Apache is functioning normally

July 12, 2023 by Brett Tams

Explainer

What steps could government take to help mortgage borrowers?

As interest rates rise, cash-strapped households need speedy solutions to meet monthly payments

As rising interest rates put a squeeze on millions of mortgage borrowers there have been calls for the government to intervene. But what could it do to help cash-strapped households?

Improve help with monthly payments

There is government help for those who are really struggling, called support for mortgage interest (SMI). This is available to people who are getting one of a list of other benefits including universal credit and income support. It is not available as soon as you go on benefits and is not a payout but a loan – when you eventually sell your house you will have to repay it. You might also need to repay it if you go bankrupt or enter an insolvency plan. The government could change the terms of this help – it could be available more quickly, or to a wider group of people. Nevertheless, it will probably remain targeted at only the very worst off.

Reintroduce tax relief on mortgage payments

More than 25,000 people have signed a petition calling on the government to let people make mortgage repayments from their salary before it is taxed – a move that could reduce some of the pain by reducing wages taxes. This would not be unprecedented – throughout the 80s and 90s borrowers could claim mortgage interest relief at source (Miras), which gave them tax relief on their interest payments. But the government has already ruled out its reintroduction, saying it does not believe it to be the most effective way to target support to those who need it most. “The tax relief would be of greater benefit to those paying higher rates of tax with the most expensive properties and would only benefit those in employment,” it says.

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Ease rules on interest-only mortgages

Borrowers could cut their monthly costs by switching from a repayment mortgage, which includes paying off the some of the original loan each month, to an interest-only loan. The government and regulators could make this an easy option by scrapping rules which mean that borrowers have to show how they will repay the mortgage at the end of the term. They are unlikely to do this across the board: the rules were brought in after the financial crash to stop people taking on mortgages they could not afford to repay and are considered to have prevented reckless lending. However, regulators have been allowing some borrowers to switch to interest-only without a repayment plan and this is likely to continue to be a strategy (see below).

Continue insisting lenders help borrowers

In December the government told lenders they must do everything they can to support borrowers, including letting them move to interest-only payments temporarily if necessary or switch to a new rate without an affordability check as long as they are up-to-date on repayments. After the 2008 banking crash and during the Covid crisis, lenders exercised this kind of forbearance and repossession rates were kept down as a result. “It is likely the government and regulators will continue with having underlying forbearance measures and encouraging lenders to take an individual approach to borrowers,” says David Hollingworth of brokers L&C Mortgages.

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Target certain groups

The government could target the borrowers most at risk of falling into arrears, says Neal Hudson, a housing market analyst at consultancy BuiltPlace. He suggests these might include those in shared ownership properties who have rising rents to pay alongside their mortgage, those with Help to Buy equity loans who face interest payments on that debt alongside their home loan (currently set at 1.75% in the fifth year and rising each year), and those caught up in the cladding scandal and facing high service charges. In these cases it might not be the mortgage payments that are reduced but the other costs on top could be capped. Many housing associations have agreed to cap shared ownership rent rises at 7%, but the government could choose to make this compulsory and even lower it.

Introduce a mortgage protection fund

Sir Ed Davey, leader of the Liberal Democrats, has revived his call for a £3bn emergency mortgage protection fund, which he first called for in the aftermath of Liz Truss’s disastrous mini-budget. The fund would allow homeowners whose mortgage payments have risen by more than 10% of their income to apply for a £300-a-month grant. “If we don’t give that sort of help to those people, you’d see a spiral down and it will hit the whole economy,” Davey said on Friday. Opponents argue that such a scheme would unfairly help wealthier people who can afford to own a home, to the detriment of tax paying renters.

Order the Bank of England to hold rates

For more than two decades the Bank has been independent of the government – one of Gordon Brown’s first acts as chancellor was to set it free, and since then it has been responsible for setting interest rates. To step in and force its hand would be a big intervention, and is probably the least likely action the government will take at this point.

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Source: theguardian.com

Apache is functioning normally

July 11, 2023 by Brett Tams

On March 29, the Federal Housing Finance Agency (FHFA) announced Fannie Mae and Freddie Mac would enhance their COVID-19 pandemic-era deferral policies which allowed homeowners experiencing hardship to defer up to six months of mortgage payments to be settled at the end of the loan. Since the pandemic began, the FHFA has enabled lenders to complete more than 1 million payment deferrals, with roughly one-third of all homeowners exiting forbearance via payment deferrals since 2020.

Smart pandemic policies like this stabilized the housing market and, by extension, the economy when it was most needed, and today’s challenging market has emphasized the need for further policy reform as servicers expand their loss mitigation toolkits to keep homeowners in their homes.

Here’s how servicers can maintain real-time compliance to keep up with real-time policymaking, all while keeping homeowners where they belong — in their homes — and executing at scale with no mistakes in our highly regulated ecosystem.

Why further loss mitigation reform and expansion is still needed

COVID-19 pandemic hardships required quick-turn regulatory shifts which ultimately provided hardship relief to approximately 7.8 million homeowners with COVID-19 pandemic forbearance programs since March 2020. Government insurers and guarantors adapted to offer new options to borrowers like forbearance, partial claim/payment deferrals and extended-term modifications.

As the Mortgage Bankers Association (MBA) noted in its recent white paper, the current high-interest-rate environment poses additional challenges that require further policy reform and expansion so servicers have simple, sustainable and standardized loss mitigation options.

The traditional options for providing payment relief for homeowners — loan modifications that either extend the loan’s maturity date or reduce their interest rate to the market rate — are not as effective in the higher-interest-rate environment and do not provide the relief many homeowners need to maintain homeownership.

Further policies should focus on reducing administrative complexity and make scalability attainable so servicers can quickly provide relief to homeowners with consistent, accessible hardship relief regardless of hardship reason or who insures or guarantees the loan.

The CARES Act and other COVID-19 pandemic-era policy developments kept servicers engaged and informed, demanding quick adjustments to accommodate homeowners experiencing financial hardship, and recent market challenges have required similarly swift adoption from servicers. So, how can servicers stay ahead of the curve?

Real-time solutions for real-time policy changes

Sagent solves these problems with cloud core, agile infrastructure. So, what are the benefits of “cloud native” or “cloud-based” platforms? Put simply: speed, security, a better experience for homeowners and servicers, real-time processing and compliance across all activities — all at scale and always aligned with real-time regulatory changes.

Servicers and their fintech partners need to be innovating incrementally by bringing real-time solutions to real-time policymaking. For example, when the CARES Act went into effect to provide mortgage payment relief as the COVID-19 cases spiked in 2020, servicers powered by Sagent were ready with push-button forbearances on day one of the CARES relief effective date.

Sagent’s default platform provides full lifecycle functionality, enabling homeowners and servicers to work together to create sustainable options for homeowners when they’re facing financial hardship. A key component of this service is the servicer’s ability to establish the workflow that fits their processes.

The benefits of this innovative programming are broad reaching in addressing all aspects of loan servicing. Homeowners, first and foremost, are provided relief and resolution. Servicers achieve improved efficiency and greater effectiveness in managing compliance throughout the process. Sagent ensures delivery ahead of the curve, with no waiting and no elevated risk surrounding the next set of changes and challenges coming our way in the servicing industry.

Real-time data standards for compliance and customer retention

Our industry has improved materially since the experiences of the Great Recession, and we’ll continue to see servicers and regulators set a new bar for compliance. The focus on helping homeowners understand their options and make an informed choice remains.

Servicers must also focus on cost, customer retention and compliance. A strong, servicing fintech partner provides critical support in successful delivery of each of these areas.

Sagent is the industry’s only mortgage servicing platform with truly real-time data. Real-time data means systems can respond to real-time policymaking without ever missing consumer and investor requirements or any compliance details.

The new standard for excellence is being established, and Sagent is leading the way. Please reach out and let us know your thoughts on these predictions or your tech stack strategy.

Perry Hilzendeger is an executive vice president of servicing for Sagent.

Source: housingwire.com

Apache is functioning normally

July 10, 2023 by Brett Tams

Consumers struggling to pay college bills could face more financial difficulties with legal challenges impeding attempts at student debt cancellation and forbearance for federal loans of this type ending, but some things will minimize mortgage impacts.

When interest-free federal student-loan forbearance ends later this year, borrowers will have a 12-month reprieve between Oct. 1 and Sept. 30 of next year from late fees, adverse credit reporting or referrals to debt collection agencies. Some loans may have more payment flexibility.

“Borrowers are going to have a little bit of time to pull things together and get back into positive habits for repayment without their credit being impacted,” said Sara Parrish, president of CampusDoor, an Incenter company that provides white-labeled private student-loan services.

“It may just kick that can down the road just a little bit but I do feel that given that amount of time to get used to it again, as long as that’s implemented in a way that does encourage people to get back into the swing of repayment, that’s going to lessen the blow,” she added.

Given these measures and the fact the overall economy remains strong, some think the resumption of student loan payments won’t probably do much more than lift consumer-debt delinquency rates among more credit-sensitive borrowers half a percentage point at most.

“I’m sure there will be 50 articles written [saying that] we’re falling off a cliff and we’re going into recession. In reality, it’ll be a lot to do about nothing,” said Vadim Verkhoglayad, vice president and head of research at dv01, a data management, reporting and analytics platform for lending markets.

Mortgage performance in particular may be insulated because, with rare exceptions, borrowers generally prioritize loans they pay to keep a roof over their heads before other obligations.

The other question for mortgage companies has to do with the impact on lending prospects given that the Biden administration had hoped to offer up to $20,000 in student debt cancellation for more than 40 million borrowers earning less than $125,000 per year.

All along, many home lending professionals have been cautious about counting on that broader forgiveness as a source of potential mortgage leads, focusing instead on more limited student loan relief that actually has materialized to some degree in the past year or so.

While some of the relief like interest-free forbearance has been temporary, mortgage companies may not see a big change in who qualifies for mortgages when it ends in the fall because even borrowers with payment suspensions were assessed as if their full debt obligation was in force.

“We’ve never stopped counting as a monthly payment for a student loan, even though it was in forbearance,” said Melissa Cohn, regional vice president at William Raveis Mortgage.

However, there are some questions about how the resumption of interest and payments will affect overall debt-to-income ratios that can be a determining factor in whether a consumer can qualify for a mortgage. More than $1.7 trillion in U.S. student debt is outstanding.

While putting student loan payments in interest-free forbearance theoretically could have allowed borrowers involved to potentially direct the suspended payments into paydowns of other types of debt, find likely did or could.

“In many cases, it was not spent to bring down the outstanding debt that they have,” Parrish said.

There could also be complications for mortgage companies considering that student loan servicers have been through consolidation. Some borrowers might have trouble identifying which one is currently handling their loan.

“It is a very good chance that you’re not making your payment to the same servicer that you were making your payment to when these student loans went into forbearance,” said Parrish, whose company provides student loan services to nonbank and depository mortgage lenders.

Mortgage companies as well as borrowers might want to be careful about communications involving student loan servicers for that reason, particularly given that misinformation that leads to an undisclosed debt in home loan underwriting could result in repurchase risk.

While all these student loan developments can challenge mortgage companies, legal barriers to widespread forgiveness for education debt and end of forbearance also have an upside in reducing payment disincentives on the part of some people not afforded relief.

Cohn said limiting debt cancellation to groups like public servants with good loan-performance track-records reduces resentment among those left out of relief, who have raised questions like, “Why should our taxpayer dollars support others and why can’t I get forgiven?”

Source: nationalmortgagenews.com

Apache is functioning normally

July 9, 2023 by Brett Tams

At this point, most homeowners have probably heard of the CARES Act and its massive 12-month forbearance option for those with federally-backed mortgages.

It sounds pretty sweet – you can request six mortgage-free months, followed by an additional six months if you need it, with little paperwork or evidence of hardship from COVID-19.

Apparently, all you need is a mortgage forbearance letter and you should be good to go, assuming loan servicers don’t revolt and balk at the sheer number of requests that flood through the door.

Does Mortgage Forbearance Need to Be Repaid?

Yes, homeowners are expected to repay the missed mortgage payments
Loan servicers are NOT waiving payments, they are offering to delay them
The big question is how and when are homeowners supposed to catch up
Especially if the homeowner loses their job permanently or severely depletes their assets along the way

The million-dollar question is how will the skipped mortgage payments be paid back.

Remember, these aren’t waived mortgage payments, they are delayed mortgage payments.

You are getting a brief moratorium on payments while furloughed or out of work, after which time you must make good on those missed payments, assuming you do get back to work.

Everything is working on the assumption that this is a temporary situation, unlike the mortgage crisis a decade ago that was driven by fundamental issues, like sketchy mortgage financing and overpriced homes.

Most homeowners could afford to make their mortgage payments in the normal, pre-COVID-19 world, so once this is all over, they should go back to making their payments per usual.

There are a few issues with that theory. For one, we might not go “back to normal” right away or ever.

While the smart people in the room have a plan, or are at least working on one, to get us back on track as a society, much of what I’ve heard so far speaks of a gradual return.

For some industries, like big events, concerts, restaurants, bars, and anything that involves large crowds, it might be a much longer road back.

How does a homeowner who missed six to 12 mortgage payments simply return to making their payments if they don’t have a job, or even if they’ve lost tons of income and therefore depleted their assets along the way?

Surely you can’t expect these individuals to pay a lump sum right after the forbearance ends to make up for the shortfall. That would be ridiculous.

I would venture to say that most Americans don’t have the ability to make multiple mortgage payments at once, even during good times. So asking them to pay several during dire times seems absurd.

Fannie Mae and Freddie Mac’s Post-Forbearance Approach

Option #1: Reinstatement (pay in full at end of forbearance period)
Option #2: Repayment Plan (pay back within 12 months of end of forbearance)
Option #3: COVID-19 Payment Deferral (pay back eventually when you refi, sell, or pay off entire mortgage)
Option #4: Loan Modification (for those who can’t even afford to resume regular monthly payments)

Fortunately, Fannie Mae got to work and rolled out post-forbearance guidelines to put its loan servicers and homeowners at ease.

FYI, these mostly mirror the post-forbearance guidelines of Freddie Mac.

There is basically a waterfall approach where servicers will reach out to borrowers 30 days before their forbearance plan is scheduled to end.

At that time, they’ll work to determine which available assistance program will be best for them at that time depending on hardship status.

The preferred solution starts with reinstatement, where the borrower simply pays the full forbearance amount when the forbearance period ends.

While obviously an ideal end to forbearance, it’s highly unlikely many homeowners will be able to muster this.

That brings us to option two, which is a repayment plan where a portion of the forbearance amount is paid each month (for up to 12 months) along with the homeowner’s regular mortgage payment.

Again, this may fall short seeing that it requires a higher total monthly payment and it only lasts for a year.

Given the fact that homeowners may have missed six to 12 payments, it seems like a big ask to make up all those payments in the same amount of time.

That takes up to option three, COVID-19 Payment Deferral, which will likely be the most common outcome.

It allows borrowers who are unable to reinstate or afford a repayment plan to simply add the forbearance amount to the end of the loan.

And that amount won’t be due until the final mortgage payment is made, or earlier if the property is sold or the mortgage is refinanced.

In other words, homeowners get to kick the can down the road and worry about it later, which is a great deal.

Lastly, there is option four, the loan modification, which as the name implies, is pretty self-explanatory.

In the event the borrower can’t even afford to resume regular monthly mortgage payments (forget about the missed ones), they’ll need their home loan modified to make it affordable.

This may involve an interest rate reduction and/or a loan term extension, but probably not a principal reduction.

Additionally, Fannie Mae released guidance on mortgage forbearance waiting periods for those wondering when they get another home loan.

A Post-Forbearance Solution That Makes Sense for FHA Loans

Fannie Mae and Freddie Mac originally offered vague solutions involving loan modifications before rolling out the comprehensive guidelines above
This upset homeowners who thought they’d have to pay it all back in one lump sum things while their credit score took a hit
HUD has always had a good solution in its COVID-19 National Emergency Partial Claim
Missed payments would be set aside as an interest-free second mortgage that doesn’t need to be repaid until sale/refinance

The Department of Housing and Urban Development (HUD), which oversees the FHA loan program, put together a good Q&A regarding mortgage forbearance.

One question explicitly asks: Will the monthly mortgage payments that are reduced or suspended under a COVID-19 Forbearance need to be repaid?

They don’t mince words; “Yes. A homeowner with an FHA-insured mortgage who receives a COVID-19 National Emergency Forbearance is responsible for repaying the suspended mortgage payments or the balance of reduced mortgage payments.”

With regard to how, they say your loan servicer can help determine “options for eventually repaying any suspended mortgage payments or the balance due as a result of reduced mortgage payments.”

They note that you won’t be charged late fees and penalties while on a “COVID-19 National Emergency Forbearance plan.”

But what about after? Again, a great unknown.

However, HUD does have what appears to be a good solution to deal with the missed mortgage payments.

COVID-19 National Emergency Partial Claim

They have implemented the “COVID-19 National Emergency Partial Claim,” which can be put to work once the COVID-19 forbearance period ends.

In short, it reinstates borrowers’ home loans by authorizing loan servicers to advance funds on behalf of homeowners.

Those advances are placed in an interest-free subordinate (second) mortgage that the borrower doesn’t have to pay down until their first mortgage is paid off, either via home sale or mortgage refinance.

For me, this makes prefect sense assuming loan servicers are able to set aside all those missed payments for an unknown length of time.

It would actually allow homeowners who get back to work to return to making regular monthly mortgage payments, as opposed to making six or 12 of them at once, along with the next one due.

Nobody is going to make seven or 13 mortgage payments all at once, or anything close to that. Asking someone to make two at once is a longshot.

Meanwhile, Freddie Mac has said that it could offer “loan modification options to provide mortgage payment relief or keep those payments the same after the forbearance period.”

And Fannie Mae said, “a servicer must work with the borrower on a permanent plan to help maintain or reduce monthly payment amounts as necessary, including a loan modification.”

For the record, Fannie Mae’s Flex Modification adds past due amounts to the unpaid loan balance, then recalculates your monthly payments over the new, potentially revised loan term.

So that could work if monthly payments were only incrementally higher as as a result.

Fannie Mae and Freddie Mac also have a new payment deferral option that works similar to the partial claim solution that will be rolled out soon, but it only allows for 1-2 missed payments, not 6-12.

The VA has instructed loan servicers not to require a lump sum payment upon exiting forbearance.

Rather, they ask that they consider other options such as a repayment plan, where installments are made over time, or a loan modification, where a new payment schedule is established that includes the delinquent amount.

If the loan servicer wants to go the lump sum route, they ask that it be paid back at the end of the loan.

They have since added that borrowers may defer any missed payments, effectively making them due at the end of the loan term along with the final payment.

If that’s the case, the VA requires that amount to be non-interest bearing, which is great news for the homeowner.

You can pay toward that deferred amount over the life of the loan via a repayment plan or request a loan modification if you won’t be able to resume regular payments.

Ultimately, don’t homeowners need assurances regarding what happens after, before agreeing to mortgage forbearance?

And what about credit scores post-forbearance? Will loan servicers begin calling these homeowners delinquent at some point?

The forbearance isn’t supposed to count against them, but will the loan modification?

Will they have trouble refinancing post-forbearance, or difficulty financing a subsequent home purchase if they took part in the mortgage forbearance relief?

FYI, the last day to apply for mortgage forbearance is also a moving target.

There are too many unknowns right now, which makes it difficult for a homeowner to determine if taking the forbearance option is a good idea.

That being said, I don’t think it will stop millions of homeowners from taking part.

Read more: Number of Mortgages in Forbearance Jumps Nearly 1000%

Source: thetruthaboutmortgage.com

Apache is functioning normally

July 7, 2023 by Brett Tams

For many people, that monthly mortgage payment can be their biggest recurring bill. It may be the main expense that guides the development and management of their monthly budget, because that is an important bill to pay on time.

Prevailing wisdom says that your mortgage payment shouldn’t be more than 28% of your gross (pre-tax) monthly pay. But whatever that sum actually is, you may be wondering how to shave down the amount. Think about it: A lower mortgage payment could reduce your financial stress. And it can also open up room in your budget to allocate more money towards shrinking other debt, pumping up your emergency fund, and saving for retirement or other goals.

Here, you’ll learn more about your mortgage payment and possible ways to lower it.

What Is a Mortgage Payment?

A mortgage payment is a sum you typically pay every month, but it’s more than just a bill. It reflects an agreement between you and your lender that you have borrowed money to buy or refinance a home, and in exchange, you’ve agreed to pay back the sum with interest over time. If you fail to keep up with your payments, the lender may have the right to take your property.

There are typically four parts of your monthly payment: the loan principal, the loan interest (which is how the lender makes money), taxes, and insurance fees.

A mortgage payment may be a fixed rate, meaning your payment stays the same, month after month, year after year. Or it might be an adjustable rate, meaning the interest and therefore the payment can change at regular intervals.

Pros and Cons of Lowering Your Mortgage Payments

There are upsides and downsides to lowering your mortgage payments.

On the plus side, lowering your mortgage means you likely have more money to apply elsewhere. You might apply the freed-up funds to:

• Pay down other debt

• Build up your emergency fund

• Put more money towards retirement savings

• Use the cash for discretionary spending.

On the other hand, there are downsides to consider too:

• You might wind up paying a lower amount over a longer period of time, meaning your debt lasts longer

• You could pay more in interest over the life of the loan

• If a lower monthly payment means you are not paying your full share of interest due, you could wind up in a negative amortization situation, in which the amount you owe is going up instead of down.

6 Ways to Lower Your Mortgage Payments

Now that you know a bit about how mortgage payments work and the pros and cons of lowering your mortgage payments, consider these ways you could minimize your monthly amount due.

Recommended: How to Pay Off a 30-Year Mortgage in 15 Years

1. Give Your Mortgage a Bonus

If you get a bonus or a windfall, consider throwing some of that money at your mortgage. If you are in a position to make a major lump-sum payment on your home loan, you may benefit from mortgage recasting.

With recasting, your lender will re-amortize the mortgage but retain the interest rate and term. The new, smaller balance equates to lower monthly payments. Worth noting: Many lenders charge a servicing fee and have equity requirements to recast a mortgage.

Other similar options:

• Make a lump-sum payment toward the mortgage principal (say, if you inherit some money or get a large bonus at work)

• Make extra payments on a schedule or whenever you can.

It’s a good idea to tell your lender that you want to put the extra money toward the principal and not the interest. Paying extra toward the principal provides two benefits: It will slowly reduce your monthly payment, and it will pare the total interest paid over the life of the loan.

Refinance your mortgage and save–
without the hassle.

2. Reap Rental Income at Home

You could lower how much you pay out-of-pocket for your mortgage by bringing in rental income and putting it towards that monthly bill. You’re not lowering how much you owe, but you are using your home to bring in another income stream.

There are two common methods: “house hacking” (generating income from your property) and adding an accessory dwelling unit (ADU).

• House hacking can mean buying a two- to four-unit multifamily building for little money down and living in one of the units. Multi-family homes with up to four units are considered residential when it comes to financing. Owner-occupants may qualify for and opt for Federal Housing Administration (FHA) loans, Veterans Affairs (VA) loans, or conventional financing.

Some people house-hack a single-family home, which just translates to having housemates or short-term rental guests.

• An ADU is another option for bringing in rental money to use towards your mortgage. This secondary dwelling unit on the same lot as a primary single-family home could be a detached cottage, a garage or basement conversion (that is, an in-law apartment or similar), or an attached unit.

With any planned addition or renovation to create an ADU, you might want to estimate return on investment — how much you’d charge and how long it would take to recoup the cash you put in before turning a profit.

3. Extend the Term of Your Mortgage

If your goal is to reduce your monthly payment — though not necessarily the overall cost of your mortgage — you may consider extending your mortgage term. For example, if you refinanced a 15-year mortgage into a 30-year mortgage, you would amortize your payments over a longer term, thereby reducing your monthly payment.

This technique could lower your monthly payment but will likely cost you more in interest in the long run.

(That said, just because you have a new 30-year mortgage doesn’t mean you have to take 30 years to pay it off. You’re often allowed to pay off your mortgage early without a prepayment penalty by paying more toward the principal.)

4. Get Rid of Mortgage Insurance

Mortgage insurance, which is needed for some loans, can add a significant amount to your monthly payments. Luckily, there are ways to eliminate these payments, depending on which type of mortgage loan you have.

• Getting rid of the FHA mortgage insurance premium (MIP). Consider your loan origination date that impacts when you can get rid of the extra expense of mortgage insurance:

• July 1991 to December 2000: If your loan originated between these dates, you can’t cancel your MIP.

• January 2001 to June 3, 2013: Your MIP can be canceled once you have 22% equity in your home.

• June 3, 2013, and later: If you made a down payment of at least 10% percent, MIP will be canceled after 11 years. Otherwise, MIP will last for the life of the loan.

Another way to shed MIP is to refinance to a conventional loan with a private lender. Many FHA homeowners may have enough equity to refinance.

• Getting rid of private mortgage insurance (PMI) If you took out a conventional mortgage with less than 20% down, you’re likely paying PMI. Ditching your PMI is an excellent way to reduce your monthly bill.

To request that your PMI be eliminated, you’ll want to have 20% equity in your home, whether through your own payments or through home appreciation.

Thinking about starting a new home renovation project? Use this Home Improvement Cost Calculator to get an idea of what your project will cost.

Your lender must automatically terminate PMI on the date when your principal balance reaches 78% of the original value of your home. Check with your lender or loan program to see when and if you can get rid of your PMI.

5. Appeal Your Property Taxes

Here’s another way to lower your mortgage payments: Take a closer look at your property taxes. Your property taxes are based on an assessment of your house and land conducted by your county’s tax assessor. The higher they value your property, the more taxes you’ll pay.

If you think you’re paying too much in taxes, you can appeal the assessment. If you do, be prepared with examples of comparable properties in your area valued at less than your home. Or you may also show a professional appraisal.

To challenge an assessment, you can call your local tax assessor and ask about the appeals process.

6. Refinance Your Mortgage

One of the best ways to reduce monthly mortgage payments is to refinance your mortgage. Refinancing (not to be confused with a reverse mortgage) means replacing your current mortgage with a new one, with terms that better suit your current needs.

There are a number of signs that a mortgage refinance makes sense, such as lower interest rates being offered or the desire to secure a fixed rate when you have an adjustable rate mortgage.

Refinancing can result in a more favorable interest rate, a change in loan length, a reduced monthly payment, and a substantial reduction in the amount you owe over the life of your mortgage. Do note, however, that there are often fees for refinancing your mortgage.

Tips on Lowering Your Mortgage Payment

If you’re serious about lowering your mortgage payments, consider these methods:

• Refinance to get a lower rate or other changes in your mortgage’s terms

• Apply a windfall (a tax refund, say, or a bonus) to your mortgage’s principal

• Reach enough equity in your home to drop mortgage insurance

• Make extra mortgage payments or higher mortgage payments (this can build equity or pay off the loan sooner, saving you interest)

• Ask about loan modification or forbearance programs if you are struggling to make payments.

Recommended: First-time Homebuyer Programs

The Takeaway

How to lower your mortgage payment? There are several possible ways. And who wouldn’t love to shrink their house payment? You might look at strategies to build equity and ditch mortgage insurance, extend the terms of your loan, or refinance to reduce your monthly payment.

If refinancing could help, see what SoFi offers. Both refinancing and cash-out refinancing are possible. And SoFi also offers a range of flexible home mortgage loans with competitive rates to help you make homeownership that much more affordable. Plus, our online process is fast and simple.

Ready to see how much simpler a SoFi Home Mortgage Loan can be?

FAQ

How can I make my mortgage payment go down?

There are several ways to lower your monthly mortgage payment. A few options: You could refinance at a lower rate or longer term, or you could build enough equity to forgo mortgage insurance.

How can I lower my house payment without refinancing?

To lower your house payment without refinancing, you could appeal to lower your property taxes; you might apply a windfall to lower your principal; or you could rent out part of your property to bring in more income.

What is the average mortgage payment?

According to the C2ER’s 2022 Annual Cost of Living index, the average monthly mortgage payment in the U.S. is $1,768.

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Apache is functioning normally

July 6, 2023 by Brett Tams

We had a few times in the previous cycle where the 10-year yield was below 1.60% and above 3%. Regarding 4% plus mortgage rates, I can make a case for higher yields, but this would require the world economies functioning all together in a world with no pandemic. For this scenario, Japan and Germany yields need to rise, which would push our 10-year yield toward 2.42% and get mortgage rates over 4%. Current conditions don’t support this.

The backstory

The lifeblood of my economic work depends greatly on the ebbs and flows of the 10-year yield, even more than mortgage rate targeting, which is unusual for a housing analyst.

When I first dipped into 10-year yield and mortgage rate forecasting in 2015, during the previous expansion, I said the 10-year yield will remain in a channel between 1.60%-3%. I’ve stuck to that channel forecast every year since — and for the most part that 10-year yield channel stuck. That range dictated that mortgage rates would roughly stay between 3.5%-4.75%.

When COVID-19 was about to hit our economy, I forecasted that the 10-year yield recessionary yields should be in a range between -0.21%-0.62%. We got to as low as 0.32% on that Monday morning in March when the crisis was hitting the markets the hardest. About a month later, I published my AB (America is Back) recovery model, which said that the 10-year yield should get back toward 1%. We got there in December of 2020 so I was able to retire my America is Back recovery model.

I said that when the economy was beginning the new expansion, the 10-year yield would create a range between 1.33%-1.60%. This couldn’t happen in 2020 but should happen in 2021. Even with the hot economic growth, the hottest inflation data in decades, and the Fed rate hike discussion picking up, this range of 1.33%-1.60% has held up nicely for most of 2021, meaning mortgage rates were going to be low in 2021.

My forecast for the 10-year yield range in 2021 was 0.62%-1.94% which translates to a bottom-end range in mortgage rates of 2.375%-2.5%, and an upper-end of 3.375%-3.625%. Single mortgage rate target forecasts have not fared well over the decades because these forecasters did not respect the downtrend in bond yields since 1981.

The X factor

Can there be a bond market sell out short term, sending yields above 1.94%, like what we saw early in the COVID-19 crisis? Yes, but if the markets do overreact for any reason, typically bond yields would fall back. Why do I not believe bond yields will push higher aggressively? The economic rate of growth peaked in 2021. The economy was on fire this year, and inflation data was super-hot. Even so, the highest the 10-year yield got was 1.75%. The economic disaster relief that boosted the recovery in 2020 and 2021 has been drawn down.

Government spending plans have also been watered down and new legislation might not even pass at all. Economic growth peaked in 2021 and some of the hotter inflation data has the potential to fall next year. The Federal Reserve wants to hike rates to cool the economy. Typically what happens before the first Fed rate hike is that the U.S. dollar has its biggest percent move higher ,which tends to hurt commodity prices and world growth. This is something to watch for next year as it could slow down world growth.

The economy won’t be as hot in 2022 as it was in 2021, but it will remain in expansionary mode. This type of backdrop will make it challenging for rates to rise in a big way and stay higher. The key with all my 10-year yield channel work is how long the 10-year stays in that channel during the calendar year. I have always believed this type of forecast is more useful than targeting a mortgage rate.

Existing-home sales

The forecast

For 2022, I am forecasting the same sales trend range as 2021 of about 5.74 million to 6.16 million. If monthly sales prints are above 6.16 million for existing homes, then I would consider the market more robust than expected. If sales trend toward 5.3 million then we will be back to 2019 levels. This would still be healthy sales considering the post-1996 trend, but it will mean housing demand has gotten softer.

This has happened before when higher rates have impacted demand. This is why since the summer of 2020 I have written about how if the 10-year yield can get above 1.94%, then things should cool down. However, as you can see it’s been hard to bond yields over that level and thus mortgage rates above 3.75%.

The backstory

If the last two reports of the year on existing home sales are above 6.2 million, I will admit that sales have slightly outperformed what I predicted for 2021. Early in 2021, I wrote that home sales would moderate after the peaks caused by the COVID-19 shutdown make-up demand and that readers should not overreact to this slowing. I wrote that sales would range between 5.84 million and 6.2 million, and that we could anticipate a few prints under 5.84 million — but sales would consistently be above the closing level of 2020 of 5.64 million. We got one print below 5.84 million and a few recent prints over 6.2 million, with two more reports. Mortgage demand was solid all year long and has picked up in the last 15 weeks.

One of my longer-term forecasts in the previous expansion was that the MBA Index would not reach 300 until 2020-2024. We got there in the early part of 2020, then the Index got hit by the COVID-19 delays in home buying to only have a V-shaped recovery that led to the make-up demand surge, moderation down and back to 300.

As you can see, it’s been like Mr. Toad’s wild ride here. We will still have some COVID-19 year-over-year comps to deal with up until mid February and then we can get back to normal. However, one thing is for sure: demand has been solid and stable in 2020 and 2021. Also, the market we have today doesn’t look like the credit boom we saw from 2002-2005.

I didn’t believe total home sales could get to 6.2 million in the years 2008-2019, this is new and existing home sales combined. We simply didn’t have the type of demographics in the previous expansion. We are in different times.

New home sales and housing starts

The forecast

My long-term call from the previous expansion has been that we won’t start a year at 1.5 million total housing starts until the years 2020-2024 and we have finally gotten here much like the 300 level in the MBA index. My rule of thumb has always been to follow the monthly supply data for new homes, and as long as monthly supply is below 6.5 months on a three-month average, they will build.

The backstory

Housing starts, permits and builders confidence are ending the year on a good note. Even though new home sales aren’t booming this year, it’s good enough to keep the builders building more homes even with all the drama of labor shortages, material cost and delays in finishing homes.

As you can see below, the uptrend has been intact even with the slowdown in 2018 and the brief pause from COVID-19.

The new home sales sector gets impacted by rates much more than the existing home sales marketplace. The last time this sector saw some stress from mortgage rates was in 2018 when rates were at 5%. Today’s 3% mortgage rates are good enough to keep things going. We should see slow growth in new home sales and housing starts as long as the monthly supply of new homes is below 6.5 months on a 3-month average. This sector has legs to walk forward slowly. I have never believed in the housing construction boom premise as mature economies don’t have construction booms with slowing population growth. More on that here.

The X factor

The one concern I have for this sector in 2022 is if the builders keep pushing the limits of home price growth to make their margins look better. When rates are low, they have the pricing power to do this. This is why the sector has done so well in 2021. If I am wrong about mortgage rates staying low in 2022, and rates go above 3.75% with duration, then demand for new homes should get hit. The longer-term concern for this sector is price growth because if demand slows down, this means a slowdown in construction and the builders really maximized their pricing power in 2020 and 2021.

Home prices

The forecast

I am looking for total home-price growth to be between 5.2% and 6.7% for 2022. This would be a meaningful cool down in price growth but would still be a third year straight of too much price growth for my taste.

The backstory

My biggest fear for the housing market during the years 2020 to 2024 was that real home-price growth can be unhealthy. When you have the best housing demographic patch ever recorded in history occurring at the same time as the lowest mortgage rates ever, with housing tenure doubling as it has in the last 12 years, it’s the perfect storm for unhealthy price growth.

Housing inventory has been falling since 2014 and mortgage purchase applications have been rising since then. As you can see below, 2021 wasn’t looking good for me regarding my fear for home prices rising too much.

The X factor

When I talk about real home-price growth being too hot, I mean that nominal home price growth is above 4.6% each year during the five-year period of 2020 to 2024, for a cumulative 23% growth. This would not be a positive for the housing market. If we end 2021 with 13% home price growth, (and it looks like we will do that or higher), then we have already achieved 23% of the price growth that I am comfortable with in just two years.

While I do believe home-price growth is cooling from the extreme high rate of growth we had earlier in the year, I would very much like to see prices get back in line with my model for a healthy market. In order for this to happen, we would need to have no increase in home prices for the next three years. Because inventory levels are falling again, and we are at risk of starting the 2022 spring season at fresh new all-time lows, this outcome is very unlikely.

Early in 2021, I had raised concerns that prices overheating should be the main concern, not forbearance crashing the market. When demand is stable, it’s extremely rare for inventory to skyrocket and American homeowners have never looked better on paper. In fact, a few months ago I talked about inventory falling again should be the concern going out.

Housing demand

The forecast

Everyone is talking about rates going higher and no one, it seems, is talking about the possibility that mortgage rates could go under 3% in 2022, except me. This is front and center in my mind. I want to see a B&B housing market: boring and balanced. In a B&B market, buyers have choices, sales move at a reasonable pace without bidding wars, and the whole home-buying experience is less stressful and more sane. I would like to see inventory get toward 1.52 – 1.93 million, (which is still historically low). However, this will be a more stable housing market.

The backstory

Millions of people buy homes each year. The only thing that cooled demand for housing in the previous expansion was mortgage rates going over 4% with duration. The increase in rates didn’t crash the market or even facilitated negative year-over-year home price declines; but it did increase the number of days homes stayed on the market.

Currently the biggest demographic patch ever recorded in U.S. history are ages 28-34, the first-time homebuyer median age is 33. When you add move-up, move-down, cash and investor demand together, demand will be stable and hard to break under the post-1996 trend of 4 million plus total sales every year in the years 2020-2024.

The X factor

Frankly, I’m getting tired of calling this market the unhealthiest since 2010. This is not due to a massive credit boom or exotic loan products contaminating the market with excess risk — it’s the lack of choice for buyers. If mortgage rates go under 3%, which I believe they can, it just keeps the low inventory story going on. The Federal Reserves wants to cool down the economy, the government is no longer providing disaster relief anymore and the world economies should get hit if the U.S. dollar gets too strong. So, my concern is about rates falling in year three of my 2020-2024 period. This is also a first-world problem to have and we aren’t dealing with the housing market of 2005-2008 when sales were declining and the U.S. consumer was already filing for bankruptcy and having foreclosures before the great recession started in 2008. This is to give you some perspectives here with my thinking.

The economy

The forecast

I expect the rate of change to slow in 2022 but the economy will still be expansionary. Retail sales have been off the charts, and this data line, which I expected to moderate, still hasn’t. The rate of growth will cool. Replicating the growth we saw in 2021 will be nearly impossible. As the excess savings have been drawn down and the additional checks that people got are no longer coming, this data line will find a more suitable and sustainable trend in 2022. Still I am shocked that moderation hasn’t happened already and I was the year 2020-2024 household formation spending guy, too.

The backstory

The U.S. economy has been on fire this year. Even with the excess savings, good demographics, and low rates, not even I thought we would see economic growth like we did in 2021. However, like all things in life, despite the peaks and valleys, the overall trend will prevail.

The X factor

I recently raised one of my six recession red flags after the most recent jobs report as the unemployment rate got to a key level for myself. These red flags are more of a progress checklist in the economic expansion, and when all six of my flags are raised, I go into recession watch. The economy is in a more mature phase of expansion since the recovery was so fast. Like everything with me, it’s a process to show you the path of this expansion to the next recession.

For housing, a strong labor market means more people are getting off forbearance, which is already under 1 million, much smaller than the nearly 5 million we had early in the crisis. I want to wish a Merry Christmas to all my forbearance crash bros who promised a housing crash in 2020 and 2021. You guys are the best trolling grifters ever!

More jobs and more robust wage growth mean the need for shelter will grow. The housing market is already dealing with too much rent inflation, but as wage growth picks up on the lower end, this means landlords will charge more rent. Again, this the problem you want to have, a tighter labor market means wage growth will pick up and we have 11 million job openings currently.

So, look for the rent inflation story to be part of the 2022 storyline, as well as the rate of growth of home prices cooling down.

There is nothing like a fifth wave of COVID-19 and a new highly transmissible variant to crank up the personal stress meter. While the continuing COVID crisis can cause havoc on some short-term data lines for the economy, we will, as we have done, get through this and move forward. Our reality is that, as a nation, we have learned to consume goods and services with an active virus infecting and killing us every day.

The St. Louis Financial Stress Index, which was a key data line to track for the America Is Back recovery model, has still been in a calm zone for the entire year, currently at -0.8564. When we break over zero — which is considered normal stress — then we have some market drama. However, that wasn’t the storyline in 2021 and we didn’t have a single day where the S&P 500 was in correction mode. It’s not normal to not have a stock correction, so a stock market correction in 2022 is in the works and this can lead more money into bonds and drive rates lower.

For more discussion on this index and the America is Back recovery model, this podcast goes over everything that has happened in 2020-2021.

Conclusion

What a ride it has been for all of us since April 7, 2020 when I wrote the America Is Back economic recovery model for HousingWire. We end 2021 with one of the greatest economic recovery stories ever in the history of the United States of America, and a terrible, dark, two-year period of failure for the extreme housing bears. Now we are well into a recovery and looking forward to a new year with its new challenges.

The job of the analyst is to forecast the positive or negative impacts that a whole slew of variables have on the economy based on carefully formulated economic models. The variables, such as demographics, the unemployment rate, what the Federal Reserve is doing, commodity prices and so many others, are constantly in flux and feed off of and influence one another. Additionally, new economic variables pop up all the time. My job, with every podcast and article, is to show you how the changes in these variables light the path to where the economy and the housing market is heading.

Take a deep breath — in through the nose and out through the mouth. The last two years have been crazy, but I am glad you are here to read this. This is our country, our world and our universe, and everyone is part of team Life on Earth. Merry Christmas, Happy Holidays and have a wonderful Happy New Year. We will get through 2022 one data line at a time.

“We have always held to the hope, the belief, the conviction that there is a better life, a better world, beyond the horizon.” Franklin D. Roosevelt

Source: housingwire.com

Apache is functioning normally

July 6, 2023 by Brett Tams

Typically, it does not cost the borrower money to refinance student loans. Most lenders do not charge origination fees or application fees. However, you can end up paying fees if you don’t make your payments on time.

In the right circumstances, refinancing your student loans can help you save both time and money as you work to pay down your student debt, without costing you any money to do so.

Student Loan Refinancing Recap

Student loan refinancing is the process of paying off one or more existing student loans with one new one through a private lender. You can typically refinance both federal and private student loans, and depending on the terms of your current loans and your creditworthiness, you may be able to get a lower interest rate or lower monthly payment.

This process is different from federal student loan consolidation, which involves combining several eligible federal loans into one new loan with a federal loan servicer. While that process can simplify your repayment plan and help you maintain federal loan protections, it typically doesn’t help you save money.

Every situation is different, but with the right refinance loan, you could save hundreds or even thousands of dollars as you pay down your student debt.

That said, there are both benefits and drawbacks to consider before you pull the trigger.

Pros of Student Loan Refinancing

Can Save You Money

If you qualify for a lower interest rate than what you’re currently paying, refinancing your student loans could save you money on interest over the life of the loan. Keep in mind that this includes keeping the loan term the same. If you extend your loan term, you could end up paying more in interest, even with a lower rate.

If you don’t qualify for a lower rate on your own, you may be able to add a cosigner with solid creditworthiness to help improve your chances.

Can Give You More Flexibility

Student loan refinance lenders typically offer a range of repayment terms, allowing you to shorten or lengthen the amount of time you have to pay off your debt.

Simplifies Your Repayment Plan

If you have multiple student loans across more than one servicer or lender, refinancing them all into one new loan can make repayment a little easier.

Cons of Student Loan Refinancing

You’ll Lose Federal Benefits and Protections

If you have federal student loans, refinancing with a private lender will cause you to lose certain benefits and protections, such as access to income-driven repayment plans, federal loan forgiveness programs, and more.

It May Not Save You Money

If your current interest rates are already low, it may be tough to qualify for something even lower. Also, applying for a longer repayment period than what you already have could end up costing you more in interest over the life of the loan.

You May Get Less Help When You’re Struggling

Federal student loans allow you to apply for student loan deferment or forbearance if you’re struggling to make your payments. When you refinance with a private lender, you may not get these same benefits.

Deferment and forbearance options can vary by private lenders. With SoFi, for instance, you may qualify for a deferment if you return to graduate school on a half-time or full-time basis, undergo disability rehabilitation, or serve on active duty in the military.

How Much Does It Cost to Refinance Student Loans?

Refinancing student loans with a private lender typically does not come with any costs to the borrower. Most companies do not charge any fees associated with student loan refinancing. If you are being charged fees (see below), you may want to look elsewhere for your refinance.

Common Fees When Refinancing Your Student Loans

If a lender does charge fees for refinancing, these are some you may run into:

• Application fee: This fee covers the cost of processing the application and is typically due when you submit your application.

• Origination fee: Some lenders charge this fee to help cover the costs of processing your loan and disbursing the funds.

• Late payment fee: Many lenders charge this fee if you miss a payment. Depending on the lender, you may get a grace period between your due date and when the fee is assessed.

• Returned payment fee: If you try to make a payment but don’t have enough money in your checking account to cover it and no overdraft protection, some lenders may charge you a fee for the failed transaction.

In most cases, you won’t have to pay anything up front to refinance your student loans. With SoFi, there are no application fees, no origination fees, no late fees, and no prepayment penalties.

As you’re shopping around, make sure you read the fine print to understand the cost of refinancing student loans with that particular lender.

Serious savings. Save thousands of dollars
thanks to flexible terms and low fixed or variable rates.

Reducing the Cost of Refinancing Student Loans

Because many student loan refinance lenders don’t charge upfront fees, shopping around with those costs in mind can help you improve your chances of finding a low- or no-costs lender.

Keep in mind, though, that some lenders may charge what are called “hidden fees.”

Instead of showing up in marketing material, these fees are often buried deep in the terms and conditions of the loan and can be tough to find if you’re not looking for them.

Taking the time to thoroughly read the terms and conditions before refinancing could help you avoid unexpected fees down the line.

If you get approved for the new loan, you might consider setting up automatic payments to help avoid missing a payment and getting charged a late fee. Some lenders, including SoFi, offer an interest rate discount to qualified borrowers using autopay.

Then, you might make it a goal to always have a buffer in your checking account or overdraft protection to ensure a payment doesn’t get returned.

Considering SoFi to Avoid Upfront and Hidden Costs

If you’re considering refinancing your student loans, shopping around can take time. When refinancing with SoFi, you don’t have to worry about paying upfront costs or hidden fees.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Does it cost money to refinance loans?

No, it does not cost money to refinance student loans. Most student loan refinance lenders do not charge fees associated with refinancing — including application fees and origination fees. If you are being charged a fee to refinance, that could be a red flag and you may want to look elsewhere.

What is a finance charge on a student loan refinance?

On a student loan refinance, a finance charge is what you pay the lender beyond the principal balance. This would include interest and any fees associated with the loan.

How much does it cost to consolidate student loans?

If you want to consolidate your federal student loans, there is no application fee associated with a Direct Consolidation Loan. It does not cost the borrower anything to consolidate federal loans.

SoFi Student Loan Refinance
NOTICE: The debt ceiling legislation passed on June 2, 2023, codifies into law that federal student loan borrowers will be reentering repayment. The US Department of Education or your student loan servicer, or lender if you have FFEL loans, will notify you directly when your payments will resume For more information, please go to https://docs.house.gov/billsthisweek/20230529/BILLS-118hrPIH-fiscalresponsibility.pdf https://studentaid.gov/announcements-events/covid-19

If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income based repayment plans or extended repayment plans.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

SOSL0122002

Source: sofi.com

Apache is functioning normally

July 5, 2023 by Brett Tams

Profitability Analysis, Closed-End 2nd Products; Ginnie Ticket Primer for Government Program Lenders

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Profitability Analysis, Closed-End 2nd Products; Ginnie Ticket Primer for Government Program Lenders

By:
Rob Chrisman

1 Hour, 19 Min ago

Hey, I’ve got news for you: 2023 is half over. Sometimes reality bites, and vendors and lenders can’t sit there, wringing their hands, waiting for things to get better on their own. Are lenders suddenly going to make huge margins on lots of volume in the second half? Are LOs who were doing 2-3 loans a month in the first half suddenly going to do 4-6? Are vendor reps suddenly going to double their clients? Are rates going to plummet? Is the number of houses for sale going to skyrocket? Banks, credit unions, and depositories are certainly doing something. An analysis of call reports shows that mortgage banking income at banks and thrifts increased by 36 percent on a sequential basis. JPMorgan Chase and Wells Fargo individually more than doubled their MB income from the fourth quarter to the first. Others, like Truist and PNC followed, as Inside Mortgage Finance points out. That said, to the surprise of no one, mortgage-banking income at banks and thrifts was down 38 percent from the first quarter of 2022. (Today’s podcast can be found here and this week’s is sponsored by Gallus, the premier business intelligence tool for the mortgage industry. With hassle-free insights and user-friendly functionality, Gallus empowers you to make faster, data-driven decisions for enhanced profitability. Hear an interview with Gallus Insights’ Augie Del Rio on how mortgage companies are best leveraging data in a high-rate environment.)

Lender and Broker Software, Services, and Products

Artificial intelligence (AI) is here, and as everyone works to determine how AI can enhance business processes, many are also scratching their heads over the new challenges. If you’re attending the American Legal and Financial Network (ALFN) Answers 2023, don’t miss the panel on Tuesday, July 18, “AI: Like It or Not, It’s Here. Are You Ready? Ethical and Business Challenges to the Utilization of Technology in a Default World.” This lunch session will cover current and future AI uses for industry law firms, service providers and others. Black Knight SVP of Servicing Technologies & Product Innovation Dana Federspiel will participate in this informative discussion to share her expertise in default processing within the mortgage industry. Take advantage of this opportunity to gain a better understanding of the intersection between AI and its potential uses in our industry. Contact Black Knight to learn more about solutions for today’s market challenges.

“I love chasing borrowers down for appraisal fees” said no one ever. With Fee Chaser by LenderLogix, you definitely won’t be saying that. Give your borrowers an easy, secure way to pay their appraisal, lock-in and condo doc fees with Fee Chaser’s seamless integration into Encompass® by ICE Mortgage Technology™. It can even handle first mortgage payments. Head over to LenderLogix and get a demo texted to your phone.

“Did you know that by yearend 2022, a remarkable 82 percent of homeowners enjoyed an interest rate below 5 percent, and an impressive 92 percent of homeowners had an interest rate below 6 percent? Consequently, there has been a decline in the demand for traditional cash-out refinancing. This is exactly where Vista Point’s Closed-End Second loan proves valuable! Rather than discarding the original low interest rate, a second loan creates a blended rate giving your borrower a lower payment solution while tapping their built-up equity. Discover the potential savings for your specific situation by visiting here and see how much your borrower can reduce their monthly mortgage payment by using our Closed-End Second Cash-Out Equity Solution. Give your borrower access to the cash they need without sacrificing their advantageous interest rate, with second line amounts up to $550K and combined lien amounts up to $2.5M. For more information, please contact us.”

Does your mortgage accounting team dream about having the ability to analyze the profitability of each loan the company originates? For Smartfi Home Loans, this dream came true with its new, industry-focused finance system, Loan Vision. Smartfi found they were able to gain efficiency and improve their processes with the help of Loan Vision’s immense drill down capabilities. “With Loan Vision, there is this wealth of information at your fingertips,” says Bill Berg, Finance, Technology, and Servicing Leader at Smartfi®. “To understand the ins and outs at the loan level, there’s a tremendous amount of analytical power there. I’m not sure how you would be able to successfully understand your business without it.” Interested in learning more about how your General Ledger should be helping you maximize efficiencies in your accounting department and gain access to financials faster? Contact Carl Wooloff to schedule a call today.

Government Loans and Servicing

Traditionally FHA and VA loans have a higher profit margin than other loan types. But originating them is not a walk in the park. James Hedvall, Chief Capital Markets Officer with Doorway Home Loans, put down some notes he titled a, “GNMA Primer.”

“I’ve been in this business for many years and have seen things done well and things done poorly. And I receive a fair number of questions regarding secondary execution. One typical question is whether a lender should pursue obtaining their ‘Ginnie Ticket,’ or to become a GNMA Approved Issuer.

“Having the ability to take FHA, VA, and USDA loans, turn them into securities, is a powerful tool for well-equipped secondary groups. Why? Well, first it allows you to underwrite straight to AUS findings, manual underwrites and originating loans that are outside correspondent overlays, provide competitive pricing and service to underserved communities, as well as allowing for efficient execution into the capital markets. However, there are a few considerations that need to be understood, because it’s not for every originator.”

James writes, “There are approximately 350 issuers spread across large and small depositories, credit unions, servicers, and independent mortgage bankers. The approval process, sometimes referred to sarcastically within capital markets circles as the GNMA Denial Department, can be long and challenging. There are plenty of cases out there where relatively large originators, with good balance sheets, are rejected by Ginnie Mae. I have witnessed first-hand the approval process a few times, and my best piece of advice is that ‘all battles are won, before they’re ever fought.’ Successful applicants have a few things in common: good financial standing, very competent Secondary and Accounting departments, plenty of operational redundancies, strong quality control oversight, last but not least, updated and complete Policies and Procedures which cover the entire origination cycle.

“For those interested in servicing, when you’re approved to issue GNMA bonds, you will be servicing your loans (PIIT agreements aside). This is why you deliver to the GSEs and issue GNMA bonds in the first place; originators should have a strategy with servicing and its intricate oversite, even if they are utilizing a sub-servicer. Historically, servicing GNMA loans (primarily FHA & VA) is costlier than its conforming cousin. A good sub-servicer can minimize this financial burden.

“In terms of keeping, maintaining, and tracking documents, if you’re FNMA/FHLMC approved, you certainly know what a document custodian does. More times than not, when I hear complaints about a custodian, it has to do with a problem on GNMA loans, as they will be the ones who review your loan collateral and initially certifies your pools for trade (most pools are traded after getting initial certification, although not a requisite).

“Ideally, a good custodian will perform a single document review that accommodates all requirements at once. This eliminates “exception surprises” at the time of sale due to different requirements delaying settlement. Choosing your custodian wisely can save headaches down the road, headaches which normally cause delays in settlements, resulting in an erosion of gain-on-sale.

“In the capital markets, broker/dealers come into play. Outside Secondary Marketing, Broker/Dealers are normally given very little thought by originators. If you’re hedging a pipeline for mandatory execution, broker/dealers are the ones your Secondary group trades forward TBA contracts with, that off-set interest rate exposure from the time the loan is locked, until the time the loan funds and gets committed. But for Issuers, they play an important role in the execution of GNMA pools as they are the ones who are buying them from the Issuer. A good relationship with your broker/dealer goes further than just execution. They can also help with pool formation and optimization. Without going down the rabbit-hole on coupons vs note rates vs high balance di-minimus requirements, B/D’s can help you build out pools that can increase the spread that is willing to be paid above (and sometimes below) what TBA’s are trading at; what you hear as the ‘spec pool pay up.’

“Lenders must pay attention to operations within the Originator. A strong Secondary Marketing team is imperative. Having a good Secondary Manager who understands the entire process: what can be pooled, when can it be pooled, when to create a pool in GinnieNet, and purview into the whole mortgage pipeline not just funded loans, helps in the dozens of moving parts in the process. A strong CFO/Accounting Dept who understands the financial risk of issuing GNMA securities pays dividends.

“Some may not know, but part of the financial risk in issuing has to do with covering P&I shortages every month. GNMA doesn’t buy loans directly like FNMA & FHLMC do. They act primarily as an insurance company, guaranteeing that bond holders receive timely payments of cash flow (for this service GNMA charges 6 bps on every loan, referred to as their Guarantee Fee, or G-Fee). When borrowers are late with payments, or miss payments, it’s the responsibility of the issuer to make up for the missed P&I payment to the holder of that security. This can be a huge outflow of cash per month considering your responsibility is to EVERY bond that has ever been issued by the originator. Anyone issuing GNMA securities back in early 2020 when COVID hit, and the term “forbearance” went mainstream, remembers that moment. Possessing the capital to weather P&I shortages is an absolute must.

“Most often overlooked is your Trailing/Final Docs department. Your last responsibility as an issuer is to make sure that trailing docs (final title/deed or mortgage) get to your custodian for final certification. This needs to be done within 365 days of issuance. This may not be a huge problem for some, but states like Hawaii come to mind, where turn times of county recorders are historically slow and getting a certified copies of anything may take months.”

James wrapped up with, “Everything above is scrutinized by GNMA during the approval process. As I mentioned before, possessing the right individuals, having strong relationships with vendors, and possessing very strong operational controls should be viewed as a requirement before submitting your application.” Thank you, James!

Capital Markets

Many mortgage rates are firmly in the 7 percent range now, and certainly 6 and 6.5 percent pass through mortgage securities are the norm for hedging. We might just be here for the remainder of 2023. The solid economic news certainly doesn’t point to lower rates any time soon.

Monday was a quiet day for those in the mortgage industry, with few locks, many people out of the office, and an early close ahead of the Independence Day holiday. Markets shook off warnings about cooling growth and a slowdown in manufacturing, likely because the highlight of the week will be Friday’s fresh look at the labor market, with June Nonfarm Payroll data following May’s big upward payroll surprise. U.S. IHS Markit Manufacturing PMI remained in contractionary territory for the eighth consecutive month in the final reading for June while the ISM Manufacturing Index fell further into contractionary territory. The manufacturing sector continues to operate in a state of contraction as optimism about the second half of 2023 weakens amid recession concerns. Some would argue that investors are still too optimistic about the prospects for economic growth and the ability of the Fed to stamp out inflation.

There was a better-than-expected Construction Spending report for May, in at +0.9 percent month-over-month. On a year-over-year basis, total construction spending was up 2.4 percent due to renewed strength in new single-family construction despite a jump in mortgage rates. Economic data over the last week continued to show a resilient U.S. economy. The final estimate of first quarter GDP was unexpectedly revised higher from 1.3 percent to 2.0 percent as additional data on consumer expenditures contributed to the increase. The personal consumption expenditures index (4.1 percent) remained well above the Fed’s target. Home price data from Case-Shiller indexes showed increasing prices in April while building permits increased 5.6 percent to an annualized rate of 1.496 million units in May. The lack of existing homes for sale has led to price increases on the limited available for sale inventory as well as an increase in new construction. Consumer confidence reached its highest level since January 2022 due to a strong labor market and receding fears of recession. We also learned last week that consumer confidence rose to its highest level in 17 months in June amid a brighter take on the current situation and a less dire assessment of the future.

Markets return to a relatively quiet calendar today, though there is some potential market moving potential from the release of the minutes from the June 13/14 FOMC meeting, Redbook same store sales, May factory orders, and remarks from New York Fed President Williams. We begin Wednesday with Agency MBS prices little changed from Monday and the 10-year yielding 3.86 after closing Monday at 3.86 percent; the 2-year is up to 4.91 percent.

Jobs

“In our most recent Chrisman post, MWF announced our Growth Strategy into the mid-west and Southeast markets. Most recently, we are pleased to announce the addition of Jeff Hemm RVP in Idaho and the Pacific NW, and the expansion of our new Branch in North Carolina. Jeff is a well-known leader in our industry and will bring a strong leadership presence in our new markets. MWF is excited to have TJ Powell on our team and the entire North Carolina team as we grow in new markets and expand in Florida. “I’m proud of our Team and the efforts to expand the MWF family in new areas. This is part of our written growth strategy and an important part of our overall company expansion,” Ed Adams, SVP Production. For information about our growth plans and career opportunities, contact Ed Adams.”

“Is your firm interested in launching a wholesale mortgage enterprise that’s mission-driven? Our group has a combined 100-year history in mortgage banking (operations, sales, underwriting, and capital markets) with a proven track record of generating over $2 billion annually over the last three decades. There are two participation opportunities: investment or joint venture. Our team includes an experienced and trusted sales force, operators, tech stack, warehouse lines, and take-out investors. Although we are currently based in California, we are actively working towards expanding to the East Coast and Southeast regions. Our expertise lies in Non-QM; however, we offer conventional and will offer government loans as well. Our focus is on serving underserved communities, and our long-term goal is to become a CDFI to ensure fair lending practices. If interested, please reach out to Chrisman LLC’s Anjelica Nixt to forward your note.

Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

July 3, 2023 by Brett Tams

The Supreme Court has blocked President Joe Biden’s student loan debt relief plan, saying his administration lacked authorization under the HEROES Act to forgive up to $20,000 in student debt per borrower.

Some 43 million borrowers won’t see a cent of the debt cancellation promised by the White House last year. Under current guidance from the Education Department, borrowers must get ready to resume student loan payments starting in October on their full student loan balance.

On Friday afternoon, Biden announced that his administration was pursuing a student debt cancellation plan B. This route leans on a different legal avenue than the one struck down by the Supreme Court, and the process could take a year or longer. But a plan B remains far from guaranteed, and there is no timeline yet. Take steps to prepare for repayment now.

“Now that we have the decision, we can move forward,” says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors. “There are a lot of borrowers who have been in limbo waiting to see what was going to happen.”

What did the Supreme Court decide?

The court ruled in two cases, and struck down the cancellation through the second case. All nine justices unanimously dismissed the first case, Department of Education v. Brown, because they found the plaintiffs had no standing to sue since they “fail to establish that any injury they suffer from not having their loans forgiven is fairly traceable to the Plan.” The two plaintiffs — individuals who claim they weren’t eligible for part or all of the relief — said they were harmed by not having the opportunity to participate in a notice-and-comment period for the program.

In the second case, Biden v. Nebraska, the court found that at least one plaintiff, the state of Missouri, had the right to sue. Six states sued jointly — Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina — alleging the relief would harm tax revenue in those states in addition to the finances of certain state-based loan agencies.

With standing established, a 6-3 majority of justices declared that Biden’s student debt cancellation plan, enacted under the 2003 HEROES Act, was unconstitutional. Chief Justice John Roberts delivered the opinion of the court, joined by Justices Clarence Thomas, Samuel Alito, Brett Kavanaugh and Amy Coney Barrett.

“The Secretary asserts that the HEROES Act grants him the authority to cancel $430 billion of student loan principal. It does not,” wrote Chief Justice John Roberts in the majority opinion. “We hold today that the Act allows the Secretary to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, not to rewrite that statute from the ground up.”

Justice Elena Kagan penned the dissent, joined by fellow liberal justices Sonia Sotomayor and Ketanji Brown Jackson.

How did we get here and what’s next?

President Joe Biden’s student debt cancellation plan, first unveiled in August 2022, promised to erase up to $10,000 per individual borrower earning less than $125,000 annually or per married couple earning less than $250,000, and up to $20,000 for those who received a need-based Pell Grant while in college. The White House said that 90% of the relief would go to borrowers earning less than $75,000 per year.

Roughly 26 million borrowers applied or were automatically eligible for relief — and 16 million of them were approved by the Education Department and subsequently sent to loan servicers. The White House opened debt relief applications in October but closed them a month later as lawsuits swirled. The Supreme Court soon agreed to take on two of the lawsuits and held oral arguments for student debt cancellation on Feb. 28.

If you were among the millions of borrowers counting on this relief, you still have options to lower your monthly payments and even get some of your debt forgiven. Here’s what else borrowers need to know, and how to prepare for the impending end of forbearance.

What should I do now?

Get ready to make payments

Federal student loan payments are set to resume soon, with no possibility of further forbearance extensions. Interest will start accruing again on Sept. 1, and borrowers will have to resume monthly payments on their full student loan balance starting in October.

“Take your time, get very organized, identify where your loans are, what your repayment expectations are, sit down and actually create your own budget or spending plan,” says Stacey MacPhetres, senior director of education finance at EdAssist by Bright Horizons, an education and child care company. “And then take the time to figure out what you need to do.”

If you set money aside during the payment pause, consider making a lump sum student loan payment toward your balance before Sept. 1 to avoid racking up interest.

Find your servicer and set up payments

Check to see who your servicer is. Roughly 44% of borrowers now have a different federal student loan servicer than before the pandemic, according to the Consumer Financial Protection Bureau. You can identify your servicer by logging into your studentaid.gov account with your FSA ID or calling the Federal Student Aid Information Center at 800-433-3243.

Your servicer can help you do the following:

Check that your contact information is up to date.
Determine the amount you owe, the size of your monthly payments and when your first bill will be due.
Set up auto-pay. If you had this set up before forbearance, you’ll need to sign up again.

Expect long wait times when calling your servicer, cautions Scott Buchanan, executive director of the Student Loan Servicing Alliance. You may also be able to check some of this information on your servicer’s self-service online portal to avoid the customer service bottleneck.

Ask about income-driven repayment plans

If you anticipate not being able to make your student loan payment, your servicer can set you up with different payment plans and relief options. Consider asking about income-driven repayment (IDR) plans, which cap monthly bills at a set percentage of your income and erase remaining student debt after you make payments for a set number of years. If you earn below a certain income threshold or have lost your job entirely, you could pay as little as $0 per month under an IDR plan.

And a new IDR plan is in the pipeline that could cut monthly payments in half for most borrowers with undergraduate loans, and fast-track some with lower balances to forgiveness.

“I don’t know whether that plan will be ready to go in the fall,” Mayotte says. “But I know that there is a strong desire by the administration to get that plan, whatever it looks like, up and running sooner rather than later.”

If your student loans are in default

A temporary government program called Fresh Start could help if you had student loans in default before the payment pause. The program gives these borrowers the opportunity to re-enter repayment in good standing and access IDR plans and other relief.

Though borrowers will have one year to enroll in the Fresh Start program once forbearance officially ends this fall, they should apply as soon as possible, advises Michele Shepard, senior director of college affordability at The Institute for College Access & Success. The application is already open. You can sign up for the Fresh Start program today by going to myeddebt.ed.gov and logging in to your account, or calling the Federal Student Aid Office at 1-800-621-3115.

What if I can’t repay my student loans?

Shortly after the Supreme Court announcement on June 30, Biden announced a 12-month “on-ramp” repayment program. Borrowers who can’t make payments won’t fall into default until a year of missed payments, but interest will still accrue, so you should pay if you can.

Contact your servicer before you miss a payment. Ask about your options to lower or temporarily suspend payments through student loan deferment or forbearance. Start with an IDR plan, which sets payments at a portion of your income and extends your repayment term. These options can help keep you out of student loan delinquency (when a payment is late by as little as one day) and default (when a payment is at least 270 days late).

Don’t skip student loan payments. Defaulting on your loans can set off a devastating cascade of financial consequences, says Kristen Ahlenius, director of education at workplace financial wellness company Your Money Line. This can include credit score hits, seized paychecks and more.

Other ways to get help

Some nonprofit and legal organizations can offer student loan help as you navigate a return to payments. But be aware of scams, and avoid debt relief companies and anyone offering loan forgiveness. Only the government can forgive your student loans.

Here are some vetted student loan help resources to consider for information, advice or both; they are established organizations with verified histories:

“It feels like there’s a lot of fervor and panic right now,” MacPhetres says. “But there’s time, there’s opportunity, lots of repayment options and the servicers are there to help.”

Source: nerdwallet.com

What steps could government take to help mortgage borrowers?

Improve help with monthly payments

Reintroduce tax relief on mortgage payments

Ease rules on interest-only mortgages

Continue insisting lenders help borrowers

Target certain groups

Introduce a mortgage protection fund

Order the Bank of England to hold rates

Why further loss mitigation reform and expansion is still needed

Real-time solutions for real-time policy changes

Real-time data standards for compliance and customer retention

Does Mortgage Forbearance Need to Be Repaid?

Fannie Mae and Freddie Mac’s Post-Forbearance Approach

A Post-Forbearance Solution That Makes Sense for FHA Loans

COVID-19 National Emergency Partial Claim

What Is a Mortgage Payment?

Pros and Cons of Lowering Your Mortgage Payments

6 Ways to Lower Your Mortgage Payments

1. Give Your Mortgage a Bonus

Refinance your mortgage and save–without the hassle.

2. Reap Rental Income at Home

3. Extend the Term of Your Mortgage

4. Get Rid of Mortgage Insurance

5. Appeal Your Property Taxes

6. Refinance Your Mortgage

Tips on Lowering Your Mortgage Payment

The Takeaway

FAQ

How can I make my mortgage payment go down?

How can I lower my house payment without refinancing?

What is the average mortgage payment?

The backstory

The X factor

Existing-home sales

The forecast

The backstory

New home sales and housing starts

The forecast

The backstory

Home prices

The backstory

The X factor

Housing demand

The economy

The forecast

The backstory

The X factor

Conclusion

Student Loan Refinancing Recap

Pros of Student Loan Refinancing

Can Save You Money

Can Give You More Flexibility

Simplifies Your Repayment Plan

Cons of Student Loan Refinancing

You’ll Lose Federal Benefits and Protections

It May Not Save You Money

You May Get Less Help When You’re Struggling

How Much Does It Cost to Refinance Student Loans?

Common Fees When Refinancing Your Student Loans

Serious savings. Save thousands of dollars thanks to flexible terms and low fixed or variable rates.

Reducing the Cost of Refinancing Student Loans

Considering SoFi to Avoid Upfront and Hidden Costs

FAQ

Does it cost money to refinance loans?

What is a finance charge on a student loan refinance?

How much does it cost to consolidate student loans?

Profitability Analysis, Closed-End 2nd Products; Ginnie Ticket Primer for Government Program Lenders

Option 1: Copy and send this link

What did the Supreme Court decide?

How did we get here and what’s next?

What should I do now?

Get ready to make payments

Find your servicer and set up payments

Ask about income-driven repayment plans

If your student loans are in default

What if I can’t repay my student loans?

Other ways to get help

Refinance your mortgage and save–
without the hassle.

Serious savings. Save thousands of dollars
thanks to flexible terms and low fixed or variable rates.