Pandemic mortgages

Jono Sexton is one of our trusted lenders. Today, he shares his thoughts and observations about changes in mortgages since the pandemic.

People ask me what is different about mortgages in a pandemic. Here are a few differences:

          - The all-important final employment verifications done prior to closing cannot happen

sooner than 5 days before. Used to be 10. This is a major hassle.           - All borrowers have to sign an attestation form that they are not aware of any impending

changes to their employment or income.           - In many cases, self-employed borrowers have to provide months of bank statements to

confirm receipt of income.           - Borrowers have to document that they have paid their 2019 taxes.

There are many others. Call a lender and ask them more. Interest rates are incredibly low, so lots of people are refinancing. This affects buyers.

- As a result of all of the refinancing activity (which is easing a bit at last), appraisers and

attorneys are extremely busy. In many cases, appraisals can take a minimum of 3 weeks.

Some lenders do not even allow borrowers who are refinancing to lock in a rate until after

the appraisal has been completed. - With interest rates at historic lows, banks are looking to beef up their residential mortgage

loan portfolios. FNMA sporadically (approximately 10% of the time) waives the need for

an appraisal. I wonder if this is just the start of a larger easing of underwriting guidelines?

- There's an increased possibility that inflation accelerates (as a result of the massive

amount of economic stimulus and spending), and interest rates increase, we could be

heading for the next big correction in the market, perhaps around the end of 2022. Condos and single-family homes are on opposing sides of the inventory spectrum.

- For the first time that I can recall, many condo deals have no offer deadlines, and allow

mortgage contingencies, while single-family homes have deadlines and no mortgage

contingencies. A telling story. Appraisers find more than enough comps in the city (for

now), but not as many in the suburbs.

Miscellaneous observations: - Subprime credit card customers are seeing their credit limits cut significantly. - Be very careful with any sort of seller credit on a P&S. It has to be worded properly, and meet

lending guidelines.

Have a question about anything here? Contact Liz & Ellie and we'll get you clear answers. We're here to help.