Record Number of Home Buyers Searching Outside Their Own City as Properties Fly Off the Shelf

Posted on June 25th, 2020

After some uncertain months while COVID-19 first emerged, home buying has become hot again. Super-hot.

In fact, homes are being scooped up at the fastest pace in more than two years, per Zillow.

Homes Are Going Pending Fast

  • Homes went pending in a median 22 days during week ending June 13
  • Down 9 days month-to-month and 3 days year-over-year
  • Listings going pending in as few as 5 days in Columbus, Ohio
  • But slowing down in metros like NYC (up to 70 days from 47 last year)

During the second week of June, the typical listing accepted an offer after just 22 days, the best reading since June 2018, when it was a 21-day average.

It was even faster in certain Midwest cities like Columbus, Cincinnati, and Kansas City, where homes went pending in less than a week, in as little as five days on average.

Of course, this could be a temporary trend related to sellers being more reticent about listing their homes, while home buyers continue to exhibit a relatively strong appetite.

We’ll know as more listings hit the market and eliminate some of the recent scarcity. Zillow said new listings were up 14% month-over-month, so that could balance the market somewhat.

Meanwhile, there are still slow housing markets, with New York properties typically spending a staggering 70 days on the market before an offer is accepted, an increase of more than three weeks from the same time last year.

Similar trends have been seen in cities like Miami (55 days) and Atlanta (38 days), also struggling with COVID-19 related closures and disruptions.

Density Has Become a Problem

home buyers moving

  • Record 27% of prospective home buyers looking outside their metro
  • Up from 26% in first quarter of 2020 and 25.2% in Q2 2019
  • Redfin says searching for out-of-town homes could be related to coronavirus
  • Searches for homes in small towns continue to surge on Redfin website

If there were a word to define 2020 at this moment, it would probably be “distance.”

Whether it’s social distancing, six feet apart, tables spaced apart, walking on different sides of the street, one-way grocery aisles, etc.

Now it appears living too close to someone else is also a problem, as evidenced by the uptrend in rural and small town home searches.

Per Redfin, pageviews of property listings in towns with fewer than 50,000 residents increased 87% year-over-year in May.

That was more than triple the 22% year-over-year increase in pageviews seen for properties in cities with more than one million residents.

So it’s pretty clear a lot of prospective home buyers have the same idea about greener and larger pastures.

Specifically, many of them want to leave once-bustling metropolises like Los Angeles, New York, and San Francisco, which had the biggest net outflows (more leaving than coming) in April and May.

As for where everyone is going, the top destinations are:

– New York residents want to move to Atlanta
– San Francisco residents want to move to Sacramento
– Los Angeles residents want to move to San Diego
– Chicago residents want to move to Phoenix
– Boston residents want to move to Portland, Maine

The trend of moving from more expensive cities to cheaper ones isn’t new, but it’s probably more practical now since a lot of people can work remotely without issue.

This is especially true for tech workers, whose companies (Facebook, Twitter and Slack) have embraced the work-from-home movement.

For many, this means moving from expensive urban centers or coastal cities to more spread out, inland metros.

The big question remains whether this is a permanent, lasting sea change, or just a short-term trend that will reverse itself in coming months or years.

If it’s short-lived, it could mean opportunity to buy a home or condo in a once-hot urban center at a discount with less competition. Same goes for properties in vacation locales that have cooled.

Will Hot Housing Market Taper Off Later This Year?

  • There are possible headwinds facing the housing market in fall
  • High and lasting unemployment has yet to be factored in
  • And the end of forbearance programs could lead to a foreclosure surge
  • A COVID-19 second wave is also a major concern

We’re only halfway through 2020 and it has been beyond painful. It’s hard to imagine what’s to come for the rest of the year.

And it won’t be without fireworks, given we’ve got a presidential election in the fall that could be more contentious than usual thanks to increased mail-in voting.

There’s also the nagging issue of unemployment, which both the stock market and housing market have seemed to shrug off so far.

At some point, we’re going to need to face the music, and the same goes for expiring mortgage forbearance programs.

While some homeowners will be able to pick up where they left off in making monthly mortgage payments, others may not be so fortunate.

This could lead to an increase in defaults, foreclosures, and higher REO inventory, which could hurt the seemingly unscathed housing market.

Of course, an ongoing inventory shortage could provide a strong buffer, assuming the pool of eligible home buyers remains.

Moody’s Analytics chief economist Mark Zandi told CNBC he thinks the housing market will “cool off a bit later this year.”

He added that he doesn’t expect a “sharp downturn,” noting that “there are some very solid underpinnings” giving the housing market strength.

I tend to agree – it’s not 2008 all over again. However, at some point in coming years it might be.

Read more: Should I rent or buy a home?


Despite COVID-19, You Can Still Get a Jumbo Home Loan

While lots of lenders have recently cut back on offerings that aren’t backed explicitly by the government, some are rolling out new loan programs to help homeowners get the financing they need.

We’ve already seen non-QM lending basically dry up as the COVID-19 pandemic hit, though some lenders in the space are still hanging on with reduced menus.

And I’ve reported that numerous large, depository banks have also eliminated their higher-risk programs, including Chase upping credit score requirements and no longer offering HELOCS.

Similarly, Wells Fargo tightened its mortgage guidelines and even implemented a rule requiring $250,000 in one of their bank accounts in order to get a jumbo loan.

Clearly that won’t work for a lot of folks, so if you’re in need of a jumbo home loan, it might be a lot harder than it used to be.

Sprout Mortgage Launches Premier Jumbo Program

  • Loan amounts as high as $3 million for purchase or refinance
  • Up to 90% loan-to-value (LTV) with a 700 FICO score and no PMI
  • Up to 43% DTI ratio (40% DTI for LTV>85%)
  • 1-4 unit primary, second homes, and investment properties (condos included)

One mortgage lender has just launched a new proprietary jumbo loan program that allows loan amounts up to $3 million on a 30-year fixed, which is available to approved mortgage brokers and correspondents.

Sprout Mortgage based in East Meadow, New York unveiled its so-called “Premier Jumbo” today to meet the demand of home buyers and homeowners left behind by larger banks and lenders.

They will allow borrowers to secure jumbo loan financing with a FICO score as low as 660, with loan-to-value (LTV) ratios as high as 80% and loan amounts up to $1 million.

Those with credit scores of 700 or higher will be able to take out $1 million loan amounts as high as 90% LTV.

And if you’ve got a 740 or higher credit score, it’s possible to get a $3 million mortgage up to 70% LTV.

Note that the max debt-to-income ratio (DTI) is 43%, or 40% for LTVs above 85%.

You also need to have cash on hand, with minimum asset reserves varying from six months to 12 months depending on the loan attributes, though gift funds are acceptable.

Sprout also allows one 30-day mortgage late in the past 24 months, but you must have been current over the past six months.

They don’t allow foreclosure, bankruptcy, or deed-in-lieu of foreclosure in the past seven years, or short sale, pre-foreclosure, or loan modification in the past four years.

Yes, You Can Get Cash Out with That Too

  • Many lenders have stopped offering cash out refinances in light of COVID-19
  • Too risky to offer them since Fannie and Freddie won’t buy them if in forbearance
  • Sprout allows cash out up to 80% LTV with $1 million loan amounts
  • Only need a 680 credit score to qualify and investment properties are also in play

It’s also possible to get a cash out refinance via the new loan program, another area lenders have been shying away from due to widespread mortgage forbearance.

In short, Fannie Mae and Freddie Mac aren’t buying cash out refis if they go into forbearance, so it’s riskier to originate such loans right now.

But Sprout is happy to offer cash out refis, even allowing $1 million loan amounts up to 80% LTV on primary residences with a 680 minimum credit score.

If you own an investment property, you can also get cash out up to 60% LTV on loan amounts as high as $1.5 million with a 700 FICO score.

Now the big question is how good are their mortgage rates? It’s great that they offer such flexible financing terms, but you’ve got to see how competitive they are, assuming other lenders can match their programs.

As always, be sure to take the time to shop around if you need a jumbo loan – yes, it’ll be harder to do so, but right now pricing can really vary from shop to shop.

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.


Mortgage Lenders Now Providing Payment Relief Due to Coronavirus

Last updated on December 28th, 2020

I will update this post as new information is made available, but we’re starting to see mortgage relief packages rolled out by all the major housing agencies.

Whether the government launches some sort of HAMP-esque program that goes beyond the usual loss mitigation options remains to be seen.

That may be dictated by how bad the coronavirus outbreak gets, and its eventual effect on the housing market.

Coronavirus Relief for FHA Loans

The Department of Housing and Urban Development (HUD), which oversees the FHA home loan program, has halted foreclosures and evictions for the next 60 days as a result of COVID-19.

This applies to the initiation of a foreclosure and the completion of any foreclosures in process.

Additionally, lenders must cease all evictions of individuals living in an FHA-insured single-family property.

This guidance applies to both forward FHA loans and reverse mortgages, known as Home Equity Conversion Mortgages (HECM).

With regard to mortgage payment relief, the FHA has called on loan servicers to offer its suite of loss mitigation options, including short and long-term forbearance options, along with mortgage loan modifications.

Coronavirus Relief for VA Loans

The VA has released a circular titled, “Foreclosure Moratorium for Borrowers Affected by COVID19,” which strongly encourages a 60-day halt on foreclosures and evictions beginning March 18th, 2020.

They have also encouraged holders of VA guaranteed home loans to extend forbearance to borrowers affected by COVID-19.

Loan servicers have been to told to evaluate the VA Loss Mitigation options outlined in Chapter 5 of the VA Servicer Handbook M26-4.

This may include the reapplication of prepayments to cure or prevent a loan default, and allows the terms of any guaranteed loan to be modified without the prior approval of the VA, assuming conditions in the regulation are met.

USDA Rural Development Response

First off, USDA Rural Development will continue to provide USDA home loans and grants to those in rural communities nationwide.

Additionally, they have granted authority to lenders that participate in their Single-Family Housing Guaranteed program to work with borrowers having difficulty making payments.

Lastly, RD will issue guidance to its Single-Family Housing Direct borrowers to ensure those in need of payment assistance are adequately reached.

Fannie Mae and Freddie Mac Assistance Options

The pair, which back the vast majority of home loans, have both suspended foreclosure sales and evictions for the next 60 days.

Both Fannie Mae and Freddie Mac will provide payment forbearance for up to 12 months.

Fannie Mae says it will either reduce or suspend borrower’s mortgage payments during that time.

Neither will assess penalties or late fees against borrowers.

Freddie Mac says forbearance is an option regardless of occupancy, meaning primary residences, second homes, and investment properties are all eligible for relief.

Additionally, both are suspending the reporting of delinquencies related to any forbearance, repayment, or trial plans to the credit bureaus.

So homeowners won’t have to worry about getting dinged by the credit bureaus as they seek assistance.

Boston Mortgage Relief

The Mayor of Boston, Marty Walsh, has inked a deal with 12 banks and mortgage lenders that allows homeowners to defer mortgage payments for at least three months.

The institutions in question include Bank of America, Boston Private, Cambridge Trust Company, Century Bank, Citizens Bank, City of Boston Credit Union, Dedham Savings Bank, Eastern Bank, Mortgage Network, Inc., PrimeLending, Salem Five Bank, and Santander Bank.

The participating lenders will extend loan deferment if needed, and have also agreed to a collective goal of approving deferments within 21 days of application.

Only “essential paperwork” is needed from the borrower, and it will not be reported to the credit bureaus as being a late, nor will they will charge late fees.

Most importantly, once the deferment period comes to an end, the homeowner will not be required to pay the total deferment/forbearance amount in a lump sum.

Connecticut COVID-19 Mortgage Assistance

Connecticut Governor Ned Lamont has announced that his administration has reached an agreement with 50+ credit unions and banks to offer mortgage relief to homeowners affected by the COVID-19 pandemic.

Like other states, there will be a 90-day grace period on mortgage payments and no foreclosures/evictions for 60 days.

Additionally, homeowners will get relief from any fees and charges for 90 days, and won’t suffer any negative credit score impact.

Nevada Mortgage Relief Measures

  • Moratorium on evictions and foreclosures for duration of the State of Emergency
  • 90-day grace period on mortgage payments
  • Banks have agreed to work directly with customers to ensure no one pays a giant lump sum payment to get back on track

Governor Sisolak and State Treasurer Zach Conine have announced relief options for homeowners in the state of Nevada.

They say “a vast majority of lending institutions are offering homeowners facing financial hardships due to COVID-19.”

This includes a a 90-day grace period on mortgage payments, and more importantly, have agreed to “ensure that no one is hit with a giant lump sum payment if they need to stop making payments for a couple of months.”

“In many cases, these payments can instead be added onto the back end of a loan, so people can get back to work and get back on their feet.”

New Jersey Mortgage Grace Period

New Jersey Governor Phil Murphy announced mortgage payment forbearance of up to 90 days for borrowers economically impacted by COVID-19.

  • 90-day grace period for mortgage payments
  • No negative credit impact for receiving assistance
  • No mortgage-related fees or charges for at least 90 days
  • Moratorium on foreclosure sales and evictions for at least 60 days

New York State Mortgage Assistance

In New York State, Governor Cuomo signed an executive order that provides mortgage relief, including a 90-day payment holiday to homeowners impacted by the novel coronavirus.

Here are the details:

  • Postpones or suspends any foreclosures
  • Waives mortgage payments for 90-days based on financial hardship
  • No negative reporting (late payments) to credit bureaus
  • Grace period for loan modifications
  • No late payment fees or online payment fees

Apparently, any missed monthly mortgage payments are being tacked on to the back of the loan. It’s unclear if this will effectively freeze the mortgage or result in a balloon payment.

Worldwide Response

Last week, Italy’s deputy economy minister announced that mortgage payments would be suspended across the entire country in light of the coronavirus (COVID-19) outbreak.

While plenty of Italian homeowners might not actually contract the virus, the economic implications of a countrywide shutdown could affect their ability to make timely housing payments.

For example, with Italy effectively coming to a standstill, many homeowners may not be able to work until the lockdown is lifted.

It’s unclear who will be paid during this time. There are also longer-term layoffs to consider if businesses are permanently affected.

In the UK, similar measures are already being extended by individual banks, including TSB Bank, which is offering a “repayment holiday for up to two months.”

My understanding is this gives homeowners a two-month break before they must resume making timely monthly mortgage payments.

Similar moratoriums are being offered to mortgage borrowers by other British banks, and they’re also making it easier for customers to get access to their cash if need be.

U.S. Mortgage Lenders May Not Be Far Behind

  • Italian banks have already suspended mortgage payments nationwide
  • UK banks are now offering mortgage holidays to affected customers
  • Matter of time before U.S. banks and lenders extend similar assistance
  • If you need help paying your mortgage, contact your loan servicer and look out for news bulletins

While no major coronavirus restrictions have made it to the United States just yet, at least beyond some universities and other private institutions, there’s a chance we could experience a similar clampdown soon.

Really, it sounds more like a matter of when than if, despite no mandatory freedom of movement likely.

This is known as “social distancing,” designed to limit human-to-human contact and stop the spread of the fast-moving COVID-19.

Assuming that happens, there’s a good chance mortgage lenders will step in and offer temporarily relief for those affected.

Again, while the virus itself may not directly affect an individual homeowner’s health, disruptions in multiple industries could lead to layoffs or the inability to perform job duties.

Generally, when a natural disaster occurs, Fannie Mae, Freddie Mac, and HUD offer some level of assistance and/or guidance to loan servicers to ensure borrowers can get back on their feet, or avoid falling behind to begin with.

This may involve the suspension or reduction of mortgage payments for 90 days up to six months, depending on the circumstances.

They may also suspend eviction lock-outs on real estate owned (REO) inventory to avoid displacing tenants during what could be a sensitive time.

Tip: If you need assistance paying your mortgage at this time, be sure to keep an eye on the FHFA or HUD websites, along with Fannie Mae and Freddie Mac’s, for any pertinent announcements.

Homeowners Are Helping Themselves to Lower Mortgage Rates

  • Record low interest rates lead to 55.4% increase in weekly mortgage applications, per MBA
  • Refinance share surged to 76.5% of total loan volume from 66.2% a week earlier
  • 2020 mortgage origination forecast revised up to $2.61 trillion
  • Industry group now expects refis to account for $1.23 trillion in volume, up 36.7% from earlier estimates

In the meantime, homeowners seem to be helping themselves by taking advantage of the record low mortgage rates also on offer at the moment.

Instead of asking for a payment holiday, borrowers are lowering their mortgage rates in droves via a traditional mortgage refinance.

This morning, the MBA reported that home loan applications surged 55.4% from a week earlier as refis jumped 79% to their highest level since April 2009.

Home purchase applications also rose six percent from a week earlier, a good sign in an otherwise uncertain time.

That pushed the refinance share of mortgage activity to 76.5% of total applications from 66.2% a week earlier.

The record low interest rate environment prompted the MBA to revise its origination forecast, forecasting total mortgage volume of $2.61 trillion this year, a 20.3% increase from 2019’s volume ($2.17 trillion).

Additionally, they expect home refinance originations to double their earlier projections, surging 36.7% to around $1.23 trillion.

Despite the unknowns in this ever-evolving situation, home purchase originations are still slated to climb 8.3% this year to $1.38 trillion.

While this is generally good news for the mortgage industry, it’s probably wreaking havoc on loan servicers and mortgage investors who are seeing prepayment speeds go through the roof.

Additionally, it’s going to make it difficult for mortgage companies to get their staffing right if mortgage rates all of a sudden U-turn, and in any case, once the party comes to an end.

Read more: How soon can I refinance my mortgage?


Redfin: 2020 Home Sales Will Be Highest Since 2006

While 2020 continues to surprise us, somehow, someway, home sales are expected to hit their highest point since 2006 this year.

This, despite an ongoing worldwide pandemic and a contentious U.S. presidential election that’s less than a month away.

You’d think those types of events would give prospective home buyers pause, but they could actually be accelerating peoples’ plans.

6.2 Million Home Sales Expected for 2020

2020 home sales

  • The total includes both newly-built homes and existing home sales
  • Would be the highest total since 2006, around the time home prices peaked
  • Their low-end estimate is 6.08 million home sales, still 1% above last year
  • Their high-end estimate is 6.4 million home sales, 6% above last year

While the year 2020 certainly got off to a rocky start, and resulted in obvious disruptions during the traditional spring home buying season, we appear to be back on track.

In fact, some 6.2 million homes are expected be sold by the end of 2020, per Redfin’s model forecast, a 3% increase from 2019.

That’d make 2020 the best year for home buying since 2006, back when real estate was flying high, and only years before it all came crashing down and ushered in the Great Recession.

This doesn’t mean we’re doomed once again – things were a lot different back then, namely mortgage underwriting guidelines.

In 2006, you could buy a house with zero down, stated income, and a subprime credit score. In fact, you could by a 4-unit investment property with zero down. Yikes!

Today, there are still zero down mortgage options, but they require full doc underwriting that takes into account your income, assets, and employment.

Of course, there are still lots of loan programs out there that only require questionably-low credit scores, like FHA loans and VA loans, but I digress.

Redfin actually has a few different outcomes for home sales, including a low-end forecast of 6.08 million homes sold, which would still be 1% more than 2019.

And a high-end forecast of 6.4 million, which would be 6% more than 2019. It’s all pretty impressive given the year we’ve had.

What’s Driving Higher Home Sales in 2020?

  • The pandemic may have actually accelerated home buyers’ plans
  • Renters living in urban areas are craving more space in the suburbs
  • There are also 45 million first-time home buyers coming of age
  • And of course, the record low mortgage rates don’t hurt either

The obvious answer might be record low mortgage rates, which are making it more appealing (at least emotionally) to purchase a home.

The other reason might be the desire to move somewhere that offers more space, such as a home in the suburbs versus an apartment in the city.

It seems the pandemic has caused folks to take a hard look at their situation, and perhaps seek out more stable living conditions.

Home sales had also been trending higher for the past few years, and with millions of Millennials and Gen-Zs coming of age, there are lots of tailwinds.

As I wrote a while back, 45 million Americans are going to reach the typical first-time home buyer age of 34 over the next decade.

This, coupled with limited inventory, will make home buying competitive for the foreseeable future, and supports my argument of skipping the starter home.

That might be especially true now that “more space” is high up on the list of home buyers wants and needs.

With regard to how the presidential election could affect home sales, Redfin notes that past elections have had minimal impact.

Since 1980, home sales actually increased an average of 0.4% in October and November of presidential election years versus non-election years.

But in the December of election years, the month where sales would likely close for offers made during November, sales typically fell an average of 1.5%, but quickly recovered by the same amount in January.

Of course, this isn’t just any year, so we’ll see how things play out.

Redfin surveyed home buyers and found that only 13% of respondents said the upcoming election has made them more hesitant to buy or sell a home, which was down from 20% in November 2019.

Read more: 2020 home buying tips

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.


Fannie Mae and Freddie Mac Mortgage Refinances Just Got More Expensive

Last updated on October 30th, 2020

Way to rain on our parade, Fannie Mae and Freddie Mac.

Just when mortgage rates were hitting record lows, the pair decided to add a new fee to mortgage refinances in light of the ongoing pandemic.

Simply put, they expect more losses related to a higher rate of loan defaults, and are adjusting their pricing accordingly. And refinance rates are higher to begin with so it’s a double-whammy.

Remember, they don’t lend directly, but rather purchase and securitize many of the mortgages that are funded by banks and mortgage lenders.

As such, this new cost will be passed along to you, the consumer.

Introducing the Adverse Market Refinance Fee

  • Fannie Mae and Freddie are charging a new fee to account for higher risk related to COVID-19
  • It applies to all mortgage refinance transactions, including those without cash-out
  • Only exception is certain single-close construction-to-permanent loans
  • The new fee will apply to mortgages with settlement dates on or after September 1st, 2020

On August 12th, both Fannie Mae and Freddie Mac released lender letters discussing a new fee that they’re going to tack onto ALL mortgage refinance loans.

Known as the “Adverse Market Refinance Fee,” it is designed to cover higher costs associated with increased risk thanks to COVID-19.

Instead of absorbing that cost themselves, they’re passing it onto homeowners, even if you don’t actually pose any additional risk to Fannie and Freddie, collectively known as the government-sponsored enterprises (GSEs).

Fannie Mae said the new fee is being charged as a result of “market and economic uncertainty resulting in higher risk and costs incurred by Fannie Mae.”

Meanwhile, Freddie Mac said it “is a result of risk management and loss forecasting precipitated by continued economic and market uncertainty.”

In other words, they expect more of these new refinance loans to sour at some point after origination, despite borrowers likely obtaining lower interest rates and corresponding monthly payments.

Makes sense, right?

How Much More Expensive Will a Mortgage Refinance Be?

  • The Adverse Market Refinance Fee is 50 basis points in price (not rate)
  • This will result in either higher closing costs or a slightly higher mortgage rate
  • Someone with a $300,000 loan amount may have to pay an extra $1,500 in closing costs
  • Or accept a higher mortgage rate to absorb those costs so they aren’t paid out-of-pocket

Fannie Mae and Freddie Mac are tacking on a 50-basis point fee to both no cash-out and cash-out refinance mortgages.

This means rate and term refinances where you don’t actually pull any cash out are subject to the fee, along with cash out refinances.

The new fee is in addition to any other mortgage pricing adjustments that may otherwise apply to your home loan.

On a $300,000 loan amount, we’re talking about another $1,500 in closing costs, which would likely just result in the borrower taking a slightly higher mortgage rate.

For example, if mortgage rates were to stay constant, and the borrower originally qualified for a 30-year fixed at 2.5% with no costs, their new rate might be 2.625% instead.

The good news is that’d only be a difference of about $20 in monthly payment. But it’s still an unwelcome development for those looking to snag the lowest mortgage rates in history.

It applies to mortgages with settlement dates on or after September 1st, 2020. It’s unclear how long they’ll impose this new Adverse Market Refinance Fee.

If you were thinking about refinancing your mortgage, you may want to do it sooner rather than later.

The big question though is how low will mortgage rates go, as I posed yesterday? If they keep falling from here, this new fee can be absorbed via the lower rates available.

So it’s hard to know if this will actually increase borrowing costs once we factor in where mortgage rates are in September and beyond.

They recently pulled back slightly after hitting new record lows, but it could just be a temporary rise before they reach even lower lows.

Note: This doesn’t affect FHA loans, but it often doesn’t make sense to refinance into an FHA loan due to the mandatory mortgage insurance premiums.

Fannie and Freddie CEOs Respond to Criticism

Folks in the industry were none too happy with the announcement, which eventually prompted a joint letter from the CEOs of Fannie Mae and Freddie Mac, Hugh Frater and David Brickman.

The pair attempted to justify the fee, claiming it wouldn’t cause mortgage payments to “go up” because a refinance generally results in a lower interest rate, which in turn reduces the monthly payment.

But that’s kind of like telling someone don’t worry about our cut, you’re still saving money.

Sure, a borrower’s payment may be lower post-refinance, but not as low as it was supposed to be, thanks to subsidizing an adverse market fee they may have nothing to do with.

The CEOs are basically arguing that with mortgage rates at or near record lows, you’re already saving lots of money, so why get upset. Hmm.

Something tells me that’s not going to go over well either.

Update: After mounting pressure, the FHFA has delayed the implementation date of their Adverse Market Refinance Fee until December 1st, 2020.

Additionally, the new fee will not apply to refinance loans with loan amounts below $125,000, Affordable refinance products, Fannie Mae HomeReady loans, and Freddie Mac Home Possible loans.


Veterans Can Now Get Rates as Low as 2.25% on a 30-Year Fixed Mortgage

Posted on June 24th, 2020

It seems mortgage rates keep moving lower and lower, and now some veterans and active duty military might be able to snag a 30-year fixed as low as 2.25%! That’s pretty unheard of.

While it sounds too good to be true, it appears to be a reality thanks to United Wholesale Mortgage’s push to dominate the mortgage market.

The rapidly growing wholesale lender based out of Pontiac, Michigan announced the new offering today via their website, calling it “Conquest for VA.”

Who Is Eligible for Conquest for VA?

  • Active duty military and veterans who otherwise qualify for VA loans
  • Those looking for a VA purchase loan or VA IRRRL (streamline refinance)
  • Primary residence only for purchases
  • Primary and second homes for VA IRRRLs
  • Minimum FICO score of 640
  • Must obtain financing via a mortgage broker approved to work with UWM
  • Homeowner must not have closed a refinance through UWM in past 18 months
  • Mortgage rates start from 2.25% to 2.375% on the 30-year fixed

Now let’s talk about who’s eligible for this seemingly fantastic loan program, which UWM says is being offered to honor our nation’s veterans.

As the name suggests, Conquest for VA is reserved for veterans and active duty military, and anyone else generally eligible for a VA home loan.

So if you don’t qualify for a VA loan, you’ll have to look into their general Conquest loan program instead.

Additionally, these low rates are only applicable to new home purchase loans and streamline refinances (IRRRLs). In other words, no cash out refinances here.

Take note of the occupancy type as well – primary residence only for purchases, primary and second homes for IRRRLs.

You must have a minimum FICO score of 640 and like the conventional Conquest program announced a couple weeks ago, these rates are only available to borrowers who haven’t worked with UWM in the past 18 months.

In terms of interest rates, they start as low as 2.25% on the 30-year fixed, which is surreal, though they could be an eighth higher at 2.375%. Either way, pretty hard to beat.

Another cool feature to this program is you can choose your own loan term, ranging from as little as eight to a full 30 years.

For example, if you’re already several years into a 30-year fixed, you could choose a shorter term to avoid resetting the clock while refinancing.

Lastly, UWM is a wholesale mortgage lender, meaning you can’t contact them directly as a homeowner.

Instead, you have to work with a mortgage broker who is approved with UWM.

So if you’re weighing the mortgage broker vs. bank argument, these super low rates could be a tipping point for some.

As always, be sure to shop mortgage rates with mortgage brokers and banks to ensure you don’t miss an even better deal.

Also, pay attention to the closing costs associated with these mortgage rates since interest rate is just one piece of the pie, and mortgage APR is a more accurate representation of total loan cost.

Like I mentioned with their conventional Conquest program, UWM seems to be the trailblazer here, but my guess is other mortgage lenders will jump on board and offer similarly low rates now or in the very near future.

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.


Mortgage Lending Volume Hits Highest Level on Record Despite COVID-19

Posted on September 9th, 2020

It makes sense that the mortgage industry would see its best quarter in history during a global pandemic.

Okay, it doesn’t make sense, but that’s what happened anyway, per the latest Mortgage Monitor report from Black Knight.

Mortgage Lenders Originated $1.1 Trillion in Home Loans During the Second Quarter

record originations

  • Mortgage lenders experienced best quarter in history during Q2 2020
  • Driven most by refinance loans thanks to record low mortgage rates
  • Refinancing was up 60% from first quarter and 200% from a year earlier
  • Purchase lending was only down 8% from a year earlier despite pandemic

The data analytics firm said about $1.1 trillion (yes, trillion) in first-lien mortgages were originated during the second quarter of 2020, the best three months on record since reporting began in January 2000.

The record numbers were mostly fueled by mortgage refinance transactions, which have surged due to continued record low mortgage rates, helped in part by the COVID-19 pandemic.

They said refinance lending was up more than 60% from the first quarter alone, and more than 200% higher than the same time last year.

Such home loans accounted for almost 70% of all first-lien mortgage originations in terms of dollar value, compared to just 39% in the second quarter of 2019.

Meanwhile, home purchase lending was down about eight percent from a year earlier, which is surprisingly strong given the economic uncertainty surrounding the coronavirus.

Some $351 billion in home purchase loans were originated during the quarter, thanks again to low mortgage rates and improved housing affordability that returned demand to its pre-COVID levels quickly.

We Might Set Another Record in the Third Quarter

purchase rate locks

  • The third quarter of 2020 might be even better than the second
  • Rate lock data reveals that many more home loans are slated to close in Q3
  • And there are still nearly 18 million homeowners ripe for a refinance
  • So there’s plenty of business left despite the already big numbers

Despite those amazing numbers, the record set in the second quarter might be very short-lived.

Based on rate-lock data gathered by Black Knight, the third quarter is looking like it’s going to be even bigger.

The company said locks on home refinance loans are up 20% from the second quarter, assuming these loans close during the third quarter based on a 45-day lock-to-close timeline (how long does it take to close a mortgage).

They also pointed out that there are still nearly 18 million homeowners with sufficient credit scores and at least 20% home equity who could reduce their mortgage rate by at least 0.75% by refinancing.

And purchase locks that are scheduled to close during the third quarter are 23% higher than the seasonal expectation, which could be an indication of making up for lost time during the early days of the pandemic.

The second and third quarter combined purchase locks are more than 6% above their expected seasonal volume based on January’s pre-pandemic baseline.

So in essence, the traditional spring home buying season was merely shifted into the summer months, which is great news for real estate agents and home builders.

Most Homeowners Refinance with a Different Mortgage Lender

servicer retention

  • Customer retention continues to be an issue for mortgage lenders
  • About one in five borrowers use their original mortgage lender when refinancing
  • Despite very marginal differences in interest rates among lenders
  • But given how busy they all are it might not matter right now

Lastly, Black Knight highlighted the awful retention rates in the mortgage industry.

Simply put, most borrowers don’t stick with their old mortgage lender when refinancing the mortgage.

Instead, they go with a new company, as indicated by the fact that just 22% of rate and term refinances and 13% of cash out refinances were retained in loan servicers’ portfolios.

Essentially, less than one in five homeowners went back to their original lender during the second quarter.

Interestingly, the difference in mortgage rate pricing for rate and term refinance borrowers (into GSE mortgages) was only seven basis points lower on average than borrowers who stuck with their original company.

So while pricing is key to drumming up business, it shows lenders could probably retain many of their customers given the very marginal price difference.

Of course, it might be a case of a lender merry-go-round, with lenders simply taking each other’s business over time, as opposed to some lenders losing out.

Nonetheless, identifying those borrowers ripe for a refinance should be a top priority for lenders/servicers if they’re interested in driving more business and growing their portfolios.

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.


How About a 1% Mortgage Rate?

Well, maybe not exactly 1%, but in the 1% range? More specifically, starting with the number “1,” which on its own sounds too good to be true.

It’s now a reality thanks to, you guessed it, United Wholesale Mortgage, who again is bringing some of the lowest rates in the industry via their aggressive Conquest loan program.

In case you’re not familiar, UWM works exclusively with independent mortgage brokers, meaning you can’t call the (wholesale) lender up directly to get a mortgage rate quote.

Instead, you’ll need to find a mortgage broker that is approved and working with UWM, who can shop your loan with UWM among other partners.

If all works out, and you’re into the idea of a 15-year fixed mortgage as opposed to a 30-year fixed, a mortgage rate that starts with the number one might be in the cards.

Get a 15-Year Fixed Mortgage Rate Below 2%

  • UWM’s Conquest program now offers low rates on 15-year fixed mortgages
  • Interest rates starting as low as 1.875% for well-qualified borrowers
  • Those with high-rate 30-year fixed mortgages may not see a big payment difference when refinancing
  • Possible to save hundreds of thousands via lower interest expense

In order to qualify for a sub-2% mortgage rate, you’ll need to go with a 15-year fixed mortgage, which is inherently more expensive due to its shorter loan term.

However, that shorter term also means you’ll pay a lot less interest and own your home a whole lot faster.

And assuming you qualify for UWM’s Conquest program and manage to get a rate of 1.875%, the difference in payment may be negligible if moving from a high-rate 30-year product.

Let’s look at an example to illustrate. Say you took out a 30-year fixed at 4.875% two years with a loan amount of $300,000. Yes, rates were that high just two years ago!

Your current monthly mortgage payment would be $1,587.62. After two years, you’d have whittled that balance down to roughly $291,000.

If you were to refinance your mortgage into a 15-year fixed priced at 1.875%, your new monthly mortgage payment would be $1,855.91.

Yes, $268 more per month, but you’d be free and clear in 15 years, as opposed to 28.

More importantly, you’d pay about $200,000 less in total interest. Yes, $200,000.

If you kept the old mortgage, you’d pay $272,000 in total interest over 30 years, assuming you held it to maturity.

If we factor in the interest on the first two years on the old mortgage and 15 years on the new 1.875% 15-year fixed, it’s roughly $72,000 in interest total.

Does a 15-Year Fixed Mortgage Make Sense Today?

Now a 15-year fixed isn’t for everyone, especially those who can barely afford a 30-year fixed, or have a better use for their money.

There’s also a decent argument these days that your money could be better served elsewhere, with mortgage rates so cheap at the moment.

If you can borrow at around 2.5% to 3% on a 30-year fixed, there’s a good chance you can beat that rate of return in many other places.

However, if you’re risk-averse and totally dislike debt, which seems to be a lot of folks out there, this strategy could be pretty darn effective.

For the record, UWM also offers 30-year fixed mortgage rates as low as 2.5% via their Conquest conventional loan program.

Similar rules apply – most importantly, you must not have refinanced via UWM in the past 18 months to qualify for these low rates.

And it only works on home purchase loans and rate and term refinances (no cash out permitted).

Additionally, it has to be a primary residence or second home. In other words, only vanilla loans are eligible.

As I said when they released their 30-year program, it’s another sign (of confidence) that mortgage rates are likely going to move lower in the near-future.

In other words, we might see a 15-year fixed priced close to 1.5% at some point soon if this trend continues.

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.


Beware the New Mortgage Fee Fearmongering

You may have heard there’s a “new mortgage fee.” And you might have been told to hurry up and refinance NOW to avoid said fee.

While there is some truth to that, it is by no means a reason to panic, nor is it even applicable to all homeowners.

Additionally, it’s possible it may not save you money to refinance now versus a couple months from today, depending on what direction mortgage rates go.

So before we all get in a tizzy and give in to what some are clearly utilizing as a scare tactic, let’s set the record straight.

What the New Mortgage Fee Is and Is Not

  • A 50-basis point cost known as the Adverse Market Refinance Fee intended to offset COVID-19 related losses
  • It’s not a .50% higher mortgage rate
  • It’s an additional .50% of the loan amount via closing costs
  • Only applies to mortgage refinance loans backed by Fannie Mae or Freddie Mac
  • Home purchase loans are NOT affected by the new fee
  • Nor does it apply to FHA loans, USDA loans, or VA loans

Over the past week, I’ve been bombarded by articles warning of the new mortgage fee – most feature something to the effect of “refinance now” and “act fast!”

But in reality, you might not need to do anything different, nor hurry.

Sure, it’s an amazing time to refinance a mortgage, what with mortgage rates hovering at or record all-time lows. No one can argue that.

Still, it all seemed to come to a screeching halt two weeks ago when Fannie Mae and Freddie Mac surprised us with their Adverse Market Refinance Fee, which is designed to offset $6 billion in COVID-19 related losses.

Why would they do such a thing at a time when the economy (and homeowners) are already suffering due to COVID-19? Well, that’s a different story and not really worth getting into here.

The important thing to know is this new mortgage fee only applies to home loans backed by Fannie Mae and Freddie Mac, and only if you’re refinancing an existing mortgage.

It has nothing to do with FHA loans, USDA loans, VA loans, or home purchase loans. Or jumbo loans while we’re at it.

Additionally, they have since exempted Affordable refinance products, including HomeReady and Home Possible, and refinance loans with an original principal amount of less than $125,000.

Some single-close construction-to-permanent loans are also exempt.

In terms of cost, it’s .50% of the loan amount, not a .50% increase in mortgage rate. That could mean another $1,500 in closing costs on a $300,000 loan, which is nothing to sneeze at.

But mortgage rates don’t live in a vacuum, and can change daily, so how much more (or less) you’ll actually pay depends on what transpires between now and the implementation date.

When Does the New Mortgage Fee Go into Effect?

  • Applies to loans purchased or delivered to Fannie and Freddie on or after December 1st, 2020
  • This means you’d want to apply for a refinance 60 or so days before that cutoff
  • Since mortgages are sold and securitized once the loan actually funds
  • But remember there’s more to mortgage pricing than just this new fee

The fee was originally supposed to go into effect for loans purchased or delivered to Fannie and Freddie on or after September 1st, 2020, but after much uproar, they just delayed it to December 1st, 2020.

This doesn’t mean you have until December 1st to apply for a refinance in order to avoid the fee.

Since we’re talking purchase of your loan or delivery of your loan so it can be bundled into a mortgage-backed security, there needs to be a buffer.

We have to account for how long it takes to get a mortgage, plus the post-closing stuff that takes place before delivery or sale.

You’d really want to get your refinance in maybe 60+ days prior to December 1st to be safe, though it’s unclear if mortgage lenders will already start baking in the fee even earlier.

If not, you might be stuck paying an additional .50% of your loan amount, either via out-of-pocket closing costs or a slightly higher mortgage rate.

Assuming you don’t want to pay anything at the closing table, your interest rate might be .125% higher, all else being equal.

So if you qualified for a 30-year fixed mortgage rate of 2.5%, it might be 2.625% instead. On a $300,000 loan, it’s about $20 higher per month.

Sure, nobody wants to pay more, but it shouldn’t be a refinance deal breaker for most folks.

And here’s the other thing – mortgage rates might move lower over the next few months due to, I don’t know, COVID-19, the most contentious presidential election in recent history, a stock market that could collapse at any moment, and so on.

In other words, if mortgage rates drop another .25% or .375% by later this year, it’s possible to come out ahead, even with the new fee.

The counterpoint is not to look a gift horse in the mouth. Either way, don’t panic.


UWM’s Exact Rate Lets Borrowers Choose Exact Mortgage Rates

Last updated on August 3rd, 2020

The mortgage industry can be a little bit old school. Similar to how the stock market used to operate in sixteenths, and later eighths, mortgage rates are mostly offered in eighths.

Before 2001, the stock market only allowed price movements as small as one-sixteenths, an archaic method that gave way to the introduction of decimals.

The issue was that big traders were losing out when trading millions of shares, because as we all know, those little fractions can add up. The rest of the world was also using decimals, so it was time to evolve.

Today, you can buy and sell stocks for prices like $73.805 as opposed to just $73 3/4. That matters if we’re talking about a large purchase or a massive sell order.

Now it’s probably not going to be as impactful with a mortgage, but in this day and age, every little bit seems to matter.

Do You Want a Really Specific Mortgage Rate?

  • UWM Exact Rate allows custom rates to the thousandth decimal point
  • Mortgage brokers can “create the unshoppable loan”
  • Pricing better matches closing costs on the loan and can be used to avoid principal reductions
  • Even a fractional improvement may be enough to win a borrower’s business

Typically, you’ll see that your mortgage rate is either a whole number, such as 3%, or an eighth of a number, such as 3.125%.

Some lenders and credit unions also offer promotional rates below key thresholds, such as 2.99%, to make their offer appear lower than the competition.

After all, it looks a lot better to hang a big banner with a price that ends in .99% than it does .125%.

Now one lender is going a step further by allowing its mortgage broker partners to offer mortgage rates in all types of endless crazy combinations.

United Wholesale Mortgage (UWM), the largest wholesale mortgage lender in the country, recently launched “Exact Rate.”

As the name implies, it lets borrowers obtain very specific mortgage rates, instead of being stuck with a whole number or an eighth of a percent.

In fact, you can get a mortgage rate priced to the thousandth decimal point in virtually any combination near that main eighth of a percentage point.

Mortgage Rate Quotes You Can’t Get Elsewhere

  • Brokers can price their loans just below those of its competitors
  • Simple way to differentiate in a market that is very homogeneous
  • May usher in new era of more exact mortgage rates in the industry
  • But borrowers will likely still pay for the fractionally lower rates and barely benefit

UWM President and CEO Mat Ishbia says you can “create the unshoppable loan with Exact Rate.”

And that it is “harder for that borrower to go get a quote from someone else.” Because let’s be honest, who else is offering a 30-year fixed at 2.541%?

Ishbia says, “there shouldn’t be a loan that you ever quote on the eighths.”

He notes that the max rate on its new Conquest 30-year fixed loan program is 2.875%, but that brokers shouldn’t quote that rate. Instead, “use 2.873%, 2.871%, 2.799%.”

By doing so, mortgage brokers can differentiate their offerings, effectively creating something out of nothing in the very boring world of vanilla mortgages.

And Exact Rate can be used when locking a conventional home loan or even a government loan, such as an FHA loan or VA loan.

It’s certainly an interesting concept, and could usher in more exact pricing on mortgages going forward.

Of course, you might still pay for that fractional price improvement, so don’t get too excited.

Also note that you probably won’t even notice the difference in both monthly payment or total interest paid when we’re talking about thousandths of a decimal point.

Lastly, when shopping a mortgage from lender to lender, pay attention to the mortgage APR, not the mortgage rate. It matters how much you’re paying to obtain said 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.