Welcome back to iLeads Mortgage Market Minute, where we bring you the latest, most relevant news regarding the mortgage market. We hope you enjoyed last week’s edition where we talked about Mortgage “Refinance” Search Spike & Housing Isn’t As Doomed As It Seems. This week we’re bringing you: Potential Drop in Home Prices in Certain Markets & The Need for Technology
Fannie Mae, Freddie Mac will only require servicers to advance 4 months of payments on loans in forbearance*
FHFA announces new policy to address servicer liquidity concerns
For the last several weeks, the mortgage servicing industry has been crying out for help, lobbying the government to set up a federally backed liquidity facility for services to address the rapid rise in forbearance due to the coronavirus.
Now, the Federal Housing Finance Agency is moving to help servicers who collect payments on loans backed by Fannie Mae and Freddie Mac, but not in the exact way that servicers were expecting.
Rather than setting up a liquidity facility, which would help servicers cover the principal and interest payments they are required to send investors on loans that are in forbearance, the FHFA is changing Fannie and Freddie’s policies to limit the number of payments servicers will be required to make.
Under the new policy, servicers will only be required to advance four months of missed payments for loans in forbearance. After that, the servicer is under “no further obligation to advance scheduled payments.”
According to the FHFA, this policy applies to all GSE servicers, whether they are banks or nonbanks. Read more in-depth here.
These markets could see the sharpest drop in home prices during coronavirus pandemic*
Home prices were very hot at the beginning of this year and heading into the crisis, and the expectation is that while the gains in values will likely slow, prices will not fall nationally. That is because unlike during the subprime mortgage crisis, when there was a serious glut of homes for sale, there is now an increasingly severe shortage. Home values fell as much as 50% in some markets a decade ago, but market dynamics are far different now, and the supply-demand imbalance favors stronger prices.
In the first two weeks of March, new listings were up 5% annually on average. By the second week of April, they were down 47%, according to realtor.com. April is usually the strongest month for new listings. Read more in-depth here.
Is There A Real Estate Silver Lining In This Crisis?*
The ongoing crisis has thrown everything and everyone for a loop. Social distancing means that schools and businesses are shut down and many people are out of work. A question for our industry is how is this affecting the broader real estate market — and how can investors who are still actively looking for opportunities possibly use the current market situation to their advantage?
If you have cash on hand and good credit, you have a leg up. In response to the economic uncertainty of the current crisis, large homebuying institutions are pausing or backing out of contracts, and banks on the coasts are tightening lending (although I have not seen that as much here in the Midwest yet). Banks will continue to lend, but since a number of borrowers will no longer be able to borrow due to credit restrictions that I anticipate slowly coming to all markets, if you have cash — in the form of a draw from a line of credit, loan from a universal life insurance policy, self-directed IRA, self-directed HSA or cash in the bank or other cash locations — now is a great time to take advantage of it. Read more in-depth here.
[PULSE] With lenders under pressure, need for technology is heightened*
COVID-19 is fast-tracking lenders to a destination they were already traveling toward
COVID-19 has had an immediate impact on the mortgage finance industry – causing borrowers and lenders alike to adapt to a new normal.
In most cases, lenders are being forced to manage their pipelines completely virtually at a time when refinance applications are soaring due to historically low-interest rates. They also need to maintain business continuity while some borrowers may defer payment following forbearance allowances built into the CARES Act.
Consumers have had their lives upended and with human-to-human contact being a significant risk, technology has taken on an elevated role, and now, more than ever before is the lynchpin bringing the industry together. Read more in-depth here.
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