fbpx
  • Tel: (651) 552-3681
    Email: joe@joemetzler.com

  • Minneapolis Area COVID 19 Real Estate and Mortgage Resource Page

    Hello fellow Minneapolis, and upper midwest residents. This page is meant as a free resource surrounding the Corona Virus and home financing that has been interrupted by Covid-19. From selling your home, buying a home, or just refinancing your home... it is a new world, at least temporarily. 

  • Minneapolis MN
    Covid 19 and mortgages
    Corona Virus and mortgages
    Corona Virus
  • COVID 19 related mortgage guideline changes

    The economic impact of the shutting down of the economy to prevent the spread of COVID 19 is causing a big disruption in the financial markets. Fear and the unknown are the enemy of the markets, and obviously the there is a lot of fear and unknown going on right now. Hopefully this will all settle back down, but in the mean time, below you'll find some of the more important changes going on in the mortgage industry.

    BASIC GUIDELINE CHANGES

    Many loan guidelines have tightened up, with one of the most common is lowering of the maximum debt-to-income ratio allowed. Another big one is related to credit score requirements.

    A major issue today is massive job loss. While many people are still working, many more are not. If you have been laid off, furloughed, or had your hours reduced, this will likely be a problem until you return to work. It does not matter if you've been pre-approved, or your loan is about to close. Most lenders now require re-verification of employment a day or two prior to closing. This is because we may have verified your job two weeks ago, but you were furloughed yesterday.

    Contact your Loan Officer immediately for more information on your specific situation if you have been effected.

    Guidelines for age of documents have been shortened. For example, you may have supplied a 401k statement from 60-days ago, but the value today is a lot less, so they want the most current statement available.

    Start a basic loan inquiry - No SSN needed

    0%

    I agree to the following terms & conditions

    I understand this is not a full loan application, and rather just a basic information contact form. No loan decision can be based on this limited information. I also hereby certify that I give permission for the lender to contact me via postal mail, e-Mail, text, and phone calls to help me determine my loan qualifications.

  •  SOCIAL DISTANCING

    Mortgage companies: In office loan applications have been falling for years as most people simply do online loan applications, do electronic signatures, and upload documents electronically, so not a huge disruption if you want to apply for a home loan.

    Title Companies: Most mortgage lenders still require live inked signatures on loan documents. A few have embraced electronic signatures, but very few. As with so many things, this virus may help make electronic signatures more common in the future.

    At the actual closing, I’ve seen both closers and clients in masks sitting at opposite ends of large tables. Buyers and sellers in different rooms, those not needed to sign staying away, and even closings in parking lots where the title closers hands you documents to sign through a tiny open in your car windows while you stay in your car.

    At Closing: 

    • Follow prevention and preparation guidelines from the Centers for Disease Control and Prevention, which are available at https://www.cdc.gov/coronavirus/2019-ncov/prepare/prevention.html.
    • Do not shake hands.
    • Bring your own pens or request a new pen to sign documents. Do not share pens.
    • Wash your hands before and after the appointment with soap and water for at least 20 seconds.
    • If soap and running water are not available, use an alcohol-based hand rub that contains at least 60% alcohol.
    • Avoid touching your eyes, nose, or mouth with unwashed hands.
    • Avoiding close contact.
    • Wear a mask. Your closer will be wearing one.

    Appraisals: Many people are afraid to let an appraiser in the their home, and many appraisers are also afraid to go in your home. New temporary guidelines from Fannie Mae, Freddie Mac, and FHA are helping by allowing alternative appraisals, know as Desktop Appraisals, or Drive by appraisals, where the appraiser still values the home, but does not physically enter.

    Homes For Sale: Real Estate Agents are trying everything possible to continue to sell homes with some sort of social distancing. Virtual tours, spacing of people at open homes, scheduling viewing so no two groups are in the home at the same time, requiring masks, etc, are all things I've heard.

    GOOD CREDIT

    For good credit clients looking to either purchase a home or refinance a home using standard conventional loans under $510,400, mortgage interest rates are still great, and most everything is still the same.

    FHA loans and VA loans are still available, but rates have jumped up a bit.

    WEAKER CREDIT

    For clients with weaker credit, primarily those under 680, we are seeing huge changes. Either loan options have temporarily gone away completely, or if any lender is still offering loans, the rates have jumped up A LOT.

    Bad credit loans, primarily credit scores under 640, there are pretty much no loan options today.

    JUMBO LOANS

    Many jumbo loans have seen minimum credit score requirements increase, along with bigger down payment requirements.  Interest rates are also up a bit.

    NON-TRADITION LOANS

    Many non-traditional loans loans, sometimes known as Non-QM loans have completely disappeared. This includes bank statement loans, and asset based loans.

    REHAB LOANS

    Rehab loans that let you buy a home, and get the money to repair it all in one loan, primarily the FHA 203k loan, and the Fannie Mae Homestyle loan, have been suspended by most lenders.

    INTEREST RATES

    Excellent credit customers are still in pretty good shape for current mortgage interest rates. As your credit score drops, your rate will go up.

    Loans with riskier feature, for example, a cash out refinance will be higher, especially if you have weaker credit scores.

    Click here for current mortgage interest rate averages

    FORBEARANCE

    The government have made getting a forbearance, essentially just a pause in your mortgage payments, very easy, with no proof of hardship required.

    If you are struggling financially, understand that this just pause your payment. Once the pause is over, you owe all the back payments, plus the current month.

    Let’s do some ‘mortgage forbearance math’.

    Let’s assume Mom and Dad have a mortgage with a $2,000 per month payment.

    Dad gets laid off because of this virus, calls the lender, and asks for forbearance.

    In one phone call, he easily gets 6 months "off" from paying simply because politicians have mandated lenders do it. No questions asked, and no proof of hardship required (dumb).

    Seven months later, Dad is finally back to work, but of course hasn't been able to save any money during the forbearance time.

    The forbearance is now over, and your lender says, now pay the $12,000 in back paused payments plus + $2,000 for the current month, for a total of $14,000.

    Dad almost passes out and says, “WHY??"

    Lender: "That's the 6 months of paused payments (forbearance) plus the current month.”

    Dad: "I can’t do that, can we work something out?"

    Lender: "Sure, we will spread out the $12,000 in paused payments over the next 12 months." (max allowed)

    Dad: "Phew....OK, good. What will that look like?"

    Lender: Your payments will increase to $3,000 a month for the next 12 months." (Math is $12,000 divided by 12 = $1,000 plus your normal payment of $1500).

    Dad: " OMG!!! I can't afford that."

    Lender: "Sorry....."

    Dad: "Can I refinance or something?"

    Lender: "No, sorry. You are high risk because you haven’t made payments."

    Oh boy....
    ——————————————

    In a nutshell, this is forbearance, folks. Forbearance is NOT forgiveness, or deferred payment. It is a short term pause, then you owe everything.

    What Can Happens When The Forbearance Is Over?

    When you are ready to resume payments, the money from the forbearance (pause) needs to be paid back. There are three ways to go about that:

    Lump Sum Payment: If you can afford it, the simplest thing to do is make a lump sum payment and pay off the whole amount you owe. That sounds like a big chunk, but one of the options you have is to pay whatever you can during the forbearance in order to cut down on the amount you owe at the end. See above example.

    Repayment Plan: The second option is to go on a repayment plan. With this, you make your regular mortgage payment plus some extra in order to pay off the amount you still owe from your forbearance over a set period of time. This means they will take the past due payments, divide them by 12 months, and add them to your next 12 mortgage payments. See above example.

    Modification: By modifying your loan, you can potentially roll the balance back into the mortgage. While this sounds simple, modification is a very complete process. All you need to do is look back to the crash of 2007 / 2008 to see the heartache, pain, and hassle of trying to get a loan modification. Many people asked for loan modifications, but few actually got them.

    DO NOT DEPEND ON OR ASSUME YOU CAN GET A MODIFICATION.

     

    Will forbearance hurt my credit score?

    No and Yes:

    Per the CARE ACT, lenders are not allowed to report any paused (missed) payments as a late payment on your credit report, so technically no, it shouldn't hurt your credit score.

    BUT, the word forbearance WILL show up as a comment under your mortgage (I've seen it already). Lenders will know, and will be extremely reluctant to lend to you in the near future.

    Long standing underwriting guidelines have always required lenders review a minimum of your last 12 months mortgage payment history, which we normally just see on your credit report.

    Lenders will likely NOT lend to you under you can prove, document, and verify you've had a normal on time payment history for at least the last 12 months.

     

    Can I get a new loan after forbearance?

    Homeowners who have been granted forbearance from making full payments on their Fannie Mae or Freddie Mac backed loans during the COVID-19 crisis may still be able to refinance or buy a new home when the crisis ends.

    The Federal Housing Finance Agency (FHFA) has announced that Fannie Mae and Freddie Mac will permit borrower to obtain a new mortgage under the following conditions.

    1) They have reinstated their mortgage or have continued to make their mortgage payments despite being in forbearance or

    2) Where forbearance has ended, eligibility will be dependent on making three consecutive payments under a repayment plan, a loan modification, or the recently announced payment deferral option.

    "Homeowners who are in COVID-19 forbearance but continue to make their mortgage payment will not be penalized," said Director Mark Calabria. "Today's action allows homeowners to access record low mortgage rates and keeps the mortgage market functioning as efficiently as possible."

    It's not entirely clear if the two conditions above are BOTH required or if it's an "either/or" situation.  FHFA's press release may offer clarity in the following section, but it's still potentially open to interpretation:

    "Borrowers are eligible to refinance or buy a new home if they are current on their mortgage (i.e. in forbearance but continued to make their mortgage payments or reinstated their mortgage). Borrowers are eligible to refinance or buy a new home three months after their forbearance ends and they have made three consecutive payments under their repayment plan, or payment deferral option or loan modification."

    In any event, we expect there will be some additional clarification offered shortly.