Category: Banks and Lending

Fannie Mae and Freddie Mac Define COVID-19 Forbearance Repayment Options

We previously talked about Forbearance as an option for anyone negatively impacted because of COVID-19. Forbearance is one of the most common options for those who cannot make their mortgage payments on time. Typically, once a loan is out of the agreed timeframe of forbearance, the borrower is expected to pay a “balloon payment,” or the total of all the payments missed plus the current payment. Fannie Mae and Freddie Mac have released their payment deferral plans to assist homeowners in forbearance.

Who is Eligible for Forbearance?

Freddie Mac states,

COVID-19 Payment Deferral will be available to homeowners with Freddie Mac loans starting July 1, 2020, at which time your servicer will begin evaluating your eligibility. Your servicer will contact you about 30 days before the initial forbearance plan is scheduled to end to determine which Freddie Mac assistance program is best or if additional forbearance is needed.
http://www.freddiemac.com/blog/homeownership/20200514_understanding_payment_deferral.page

Fannie Mae offers three different options for borrowers who have entered forbearance:

Homeowners who are experiencing a financial hardship caused by COVID-19 may request a forbearance plan through their mortgage servicer (the company listed on their mortgage statement). Homeowners must contact their mortgage company to request assistance. Under a forbearance plan, a homeowner may be able to temporarily reduce or suspend their mortgage payment while they regain their financial footing. Forbearance does not mean a homeowner’s payments are forgiven. Homeowners are still required to eventually fully repay their forbearance, but they won’t have to repay it all at once — unless they choose to do so.

Homeowners have several options to pay back unpaid amounts accrued during their forbearance period. Mortgage servicers will attempt to contact homeowners 30 days before their forbearance plan is scheduled to end to determine which assistance program is best for them at that time.

Full repayment: Homeowners have the option of immediately reinstating their loan, which means catching up on all the missed payments in a single payment if they can afford it. If a homeowner chooses to reinstate their loan, they can continue to pay their mortgage under the terms originally agreed to before they received forbearance.

Short-term repayment plans: Homeowners can gradually catch-up on the past-due amount over an agreed-upon time frame (for example, 3, 6, 9, 12 months). A portion of the past due amounts must be paid in addition to their existing monthly mortgage payments. Upon completion of their repayment plan, they can continue paying their mortgage under the terms originally agreed to before they received forbearance.

COVID-19 payment deferral: Homeowners can resume their regular monthly payments and the amount of their missed payments moves to the end of the loan term. Note: Mortgage servicers will begin offering the payment deferral repayment option starting July 1, 2020.

Loan modification: The original terms of the loan are changed in order to make the borrower’s monthly payments more manageable and address their ongoing hardship.

https://www.fanniemae.com/portal/media/corporate-news/2020/covid-payment-deferral-7018.html

Now that there is more explanation regarding ways to enter and come out of forbearance, we still want to caution borrowers to only enter in forbearance if a true economical hardship due to COVID-19 has occurred and you can no longer make your mortgage payments. Mortgage forbearance will go on your credit history, and it is still unclear if a mortgage forbearance will impact a person’s credit score, or by how much if it does.

If you or someone you know would like to discuss your options, contact your local Benchmark branch today.call me or contact me today.contact us today, and let our team take care of you.

New appraisal and origination requirement changes announced due to COVID-19

by Jason Haeger

Special measures have been taken to help account for challenges facing the real estate market due to COVID-19. Here are the temporary flexibilities in place to facility the continuation of transactions for buyers.

Celebrating 20 Years Of Mortgage Excellence

by I Am Benchmark

In 1999, a couple of friends who worked as loan officers decided that they could do more. The mortgage industry needed something new and better. The time was right to prioritize the client experience. They knew that doing better meant putting the best team together. They wanted to create a company that would set standards; a company that would lead the industry not only in numbers, but most importantly, in their signature first-class home buying experience. In August of the same year, Benchmark Mortgage was born.

Starting the way many great companies have, Benchmark has grown from a single office in Dallas, Texas and a small team to over 100 branches in 47 sates across the nation. We were founded on core values that we have based, and continue to base every business decision on. These values – Success, Excellence, Positive Attitude, Dynamic, and Relationship – have shaped us into the company we are today. We are grateful for our team, their relationships with real estate partners, and the thousands of clients who have trusted Benchmark to finance their first home, their next home, or to refinance their forever home. We couldn’t have made it this far without you, and the tapestry of our story is embedded with the thousands of threads in our progress so far.

At Benchmark, it has never been enough to do things well. We are proud of our commitment of striving to exceed expectations. We are proud of being more than just a mortgage company. Benchmark created an event to give back to, and celebrate, the brave men and women who have served our country. In 2012, the first annual Boot’n & Shoot’n event took place to raise money for veterans. Boot’n & Shoot’n has become a staple for our nationwide family to come, join, and give back to our veteran and first responder heroes. As we reflect on our 20th year, we celebrate that Boot’n & Shoot’n 2019 raised over $1million for the Brain Treatment Foundation.

Benchmark’s love for helping those who serve never wavered, and in 2017 we launched our initiative to change the way VA lending is done. Veterans deserve better. With our history of striving to excel, it was only a matter of time before this same model was applied to help veterans make use of their VA loan benefits. In 2018, Benchmark sponsored the Patriot Tour by Team Never Quit.

If you are a past client, you are part of our story. If you are a current or future client, welcome to the family. We are Benchmark.

Here’s to a bright future!

Benchmark brings you home.

Conforming Loan Limits Set To Increase For 2017

by I Am Benchmark

The Federal Housing Finance Agency has announced that it is increasing the maximum conforming loan limits for mortgage loans beginning in 2017. A mortgage loan is considered “conforming” when it is eligible to be acquired by Fannie Mae and/or Freddie Mac. (Mortgages are often sold to Fannie or Freddie so that a lender has the liquidity/money available to issue more mortgage loans for home buyers.)

The New Conforming Loan Limit

The current 2016 loan limit for single-unit properties or single family homes has remained at $417,000 for the last 10 years until recently. The FHFA has announced that the loan limit for single-family homes is increasing approximately 1.7% on January 1, 2017 from $417,000 to $424,100.

The changes were established because of The Housing and Economic Recovery Act of 2008 [pdf], which previously set the baseline loan limit at $417,000. The law also determined that after a period of housing pricing declines, the loan limit may not rise until prices return to pre-decline levels. It follows that since the FHFA is increasing the limit, it stands to reason that home pricing is back to pre-decline levels!
See also: Low Housing Inventory Driving Values Up – Benchmark (why the latest rise in home pricing is not another bubble)

FHA National Loan Limit is Up, Too

The FHA national loan limit “ceiling” will rise to $636,150, formerly set at $625,500. Additionally, the “floor” will increase to $275,665 from $271,050. The actual limit is variable by state and county. The “floor” is the lowest assigned limit, and the “ceiling” is the highest assigned limit for the nation as a whole.

The national loan limit is recalculated annually by the FHA from a percentage calculation of the national conforming loan limit. The calculated increase is positively correlated with rising home prices in high-cost markets.

What Does This Mean?

It means that the Department of Housing and Urban Development has taken notice of the trend of rising home prices. It also means that borrowers will be able to borrow more than they previously could without affecting the ability of lenders to maintain liquidity.

It’s a great time to buy!

Home Prices and Mortgage Interest Rates to Rise in 2016

by I Am Benchmark

Your home’s mortgage payment is based on the price of the home (minus the down payment), and the interest rate for the loan.

Both prices and interest rates will likely rise in 2016.

Home Prices

CoreLogic anticipates a national 5.2% home value increase for the next year. The percentage varies by state, with WA, CA, NV, UT, AZ, NM, FL, and VT seeing the greatest increase at an average of 7.6% (the highest being CA at 10.8%, the lowest of this group being NM at 6.0%). The lowest forecasted home price increase is WV at 1.3%. Clearly, the majority of the country is projected to see a real home value appreciation that outpaces currency inflation (0.5% from 2014-2015).

Which reminds one of this post: click here

Mortgage Interest Rates

All four establishments who provide future projections on mortgage interest rates agree that rates will rise in 2016. The following table shows the change for each quarter of the next year.

Quarter	Fannie Mae	Freddie Mac	MBA	NAR	Average of all four
2016 1Q	3.9	4.0	4.2	4.1	4.05
2016 2Q	4.0	4.2	4.4	4.3	4.23
2016 3Q	4.0	4.4	4.6	4.6	4.4
2016 4Q	4.1	4.6	4.8	4.9	4.6

So, What’s the Bottom Line?

Since home prices and interest rates expected to increase over the next year, it makes sense to buy sooner rather than later, if you are buying a new home.

Quantitative Easing (QE) Explained and What It Really Means to Homeownership

by Benchmark

Lately, our US economy has needed stimulation to return closer to the equilibrium point of enough money via taxation to enjoy full employment, limited inflation, and adequate tax revenues to run the government.

The Federal Reserve Bankers (“The Fed”) buy/hold US treasury bonds/securities when they desire to stimulate the economy, and sell those same treasuries/bonds when they want to slow the economy and rein in inflation.

They do this on the open market, just like you and I (competing with retirement funds, mutual funds, foreign governments, insurance companies, etc.).
However, The Fed – with its enormous capacity – relatively predictably affects the supply and demand balance of how many buyers/sellers are available, and at what price those buyers/sellers trade their securities.

In a Supply and Demand Market…

If there are more purchasers relative to the supply of an item (whatever it is –cars, salaries, food, US treasuries) the price of that item typically moves up (or the availability of that item dries up).
If there are more sellers than buyers for that item, it drives the price down.
Think of our pricing in a market economy as an ongoing auction, whether it’s called an auction, or not.
It is in this context that “The Fed’s” actions play out…..

Since treasuries/bonds (mortgages are bonds) pay a fixed amount of money every year (known as a “coupon), there is an inverse relationship between current market rates and the price of existing bonds.

If the fact of a bond price going up makes rates go down seems backward to you, please let me use an example to explain:

Say that a bond pays $5/year. This will not change.
If bond investors require a 5% return (yield) on their money, they would pay $100 per $5 of annual coupon for this bond on the day that the bond is created.
1. $100 * 5% = $5.
2. But, let’s say that later, the same bondholder wants to sell that same bond.
3. If the investors at that later sale date require a 6% return, they would pay $5/.06= $83.33 for that bond.
4. Conversely, if investors require only a 4% return, they would pay $5/.04 = $125 for the same $5 per year.
5. Notes:
  - For detail-obsessed technocrats (I am one), there are more inflective details to this (maturity date, etc.), but this information is close, complete and correct enough to be actionable considering the context of creation of new mortgages for new transactions.
  - The Fed usually can do all it needs in the US economy by buying and selling ONLY US treasuries. But, The Fed can affect all kinds of financing cost and availability by buying/selling in those markets as it has lately: mortgages, corporate bonds, etc.

Why Did the GOVERNMENT Need to Act? Why Not the US “Free Market” Economy?

At the depths of the recession, there were not enough private investors to accomplish the government’s priorities of full employment, limited inflation, and adequate tax revenues.
So, the government acted on its own plus theoretically the interests of the public that employs in its ability to take more risk using our public money (both debt and tax derived) than private investors were willing or able to do.

Now that the economy is growing again, risk to private investors/lenders is reducing, and private investors/banks are stepping back in at more reasonable rates for the risk of investing their money.

As the US economy/government/Fed pursues the desired “privately funded equilibrium” of priorities initially mentioned (full employment, limited inflation, and adequate tax revenues), and as long as sufficient private investors participate, the government will try to carefully extricate itself by first reducing the amount of stimulus (yesterday’s announcement reduced purchases from $85 billion to $75 billion per month), and later selling its bond assets back in the economy. This may take years to accomplish.

What does this new shift from public to private funding mean for housing and housing finance?

Since the economy is recovering, we are employing more people:
1. There are and will be more workers with more money to buy more houses.
2. Prices should go up.
3. Because private investors require higher returns over inflation than the government requires:
  1. Higher rates for mortgages.
  2. Price increases may be dampened.
  3. Since the labor pool is tightening and wages are anticipated to increase, buyers will afford higher payments and prices, therefore more houses will be sold, and higher prices can be paid.
  4. Consensus:
    - Mortgage rates will go up.
    - Housing prices will go up.
    - Homeownership will go up.
    - American workers will have more money to pay for housing – and that ability will more than offset the costs of higher interest rates.

Scott Layden is Senior Mortgage Planner and originator for Benchmark Home Loans in Franklin, TN. Scott Layden specializes in “obtaining the lowest net after-tax cost of mortgage borrowing for the time period a client will have the money, offset and with respect to their short and long term financial needs and priorities.” You can reach the Scott Layden Team at 615-224-8851.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Ark-La-Tex Financial Services, LLC d/b/a Benchmark Mortgage 5160 Tennyson Pkwy STE 2000W, Plano, TX 75024. NMLS ID #2143 (www.benchmark.us) 972-398-7676. This advertisement is for general information purposes only. Some products may not be available in all licensed locations. Information, rates, and pricing are subject to change without prior notice at the sole discretion of Ark-La-Tex Financial Services, LLC. All loan programs subject to borrowers meeting appropriate underwriting conditions. This is not a commitment to lend. Other restrictions may apply.

Mortgage Lenders See Tighter Credit Under New U.S. Rules

by bmadmin

Mortgage bankers and Realtors are warning that it could become even harder for borrowers to qualify for a home loan early next year as the industry faces a barrage of new rules.

Regulators are preparing to release the language of two rules taking effect in January to set standards for non-abusive lending and require banks to hold a slice of risky mortgages on their books. In addition, U.S. banking overseers must also complete new capital standards mandated in the international Basel III accords next year.

The housing rules, coming almost simultaneously, may overlap or conflict, creating what National Association of Realtors President Maurice “Moe” Veissi called a “perfect storm” of regulation.

“There’s this intersection of policies that are absolutely not being considered by this massive array of institutions, all involved in deciding the future of homeownership and rental opportunity,” David Stevens, president of the Mortgage Bankers Association, said in an Oct. 22 speech at the association’s annual conference in Chicago.

Mortgage credit is already tight. U.S. regulators including Federal Reserve Chairman Ben S. Bernanke and Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, have expressed concern that banks are preventing qualified borrowers from taking advantage of interest rates driven to record lows by the Fed’s quantitative easing strategy.

Crisis Correction

James Parrott, a member of President Barack Obama’s National Economic Council who advises on housing issues, told mortgage bankers that the administration is still concerned.

“How do you correct for what happened in 2005, but not do so in such a way that we’re stuck where we are today, where there’s not nearly enough liquidity?” Parrott said at the MBA conference. “We clearly haven’t threaded the needle yet.”

Borrowers whose loans closed in September had an average credit score of 750, which would place them in the top 40 percent of Americans, according to Ellie Mae (ELLI), a Pleasanton, California, company that provides automation solutions for the mortgage industry. Those buyers made down payments averaging 22 percent. The interest rate on a 30-year fixed-rate mortgage averaged 3.37 percent in the week ended Oct. 18, according to Freddie Mac.

The housing market has been gaining steam in recent months, with online real-estate listing firm Zillow Inc. (Z) reporting yesterday that home prices jumped 1.3 percent in the third quarter, the largest gain since 2006. At the same time, about 28 percent of existing-home sales are all-cash transactions as investors snap up distressed inventory.

Fears Overblown

Consumer advocates, who question whether high credit standards are really just a response to regulation, say the industry’s fears are overblown.

“All of these rules are reactions to the failure to regulate at all over the last decade,” said Alys Cohen, a staff attorney at the National Consumer Law Center. “The rules don’t need to be in lockstep in order to provide reasonable oversight.”

The next few months will usher in a new implementation phase of the government response to the financial crisis of 2008 as regulators begin to unveil exactly how they will set limits intended to prevent another housing bubble.

The Consumer Financial Protection Bureau is briefing other regulators about its plans for the qualified mortgage rule, which will require lenders to determine borrowers’ ability to repay loans. If banks meet the standards for a non-abusive mortgage set in the rule, they’ll be offered a degree of legal protection.

Safest Mortgages

Lenders say they’ll probably make only the safest mortgages as defined by the rule, commonly known as the QM regulation, after it is issued.

“QM will, in my mind, largely define the market,” Michael J. Heid, president of Wells Fargo (WFC) Home Mortgage, said at the MBA conference on Oct. 22.

The CFPB, which faces a Jan. 21 deadline, told regulators last week it is considering issuing a rule that would offer the strongest legal protections for loans to borrowers spending less than 43 percent of their income to repay debt. That would include about 80 percent of government-backed loans, according to data from the Federal Housing Finance Agency.

Once the QM rule is set, regulators including the Fed, Federal Deposit Insurance Corp. and Securities and Exchange Commission will write a second measure with a similar name: the qualified residential mortgage rule. The QRM rule will require lenders to retain stakes in risky mortgages when they package them into securities.

Basel III

At the same time, regulators have proposed a set of standards under the Basel III agreement that would require banks to hold more capital against risky mortgages. A deadline for public feedback on the proposal was Oct. 22. The agencies are going to complete the language and phase in the rule beginning next year.

The MBA last week wrote a letter urging regulators to abandon their Basel III proposal on the grounds that it would hurt lending.

Veissi of the Association of Realtors also sent a letter raising concerns. “The sheer volume of regulations surrounding the mortgage-finance business has resulted in consolidating and constraining the number of institutions offering mortgage credit to consumers,” he wrote.

Consumer advocates say they agree that the rules are complex and must be carefully calibrated. However, they say, the mortgage industry needs to be more judicious with its complaints.

Crying ‘Wolf’

“Unfortunately, the mortgage lobby is the boy who cried wolf,” Julia Gordon, director of housing finance and policy at the Center for American Progress, said in an e-mail. “They fight any and every regulation and routinely insist that the [fill in the blank] rule will increase the cost of credit or reduce access to credit, which makes it difficult for the regulators to figure out when that’s actually true.”

Federal Financial Analytics, a Washington-based consulting firm, released a study yesterday analyzing possible unintended consequences of overlapping mortgage rules.

Karen Shaw Petrou, author of the study commissioned by the Securities Industry and Financial Markets Association, said the rules will shut out less-than-perfect borrowers.

Rule ‘Tightening’

“Regulators in every cubicle at all of the agencies are tightening each of their rules so drastically that the combination of all of them will stifle a return of private capital to securitization, blocking constructive change at the GSEs to end their conservatorship and limiting credit availability for all but the most gold-plated borrower,” Petrou said in an e-mail.

Parrott, the Obama administration official, said the rules could always be changed if they don’t work.

“Given where the market is today, I’m actually optimistic that we can land these regulations in a pretty good place,” Parrott said. “I think the objective everybody shares is a more stable, healthy system going forward that maintains broad access to credit.”

Original Post on Bloomberg BusinessWeek here: Mortgage Lenders See Tighter Credit Under New U.S. Rules

Are Free Credit Score Offers Really Free?

by bmadmin

If you spend any time online, you have surely seen the many ads offering free credit scores. I also get several pieces of junk mail in my mailbox and see a lot of commercials for these different services. It sounds like a good deal, except credit scores are never really “free”. You will pay one way or the other for these advertised businesses.

To get your credit rating from one of these companies, you will have to sign up for one of their services, usually a credit monitoring service. It is not necessarily a bad idea to have one of these services running in the background. It can help protect you from identity theft, and alert you anytime your credit is checked by businesses that want to offer you a pre-approved credit card or loan.

If you do not want to join those credit monitoring programs, you can pay a one-time fee to see your credit score on the official FICO website.

There are two ways to receive your credit report for free:

1. Lender denies you credit. A new law that went into effect in 2011 makes your report available anytime you are denied credit. You will probably have to submit something in writing to receive your report but by law they are required to supply it to you. This is a good thing for consumers put in that unfortunate position, as it will eliminate any mystery surrounding a consumer’s credit rating. You will not see your score but you will be able to verify the validity of the information on your report.

2. AnnualCreditReport.com. This free service from the Federal Trade Commission offers a once-per-year service to help consumers stay abreast of their credit report. This is a great opportunity to verify any new marks and ensure there are no mistakes you need to dispute. Your credit score will not be included in the free report but you will have the opportunity to purchase the score or view your free report.

The very best thing you can do is maintain the finest credit history you can. The higher the credit score, the lower the interest rate in many cases, especially when it comes to credit cards and auto loans.

If you must know your actual credit score, go ahead and pay to get it.

Here are the websites for the Big 3 credit companies:

Experian.com

TransUnion.com

Equifax.com

Mortgage Application Are Up: Here’s How to Select A Lender

by bmadmin

I had an interesting conversation with a young professional the other day. He told me that he only had four more days to select his lender and that his dad’s business partner told him to call me.

He lived outside of our market so I wasn’t sure if he wanted me to do his loan or just help him find a lender so I simply asked him what criteria he was using to make his decision.

With no hesitation, he simply said rate and closing costs.

Ironically I had just finished reading an article where they estimated that over 70% of the time a borrower closed at a higher rate than initially quoted. When I asked him if he was aware of this he said YES.

Isn’t it odd that a majority of consumers select their lender based on data that they know to be erroneous over half the time?

Rate and closing costs are obviously a key component, but let’s be real. If you aren’t working with someone you can trust and someone who knows what they are doing, does it really matter what they quote you?

Marty Preston, Branch Manager of Benchmark Mortgage in Lexington, Kentucky, is a consistent Top Producer and one of the country’s premier mortgage lenders. Marty is also a nationally known speaker and a major force in the national mortgage banking scene.

FHA Increasing Mortgage Insurance Premiums

by bmadmin

The Federal Housing Administration announced plans to increase the cost of up-front mortgage insurance premiums beginning on April 1, FHA Acting Commissioner Carol Galante said yesterday in a call with news reporters.

What does this really mean for you the consumer?

It will cost a little bit more upfront to buy a house.

The current upfront mortgage insurance rate is 1% and that will be changed to 1.75% on April 1st.

“After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA’s capital reserves and help private capital return to the housing market,” said FHA Commissioner David Stevens in a statement. “This quarter point increase in the annual MIP is a responsible step toward meeting the congressionally mandated 2% reserve threshold, while allowing FHA to remain the most cost effective mortgage insurance option for borrowers with lower incomes and lower down payments.”

If you have an FHA loan you’ve been waiting to refinance, do it now.

If you’re in the market for a new home using an FHA loan, you’ll need to be in a signed contract before April 1st to have the current, lower mortgage insurance fees. If you are thinking it will take you longer to find the right home or you aren’t ready yet, we take run different scenarios to show you how this change will affect your payment.