Refi Demand Staying Strong Despite Rising Rates

The current Mortgage Monitor from
Black Knight looks at the recent small increases in mortgage rates and their
potential impact on home sales. The company says that Treasury yields have been
rising with the 10-year up nearly 0.25 percent just since the January 5 Georgia
senatorial runoff. While the spread between it and the 30-year mortgage rates
absorbed part of the increase
, mortgages did subsequently rise by about 1/8th
of a point. The January spike wasn’t an isolated event, the 10-year yield had
eased up 40 basis points over the last five months of 2020. “Should yields rise
further in coming months, they may begin to impact 30-year rates more directly,
although the Fed’s bond buying efforts are expected to insulate the mortgage
market to some degree,” the report says.

The 1/8th point growth of the
30-year rate doesn’t appear to have discouraged lending. Black Knight says rate
lock activity remains strong with those tied to refinancing rising 10 percent
during the first 15 days of January and are up 90 percent from the same period
in 2020. This would make the January activity one of the strongest periods
since the refinance boom kicked off early last year. Purchase rates locks also
remain strong with double digit gains year-over-year.

Rising rates and recent refinancing
activity has caused some moderation of refinancing incentive. The number of
homeowners able to qualify for and benefit from refinancing (saving at least 75
basis points on a new loan) declined to 16.7 million on January 14 from 18.7
million at the start of the year. Even so, the refinancing pool is still down
only 14 percent from its record high point in mid-December.
The average
refinancing candidate could still save $303 a month; an aggregate of $5.2
billion per month if everyone took advantage of the opportunity.

The supply of available homes for sale
continues to shrink. The number of listings is down 450,000 units or 40 percent
compared to last year. Black Knight says that even without considering the
slight downward trend in new listings in recent years, it appears that more
than 750,000 homeowners chose to forego listing their homes for sale (-16
percent) due to the pandemic. Most (470,000 missing listings) came in the
second quarter of 2020. By December new listings had caught up with those a
year earlier but even if listing volumes are normalizing, it will leave a significant
deficit unless buyer demand also moderates.

The low interest rates and even lower
supply of homes is continuing to put upward pressure on home prices. Black Knight
puts the annual rate of increase in December at an astonishing 15.7 percent,
caping a three-month run of growth exceeding 15 percent (October, 15.8 percent
and November, 16.2 percent.) The only other month that this has occurred was in
August 2005 with a 15.9 percent gain.

Black Knight updates the status of COVID-19
related forbearance plans each week, but the current Monitor takes a comprehensive
look at those plans, delinquencies, and foreclosures at the end of 2020.

The national delinquency rate fell 3.09
percent in December to 6.08 percent and serious delinquencies fell to 3.43 million
from 3.56 percent the previous month. The company says that nearly 40 percent
of the spike in delinquencies early in the pandemic has been reversed, however,
serious delinquencies (90 days or more) associated with the pandemic are down
only 11 percent. The number of loans rolling from current to 30 days past due
returned to pre-pandemic levels in July and continue to remain lower on an
annual basis. That, however, is not true of later stage delinquencies. The
number of loans transitioning from 30 to 60 days past due was up 34 percent
year-over-year in the 4th quarter and 60-to-90-day transitions are
more than double those in 2019. Ninety-day defaults rose by more than 250
percent to 2.6 million, the third largest default total on the record and the
largest since 2009.
With foreclosures down 67 percent from 2019 because of moratoriums,
the number of seriously delinquent borrowers increased by 400 percent to 2.15
million compared to December 2019.  

With the current steady but small improvement
in overall delinquencies, the national rate could remain elevated for another
17 months and it would take nearly five more years
for serious delinquencies to return to pre-pandemic levels. By the end of
March, there could be nearly 1.5-1.6 million excess seriously delinquent
mortgages in the market.

And March is important because, without
further government action, almost a quarter of all homeowners in forbearance
will hit their 12th month and final plan expiration. At that point,
Black Knight says, we could likely see an inflection point, with post
forbearance waterfalls helping to get borrowers back on track with a
combination of deferrals, repayment plans, and loan modifications.

Black Knight Data & Analytics
President Ben Graboske says, “When nearly a quarter of all forbearance plans
come to an end on March 31, at the current rate of improvement there would
still be approximately 1.5 million more such serious delinquencies than before
the pandemic. With that rate of improvement slowing in recent weeks, current
trends suggest more than 2.5 million homeowners would still in forbearance at
that point. While early in the pandemic roughly half of homeowners in
forbearance continued to make their monthly mortgage payments, that number has
steadily declined. Today, it’s about 12 percent, which suggests the people who
are taking the full forbearance period afforded to them
may well be
experiencing prolonged financial distress and face extended challenges as they
return to making payments.

“For the roughly 6.7 million
Americans who have been in COVID-19 related mortgage forbearance at some point
since the onset of the pandemic, the programs have represented an essential
lifeline,” said Graboske. “The vast majority of plans have a 12-month cap on
payment forbearance, though. And the various moratoriums which have kept foreclosure
actions at bay over the past 10 months may be lulling us into a false sense of
security about the scope of the post-forbearance problem we will need to
confront come the end of March. Last year saw the largest number of homeowners
– nearly 3.6 million – become 90 or more days past due since 2009, and as of
the end of December, 2.1 million remained so.

Over
the past 30 days removals from plans have slowed to about one in four of removals
and extensions, well below the 40 percent average for the life of the program. Looking at example scenarios of active forbearance volumes
based on the best, worst and average improvement of the recovery period (June
2020 – January 2021), the rate of improvement to date, could mean there would 2.5
million to 2.8 million active forbearance plans remaining at the end of March.
That works out to more than 600K seriously delinquent mortgages that will move
into post-forbearance loss modification waterfalls as they work to get back to
current on their mortgages. Another 300K+ borrowers will reach the end of their
terms at the end of April. Of course, performance could be outside either the
high or low end of these estimates, but the trend has been toward the “high”
scenario.

Of the 6.7 million homeowners who
were in forbearance plans at some point over the last 10 months, 1.8 million
were past due on their mortgages before the program started, the remainder were
current. There have been significant differences in the performance of the two
groups. Sixty-five percent of the 4.9 million who were current at the beginning
have left their plans and 59 percent are either performing or have paid their
mortgages in full. Only 2 percent are currently past due and in loss
mitigation. Of the pre-pandemic delinquent borrowers, only 45 percent have left
plans
; 26 percent are reperforming and 6 percent have paid off their loans. Six
percent have left forbearance, remain delinquent, and at risk of foreclosure
when moratoriums expire.

The chart below shows that status of
all forbearances as of January 19, 2020.

Source: mortgagenewsdaily.com

How Long Do Hard Inquiries Stay on Your Credit Report?

March 3, 2020 &• 5 min read by Cheryl Lock Comments 56 Comments

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Your credit report offers valuable insight into your financial history and affects most of your financial future. Everything from whether you get approved for a mortgage to what your credit card interest rate will be balances on your credit score.

Negative information on your credit report can be detrimental for years. Wonder how long hard inquiries stay on your credit report? It’s not always clear how long inquiries and other negative information stays on your credit report and affects your score. The length and severity vary, but here are four common types of inquiries and how long they affect your credit score.

1. How Long Do Hard Inquiries Stay on My Credit Report?

What is a hard inquiry?

Hard inquiries are created every time your credit report is accessed by a business when you apply for a line of credit. For example, when you apply for a car loan, mortgage, student loan or credit card, your credit receives a hard inquiry.

How long do hard inquiries stay on your report?

Inquiries remain on your credit reports for 24 months. However, hard inquiries impact your score for only the first 12 months. After that, they have no impact on your score.

How much do hard inquiries affect your credit score?

New credit—including inquiries and any new credit accounts—make up just 10% of your FICO score. A single inquiry typically only drops your credit score by three to five points. As long as you apply for credit only when you need it, this is one of the lesser hits to worry about.

It is important to consider the perception associated with numerous hard inquiries, though. Even if your credit score can take a few hits and remain good or excellent, perception can matter. If a lender pulls your history and sees you’re running up a string of inquiries, they may wonder why. It can look like you’re desperate for credit but not getting approved by lenders, which isn’t an ideal look on your credit report.

2. How Long Do Credit Accounts Stay on My Credit Report?

What is a credit account?

Credit accounts refer to all of the accounts for which you hold credit, including credit cards, mortgages and car loans. Credit scoring models like to see a healthy balance to the types of credit accounts you have and can manage effectively. Negative information on a credit account includes late or missing payments.

How long does negative credit account information stay on your report?

Negative account information, such as a late payment, can stay on your credit report for seven years from the date it was first reported as late. If you close the account, the entire account typically will be removed from your report after seven years. If the account remains open, the negative information should be removed after seven years while the rest of the account information stays on your report.

Positive information, on the other hand, remains on your credit report indefinitely. If you close the account, positive information typically stays on your report for 10 years past the closing date.

How much do credit accounts affect your credit?

Your credit mix accounts for 10% of your credit score. A healthy mix means more points. The age of your credit accounts also impacts your score, accounting for 15% of the score. If you don’t have many credit accounts or if you close your accounts, it could negatively affect your credit score.

Payment history accounts for 35% of your credit score, and making payments on time is the most important factor in determining your credit score. A single late payment can drop a good score by as much as 90 to 110 points.

Most lenders don’t report missed payments until accounts are more than 30 days past due, so if you can catch the missing payment in enough time, you might not notice a hit at all. Other lenders will let one late payment slide, especially if you’ve been a loyal customer for many years and have a good excuse for why you missed it.

3. How Long Do Collection Accounts Stay on My Credit Report?

What is a collection account?

When you fall behind on making payments on an account, your debt could end up in the collection’s department of that company. The creditor may also sell your debt to a collection agency, which reports it as a collection account. At this point, the original creditor that sold the debt should not continue to report a balance owed, but you should watch out for duplicate collection accounts.

How long will collection accounts stay on your report?

Collection accounts remain open for seven years plus 180 days from the date the account was delinquent. After that time, it must be removed regardless of when it was paid or when it was placed for collection.

How much do collection accounts affect your credit?

Understanding how collection accounts can affect your credit score is tricky. The most important factor that will affect your credit score when it comes to collections is how recently the collections occurred—the more recent the collection, the lower the score. Multiple collection accounts can also lower your score. Unfortunately, settling or removing a collection may not impact your score positively.

While there’s no way to tell exactly how much a collection account will affect your credit score, it is one of the higher penalties. The best course of action is to avoid having accounts sent to collection in the first place.

4. How Long Do Bankruptcies Stay on My Credit Report?

What are bankruptcies?

Bankruptcies are proceedings that let you restructure debt you have no way of paying. Depending on the type of bankruptcy you file, you may pay a portion of some of your debt back via a plan. Once your bankruptcy is over, outstanding debts are considered discharged and no longer owed.

How long do bankruptcies stay on your report?

Chapter 7, 11 and 12 bankruptcies stay on your credit report for 10 years from the date filed. Completed Chapter 13 bankruptcies are usually removed after seven years from the filing date.

How much do bankruptcies affect your credit?

In the aftermath of a bankruptcy, your score is likely to drop dramatically. However, the purpose of bankruptcy is to provide a last-resort option for restructuring your financial life. By making strong financial decisions during and after your bankruptcy, you can work on bringing your score back up.

How long do inquiries stay on your credit report? As you can see above, it depends. And the impact each has to your score is variable.

But one truth remains. Negative items on your credit report do impact your score. You can’t afford to ignore these items, especially since some may not even be accurate. Sign up for your free Credit Report Card today. You can check your credit, get a better grip on your credit report and learn how to get the most from your credit score. 

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Source: credit.com

Partial Claim May Be Option for VA Borrowers Exiting COVID-19 Forbearance

Posted on December 10th, 2020

The Department of Veterans Affairs (VA) has proposed a new loss mitigation method to help homeowners with VA loans in COVID-19 related forbearance get back on track.

The new program, known as the COVID-19 Veterans Assistance Partial Claim Payment program, or COVID-VAPCP for kind of shorter, somewhat mirrors existing programs offered by the FHA and USDA to pay forbearance back.

It would allow veteran borrowers to defer the repayment of missed mortgage payments for up to 60 months.

And the full repayment of any forborne payments wouldn’t be due in full for 120 months, or 10 years to provide veterans with a “soft landing.”

However, there would be interest charged, though at a very nominal 1% rate, which differs from the interest-free offerings at the FHA/USDA.

Additionally, the FHA/USDA both don’t require repayment until the loan is refinanced or otherwise paid-in-full.

While perhaps not as attractive, it has to do with the VA’s smaller guaranty percentage versus those other loan types.

Still, when compared to a standard loan modification, a veteran homeowner could stand to save thousands in interest and stay on track with respect to paying off their loan in full.

It should be noted that loan servicers would only consider this proposed partial claim option after evaluating “all loss-mitigation options for feasibility.”

How the COVID-VAPCP Works

  • Any missed mortgage payments from CARES Act forbearance are set aside
  • Monthly payments on this amount are deferred for up to 60 months (five years)
  • The repayment period begins in years 6 through 10 if not otherwise paid off earlier
  • Homeowners also have the option of repaying earlier, refinancing, or selling to satisfy the debt

This proposed program would allow a servicer to consider a partial claim option after all loss-mitigation options are evaluated, including repayment plans, special forbearances, and loan modifications.

Assuming those other options weren’t appropriate, the VA would act as a mortgage investor of last resort, thereby purchasing the amount of indebtedness necessary to bring the veteran’s guaranteed loan current.

This amount would then be secured as a lien against the property and the veteran would resume making regularly scheduled monthly mortgage payments to the servicer.

The homeowner would receive up to 60 months of repayment deferral for the delinquent amount, followed by a 60-month repayment window to the VA, with an interest rate fixed at 1%.

In other words, once their forbearance comes to an end, any missed payments would simply be set aside and no payments would be necessary for five years, at which point they’d have an additional five years to extinguish the debt.

Of course, chances are most homeowners would simply pay off the debt when they refinanced the mortgage or sold the property.

If you recall, the CARES Act provides mortgage forbearance for up to 180 days, with an additional period of up to 180 days permitted at the request of the borrower.

In total, homeowners could be looking at six months of missed payments, which can add up depending on the size of the loan.

The VA provided a hypothetical scenario where a borrower enters forbearance with 300 monthly payments remaining and an unpaid principal balance of $239,450.

Assuming a monthly payment of $1,587.83, they would owe $19,054 at the end of a 12-month forbearance period.

Clearly most Americans already suffering a financial setback wouldn’t be able to simply pay $20,000 out-of-pocket in one lump sum.

While a loan modification set at the same interest rate with a fresh 30-year loan term would actually result in a $26 decrease in monthly payment, $39,518 in additional interest would be paid over the life of the loan.

Conversely, a VA partial claim payment would require a monthly payment of $341.58 in years 6 through 10, but just $1,441 in additional interest over the life of the loan.

So for a veteran homeowner who actually keeps their loan and their home, the COVID-VAPCP is a much better option, assuming they can afford it.

COVID-VAPCP Requirements

  • Must be a VA home loan
  • Borrower must have been current or less than 30 days past due as of March 1st, 2020
  • Only available to borrowers who occupy property as primary residence
  • Partial claim amount cannot exceed 15% of unpaid principal balance
  • Monthly payments on partial claim deferred for first 60 months
  • Full repayment of partial claim due in 120 months
  • Can pay off during deferment if amount is not less than what would be due for one full monthly payment
  • Repayment in full required if title to the property transferred, loan refinanced, or underlying loan paid off
  • Interest rate set at 1%

Read more: There Will Be a 3-Month Waiting Period to Get a Mortgage After Forbearance

Lock in a lower rate.
About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Source: thetruthaboutmortgage.com

How Late Can You Be on a Car Payment, Mortgage or Other Bill?

December 1, 2020 &• 8 min read by Gerri Detweiler Comments 1 Comment

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It’s always frustrating to come across a bill and realize it was due yesterday—or last week. If you’re late on a payment or if you miss it completely, you could end up paying late fees and taking a hit on your credit score. It can be especially difficult if you want to apply for a loan or credit and are about to make a big purchase like a house or a vehicle.

If you’re a reliable customer and have only missed this one payment, it likely shouldn’t be a big problem, and you can probably avoid a late fee. But if you wait too long, it might not be possible.

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Either way, we’re going to help answer some of your biggest questions:

  • How late can you be on a car payment before it affects your credit?
  • Is there a late car payment grace period?
  • What about for rent?
  • What happens if you miss a payment completely?
  • Who should you notify?
  • How will it impact your credit score?

Read on to learn how late a credit card or car payment can be before it affects your credit score and what to do if it does.

How Late Can a Credit Card Payment Be?

People often wonder how late a payment has to be before their creditors report it to the credit bureaus. A credit card payment is considered late if it’s received after the cutoff time in your credit card agreement or if the payment submitted is less than the minimum amount due.

Missed credit card payments are generally added to your credit report when the payment is more than 30 days late. This same entry is updated if your payment is 60 days late, and then 90 days. It is important to know what your specific credit card issuer’s policies are, so you can know what to expect.

Keep in mind that one late payment among years of on-time payments is far less serious than a late payment and limited credit history.

When Is a Credit Card Payment Considered Late?

As far as credit card companies are concerned, the payment is considered late if it’s submitted after the cutoff period, which varies depending on the lender. Sometimes it’s 5 p.m. on a business day while for others it’s 8 p.m. or 11:59 p.m. Also be aware of when a late fee will be charged. Generally speaking, a late fee is issued if payment is received after the credit card issuer’s cutoff time.

30 Days Past Due

Late credit card payments usually aren’t reported to the credit bureau until after 30 days. In other words, if you make a payment after the due date but within this initial 30-day period, it won’t show up on your credit report, but you may have to pay a late fee.

60 Days Past Due

If your payment is more than 60 days late, the 30-day entry on your credit report is updated and your card’s interest rate could increase. If it increases and by how much depends on your card’s terms.

How Late Can You Be on a Car Payment?

Typically, the grace period on auto loans is 10 days, but this depends on the lender. The grace period your lender allows should be listed under the terms and conditions of your loan. This is where you’ll also find the details of the loan, including your loan balance, your interest rate, the term of the loan and the fees associated with a late or missed payment.

If you can afford to pay but simply forgot, you’ll want to pay it as soon as possible. But if you feel you can’t afford the car payment, you should get in touch with your lender and see if they would be willing to renegotiate the terms of the loan.

Deferring Car Payments

You can also look into deferring your car payment if you don’t have the funds now but you expect to later. A deferment essentially means you’re changing your due date by postponing the date of your next payment. Deferments usually don’t negatively affect your credit score.

What If I’m Late on Paying My Rent or Mortgage?

If you’re a few days late paying your rent, usually you shouldn’t have to worry about this affecting your credit score. If you know your landlord, chances are they’ll say something if you continue to submit late payments. If you’re paying a property management company, they likely won’t be as lenient on late payments. Our best advice is to pay your rent within the week it’s due.

Mortgage lenders typically report late payments to credit bureaus and usually have different grace periods. Paying within seven days should help you avoid decreasing credit scores.

One of the best ways to stay on top of your mortgage or rent payment is to set up a monthly reminder for a few days before the first of the month or, if possible, set up an automatic payment. Because your rent or mortgage payment is the same each month, it should be easy to calculate it into your personal finances.

Can a Late Credit Card Payment Made Under 30 Days Still Affect My Score?

If you make a credit card payment within the 30-day period, it generally should not be reported negatively or have any effect on your credit score. Beyond that time, however, there is a possibility your credit score could be affected. Make sure you know the terms of your credit card however, terms can vary and you don’t want any surprises.

If it turns out your late payment has been reported, know that its impact on your score generally diminishes with time, especially if it’s an isolated event. Other on-time payments can help counter the negative effects of late payments. And, as with almost any other mistake, the sooner you realize you’ve made it and try to fix it, the less likely it is to turn into a big problem.

Late Fees vs. Overdue Payments

Late fees are essentially fees charged by lenders to borrowers if a payment is received after its due date. So, if your payment is sent late—or is not the minimum payment or above—you could be charged a late fee.

Most credit card payments are due within a minimum of 21 days after the billing cycle ends, but remember, the grace period is usually only 30 days, so you’ll want to pay them off as soon as possible. Credit card late fees vary depending on your lender and requirements under the CFPB, but the late fee amount can’t be more than the minimum payment. For example, if your minimum payment is $35, your late fee won’t be higher than that.

An overdue payment, however, is a payment that was not paid by the due date. If you miss a due date, you will see the minimum balance plus the overdue payment on your next billing cycle. The overdue payment may be the full amount or a partial amount, such as if you paid part of your minimum but not all of it.

Removing Late Payments From Your Credit History

If there’s an error on your credit history, such as if a car payment is marked late but it actually wasn’t and you have proof, you can challenge it with the lender. The process involves explaining exactly what happened and asking that the error be fixed. Technically, the lender or servicer has 30 business days to respond to the error. If you don’t hear from them within about 45 days, follow up with them.

If a late payment ding on your credit report is accurate, you can still contact the lender and dispute it, especially if you’ve been diligent about paying your bills on time. The lender can provide what’s called a goodwill adjustment, which is when the lender essentially forgives your late fee.

As part of this process, you may be asked to explain the circumstances surrounding the reasons for your payment being submitted late. For example, maybe you went on vacation and forgot or you had to pay a large unexpected cost, such as medical fees, and you couldn’t afford the payment that month.

The lender may offer you a chance to enroll in automatic payments to lessen the chances of a late payment happening again.

How Long Does It Take for a Missed Payment to Come Off My Credit Report?

Unfortunately, if there’s a missed payment or a negative item on your credit history and you’re not able to have it removed, it can stay on there for seven years.

Keep in mind that if the incident occurred five years ago and you’re applying for a loan, it will have less effect than if it occurred last week. The more time that passes after the missed payment occurs, the better. Why? Because credit scores are based on recent financial behavior, so if you only miss one payment and not multiples, eventually your credit score takes your frequent on-time payments into account.

How to Prevent Late Payments in the Future

It’s hard to keep track of everything—grocery lists, kids’ schedules, work to-do lists and, of course, bill due dates—but there are ways to manage your personal finances better to ensure you never miss a payment.

  • Go paperless. Going paperless may increase the likelihood you notice when a bill comes through each month instead of being lost in piles of other mail.
  • Set up reminders. Banks sometimes offer text and email reminders that tell you when a bill, such as a car payment or credit card payment, is coming up. You can also set these up yourself to recur each month on your personal digital calendar.
  • Enroll in automatic payments. Automatic payments ensure your car payment or other loan payment is made on time. Just make sure the funds are available in your account on the day it’s due to be withdrawn to avoid potential overdraw fees.

Keep an eye on your credit report and past late payments when you sign up for Credit.com’s Credit Report Card. It gives you a letter grade in each of the five key factors of your credit.

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Source: credit.com