can purchase a home with as little as a five per cent down payment, but with credit issues you need to be prepared to provide more equity. Lenders are going to require somewhere between 20-25 per cent down payment.
  • There will be fees — Be prepared to pay some fees to arrange a mortgage with either an alternative or private lender on top of the standard closing costs.
  • Rates — You will not qualify for the best rates that are currently being advertised, but if you make all of your payments on time and work on repairing your credit, then most likely you will qualify for better rates at renewal time.
  • Income and employment — A lender is going to review your history of employment and income to ensure that you are able to make your payments. Is your income confirmable? (Declared on your tax returns with your taxes paid up-to-date). This is particularly important for the self-employed applicant. Do you have employment stability?
  • Current debts — Carrying high balances on unsecured credit cards or having a high car payment could also affect a mortgage decision. Alternative lenders will want to ensure that you can afford your current obligations to prevent the potential of future default on a mortgage payment.
  • The property you are purchasing — This is a very important factor for private lenders lending to clients with bad credit. They will want to have a full appraisal completed on the property to ensure that it is marketable and worth the investment they are making in the mortgage.

There are options available

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5 Mistakes to Avoid Getting Rejected for a Mortgage

Amassing a big pile of cash for a down payment–to apply for a mortgage is a daunting task. First-time buyers often rightly pause as they begin to grasp the meaning of the phrase, “mortgaging your future.”

If you can get over that hurdle, you could be well on your way to the seven out of eight mortgage applications that get approved. A pessimist might observe that that means the application has a one-in-eight chance (12.5%) of being rejected.

True enough, but you can reduce the chance of rejection by avoiding a handful of mistakes that have a virtually immediate negative impact on your credit score. The experts at Realtor.com have come up with a list of five mistakes you can easily avoid to make sure that your application is one of the seven that gets approved and not the one that gets rejected.

1. Use your credit cards

One way to establish creditworthiness is to use the credit you have. That doesn’t mean to pile it on, but use the cards you have and pay them on-time to build up a credit history. If you really don’t want to do that, some lenders will look at your history of rent payments and other regular bills that you have.

2. Don’t open new credit cards near the time you are applying for a mortgage

According to Realtor.com, opening a new credit card account can cost you up to five points on your credit score. That may be enough to disqualify you for a mortgage. Also, don’t spend a lot of cash (or use credit on existing cards) before you get the mortgage and moved in.

3. Don’t miss a payment on a medical bill

If you’ve run up some big medical bills, work with the doctor or hospital to develop a payment plan you can live with. Defaulting on a medical bill typically results in the provider referring your account to a collection agency and the agency can refer your status to the credit reporting agencies.

4. Don’t change jobs

Most mortgage lenders want to see at least two years of consistent income before approving a loan. There are exceptions, of course, but sticking with the job you have until the mortgage is approved is a better choice if at all possible.

5. Don’t lie on the mortgage application

This should be obvious. In the first place, if you do stretch the truth, it can be prosecuted as mortgage fraud, a federal crime. Second, mortgage lenders do their homework and chances are you’ll get found out, and there goes the mortgage. While it might seem quaint these days, honesty is the best policy when it comes to getting a mortgage.

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Conventional Home Loans – First position home purchase in Fresno, CA.

Conventional Home Loans

Most lenders would consider conventional home loans that conform to the guidelines set forth by Freddie Mac and Fannie Mae. These government sponsored enterprises (GSEs) provide liquidity in the mortgage market. Generally, any loan which does not meet guidelines is a non-conforming loan. A loan which is not at par for the guidelines is because the loan amount exceeds the guideline limits is known as a jumbo loan.

Technically speaking, a conventional loan is any mortgage that is not guaranteed or insured by the US government, such as VA, FHA and USDA. Conventional mortgages include portfolio loans, construction loans, and even subprime loans. Yet, whenever a lender refers to a “conventional loan” they are in all probability referring to conforming mortgages that are eligible for purchase by Fannie Mae and Freddie Mac.

The process of securitizing mortgage loans and selling them on the secondary market allows banks to continue writing loans for real estate. For Example: If you were to go to your favorite lender and were approved for a mortgage loan of $250,000, they would have to provide the funds necessary to complete the transaction while receiving a payment each month for the next 30 years until the loan was paid off. However, if the bank tied up their money for 30 years, they’d eventually run out of cash to lend on properties, auto loans, credit cards….

Fannie and Freddie provide that liquidity needed by purchasing the mortgages. They bundle them with thousands of similar loans and sell them as bonds on the mortgage backed securities market.

 

Fannie Mae and Freddie Mac follow the below criterion to evaluate mortgages they purchase:

1. They meet the yearly evaluated conforming loan limit
2. Loans with borrowers who have a minimum Credit Score
3. It meets the GSE guidelines in regards to Debt-to-Income ratios
4. The borrower requires all loans where has less then 20% equity for Private Mortgage Insurance (PMI).
5. Many more guidelines
It is important to understand that neither Freddie Mac nor Fannie Mae service the loans they purchase.

Even though these companies purchase loans from various lenders, it is the lender who retains the servicing. This is just a nice way of saying “we collect your payments.”

 

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