2021 predictions for mortgage lending

01st Dec 2020 Uncategorized

As lenders look ahead to a new year and a new administration, they offer some insights into what lies ahead for non-bank lenders and servicers. Fannie Mae predicts 30-year FMR will stay between 2.8% and 2.9% through 2022 Fannie Mae predicts avg rates for the 30-year fixed loan will remain at 2.8% through 2021 and only rise to 2.9% for 2022.The GSE’s November forecast calls for $4.12 trillion in mortgage origination this year, up from $4.08 trillion in the October outlook. For 2021, the latest projections call for $2.72 trillion in volume, up from the $2.62 trillion that Fannie Mae Chief Economist Doug Duncan last predicted. Total home sales will increase 5.7% this year over 2019, to 6.37 million units on a seasonally adjusted annual rate basis, Fannie Mae said. That will be driven by a 21.5% increase in new-home sales. Existing-home sales will be up 3.6% on a year-over-year basis. While total home sales are expected to increase by 0.8% next year, new-home sales will be up by 6.2% while existing-home sales should remain flat in Fannie Mae’s forecast. The MBA, however, projects rates will rise to 3.3% in 2021 and to 3.6% in 2022 The MBA is more conservative than Fannie Mae, predicting the 30-year FRM will go from 2.9% in the current quarter to 3.3% one year from now and to 3.6% by the end of 2022. However, the MBA’s chief economist, Mike Fratantoni, recently said he expects rates to go even higher if both Senate seats in Georgia flip to the Democrats after January’s runoff election.In November, Fratantoni raised his projections for 2020 to $3.39 trillion from October’s $3.18 trillion. Next year, he projects $2.56 trillion, compared with $2.49 trillion one month prior. The forecasts for 2022 and 2023 were also raised to $2.2 trillion and …

Refinance appraisal vs. purchase appraisal: What’s the difference?

24th Nov 2020 Uncategorized

Home appraisals are common steps in both the home buying and home refinancing processes. Surprised? Yes, even current homeowners are expected to endure the appraisal process. Since refinancing requires a financial institution to underwrite a brand-new loan, existing homeowners looking to take advantage of current record-low interest rates will need an appraisal to assess their home’s current value. Refinance appraisal vs. purchase appraisal If you’re ready to start the mortgage refinance process, the first step is to shop interest rates and it’s best to check with multiple lenders to see who is offering the most competitive rates and terms What is a purchase appraisal? A home appraisal is a process by which a lender determines the fair market value of a home. Appraisals are a lender-required process as the bank doesn’t want to loan more money for a home than it is worth. Yes, you’ll need a new appraisal even if you currently own the home and purchased it as recently as 2019. An appraisal is typically ordered anytime a buyer is using a mortgage to purchase the home. If you are buying a home in cash, you don’t need one. A low appraisal can be a headache for both the buyer and the seller, particularly in a home refinance situation. What is a refinance appraisal? Because a refinance mortgage is a new loan, the appraisal process is almost exactly the same as when you purchased the property. There’s less at stake during a refinance appraisal, since three parties (buyer, seller, and lender) aren’t anxiously awaiting the appraisal to reflect the sales price, but even during a refinance you still want the appraisal to accurately represent your home’s value. An appraisal validates the amount of equity a homeowner has in the home, which impacts a cash-out refinance. Substantial equity can also snag …

What a COVID-19 vaccine would mean for mortgage rates and the housing market

17th Nov 2020 Uncategorized

When the coronavirus pandemic first reached U.S. shores earlier this year (actually exactly a year today), worries abounded about how it would affect the country’s housing market. Starting in March, home sales all but ground to a halt as Americans stayed at home to avoid getting sick. All the while, mortgage rates turned lower — and lower and lower. The nation saw the beginnings of a boom in refinancing activity, as homeowners welcomed the lowest interest rates on record. A few months later, home-buying activity resumed with abandon. With low mortgage rates locked-in and a desire for more space amid the pandemic, Americans flooded the housing market in search of new homes. Even now in the fall, when home sales activity typically slows down with the cooler weather, Americans are still buying properties well ahead of last year’s pace. In many ways, the pandemic has driven this home-buying craze, experts say. “This has been an acceleration to lifestyle and behavior changes that were already underway,” said Mark Fleming, chief economist at First American Financial Corp., a title insurance company. Case in point: The pandemic appears to have nudged the timeline forward for many millennial households who might have otherwise waited a few years to become homeowners. But now, the end of the pandemic may be in sight. On Monday, the COVID-19 vaccine candidate from BioNTech and Pfizer became the first to demonstrate it could protect people from contracting the illness in a Phase 3 clinical trial — with a reported efficacy rate of 90%. What’s more, Pfizer’s vaccine candidate is taking a similar approach as some of the vaccines being developed by other companies, meaning that other vaccine candidates could hold similar promise. While the world is still months away from seeing the distribution of an approved vaccine, the vaccine …

How Will Biden Reshape the Nation’s Housing Market?

11th Nov 2020 Uncategorized

It was a knock-down, drag-out fight that polarized much of the nation in the months—all right, years—leading up to Election Day, as well as over the last few nail-biting days after the election as ballots across the country continued to be counted. But former Vice President Joe Biden managed to get a victory, although President Donald Trump insisted he would challenge the results. The election played against the stark backdrop of the deadly COVID-19 pandemic, a battered economy, and a slew of hot-button racial and immigration issues. Almost lost in the partisan spectacle has been the future of the white-hot housing market. But the 46th president’s ambitious housing plan could have momentous consequences—if it shakes out to more than just empty campaign promises. A historic home shortage and record-low mortgage rates have pushed prices to new heights, even as the U.S. entered into the worst recession since the Great Depression. “Everyone may not love the outcome of this long-drawn-out roller coaster of an election, but I think everyone can breathe a sigh of relief that it’s over,” says Chief Economist Danielle Hale. “Biden has a really ambitious agenda that will try to create opportunities for more low- and middle-income Americans to become homeowners or afford rental housing.” That could result in some big changes. “The issue is really how affordable housing, as a category of efforts, compares to the other things he’s going to want to accomplish, such as student loan debt, climate change,” and how he prioritizes them, says Goetz. Soon enough, Biden will have to make good on his campaign-trail promises. Here’s a roundup of his to-do list. Campaign promise: Help more Americans achieve home ownership One of the main planks of Biden’s $640 billion housing plan, which his campaign dropped in February, has been to help more …

Will The Election Outcome Impact Record-Low Mortgage Rates?

04th Nov 2020 Uncategorized

  The path from mortgage rates to the White House is a circuitous one. There is no direct route, as the president doesn’t control rates, but there are factors the president controls—in tandem with Congress—that can have a major influence on them. As we pass the Nov. 3 election, mortgage rates are still hovering near record lows. The 30-year fixed-rate mortgage is at 2.81%, according to Freddie Mac’s latest Primary Mortgage Market Survey. These are the lowest rates on record, and they’re generating lift to the housing market, as refinance applications are up 80% year-over-year and mortgage applications to buy a home are up 24% compared to last year, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Heightened lending activity is a ballast in today’s shaky economy. The question is: What will happen to rates after the election? We talked to a few experts in the housing and mortgage industries that weighed in on how the presidency can sway the economy and in turn affect mortgage lending and rates. A Few Factors Consistently Influence Mortgage Rates We know that mortgage rates are driven by a few things: Treasury yields, the economy, the Federal Reserve (policy, not the prime rate) and the housing market. However, these factors don’t necessarily operate in any kind of prescribed pattern. Rather, like a Rube Goldberg device, one action can set off a chain of events that impacts rates. In 2020, that action was a global pandemic. Before President Trump declared Covid-19 a national emergency, the housing market was strong. Home prices were steadily rising and mortgage rates were steadily falling from their five-year peak of around 5% in Nov. 2018, landing at 3.36% one day before Trump issued the emergency declaration on March 13. In some ways, buyers and sellers were splitting …

A review of how the 2017 tax law affects mortgage interest deductions now

29th Oct 2020 Uncategorized

  Q: Is mortgage interest still deductible on our federal income taxes? Is there something new that I am not aware of? Is there some reason to not have a mortgage that is different from what we’ve always believed? Here’s why I am asking: All of a sudden, it seems like we ca not deduct the interest in our tax preparation software. So we do our own taxes. My partner is one of those people who says doing taxes is easy: Just fill in the blanks on the software. So far, he has done them every year for the past 51 of our joint adult life. Our taxes are easy, always one employer. We are 73 years old, and my partner is still working at a job that he loves. But this year, as we’re finally getting around to filing, the software is telling us we can’t write it off. A: Thanks for your question; it is a good one. Over the past couple of years, you may have missed information about the interest deduction on mortgage loan payments and the new limitations on the deductibility of state income tax and real estate taxes on federal income tax returns due to the Tax Cuts and Jobs Act (TCJA), which was signed into law on Dec. 22, 2017. Some people refer to this with the acronym SALT, for state and local taxes. Let us clear the air on the first point: Payments you make to a lender on your home mortgage are still deductible on your federal income tax return. However, one of the limitations from the TCJA is that you can only deduct the interest on a loan of up to $750,000. Most people have a mortgage on their primary residence and some even have a mortgage on a second …

Thinking about paying off your mortgage early? Here are the positives— and the negatives.

08th Oct 2020 Uncategorized

  If you’ve got years to go on your home mortgage, you have probably dreamed of the day your mortgage is all paid off. And depending on how long your loan term is, you could wait for 15, 20 and even 30 years for that dream to become a reality. But what if you could speed up the process and pay off your mortgage sooner? Should you? For some homeowners, the risks of early mortgage payoff outweigh the benefits. Let’s look at some of the things you should consider before sending that final payment to your mortgage holder. Benefits of early mortgage payoff Paying a mortgage off early frees up a large sum of money every month. A study by LendingTree in early 2020 revealed that Americans hold $10.5 trillion in total mortgage debt, with 62 percent of homeowners carrying a mortgage. Also, nearly a 1/4 of Americans have less than $5,000 saved for retirement. Homeowners could redirect money previously saved for the mortgage into retirement savings. Eliminating a mortgage payment also means you’ll need less income to cover your daily expenses in retirement. How to decide if a property is a good investment Early payoff can also result in paying less in interest during the life of the loan. Also, it can provide homeowners with an asset that could be used when needed. Some homeowners open a home equity line of credit (HELOC), which serves as their emergency fund and can be used for major expenses. Risks to consider There are drawbacks to early payoff, however. The general rule of thumb is to keep three to six months’ worth of expenses in an emergency fund. Paying off a large sum toward your mortgage could deplete your reserves and leave you cash poor in the event of an emergency. Paying …

There are 4 types of private mortgage insurance

28th Sep 2020 Uncategorized

The type you choose determines how and when you pay What is private mortgage insurance? When you buy a home, you’ll pay for homeowners insurance to cover damage to your home from events like fires, windstorms, or theft. But you also may have to pay a second type of insurance: private mortgage insurance. While homeowners insurance protects you and your home, PMI protects the lender should you default on your mortgage payments. You’ll need PMI if you have less than 20% for a down payment on a conventional mortgage. The lower your down payment, the bigger risk the lender considers you to be. PMI helps offset that risk. Keep in mind that PMI is only for conventional mortgages. This means you don’t need PMI if you have a government-backed loan — including an FHA, VA, or USDA loan. Government-backed mortgages do come with their own costs, though. For example, FHA mortgages don’t charge PMI, but you will have to pay a different type of mortgage insurance premium that comes to 1.75% of your loan at closing. Then you’ll pay an annual premium of 0.45% to 1.05% of your mortgage. If you do need PMI for a conventional mortgage, you’ll choose between four payment methods. 4 types of private mortgage insurance 1. Borrower-paid mortgage insurance Borrower-paid mortgage insurance is the most common type of PMI. With this payment option, you as the borrower make PMI payments. With BPMI, you’ll make monthly payments. You can roll PMI payments into your mortgage or pay separately each month. You may contact the lender once you have gained 20% equity in your home to ask to cancel PMI, but the lender isn’t guaranteed to approve this request. Even if your request is denied, the lender is legally required to cancel PMI once you’ve obtained 22% …

3 Moves to Make After You Refinance a Mortgage

15th Sep 2020 Uncategorized

There are plenty of good reasons to refinance a mortgage today. Mortgage rates are extremely low that swapping your existing home loan for a new one could save you a lot of money each month. Or, it could help you pay off your home a lot quicker and slash the total amount of interest you pay on your loan. If you’ve recently refinanced, you can now sit back and look forward to reaping these benefits. But you’ll also need to make these important moves. 1. Cancel your auto-pay with your old lender When you refinance a mortgage with a new lender, your old lender doesn’t necessarily get the memo right away. As such, if you pay your mortgage automatically each month, you’ll need to cancel that payment. That way your old lender won’t continue to collect a payment you’re not liable for. Of course, if you do not have your mortgage set to auto-pay, you can just stop writing out those checks to your old lender — it’s pretty simple. But many people have the process set up automatically as they worry about forgetting their payments. If you’re one of them, you will want to cancel as soon as possible. 2. Set up auto-pay with your new lender It is easy to forget to pay your mortgage, or any other bill for that matter, when you wind up with a new payment schedule or your mind is simply occupied with other things. That’s why setting up an automatic payment with your new lender is a good idea. But you may not be able to do so the day you close on your mortgage. It could take a few days to get your account or loan number, so be prepared to sit tight and wait for a payment letter with instructions …

No Money down, but there is a cost to Refinance

08th Sep 2020 Uncategorized

When you refinance your mortgage, you hardly need to make a down payment like you did when you obtained the initial loan. However, there are still costs involved in refinancing, so you may need to provide cash when you close. How much largely depends on the type of refinance. Do you need to put money down to refinance a mortgage? More often than not, you don’t need to put down money to refinance your mortgage. In the typical rate-and-term refinance, which lowers your interest rate and payments and/or shortens your loan term, lenders generally look for an 80 percent loan-to-value ratio (LTV) or lower and solid credit, not money down. If your LTV isn’t in line with that threshold, however, you may be considering a cash-in refinance, which does involve bringing money to the table. The extra funds in a cash-in refinance can help you lower your monthly payments if you’re shortening the term, get a lower interest rate or bring your LTV to the point where you can rid of private mortgage insurance (PMI). Sometimes, putting money down can help you save more in the long run. For a cash-out refinance, on the other hand, there is no down payment requirement. Generally, lenders limit the amount you can cash out to 80 percent of the equity in your home. How much does it cost to refinance? While in most cases putting money down isn’t necessary, refinancing does come with closing costs. The average closing costs to refinance total $5,000, according to Freddie Mac, and can include: Appraisal fee Loan origination fee Credit report fee Survey fee (if needed for property boundaries) Discount points Title search and insurance For certain refinances, there is a newer fee to consider, as well. For closings after Dec. 1, 2020, Fannie Mae and Freddie …