I hope this finds you and your loved ones healthy and not too stir-crazy. Here are a few thoughts on mortgage operations at Johnson Financial Group and the industry in general:
Every lender is saying this, but at Johnson it is reality: Purchase loans are our priority and go into a fast lane for underwriting approval from the moment we get an application. Volume of purchase loan remains steady for homes priced under $500K. A bit slower for higher-priced homes.
Where are rates at? I’m tempted to say “Who Cares?”. Rates are low. Rates have been low for a few years. Rates dipped for a few heartbeats right after the Saudi oil production news. More fuel of course provided by COVID escalation and Fed policy to fight a recession. When the dust settled, rates went right back to where they were in January. Anyone with a rate that starts with a “3” should pat themselves on the back and worry about more important stuff.
Some interesting news here. Freddie and Fannie are temporarily modifying policy based on complications COVID is creating. Specifically, interior inspections may not be required if owner denies access. Johnson Bank is a Freddie Mac lender. Freddie has also loosened up their property valuation software. This means we are getting more “no appraisal required” approvals than before. Our small group of long-time local appraisers continues to meet deadlines on appraisal orders. This is largely due to the fact that we do not have a gazillion refinances going like some of our big-box competitors.
Buyers and Employment
Getting to the important stuff now. People. I’m personally not yet seeing any fall out on loans in process due to income reductions or layoffs. Probably because I am ancient and many of my clients are well-established in professions that are less vulnerable. One question that has come up is the required pre-closing call to employer to verify employment status. Since in many cases there is no one manning the HR phone, we are able to satisfy this final check by obtaining client’s most recent pay statement received prior to closing. I am seeing some understandable hesitation from “move-up buy” clients. Incoming medical and academic staff clients are anxious but still asking to get preapproved and I feel confident they will buy.
You, me, and our clients have likely never had to think about this word. During past economic slumps, lenders went from default to foreclosure with forbearance rarely considered.
Good news here. For clients that qualify, Freddie Mac has authorized lenders to offer a 3 month forbearance plan which could be extended in 3 month increments for up to a full year as the situation dictates. A pending congressional bill currently contemplates a 6 month forbearance with the possibility of extending it to 12 months. After the forbearance period is over, and the crisis has passed, lenders will craft terms that may include:
A repayment plan
A payment deferral – moving some of the payments to the end of the loan
A loan modification whereby we may alter the terms of an existing mortgage to make the repayment of the forbeared payments affordable after the crisis.
Clients will also be able to choose to make partial payments that are affordable based on reduced income, so that the unpaid amount at the end of the forbearance period is not so large.
The vast majority of home mortgages are owned by either Freddie Mac or Fannie Mae. I would assume Fannie’s forbearance plan will be identical to Freddie’s.
Business as usual
At Johnson Financial Group, our mortgage team remains fully staffed and we have seen no slow down even though everyone is working from home. We are closing a record volume of mortgages right now but morale is high and our business partners (realtors, appraisers, title company staff) have been fantastic in helping us keep things on track.
Thanks for taking time to read this and please know that I’m here for any questions.
Michael Bacsi NMLS ID: 770833
JOHNSON FINANCIAL GROUP
VICE PRESIDENT – SENIOR MORTGAGE LOAN OFFICER
10 E. DOTY STREET #100, MADISON, WI 53703
Apply Online: https://mortgage.johnsonfinancialgroup.com/michaelbacsi