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FHA s NOT Dead; Forbearance is NOT Forgiveness; and this Market of the Moment is all about Liquidity

After spending hours reading the 880-page Stimulus Package that rolled out on Friday; as well as the Ginnie Mae Letter proposing a Pass Through Assistance Program (PTAP) I have come to a few conclusions.

Let's start with FHA.. FHA is NOT Dead!  

I have heard too many rumors around this from lenders and Realtors alike.  Just as many other loan products, FHA has to change in this environment but it is not going away.  FHA loans with FICO scores under 660 have historically high default rates.  Add to that our current mortgage forbearance environment with homeowners out of work; Servicers are not able to continue paying investors (as they are required to do by Ginnie Mae) when they have no money coming in (i.e. no mortgage payment revenue).  This servicer crunch is the essence of the Ginnie Mae letter setting up a PTAP.  The relief this provides is to be determined.  So in the meantime, lenders and servicers have to protect themselves by shrinking the credit box.. i.e. higher credit scores and lower debt to income ratios.

Second, Forbearance is NOT Forgiveness... neither is it Deferment.

Today Servicers are doing the best they can to answer all of the inquiries.  Remember.. we just came off of historically low foreclosure rates.  Many Servicers were not staffed for times such as these.  New information keeps coming out... especially as the 880-page bill is rolled out.  

First, let me say.. if you can, you are best served to make your mortgage payment... it will keep you on the road to wealth building. 

If you can't.  contact your Servicer.  For the most part, they are offering 90 day forbearance options, which simply means delaying your payments until the end of that window (with all past due amounts owed at that time).   At the end of 90 days borrowers can call their Servicers back and reassess their options based on agency and investor guidelines:
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  - pay the back owed in full
  - start another 90 day forbearance period 
  - go into deferment.. i.e. moving the amount owed to the end of the term
  - do a loan modification
  - start the foreclosure process

Lastly, Every Market has its Moment
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This moment calls for liquidity!!  One for opportunities.  Two for protection.  This market is unlike any other in the past and our hot spring market could be delayed.  Think about your funnel.. anyone in it is closing.. so March and April are still great months.  May and June however, is dependent on the top of the funnel.. which right now is mostly on hold. So protect yourself now and reassess your budget and save your commissions.  because as much as May and June might be slow.. there will be opportunities on the other side!  

The housing market was strong going into this and will be strong coming out!

Stay tuned as I send out more regular updates.  And give us a call if you want to know what this means to you!  Our team is ready to not only keep you informed but support you!

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Did you get the LOUD mobile alert this morning reminding you the state is on lockdown?  Sorry, what I meant was Stay at Home. On Monday Denver Mayor announced the City and County of Denver was on Stay at Home status. Essential workforce added Realtors, Marijuana and Alcohol within hours.. Colorado's shortest prohibition... and somewhat of a interesting pairing??? Additional counties followed suit the next day. Then on Wednesday, Governor Polis changed directions and put the whole state in a Stay at Home position. Is he wrong? I don't think so. But State trumps County.. there's no play on words there... seriously.   

Right now, financial services are essential.. notaries, banks, lenders. But not Realtors... at least not yet. Damien Cox wrote an eloquent letter posted on the CAR website and linked here stating the case for honoring the stay at home for new business; but taking care of existing business. He also quoted three stories of pushing safety to complete transactions. His words hit home.

So team.. we pause. You are being called to pause and so am I. Of course you know me.. I'm a Keep Business as Usual kind of girl. But... there is a lot going on right now on a daily basis. Just this week, Jumbo was put on hold on Monday, Non-QM on Tuesday and just yesterday Down Payment Assistance.  

There are messages coming out of the medical industry that this could soon be over? Soon? Over? There is talk right now that they're might be a treatment plan by April. Now that is not a full solution or even the absolution of COVID-19.. but a plan, and a plan is HOPE. So guys this is not a forever thing... it's a temporary pause.

So use this time! Not only spending quality time with the family you are locked up with ;-) but also in educating yourself and staying on top of the market trends. Reach out to all of your clients, staying top of mind with them as well and educating them.

In that vein, we are kicking off Agent Ignite Coffee Talk tomorrow morning ... as my gift to you.10:30 every Friday until we are all released. Tomorrow we will talk about the jump in jobless claims and pressure on mortgage servicers and their impact on you. RSVP Here.

Until then, stay safe, stay well.  

Would having more cash on hand, more gap in your budget help you right now to weather the turbulence we are facing? We have all been given a gift of equity during the last eight years. It is time use that gift, to protect ourselves and our families during this period of uncertainty. Here are three options you can take RIGHT NOW to increase your liquidity.. your cash on hand... using your home.

1 - Do a cash out refinance. Yes, a cash out refinance might have a higher interest rate; but when used as a financial strategy, that does not matter. What if you could pay off all other debts and/or add cash to your savings account right now. Equity in your home is illiquid, locked up and not serving you. If we could instead convert equity to cash to pay off debts, we could save hundreds, if not thousands, of dollars a month. If rates continue to be low, and I feel strongly they will, we can do a refinance in six months to lower your payment and secure your financial future.

2 - Get a HELOC. A HELOC is a Home Equity Line Of Credit. This is a second loan that sits on top of your current first mortgage. It is typically a variable interest rate and acts like a line of credit you can draw from. You can get a HELOC on a primary home, second home or investment. There are several second lenders who are no longer originating. Don't worry! There are others who are.. and I have the list. Feel free to reach out and given your individual solution, I can provide the best referral options.

3 - Request a Mortgage Forbearance. This needs to be requested through your Servicer.. the company you write your checks to each month. Forbearance allows you, the borrower, to apply for a pause in mortgage payments without risk of negative credit reporting and foreclosure proceedings. The length of time available will be determined by the duration of this crisis.

Please know we are here to serve you in anyway we can... including pointing you to the appropriate resources. Wishing you and your family good health and stability.

Nicole Rueth
NMLS: 239840
The Rueth Team of Fairway Independent Mortgage Corporation
750 W Hampden Avenue,
Suite 500
Englewood, CO 80110 303-214-6393
www.TheRuethTeam.com

 

How do you maintain business as usual as much as possible is the question I am asking myself everyday.  We all can agree.. the last seven days were surreal.  The next 7, 14, 21 .. will be as well. Making sure I have the most up to date information during this time has become even more important.. and how I am staying grounded. ​ Last night a member of the Federal Reserve Board, stated that the biggest lesson learned from 2008 was that the Federal Reserve did not act fast enough.  We have seen them in action already.  They threw everything they had at the problem last weekend...  dropping the Fed rate to zero and adding another $700B in purchases after committing to $1.5T the week before.  This morning they announced they are going limitless.. YEP .. you heard that right. Spending as much as it takes to keep businesses and governments afloat... purchasing treasuries, mortgage backed securities, commercial securities (ie. multifamily), corporate bonds, and muni bonds.  Let's deal with inflation later.. game on! ​ Colorado Governor Polis came out last night saying Colorado was going to do business as usual as much as possible as well.  Not putting us into a Shelter in Place, but mandate all essential businesses thin their workforce by half.  I agree and had already sent my team to work from home last week. ​ We are also seeing FHFA stand up where needed.  They announced last week that they had rolled out mortgage forbearance.  Today they announced work around for appraisals through desk appraisals and drive-bys.  Work around for Verification of Employment has opened up to personal cell phone for HR department contacts, emails from company domains, most recent paychecks and/or bank statements to show income. ​ Title companies are also getting creative with buyers bringing their own laptops and signing in their car. ​ We are all getting creative in this time of disruption... to maintain the dream of homeownership! Stay tuned as I send out more regular updates.  And give us a call if you want to know what this means to you!  Our team is ready to not only keep you informed but support you! ​ ​

Don't Break Team I have had many conversations this week with you, my referral partners, and your clients.  These are challenging times.  This is a new normal.. one we are not comfortable in.  One that is fairly based in fear.  But this is also the time our clients who are striving to maintain stability, striving to provide shelter for their family, or looking for opportunities to protect and grow their financial future against the volatility of the stock market.  This is not the time to fall back.  This is the time to stand tall in strength and confidence knowing you can help them navigate their real estate journey. Individual Solutions Each client has their own set of risk factors... job security, liquidity, risk tolerance, financial acuteness.  There is NO one solution.  We must listen intently and offer individualized solutions. We can not be transactional in nature. The Market Will Maintain Strength Real estate is hyper local... we all know that.  Each area having it's own median sales price. Those homes that are at or below the median are still seeing strong activity through this weekend.  In the 7 days following last weekend 1669 homes came on the market and 1948 homes went under contract.  40% of all homes are sold between March and May.  Yes.. the market is being affected by the incredible distress in our environment; but it is not stopping.   Home building will slow down.  This is a product of supplies, workforce, and funding.  This will impact supply.. a supply that is already distressed.   Generationally, we have an extremely strong 5 years coming up with the largest number of millennials turning 33 (the average home buying age) in front of us.  Demand will remain strong. Interest rates will go lower.  Every time we have a recession, we have lowered interest rates. Rates dropped from 6 to 4.875 percent during the last recession; 7.375 to 6.75 percent in 2001 and 11 to 8.75 percent in 1991. Home prices will continue to rise.  During times of decreased interest rates and supply, demand pushes appreciation.  Home prices have risen five out of the last seven recessions.  They will rise in this one. What if we shut down the country?  It will put a pause on home buying.  But remember, we had an extremely strong housing market entering into this time.  It will be housing that helps pull us out.  And not to make light of the subject, but I'm thinking they might be ready to not only get out of their house, but move entirely! Your Solution In the meantime, there are buyers who are financially able to purchase not only primary homes but investments.  There are sellers who have either bought already or need to consolidate. There are investors who will want to sell their investments during this time to take their profits out from the last eight years of generous appreciation and rental income.   I am also doing a large number of cash out refinances to increase liquidity during this time of unsettledness.  Even when rates have increased momentarily, we can improve a client's overall debt structure and refinance in six months to drop the rate. I am also helping each client work through their financial acumen, to determine if now is the right time.   This is the time to stay informed, stay positive, and align yourself with a team who can assess each client's specific fears, stability, opportunity and action.   This is not the time to feed into the fear but to be their champion.