Count your pandemic-related mortgage blessings

Unlike the Great Recession, stakeholders got it mostly right this time.

By Jeff Lazerson | jlazerson@mortgagegrader.com | MortgageGrader.com | November 27, 2021

Time for the holiday season-celebrations, starting with the Thanksgiving kickoff festivities, with all its trimmings and blessings. Hanukkah lights it up early this year, with the first candle on Saturday night. A fast month later, Christmas and Kwanzaa calendar up.

This is when we pause to reflect, appreciate and congratulate ourselves, our communities, the mortgage lending industry and government leaders for the good stuff as it concerns your home, your family shelter, your sanctuary.

Here’s my list of top mortgage blessings to be thankful for:

1) The 2020 CARES Act: the U.S. government got the COVID-19 employment fallout and foreclosure threat right.

CARES brought badly needed liquidity to the mortgage markets so borrowers could knock down their mortgage rates and payments and pull cash out. Congress and President Trump, learning from the crushing Great Recession government missteps, granted mortgage payment forbearances for all needy borrowers with government-backed mortgages.

The roughly 7.8 million foreclosures suffered during the Great Recession and mortgage meltdown never materialized in the pandemic.

“How can you lose 22 million jobs in a recession and not have a big wave of foreclosures?” asked Rick Sharga, executive vice president of RealtyTrac. “Government intervention and a rapid recovery in the economy prevented 4 to 5 million unnecessary foreclosures.”

2) The number of borrowers getting back on their feet — that is, sheltering in place and making their mortgage payments again — is a relief. CARES Act and amended allowances allow up to 18 months of payment forbearance. As of Oct. 31, loans in forbearance decreased to 2.06% of all mortgages, or about 1 million homeowners, according to the Mortgage Bankers Association. Mortgage forbearances were at a high of 8.55% on June 22, 2020. That’s 4.3 million homeowners.

3) Late mortgage payments of 30 days or more dropped to 4.88% at the end of the third quarter of 2021, compared with 7.65% a year earlier, the MBA reported. For Q3 2021, there were just 45,517 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions, according to RealtyTrac.

4) Sandra Thompson, acting director of the Federal Housing Finance Agency (conservator and regulator for Fannie and Freddie) removed the nonsense one-half point adverse market refinance fee . For example, a fee of $2,500 on a $500,000 mortgage. Former Director Mark Calabria had imposed the fee on almost all Fannie and Freddie refinances on Dec. 1. Fannie and Freddie earned $5.3 billion from this money grab, according to a FHFA Inspector General report.

5) Mortgage rates remain low and stable despite inflation pressures. Yesterday, the 10-year Treasury, which is closely tracked by mortgage rates, closed at 1.67%. The average 30-year fixed rate averaged 3.1%, Freddie Mac reported this week. The last time we saw the 10-year at 1.67% was on April 8. Freddie rates were 3.13% at that time.

6) Around the outset of the pandemic, when self-employed borrowers needed mortgage giants Fannie Mae and Freddie Mac most, the FHFA mandated that Fannie and Freddie add ridiculously high and difficult approval standards for most of America’s self-employed borrowers.

But the so-called non-QM or non-qualified “exotic mortgage” menu (formerly known as B- paper or subprime) was a blessing when it comes to answering the Fannie, Freddie self-employed void, albeit at higher rates and fees.

Non-QM qualifying standards are safer and better than then in yesteryear. Generally, you need good credit and 20% or more down payment (also called “skin in the game”). Non-QM goes way outside the F & F’s wheelhouse — especially when it comes to self-employed borrowers. If you can fog a mirror, you can get a mortgage. No job necessary. Or you can get a mortgage by immediately liquidating your Bitcoin. Not so with F & F. Marijuana-related business owners, come on down.

7) No doubt the unsung heroes of the COVID-19 pandemic are America’s very short list of remaining appraisers, who exposed themselves to infection by conducting interior inspections. The average age is north of 60 years old, by most accounts. But for them, most purchase and refinance transactions across America cannot happen.

Freddie Mac rate news: The 30-year fixed rate averaged 3.1%, unchanged from last week. The 15-year fixed rate averaged 2.42%, 3 basis points higher than last week.

The Mortgage Bankers Association reported a 1.8% increase in mortgage application volume from the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $625,000 loan, last year’s payment was $127 less than this week’s payment of $2,669.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages without points: A 30-year FHA at 2.625%, a 15-year conventional at 2.5%, a 30-year conventional at 3.125%, a 15-year conventional high-balance ($625,000 to $822,375) at 2.75%, a 30-year conventional high-balance at 3.25% and a 30-year fixed jumbo at 3.125%.

Eye catcher loan of the week: A 30-year mortgage with an interest-only adjustable rate for the first 10 years at 2.875% without points.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.