Now that the 2020 election has seemingly come to a close, many Americans are anticipating what the housing and mortgage industry may look like with Biden as president. Throughout his presidential campaign, Biden pledged to make some changes so that Americans will have “access to housing that is affordable, stable, safe and healthy, accessible, energy efficient and resilient,” according to his campaign website. In a Housing Wire article reporters James Kleinmann and Tim Glaze detail some of the possible changes that may be proposed by Biden.
To begin, Biden is looking to introduce a tax credit of close to $15,000 for first time home buyers. The purpose of the tax credit would be to help first time home buyers, specifically younger Americans as well as Black and Hispanic Americans. Although, according to the article, “Industry observers … weren’t optimistic that Biden would have the legislative muscle to get the full initiative through, unless Democrats also take the Senate.”
Biden also promised to put more regulation in place for agencies such as Consumer Financial Protection Bureau, where it is anticipated he will select a new leader of the agency. Its expected he would also look to continue the conservatorship of GSEs. According to Tim Rood, head of government & industry relations for Situs AMC, “If Biden wins, he is going to look to use Fannie and Freddie as instruments of public policy to help close the homeownership gap, the wealth gap, cap people’s payments on both rental and occupied housing, support the construction of 1.5 million to 2 million affordable housing units.”
Nevertheless, the results of the 2020 general election seem to point toward a split government, with a Republic-led Senate and Biden, a Democrat, as President. This balance is predicted to work in favor of the mortgage and real estate industry. The Republican led Senate may be able to push back on some of the tax policies, which could impact the investment and cost of owning a home, Biden has promised to introduce.
The undisputed belief among industry experts is that rates will continue to remain at the historically low rates for the next few years as the economy continues to stabilize.
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Despite the fact that many Americans have struggled financially as a result of the pandemic and subsequent shut downs that led to layoffs and business closures, foreclosures in the first quarter of 2020 declined almost 10% from the previous year. Specifically, home mortgages backed by Fannie Mae and Freddie Mac, who entered into a conservatorship and have been working to implement foreclosure prevention.
While third-party foreclosures as well as foreclosure starts both saw drops in numbers in comparison to the first quarter of 2019, the number of forbearance plans rose from less than 7,000 in the first quarter of 2019 to over 170,000 in the first quarter of 2020. Additional efforts to keep Americans in their homes and avoid foreclosure include loan modifications where homeowners have received lower monthly payments, principal forgiveness or extended term modifications.
According to an article published by DSNews.com, reported by Krista F. Brock, Freddie Mac and Fannie Mae, “Since entering conservatorship, Fannie Mae and Freddie Mac have completed 4.4 million foreclosure prevention efforts, with 3.7 million homeowners able to retain their homes as a result.” The efforts are resulting in positive numbers with regards to loan performance as well. The number of loans, according to the FHFA’s Report, between 60 and 90 days delinquent are showing slight declines from the end of 2019.
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As American homeowners suffer economic losses due to the global pandemic, mortgage companies allowed their borrowers to pause their mortgage payments, also known as forbearance. This offers some relief and peace of mind to homeowners struggling to pay their monthly bills due to job loss or a reduction of pay.
However, in recent weeks, incorrect or misinterpreted information has caused some homeowners to panic, believing that once the forbearance period comes to an end, they will be expected to pay their missed mortgage payments back in a lump sum. An article published by HousingWire.com sets the record straight.
The article, written by Ben Lane, indicates “Fannie Mae and Freddie Mac each issued a statement Monday, reiterating that borrowers are not required to repay their missed payments all at once when their forbearance period ends.” Additionally, Lane quotes the Federal Housing Agency Director, ‘“During this national health emergency, no one should be worried about losing their home,” FHFA Director Mark Calabria said in a statement. “No lump sum is required at the end of a borrower’s forbearance plan for Enterprise-backed mortgages.”’
Its important for borrowers and lenders to understand and communicate the next steps and what will be expected of the borrower once the forbearance period comes to an end. Many lenders will offer a repayment plan, a payment deferral or a modification of the loan. The borrower should reach out directly to their lender and discuss the details of these next steps.
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The national delinquency rates on home is a number that may not be tracked diligently by real estate professionals. It isn’t as widely tracked as mortgage interest rates, average days to close and housing price fluctuations, but it may offer insight to the health of the American economy.
The Mortgage Bankers Association released the most recent national delinquency rate and it is lower than it’s been in 18 years. According to an article published by the Chicago Tribune, “That’s a big deal, because when large numbers of owners do the opposite – stop paying on their home loans for months at a time — the entire economy feels the effects. Spiking delinquencies in 2007-2008 ushered in the global financial crisis and spawned tidal waves of foreclosures that devastated borrowers and their communities.”
It sounds like it is some great news, but what has caused the number of delinquencies to drop? Perhaps, and most likely, we can thank the underwriting rules that were tightened up back in 2010. Specifically, mortgage lenders are requiring a high FICO score to qualify, avoiding approving mortgages to high risk borrowers more likely to default. These changes, coupled with continued low rates, a healthy economy and a drop in unemployment are helping ensure more home owners stay on track with their payments.
Many American home owners have been relieved to see the real estate market, and their home value, rebound from the real estate collapse which began more than ten years ago. At the height of the real estate market crash, many homeowners found that their homes were worth less than they owed on the home. In a recent report from Zillow, the percentage of homeowners “underwater” on their mortgage has finally fallen below ten percent, the first time the number has been this low since the collapse.
However, according to an article published in the Chicago Tribune, by Darcel Rockett, Chicago homeowners may not be feeling the same market rebound. In fact, Rockett states, “According to Zillow’s 2017 Q4 Negative Equity report, the city has the most homes with negative equity of all the metro areas in the country.” A little over 15% of Chicago metro homeowners are underwater on their mortgage. More alarming, about 20% of these homeowners with negative equity owe two times as much as their home value.
Homeowners are faced with limited options when they owe more than their house is worth. They can wait out the market until their home value returns to a value that matches what they owe. However, some homeowners may choose to cut their losses and sell their homes at the current value. Fournier Law Firm can assist homeowners with the process of a short sale. Contact us at 630-792-1000 or firstname.lastname@example.org
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The real estate market has been improving significantly over the past several months. Home prices are on the rise and homes aren’t sitting on the market for very long before going under contract. This is great news for home sellers, but challenging for those looking to purchase a home. First-time homeowners might find the conditions overwhelming and intimidating.
CNN Money published an article written by Beth Braverman which outlines several mistakes first-time home buyers make and tips for avoiding these pitfalls. Important reminders noted include getting pre-approved for a mortgage early in the home buying process, not maxing out the mortgage limit provided by the lender and keeping emotions out of the decision making process.
It is highly recommended that all prospective home buyers get pre-approved for a mortgage early in the home buying process. It allows the buyer to have an idea of how much money a bank is willing to lend them for a home. As Braverman points out, “Second, it shows sellers that you’re serious and gives you slightly more standing if you’re competing for homes with all-cash buyers.” This can be an important advantage in a competitive market.
However, upon receiving a pre-approval, home buyers maybe anxious to bump their budget up to the maximum amount the bank has approved. It is wise to review a detailed budget to be sure the monthly budget can handle the mortgage payment, including potential income changes and other unexpected housing expenses.
As the home search continues, there will be bumps in the road, houses lost to other buyers or dream homes priced just outside the budget. Braverman warns, “In that kind of environment, it’s easy to fall in love with a house that’s out of your budget, or get caught up in the heat of a bidding war and end up paying more than you expected.” Being level headed and taking emotions out of the decision making process will ensure financially wise decisions are made.
For more details and additional tips, read the entire article.
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Come this July, you may see a boost in your credit score. The three major U.S. personal credit monitoring firms, Experian, TransUnion and Equifax, will be removing some borrowers’ civil judgement and tax lien information from their credit reports.
According to an article published by Fortune.com, written by Kevin Lui, since 2015, these credit reporting firms have been working to correct credit reporting mistakes and removing information unrelated to the borrower’s loan application by omitting information deemed unnecessary to lending. In fact, according the article, “…in 2011 alone, 8 million complaints about wrong information in credit reports were received by the three major credit-reporting firms, according to the CFPB”.
This latest announcement could result in some borrower’s credit scores increasing by up to 20 points. An increase in a credit score can increase the likelihood of securing a loan and is also helpful when applying to rent a home and even can affect future employment opportunities.
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Over the past fifteen years, the percentage of first-time home buyers that fell between the ages of 20 and 29 has increased from 17 percent to 28 percent of all buyers, according to TransUnion. Following the same trend, first-time home buyers between the ages of 20 and 39 increased 16 percent in that same 15 year span; ultimately, the age group made up 60 percent of all first-time home buyers by the end of 2015.
An article published by The M Report by Brian Honea indicated that TransUnion anticipates up to 17 million first-time home buyers will enter the real estate market over the next five years. With this influx of new homeowners comes positive economic news for both local economies as well as the mortgage lending industry.
Joe Mellman, VP and Mortgage Business leader for TransUnion, explained that first-time home buyers help to
improve the local economic activity as a result of increased construction and home improvement demand. Mellman also describes, from the perspective of mortgage lenders, “First-time home buyers are valuable prospects in the eyes of many mortgage lenders, as that time in a borrower’s life often corresponds to additional financial needs,”.
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For the first time in the past nine months, mortgages for home purchases have accounted for more than 60 percent of all closed loans. According to a report released by Ellie Mae, the rate of actually reached 62 percent in May.
Additionally, the rate of loans that closed improved to 70 percent. Specifically, the rate of home purchase loans that closed was 75 percent, with the rate of refinancing closes lagging slightly at 67 percent.
The report also notes that home buyers who are financing their home purchase have seen an average of 45 days to close their loan, which is an increase of one day from last month.
The article published by REALTORMag on June 16, 2016 provides data from the Ellie Mae Report, and also discusses the percentage of home borrowers with “high” credit scores, which exceeded 80 percent for conventional loans.
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