Appraisal

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If your appraisal is so low that you owe more on the house than you could sell it for, there are several options for you to consider.

The 30-year fixed mortgage rate keeps getting lower and lower, making it a great time to refinance your mortgage and cut your monthly payment. But as Pat Esswein, associate editor of Kiplinger’s Personal Finance magazine, reports, homeowners have to clear a few hurdles before they can refinance.

One of those hurdles is the appraisal, which determines the value the bank will assign to your home.

That’s an important number because it determines your refinancing options and affects your monthly payment and interest rate. For example, if your home value drops and your loan-to-value is higher than your lender allows, typically 80 percent, you have to either increase your equity with cash or pay for mortgage insurance.

I recently spoke with Esswein about ways to get the highest possible value before the appraisal, and what to do if your appraisal comes in low.

What to Do Before an Appraisal to Get a Higher Home Value

There are a few things you can do to get highest possible appraisal possible.

First, consider researching the appraisal company. “This may be a little bit of a stretch, but when looking for a lender, ask what appraisal management company they order appraisals from,” says Esswein.

What you want is an experienced appraiser who really knows your local market, and you’re most likely to find that kind of appraiser at “a smaller, local appraisal management company that probably pays more and therefore attracts the best appraisers,” says Esswein. “Some companies go for the cheapest hires who also are willing to travel really far, so that means they’re inexperienced and they don’t know your area very well.”

Second, get your home in shape. “Make your house show well,” says Esswein. “Clean, declutter and fix things that need to be fixed so that when the appraiser comes, they’ll note that your house is in the best condition it can be.”

While you’re at it, create a house file for the appraiser that documents any upgrades or recent repairs, such as the new roof you installed two years ago. “When the appraiser actually comes to your home, have the file ready for them and walk around with them to point out the upgrades,” says Esswein.

Third, research recent comparable home sales. “Even though you may feel that prices are rising in your market, and in many markets they have, the appraiser still has to find comparable recent sales to support the value,” says Esswein. “One recent comp doesn’t make a trend, and appraisers may be adjusting prices more slowly than you wish.”

Instead of hoping the appraiser will pull a complete list of comps, Esswein suggests contacting a real estate agent to ask for a list of recent comparable sales, which you can add to your house file. “An experienced real estate agent will know what’s most comparable to your house,” she says.

What to Do If Your Appraisal is Low

So what happens if your appraisal is lower than expected? Is it possible to get another appraisal from a different company?

Esswein says you could shell out $250-$350 for a second opinion, then appeal to your loan officer with the new appraisal. “But before you do that, you should ask your loan officer if they’ll even consider the second appraisal,” says Esswein.

It’s more likely that the first appraisal will stick, but you still have options for refinancing.

Let’s say your home is appraised for $180,000. You still owe $162,000 on the mortgage, which is 90 percent of the value of the home. What are your options?

When it comes to maximum allowable loan-to-value, 80 percent is usually the magic number, so there are three things you can do if you aren’t at 80 percent.

Option one: Bring more cash to closing. If you can afford to put in an additional $18,000 in cash, you’d reduce the loan balance to 80 percent of the value of your home.

“Keep in mind that even if you anted up that money, you still have to have enough money in your reserves to satisfy any lender requirements for adequate savings, which is usually two months’ worth of mortgage payments, but can be more,” says Esswein.

Option two: Refinance into an FHA loan. An FHA loan is a Federal Housing Administration-backed mortgage loan.

Although an FHA loan requires just 3.5 percent equity, “with recent increases in FHA’s upfront mortgage insurance and monthly premiums, private mortgage insurance (PMI) could be cheaper,” says Esswein. Which brings us to…

Option three: Pay for PMI. PMI protects the lender if you stop making payments. “Because home values have fallen, many homeowners who didn’t need PMI when they bought their home will need it when they refinance,” says Esswein.

If you opt to refinance and need PMI, there are two ways you can pay for it.

One way is to simply pay for PMI yourself, which typically costs 0.5 percent to 1.5 percent of your loan amount per year. “Your lender will add the cost of PMI into your monthly mortgage payment,” says Esswein. “You would continue to have to pay the extra premium each month until you have 20 percent equity, at which point you can contact the lender and ask them to cancel PMI. Otherwise, when loan-to-value reaches 78 percent, they have to drop PMI automatically.”

The other way you can pay for PMI is lender-paid mortgage insurance. With lender-paid mortgage insurance, the cost of PMI is folded into your interest rate. The less equity you have, the higher your rate. “The higher rate applies for as long as you have the loan, so this option makes sense only if you don’t plan to own your home for the long term,” says Esswein. “You’re going to have to pay the higher rate for as long as you have that loan, it’s not going to fall away when you reach 20 percent equity.”

Before you decide to take lender-paid mortgage insurance, Esswein says to calculate your monthly payments and the total interest you’ll pay over the life of the loan, based how long you plan to keep loan.

So if you have to take on PMI, is it worth it to refinance? After all, you’re trying to lower your payments, not add extra fees!

Esswein says that as long as you’re saving money, it’s worth it. “PMI is a tool you can use if you need it, and if you’re still reducing payments and saving on interest, then it makes sense,” says Esswein.

And even if you have enough cash to bring your loan-to-value to 80 percent, you might think twice about spending it. “Before you bring cash to the table, decide what else you might want to spend that cash on,” says Esswein. “Don’t drain your emergency fund to avoid PMI.”

Finally, if your appraisal is so low that you owe more on the house than you could sell it for, you have options, too. Esswein recommends makinghomeaffordable.gov, which highlights home loan programs and refinance options for people who are underwater on their homes.

Source: getrichslowly.org

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If you’re looking for a home purchase lending expert in the Midwest, you may want to check out “Flat Branch Home Loans.”

The Columbia, MO-based company is the #1 home purchase lender in the state, beating out the very biggest names in the industry.

They’re also the top USDA lender in the states of Missouri, Kansas, and Illinois, as well the eighth largest nationwide.

That’s pretty impressive, and could be directly related to their 1,000+ years of combined mortgage experience.

So if you’re a prospective home buyer looking for a little extra guidance, they could be a good fit.

Flat Branch Home Loans Fast Facts

  • Employee-owned, direct-to-consumer mortgage lender
  • Offers home purchase loans and mortgage refinances
  • Founded in 2005, headquartered in Columbia, MO
  • Funded about $3.75 billion in home loans last year
  • #1 retail home purchase lender in the state of Missouri
  • Roughly two-thirds of overall business comes from home state
  • Also very active in Illinois, Kansas, and Oklahoma
  • Currently licensed in 30 states nationwide

Flat Branch Home Loans is an employee-owned, direct-to-consumer retail mortgage lender located in Columbia, Missouri.

They were founded by current president Jim Yankee in 2005, and have since grown to a 700-employee strong company.

Their claim to fame is being #1 home purchase lender in the state of Missouri, as well as a big-time USDA loan lender.

This makes it obvious that they’re a solid choice for home buyers, though they also do a good deal of mortgage refinancing as well.

Last year, they funded about $3.75 billion in home loans, with a 70/30 split of purchase loans and refinances.

Roughly two-thirds of their overall production comes from their home state of Missouri.

And they’re the fourth largest mortgage lender in Missouri overall, only bettered by U.S. Bank, Rocket Mortgage, and Wells Fargo.

Aside from Missouri, they’re quite active in the states of Illinois, Kansas, and Oklahoma.

At the moment, they’re licensed in 30 states, including Alabama, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, and Wisconsin.

For the record, their name is derived from the Flat Branch stream that flows near Columbia, MO.

How to Apply with Flat Branch Home Loans

To get started, you can visit a local office if located in the Midwest, or simply navigate to their website.

At last count, they’ve got about 58 physical locations in a handful of Midwestern states.

If you begin at the website, you can browse their online loan officer directory, read bios, and find someone to work with.

Once you narrow down your loan officer search, you can click on “Apply” and you’ll have the option to continue on to the digital application or have them reach out to you.

It might be wise to have them reach out first so you can discuss loan pricing and eligibility before filling out the app.

When it comes time to complete the app, their digital mortgage experience is powered by SimpleNexus.

You can fill out the app from a computer, or download their smartphone app and tackle it that way.

Applicants can eSign disclosures, quickly calculate payments, securely scan and upload documents, and message their loan officer with questions along the way.

You’ll also receive updates as you go to determine where you’re at in the process. And receive a notification whenever they request a new document from you.

Simply put, Flat Branch Home Loans offers a good combination of the latest technology and human touch.

Loan Programs Offered by Flat Branch Home Loans

  • Home purchase loans
  • Refinance loans: rate and term, cash out, streamline
  • FHA loans
  • USDA loans
  • VA loans
  • HomeReady and Home Possible (3% down)
  • Grants and down payment assistance programs
  • MHDC loans
  • Section 184 Indian Home Loan Guarantee program

Flat Branch Home Loans is big on home purchase financing, and has a long list of programs to help secure a mortgage.

If you’re an EMT, firefighter, police officer, teacher, or military, their “Community Champions Program” comes with up to $900 in lender credits and a waived appraisal fee.

They also originate Missouri Housing Development Commission (MHDC) loans, which feature down payment assistance via a forgivable second mortgage.

As noted, they’re a major USDA loan lender, so if you’re purchasing a rural home they should be a great fit.

The USDA program has its quirks, so using an experienced lender who knows how to navigate it is advised.

Aside from that, they offer all the major stuff like conforming loans, FHA loans, VA loans, and even bridge loans to help you buy before you sell.

Their Lock and Shop option, which allows you to lock a mortgage rate before you find a home, is available in the states of Arkansas, Illinois, Iowa Kansas, Missouri, Oklahoma, Texas, and Nebraska.

Lastly, they offer the Section 184 Indian Home Loan Guarantee program, a low-down payment loan option for Native Americans.

It’s unclear if they offer jumbo loans or adjustable-rate mortgages, though you can get a fixed-rate mortgage in a variety of different loan terms.

Flat Branch Home Loans Rates

While we know they specialize in home purchase lending, we don’t know a lot about their loan pricing.

To my knowledge, they don’t feature their mortgage rates or lender fees on their website. As such, you’ll need to speak with a human to get a quote.

This doesn’t say anything about their rates, good or bad, it just doesn’t give us anything to go on in this review.

Once you get a mortgage rate quote, be sure to shop their mortgage APR with other banks, lenders, and mortgage brokers to see where they stand.

Take note of any lender fees and/or discount points required for the quoted rate to ensure you’re doing an apples-to-apples comparison.

The only hint we have about pricing comes from their Zillow reviews, in which a good chunk of customers indicated a lower rate and/or closing costs than expected.

Flat Branch Home Loans Reviews

Over at Zillow, Flat Branch Home Loans has a stellar 4.96-star rating out of a possible five from about 900 customer reviews.

Many of the reviews highlight their hands-on service and fast closings, especially important to home buyers.

They’ve also got a 4.9-star rating from about 160 Google reviews, along with a 4.7-star rating on Facebook from roughly 200 reviews, and a 4.9 rating on LendingTree from 40 reviews.

While they aren’t an accredited business, they do hold an ‘A+’ rating with the Better Business Bureau based on customer complaint history.

To wrap things up, Flat Branch Home Loans is clearly a home purchase lender first and foremost.

They pride themselves on their extensive mortgage knowledge and experience, important attributes when it comes to home buying.

Ultimately, if you want a competent lender who you can rely on to close on time, they might be a solid choice.

Their wide array of loan programs, including proprietary offerings and low or zero down options, is also a big plus.

Just pay attention to pricing as well to ensure you receive quality service and a competitive rate.

Flat Branch Home Loans Pros and Cons

The Pros

  • Can apply for a home loan online or via smartphone
  • Offer a mostly paperless, digital mortgage experience
  • Physical branches in many Midwestern states
  • A good range of loan programs to choose from (especially for home buyers)
  • Excellent customer reviews across ratings websites
  • A+ BBB rating
  • Free smartphone app
  • Free mortgage calculator and home buyer guides online
  • They service their loans after closing

The Cons

  • Do not list their mortgage rates or lender fees online
  • Not licensed in all states

(photo: Ivan)

Source: thetruthaboutmortgage.com

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United Wholesale Mortgage continues to bring the heat, this time shaving 50 basis points off streamline VA loans from now until Veterans Day on November 11th.

The move will make it even cheaper for veteran homeowners to refinance their existing mortgages to take advantage of today’s near record low mortgage rates.

What’s the Deal?

  • UWM is offering 50-basis point discount on VA IRRRLS
  • Offer good on rate locks now through Veterans Day (November 11th)
  • Can also be combined with VA Conquest program
  • Rates start as low as 2.25% on the 30-year fixed

To celebrate and better yet, appreciate our active duty military and veterans, UWM is offering a special pricing incentive on VA Interest Rate Reduction Refinancing Loans, or IRRRL for short.

This means existing veteran and active duty homeowners in the market for a mortgage refinance can save even more through Veterans Day.

At the moment, mortgage rates are already basically rock bottom, hovering near all-time lows achieved just a couple weeks ago.

When combined with UWM’s already low VA Conquest program, which has interest rates starting at 2.25% for a 30-year fixed, a borrower might be able to snag an exceptional deal over the next month and change.

And if we see mortgage rates creep down even lower prior to the election, thanks to the election and COVID-19, homeowners might get their hands on a deal of a lifetime.

The VA IRRRL is a streamlined refinance program that doesn’t require an appraisal and allows for an unlimited loan-to-value (LTV) ratio.

This makes it easy to refinance to a lower rate, regardless of your existing loan amount relative to your property value.

How to Take Advantage of This Special Offer

UWM is a wholesale mortgage lender only, meaning you can’t call them up directly to get a home loan.

Instead, you must work with a mortgage broker, who will act as the intermediary between UWM and yourself.

If interested, seek out a mortgage broker and ask if they’re approved to do business with UWM. If so, you can get pricing to see if their deal is better than the competition.

Just note that you should always take the time to shop around with other banks and lenders as well to ensure it’s truly the best deal.

On top of the savings being offered for a limited time, UWM says it can close IRRRL loans super-fast, often in less than 20 days, versus the typical 45 days or so for a refinance.

UWM is the nation’s largest wholesale mortgage lender, as has been for the past five years.

Their largest competitor is the wholesale lending arm of Quicken Loans, formerly known as Quicken Loans Mortgage Services (QLMS) until last week when they changed their name to Rocket Pro TPO.

The pair appear to be battling in the wholesale space, which should be good news for homeowners looking for a better deal on a mortgage via the mortgage broker channel.

Like Rocket Companies Inc. just did, UWM has plans to go public in the fourth quarter of 2020, as both take advantage of record origination volumes and corresponding profits.

Source: thetruthaboutmortgage.com

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You’ve put in an offer on your dream home and the seller has accepted. But before you get too carried away with celebrating, you may want to take some time to consider a mortgage rate lock.

A mortgage rate lock is a guarantee from a mortgage lender that the interest rate they’re offering you won’t change for an agreed period (typically from 30 to 60 days). This can prevent your lender from increasing your mortgage’s rate (due to changing market conditions) during the application and approval process. Depending on what’s going on with mortgage rates, a lock might save thousands of dollars over the life of your loan.

Below, CNBC Select breaks down how a mortgage rate lock works and what to consider before asking for one.

When should you lock in an interest rate?

Ideally, you want to lock in the rate when overall rates are low. But no one can predict the exact movements of mortgage rates — not even industry analysts possess that kind of crystal ball.

For that reason, it’s best to avoid the guesswork and lock in the mortgage rate after you’ve shopped around for a mortgage lender and compared the rates offered to you. Your rate has a huge effect on your monthly payments, as well as how much you’ll pay in interest over the life of the loan. It’s a good idea to compare offers from at least three lenders to ensure you’re getting the best deal.

CNBC Select recommends SoFi if you’re looking to save money through discounts and other lender incentives, Rocket Mortgage if your credit score is on the lower side and Ally Bank if you want to avoid lender fees.

SoFi

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included

  • Types of loans

    Conventional loans, jumbo loans, HELOCs

  • Terms

    10 – 30 years

  • Credit needed

  • Minimum down payment

Terms apply.

Rocket Mortgage

  • Annual Percentage Rate (APR)

    Apply online for personalized rates

  • Types of loans

    Conventional loans, FHA loans, VA loans and Jumbo loans

  • Terms

    8 – 29 years, including 15-year and 30-year terms

  • Credit needed

    Typically requires a 620 credit score but will consider applicants with a 580 credit score as long as other eligibility criteria are met

  • Minimum down payment

    3.5% if moving forward with an FHA loan

Terms apply.

How a mortgage rate lock works

Mortgage rates move constantly. Many interconnected factors contribute to these movements, including changes in the Federal Reserve’s target rate, the overall state of the economy, conditions and trends in the housing market and the 10-year Treasury bond yield, to name a few. A mortgage rate lock is designed to protect the mortgage interest rate your lender offers you from the influence of these market forces. If you’re taking advantage of a mortgage rate buydown, you’ll also be locking in the cost of any discount points.

Usually, you can lock in your mortgage rate for 30 to 60 days. Certain loans, such as construction loans, may have longer lock periods to allow enough time to close. During this time, even if mortgage rates go up, the rate your lender has given you won’t change.

But what if the rates go down? Unfortunately, you may miss out on potential savings — unless your lock comes with a “float-down” option. This feature allows you to take advantage of a lower rate when it’s available, but you typically can only use it once and it usually comes at a fee. If your lock doesn’t have this feature, you may be out of luck. At the same time, the lock’s purpose isn’t to guarantee the best rate but to protect you from an increase in loan costs. And most of the time, that’s well worth the price.

A mortgage rate lock isn’t free. Even when there’s no official fee listed on your closing costs breakdown, the lender will factor it into the rate you’re receiving. Typically, you can expect to pay somewhere between 0.25% and 0.50% of your loan to lock in your rate. If you need to extend the lock period, you might have to pay an additional fee for that too — usually, 0.375% of the loan amount.

How to lock in a mortgage rate

To lock in a mortgage rate, you need the address of the property you’re interested in purchasing. Some lenders may allow you to lock in the rate once you’re preapproved, while others might require that the seller first accepts your offer.

Rate lock policies vary by lender, but usually, a loan advisor will offer you one once your application is approved and ready to go to underwriting. If they don’t, ask about the rate lock and how much it will cost you.

Can you change mortgage lenders after locking in your rate?

A mortgage lock doesn’t tie you to a lender. However, if you switch lenders, you’ll have to start the process again. This may result in closing delays that will force you to pay fees to the seller, or your deal might fall through altogether. Even if that worst-case scenario doesn’t occur, you may still need to pay expenses such as appraisal and credit check fees again. For that reason, it’s best to shop for a lender before you’re too far ahead in the process.

Your interest rate can still change after a mortgage rate lock

A mortgage rate lock protects your interest rate, but it’s not absolute. Certain situations may void your rate lock.

Your mortgage rate lock is tied to a specific property address. If your purchase contract is canceled, so is your lock. Once you find a new home, you’ll need to get a new rate.

Further, all the conditions of your mortgage contract, including your locked rate, are contingent on your financial profile staying unchanged. For example, if your credit score drops or you add to your debt, your lender will reevaluate your eligibility, which can affect what interest rate they’ll offer you. Because of this, avoid opening new credit lines or racking up balances on your credit cards until you close — otherwise, you might put your home purchase in jeopardy. Likewise, your interest rate may change if the appraised value of the property changes from the time you initially locked your rate.

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Bottom line

Mortgage rates often fluctuate, but a rate lock can protect the rate your lender has quoted you from such fluctuations. While you may need to pay for it and it doesn’t guarantee the lowest rate, it provides the peace of mind that comes with knowing the cost of your mortgage won’t increase before you close.

Catch up on CNBC Select’s in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

Source: cnbc.com

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Refinancing a mortgage can be a great financial move for homeowners to potentially lower monthly mortgage payments, tap home equity, or build equity more quickly by shortening the term of the loan.  

Refinancing can save you money — but it can cost you money too. Before you start the refinancing process, you should know how it works, the benefits and drawbacks, and the steps you’ll need to take. 

What Is Mortgage Refinancing and Why You Might Want to Refinance?

Refinancing a home mortgage is basically replacing your existing mortgage with a new one, typically with a different principal and interest rate. 

There are many reasons why borrowers choose to refinance a mortgage, including: 

  • To take advantage of lower market interest rates
  • To shorten the term of their loan
  • To withdraw a portion of their equity
  • To lower their monthly payments with a longer repayment term
  • To convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage 
  • To remove or add another person to the mortgage

Choosing the Right Type of Mortgage Refinances 

There are three main types of mortgage refinances: rate-and-term, cash-out, and cash-in. 

  • Rate-and-term refinance: This type of refinancing allows the borrower to change the interest rate, the term of the loan, or both without advancing any new money.
  • Cash-out refinance: A cash-out refinance takes advantage of the built-up equity in the home and gives the borrower cash in exchange for a larger mortgage.
  • Cash-in refinance: A cash-in refinance allows homeowners to pay a large sum towards their principal balance during the refinance process.

4 Benefits of Refinancing a Mortgage

Your decision to refinance your home mortgage ultimately depends on your goal. Do you want to lower your monthly payments? Are you hoping to shorten the length of your loan? 

Here are some common reasons that people choose to refinance:

  1. Changing the length of your loan. By refinancing from a 30-year mortgage into a 15-year mortgage, you could pay it off in half the time. This also results in paying less interest; however, your monthly payment may go up.
  2. Switching to a different loan type. Some homeowners choose to refinance their mortgage to change their loan types. For example, refinancing from an adjustable-rate mortgage to a fixed-rate mortgage. The interest rate for an adjustable-rate mortgage can go up and down over time but the interest rate for a fixed-rate mortgage doesn’t change.
  3. Tapping into your home equity. Want to do some home improvements, pay off debt, or even take a trip? You can do a cash-out refinance to borrow more than you owe on your current mortgage.
  1. Getting a lower interest rate. Interest rates fluctuate for a variety of reasons. Refinancing could make financial sense if you can get a lower interest rate than when you originally took out your mortgage. If you can secure a lower interest rate, you could potentially save money and pay off your mortgage faster. 

Calculate how refinancing might affect your monthly payments with Total Mortgage’s Refinance Calculator and see how much you can save. 

How to Refinance a Mortgage: 4 Key Steps

Refinancing a mortgage is very similar to purchasing a home; however, it’s a little less complicated. But how exactly does refinancing your home work? Here is a simplified step-by-step guide:

  1. Understand your reasons for refinancing. Before you refinance, you need a clear goal. What do you want out of your refinance and what type of loan will help you achieve that goal?
  2. Apply for a refinance. Once you’ve selected your lender, you’re ready to complete your refinance application, lock your interest rate, and submit any necessary documents. Keep in mind that you don’t have to refinance with your current lender. Exploring other landers’ options could increase your chances of finding a better interest rate with more favorable loan terms.
  3. Appraisal and underwriting. The underwriter will review the application and documents and offer conditional and/or final approval of the loan. The lender will also order a home appraisal to verify the current home value.
  4. Close on the loan. The home closing is when you and your lender will go over the loan documents and finalize all details. You’ll need to sign documents and pay closing costs listed in the Loan Estimate and the Closing Disclosure.

The time it takes to refinance a mortgage depends on several factors, such as credit checks, appraisals, and the lender. Refinancing a mortgage can take anywhere from 15 days to 45 days or longer, with an average of 30 days to close. 

Costs of Refinancing a Mortgage 

Refinancing isn’t free — but depending on your circumstances, it can be worth it. Closing costs typically include origination fees, home appraisal, and recording. Depending on where you live and your lender, there could also be an attorney fee and title search, and insurance.

Closing costs are generally a percentage of your loan amount —about 2% to 5% — though these are just estimates and costs may vary depending on the state and county where you live as well as your lender.

Not every closing will cost you money at the closing table. You could also have a no-closing cost refinance. 

This is a refinance where instead of paying upfront, closing costs are either rolled into the new loan or the lender may raise your interest rate. While this does mean that you need to come up with less money at closing, you could end up paying more over the long run.

Explore Total Mortgage’s Refinancing Options

Unsure if you should refinance? Refinancing a mortgage could potentially lower your monthly payments with more favorable terms. Another option is to use a mortgage refinance to tap your home’s valuable equity and use the cash as you please. 

If you’re looking to refinance a mortgage, be sure to check out Total Mortgage’s list of branches across the US and find the one nearest to you. You can also apply online and get a free rate quote.

Source: totalmortgage.com

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While public debate continues on the pricing grid for Fannie Mae and Freddie Mac, another important issue is growing in impact: the growth and skyrocketing cost to mortgage lenders of repurchase demands being made by Fannie and Freddie on performing loans.

First, a basic primer: when lenders originate and sell loans to Fannie and Freddie — either directly or through third party aggregators — they are on the hook financially for improperly underwritten loans.   This can include fraud, misrepresentation, underwriting errors (most often related to a borrower’s income or employment), appraisal concerns, and other reasons.  

This is fair. So, when a borrower defaults on a GSE loan because of material problems with the underwriting of that loan, it is not unreasonable to ask the lender to buy back (re-purchase) that loan.

Unfortunately, what we have experienced over the last year is an increase in repurchase demands on loans that are performing — loans where the borrower is not even in default.   

What has also changed for lenders is a significant increase in their back-end loss on a repurchase. Because mortgage rates have doubled in the last year, the cost to lenders of taking a loan out of an MBS pool has skyrocketed. As a result, the back-end loss to the lender on each repurchase is around 30% per loan. This is over $100,000 on an average loan and over $300,00 for high-cost loans.  

Moreover, this is a highly inefficient resolution. A repurchase reduces expected GSE losses by a small fraction of the cost it imposes on the lender, because of the cost of taking loans out of MBS pools.  This is exacerbated by the fact that there is no third-party appeals process to contest a GSE repurchase demand.  And it is an especially unfair outcome, for lenders, since these are performing loans!

A better option exists for these performing loans with underwriting defects – an indemnification.  This is the approach FHA takes.  Moreover, an indemnification fully protects Fannie and Freddie, since the lender continues to be responsible for repurchasing the loan if it later becomes non-performing.  

So, CHLA recently sent a letter to FHFA, Fannie Mae, and Freddie Mac with a simple request:  the Enterprises should adopt a uniform policy of offering an indemnification, at a reasonable level — in lieu of the practice of a repurchase demand — for all performing loans.

This is not just a matter of fairness for lenders, it is also a better outcome for consumers.  

Fannie Mae and Freddie Mac loans have strong consumer protections in the form of required loss mitigation actions and a prescribed waterfall in the event of a borrower default.  However, when a lender is required to repurchase an Enterprise loan, it is no longer an Enterprise loan.  Those loss mitigation requirements and consumer protections simply expire when the repurchase takes place, through no fault of the borrower! Without a secondary market, a lenders’ only option is usually to sell a loan on the scratch and dent market, to purchasers who commonly minimize losses through foreclosure if the borrower defaults.

The practice of using repurchase demands as the default option for performing GSE loans with defects also hurts consumers by discouraging new GSE loans to underserved borrowers and to borrowers in rural areas.  Underserved borrowers have more risk and generally thicker loan files, which create more repurchase risk.  The same is true with rural borrowers, since appraisal comps are less prevalent in rural areas, leading to more repurchase demands based on alleged appraisal problems.

Again, CHLA agrees that it is appropriate for lenders to be held accountable for underwriting defects.  However, when it comes to repurchase demands, the penalty is now wildly disproportionate to the crime.   Particularly since CHLA members report that many repurchase demands are based on minor, technical defects largely unrelated to any real risk of loan loss.

To support this contention, in our letter CHLA offered four real-world repurchase demands, supplied by our members. In one case, a Home Possible Loan to an underserved borrower was based on a minor disagreement about income, where overall DTI in practice was at least as good as the underwritten DTI.  Another loan highlighted the unfairness of relatively small disagreements over appraisal values creating large repurchase exposure to the lender. And one loan the GSE couldn’t even allege a specific violation!

Added to these concerns is the fact that smaller lenders that execute GSE loans through aggregators are at even greater risk, because they don’t have the legal right to challenge a repurchase request directly with Fannie or Freddie; they have to work through the aggregator.  Our smaller lenders report that in some instances the aggregator does not forward the repurchase demand from the GSE to the lender until close to the deadline to challenge it.  And their challenges to repurchase demands are not always fully presented or vigorously pursued by the aggregator to the GSE.

So, in late March, CHLA wrote Fannie Mae and Freddie Mac, asking both to impose “rules of the road” for aggregator behavior,  Our request is simple and fair: aggregators should be required to pass along repurchase requests to the lender promptly upon receiving them from the GSEs — and required to promptly summit a full challenge prepared by the lender to the GSE.

Technical issues like repurchase and indemnification policies may not get a lot of attention — but they can be consequential.  A balanced approach is the best outcome for borrowers, lenders, and the GSEs alike.

Source: nationalmortgagenews.com

Apache is functioning normally

Warehouse, Appraisal, Non-QM, RON Products; Reverse Mortgages: Catch the Wave; Mortgage Apps Continue Decline

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Warehouse, Appraisal, Non-QM, RON Products; Reverse Mortgages: Catch the Wave; Mortgage Apps Continue Decline

By:
Rob Chrisman

3 Hours, 24 Min ago

A biologist, a chemist, and a statistician are out hunting. The biologist shoots at a deer and misses five feet to the left. The chemist takes a shot and misses five feet to the right. The statistician yells, “We got ’em!” Are you selling your house? Me neither. Few people are: there are only about 564,000 active listings. That’s about 11,000 per state. In California, where there are 58 counties, that is an average of less than 200 per county. In Wyoming, the least populated state, there are 58 counties so that’s 190 listings per county. Of course, averages don’t apply like that, but it is important to keep things in perspective, and the overarching issue is a continued lack of supply and a strong demand impacting prices, affordability, and sales numbers. Can lighthouses help? Since 2000 about 150 lighthouses have been transferred to new owners, about 80 given away at no cost to agencies, nonprofits or educational organizations willing to maintain them, and about 70 auctioned off for a total $10 million so far. This year, six lighthouses are up for offer. (Today’s podcast can be found here and this week’s is sponsored by Lenders One, one of the largest mortgage co-ops in the country with a diverse mix of 250+ member companies and providers of an end-to-end solution independent mortgage professionals trust to drive profitability and growth. Listen to an interview with Verisk’s Kingsley Greenland on climate risk, stress testing, catastrophe modeling, and macroeconomic policy.)

Lender and Broker Products, Software, and Services

“Have you found yourself digging through loan files to find price concession records while an auditor awaits? Have you ever wondered if your margin is better or worse than your peers? Have you been looking for a way to track how competitive your pricing is, in real time? Optimal Blue, a division of Black Knight, offers data and analytics tools that provide this actionable business intelligence, and more! Our granular rate lock data provides key insights into your business, as well as benchmarking against 42% of all rate lock activity. Reach out to Optimal Blue now to learn how our data and analytics platform can help you develop smarter, more profitable pricing strategies!”

Beer – it’s not just for drinking anymore. In fact, beer is just one of many everyday items with multiple uses that would surprise you. Want another? Remote online notarization (RON) isn’t just for originations anymore. Recently, servicers have discovered the benefits of using RON for loan modifications, partial claims and even assumptions. On average, servicers reduced the average cycle time from 21 days down to 7 days. While we all know that time is money, the reduction in cycle time and carry costs resulted in a savings of about $500 per loan. In today’s environment where we all need to find savings to help improve our margins this is an easy way to get there. Email Suzanne Singer or stop by NotaryCam’s booth 22 at NS3 in St. Louis next week to learn more about the many uses of RON.

“No one does Non-QM like Newfi Wholesale! Our newly expanded Non-QM product suite offers 90% LTV up to $1.5M, loan amounts up to $4M, 2-1 buydowns, DSCR (no minimum ratio) 1-8 units, and alt-doc solutions that make sense for your borrowers. Most of all, we have a passion to close deals and about 1/3 of all of our funded Non-QM deals have common-sense exceptions! In the words of one of the brokers who work with us: “Looking for an amazing Non-QM lender? Newfi is your go-to lender.” We offer industry-leading Non-QM pricing, technology, and product innovation. For more information contact SVP, Non-QM Development & Strategy Dan Bayer or 925-584-0579.”

Tired of slow, low-quality appraisals? Try The Appraisal Marketplace. The Marketplace allows you to fulfill appraisal orders directly from your LOS, without relying on an AMC or managing a panel. Even better, by leveraging real-time appraiser performance data, its “Uber-style” algorithm matches every order with the appraiser that’s truly right for the job. This gives you the fastest turn times, lowest revision rates & lowest fee escalation rates in the industry. Seriously. Learn more.

“CWDL is committed to empowering our clients and friends with mortgage industry-specific education and insights, even when it’s outside of our core focus on audit, accounting, and tax. So, when our clients mentioned they’d like to better understand the perspectives of warehouse bankers and how they evaluate lenders, we organized a panel of industry veterans to share their insights. Join us for our webinar on June 15 to “Meet the Warehouse Bankers,” as we discuss such topics as when and how to best communicate with your warehouse partners; how warehouse banks evaluate counterparty risk in their clients; what lenders should consider or plan for regarding M&A, a winddown or facility consolidation; and much more. This webinar is free and open to all lenders who are looking for more insight into their warehouse relationships. To register, contact Kasey English.”

Agencies, Investors, Lenders, and Reverse Mortgage Biz

The last time I saw a stat, 10,000 people a day were turning 62. And a lot of them have equity in their houses. The National Reverse Mortgage Lenders Association points out that, “Homeowners 62 and older saw their housing wealth grow by 1.95 percent or $226 billion in the third quarter to a record $11.81 trillion from Q2 2022, according to the latest quarterly release of the NRMLA/RiskSpan Reverse Mortgage Market Index… The increase in older homeowners’ wealth was mainly driven by an estimated 1.95 percent or $268 billion increase in home values, offset by a 1.93 percent or $42 billion increase in senior-held mortgage debt.” So, if you’re looking for a growth business…

Need a Pre-Qual? Plaza’s Reverse Mortgage staff will run a complete analysis of your submitted information and send the findings back to you via e-mail, typically within a few hours. The analysis details available funds, interest rates, fees, and other loan information.

Plaza Home Mortgage posted Video Marketing to Seniors. And brokers can use Plaza’s Reverse Calculator to run scenarios and you’ll quickly and easily see how much borrowers could receive, no personal information required.

Fairway Independent Mortgage Corporation has had a reverse division for many years and has seen continued growth.

CrossCountry Mortgage (CCM) announced that it is expanding its reverse mortgage division by making additional investments, resulting in what it calls “enhancements.” “Borrowers heading into retirement are seeking solutions that will benefit their future. CCM’s newly established Reverse One Team offers a specialized network of advisors and tools for loan officers to become certified specialists in originating reverse mortgage loans.”

Reverse training and certification programs among “forward” lenders are increasing. Fairway Independent Mortgage Corp. and Guaranteed Rate, for example, offer pathways within their organizations for forward professionals to become certified in reverse mortgages. Broker shops including C2 Financial also maintain a reverse training and certification program.

PHH Mortgage delivers for the entire mortgage lifecycle: non-delegated, best efforts, mandatory, bulk MSR, and reverse.

While bringing more forward specialists up-to-speed with reverse origination practices can certainly help to expand an LOs or lender’s business, it is well known that anyone interested in the business must be aware of some of the specific differences inherent in originating the product when compared with more traditional, forward mortgage options. And a solid month, volume-wise, might only be one or two loans.

Anyone interested should check out Reverse Mortgage Daily, and think about the use of video in their marketing and consulting with client’s families. “Homeowners aged 55 and over increasingly embrace online video as one of their preferred ways to research and discover information…68% of Baby Boomers use YouTube to watch videos. Half of them watch videos more than once per week, and they’re watching news, educational content, and DIY tutorials.”

Capital Markets: Housing Prices Ramping Up

The bad news is that mortgage applications continue to falter. The good news is that we finally had a little rally yesterday as bond markets responded to weekend news that President Biden and House Speaker McCarthy reached an agreement to raise the debt ceiling. Rates had risen of late as fears of a U.S. default gained momentum. A default would force the Treasury Department to pay higher interest on its bonds to convince investors to stick around, with mortgage rates and other borrowing costs tending to follow Treasury rates.

In Federal Reserve news, New York Fed President Williams discussed inflation, the labor market, and the importance of price stability yesterday by saying, “Inflation remains too high, and high inflation is hardest on those who can least afford to pay higher prices for food, shelter, and transportation.” He explained that the U.S. is seeing signs of a gradual cooling in the labor market, along with a rebound in labor force participation. Still, unemployment nationally remains historically low, at 3.4 percent.

The first trading day of a shortened week was headlined by house price indexes. The FHFA Housing Price Index was up 0.6 percent in March after increasing a revised 0.7 percent in February. The index was up 4.3 percent year-over-year, with prices in many western states starting to decline for the first time in over ten years. The fastest growing states were South Carolina, North Carolina, Maine, Vermont, and Arkansas. The declining states included Utah, Nevada, California, Washington, and D.C. Separately, the Case-Shiller home price index rose 0.7 percent in March, suggesting that the decline in home prices that began in June 2022 may have come to an end. The S&P Case-Shiller 20-city Home Price Index was down 1.1 percent in March with big declines out West, and the Southeast remaining the country’s strongest region.

Today’s calendar kicked off with the usual mortgage applications from the MBA for the week ending May 26. Mortgage applications decreased 3.7 percent from one week earlier, with activity expected to decline again following last week’s increase in yields amid increasing odds of a 25 basis points hike at the June FOMC meeting. During the reporting period, 30-year mortgage rates hit new highs for the year and their highest since last November.

Later this morning brings Chicago PMI for May, Job openings from JOLTS for April, and Dallas Fed Texas services for May. Four Fed speakers are scheduled: Boston President Collins, Governor Bowman, Governor Jefferson, and Philadelphia President Harker. The latest Beige Book will be released in the afternoon ahead of the June 13/14 FOMC meeting. The rest of the week will be dominated by the jobs report on Friday, the last jobs report before the mid-June FOMC meeting. Fed funds futures currently see a 60 percent chance for another 25-basis point hike. We begin the day with Agency MBS prices better by .125-.250 and the 10-year yielding 3.65 after closing yesterday at 3.70 percent; 4.40 percent on the 2-year.

Employment and Transitions

“Are you an account executive looking to change it up!? Why not Kind Lending!? At Kind, our family of diverse and talented Kind Ambassadors are the driving force behind our new approach to the mortgage experience. We are focused on serving the broker community and their borrowers by providing an array of products, top-notch service by experienced and friendly professionals and superior resources to support their business model. Founded by Glenn Stearns in 2020, Kind Lending is one of the fastest growing mortgage lenders in the country, building partnerships with our customers, who ultimately become family and our reason why. At the heart of it all, our people believe kindness matters and a client’s positive experience is everything. Come grow with us! Contact Delfino Aguilar, SVP TPO Production (619.726.0377).”

Earlier this month Freddie Mac (OTCQB: FMCC) announced the winners of its Home Possible RISE Awards®. The annual program, RISE (Recognizing Individuals for Sustained Excellence), salutes Freddie Mac’s top clients across multiple categories for excellence with the Home Possible® mortgage, Freddie Mac’s affordable lending solution for very low- to low-income homebuyers. Hallmark Home Mortgage earned the Home Possible RISE Award for Greatest Volume. “I’m thrilled and honored that Hallmark Home Mortgage has been recognized with the Freddie Mac Home Possible Rise Award for the Greatest Volume in the Corporate Segment. This award is a testament to the hard work and dedication of our entire team, and we are incredibly proud of this achievement,” noted Deborah Sturges, CEO & Founder Hallmark Home Mortgage.

Evergreen Home Loans™ adds to its awards line up. This year, the company placed on the Puget Sound Business Journal Corporate Philanthropy List for the third year in a row. It honors the region’s corporate philanthropists and companies who have made significant contributions to the community through philanthropic work. “We are committed to making a meaningful impact in our local communities,” said Don Burton, Founder and CEO of Evergreen Home Loans. “And we are humbled by the recognition for this award.” As loan officers, you already positively impact lives and communities… Continue to do so with a company that helps associates give back, provides paid hours for volunteer work, celebrates individual growth, and truly lives its unique and award-winning culture. Visit the Evergreen careers page to explore current opportunities.

Are you a loan officer or mortgage banker frustrated with the constraints of retail lending? Tired of competing against lower rates, fees and closing costs? Then now’s the time to take control of your pipeline and career by making the switch to wholesale lending as an independent mortgage broker. Whether you’re looking to open your own brokerage or join a team as a loan officer, you can get up and running without missing a beat with support from the team at BeAMortgageBroker.com. You have nothing to lose and only clients, greater flexibility and compensation to gain.

loanDepot, Inc. has promoted Alec Hanson to serve as its chief marketing officer (CMO). Hanson will “lead a consolidated marketing team, overseeing the development of brand, digital marketing, and organic and digital lead generation campaigns that drive awareness and revenue growth while differentiating loanDepot’s marketing engine as a competitive advantage for loan originators. Hanson will also be responsible for the company’s originator-led field-level marketing capabilities.”

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Source: mortgagenewsdaily.com

Apache is functioning normally

Welp, it’ll be nice to close out 2020 and look ahead to a brand-new year that hopefully features a lot less drama and much more good news.

While the housing market actually absorbed both the COVID-19 pandemic and the presidential election surprisingly well, we can probably thank the record low mortgage rates for that. And the continued lack of inventory.

That has been the silver lining for existing homeowners, but it’s created an even wider divide between the haves and the have-nots, otherwise known as homeowners and renters.

So what does 2021 look like when it comes to mortgages and the housing market? Let’s dust off the old crystal ball and make some predictions.

1. Mortgage rates will hit new record lows

As of this writing, mortgage rates hit 14 new all-time lows in 2020. And there’s a decent chance they’ll hit a 15th before the year is complete.

This has many pundits calling for an end to the low rates. Sound familiar? It does because every single year they call for higher rates, only to be proven wrong over and over.

I expect mortgage rates to hit new all-time lows in 2021, though the caveat is that they may not remain there.

In other words, we could see 30-year fixed mortgage rates reach levels never seen before in the first half of the year, before they rise back above lows seen this year.

The good news is rates should remain low throughout the year if the 2021 mortgage rate predictions hold true.

And that means those who haven’t yet taken advantage of a rate and term refinance can do so and save some dough.

2. Lenders will stay really busy, but won’t break 2020 records

Thanks in part to those ultra-low mortgage rates, banks and lenders will continue to be absolutely slammed.

This is wonderful news for loan originators and mortgage brokers, but not so great for consumers.

Simply put, things will still be slow, so be patient. It may take months to close your mortgage as opposed to 3-4 weeks.

This is just the way things are going right now and you should set realistic expectations if you’re currently shopping for a new home loan.

In terms of loan volume, 2020 mortgage originations will likely surpass the massive totals seen back in 2003.

The question is where does the mortgage industry go from here? While rate and term refis will inevitably become less prevalent in 2021, record home purchase volume of more than $1.5 trillion is expected.

That should keep the party going for mortgage lenders focused on home purchase financing, but it could prove challenging to those that are refinance-heavy.

3. The cash out refinance will re-emerge as a popular product

That being said, while rate and term refis will fade into 2021, the emergence of the cash out refinance could pick up the slack.

Ultimately, borrowers are sitting on a ton of home equity at the moment, the most in history I believe.

At some point, it’s going to be tapped via cash out refinance loans, even if borrowers are forced to take a slightly higher interest rate in the process.

The other big question related to this is will lenders loosen underwriting standards to make up for any decline in new business?

That’s where things went so badly wrong a decade ago, especially as home prices were peaking.

But maybe the Qualified Mortgage (and still decent affordability) will be the difference maker this time around.

4. Mortgage brokers will grab more market share

Now let’s talk about mortgage brokers. Largely forgotten post-housing crisis a decade ago, they’ve been making major strides lately.

In fact, the second largest mortgage lender in the nation, after Quicken Loans, is United Wholesale Mortgage (UWM).

And Quicken also runs a massive wholesale lending division as well, so there’s a good chance you’ll be working with a mortgage broker in 2021 and beyond.

Brokers had a near-35% market share back in 2008 before it fell to around 7% in 2011. Today, it’s closer to 16% and likely to grow back to 20%+ sooner rather than later.

One thing helping brokers today is the abundance of technology that has leveled the playing field.

Even a one-woman shop can offer a better customer experience than a billion-dollar bank thanks to the many tools now readily available.

That, along with access to wholesale mortgage rates from dozens of lending partners, could give brokers the edge going forward.

5. COVID-19 related foreclosures will free up some inventory

Everyone and their grandmother knows that housing inventory is abysmal. There’s just nothing out there no matter where it is you’re trying to buy a home.

Once something does come on the market, it’s being scooped up in record time by desperate home buyers.

The National Association of Realtors recently noted that properties typically remained on the market for just about 20 days in October, down from closer to 40 a year ago.

My expectation is that 2021 will be no different – it’s going to be a seller’s market yet again, which means you really need to do your homework and be prepared to make an offer immediately.

The only possible relief could come from COVID-19 related foreclosures, assuming those actually transpire once forbearance options fizzle out.

NAR also said distressed sales (foreclosures and short sales) represented less than 1% of home sales in October, which was down from 2% in October 2019.

Take the time to research how mortgages work and get pre-approved so you’re ready to make your move at a moment’s notice. But also still do your due diligence and don’t buy a home sight-unseen.

6. Home prices will continue to surge higher

That critical lack of inventory, coupled with the still-low mortgage interest rates will lead to even higher home prices in 2021.

It’s pretty simple really, just a matter of supply and demand.

Speaking of, unsold inventory remains at an all-time low of 2.5-months at the current sales pace, which is well below the near-4-month figure seen a year ago, per NAR.

As such, the Realtor group expects existing home prices to rise a further 5.7% in 2021, and that might be conservative given the red-hot housing market combined with an ongoing pandemic.

Again, excellent news for those who already homes, but another unwelcome development for the many prospective first-time home buyers out there.

7. iBuyers will regain market share and usurp real estate agents

Despite a housing market that will remain on fire in 2021, I expect iBuyers to continue to gain market share.

They got derailed last spring thanks to the emergence of COVID-19, and actually stopped purchasing homes in many markets.

But now they’re not only returning to market, but also expanding to new metros nationwide.

Folks love convenience, even if there’s a cost. And when it comes to iBuying, the cost is likely a lower sales price, meaning you walk away with less.

However, home sellers may be skittish about letting others into their homes, so going with a sure thing from an iBuyer could be just the ticket.

It also allows home sellers to pivot to a replacement property without dealing with contingencies, which are basically a no-go right now with competition so fierce.

8. Remote closings and distanced real estate transactions will be the norm

To that same end, I expect the temporary measures to keep real estate distanced will become more of a mainstay in 2021.

So those remote closings, appraisal waivers and other flexible appraisal options, along with new methods to document income and verify employment before loan closing should continue.

Additionally, we should see more technology that supports these efforts, which is a nice silver lining of the pandemic.

All the promises about making the mortgage process easier may come to fruition a lot sooner because no one wants to be near each other.

However, as noted, it’ll still take a while to get a home loan because lender capacity will remain an issue well into 2021.

9. Home remodeling will remain white-hot as homeowners stay put and spend more time at home

One trend that we saw this year will also extend into 2021, and could in fact become even more popular. I’m talking about home remodeling.

Have you tried to book a contractor lately? Good luck! They’re all busier than ever because homeowners are spending more and more time in their properties.

That has made many of us question if we should upgrade our digs, or get to those projects we’ve been putting off for years.

Most existing homeowners don’t seem to be going anywhere, as evidenced by that lack of inventory and those low mortgage rates, so they’re fixing up what they’ve got.

While you might be considering a home equity line of credit to pay for your home improvements, a cash out refinance that features a fixed interest rate could be the better option.

10. The exodus out of urban centers to the suburbs will stay on trend

Lastly, I expect the urban exodus to continue in 2021, even if the vaccine proves successful and we get our heads back above water.

The damage of 2020 on our psyches is already done, which means some just won’t consider the urban lifestyle anytime soon, or ever again.

Once forgotten, the suburbs are back with a vengeance thanks to COVID-19, and the pandemic perhaps served as a not-so-gentle reminder that more space and fresh air isn’t such a bad thing.

Sure, urban living has its advantages, but its fragility has also been exposed big time.

And with remote work and less commuting no longer just a trend, it makes a lot more sense to be anywhere, even far from a city center.

Source: thetruthaboutmortgage.com