Webinar Recap: Spotlight on Residential Financing
Residential financing has been on a wild ride since the beginning of the pandemic. We invited Garett Frol, sales manager and loan officer of Evergreen Home Loans, to join our August webinar to talk about:
The pandemic’s impact on residential mortgage lending
Insights on trends driving the market
The environment for residential refinances
How COVID Affected Mortgage Lending
The pandemic had multiple impacts on home mortgages. Jumbo lenders swiftly left the marketplace in the early days because there was so much financial uncertainty. Big banks followed suit, ceasing to offer riskier products, like adjustable-rate mortgages and HELOCs. Smaller community banks – in an abundance of caution – also pulled back, loathe to have anything on their books that could potentially be at risk of default, foreclosure or anything like that. These departures left many homebuyers, already approved and ready to go, in the lurch – and precluded others from getting into the market.
By December of 2020, however jumbo loans came back but with massive caveats and COVID restrictions, on the underwriting requirements. Lenders demanded the usual two years of tax returns, plus business bank statements and profit and loss statements to see how borrowers did during the pandemic. Additionally, most small business owners took advantage of PPP loans, which are taken off the top of your income analysis. COVID also affected underwriting in the rental housing market. Lenders are digging in the weeds. If you reported a loss or declining income, they want a lot more detail on what was behind that.
What Trends Are Moving the Markets
Interest rates were performing well until COVID hit. When markets get scared the money flows to the less-risky bond market, which drives up mortgage-backed securities prices and pushes down interest rates. From Q1 2020 into the beginning of 2021 we saw record-low interest rates. Millions of people were refinancing but some people are left out to dry. Rates are expected to drop again thanks to the Delta variant. With rates as low as they are, buying power remains high. That’s why we're seeing homes flying off the market.
Rising inflation is putting downward pressure on the bond market, reducing the return on those fixed assets. However, this appears to be somewhat transitory driven by the federal stimulus package, which put a lot of money into the economy. Now that those funds have been used, things are flattening back out.
When You Should Refi
It depends on where you are. There are hard costs associated with refi’ing, like closing costs, appraisals, and title and escrow fees. It’s smart to get your mortgage advisor to do a cost-benefit analysis to determine whether paying a few thousand for upfront fees is the best way to save interest on your mortgage over the life of the loan.
Get more details by tuning into the full session below.
This information doesn’t constitute financial or legal advice. Always check with an attorney, real estate investment or financial expert before making decisions.
As always, reach out if you have any questions.
