Today we want to talk about the mortgage market and how COVID is changing the mortgage landscape. JPMorgan Chase just announced that it has stopped accepted HELOC applications as of April 14th, 2020. Of course, they’re calling this a temporary pause. In addition to that, JPMorgan Chase is requiring 20% down payment and a 700 FICO on most of its loans.
But, not all lenders are doing this. This is just an example of an institutional reaction to fears that homeowners will stop paying their mortgages.
This is in large part because the government has created some confusion behind their mortgage-backed securities with Fannie, Freddie, and FHA requiring a 12-month moratorium on mortgage payments if the borrowers suffer a COVID-19 related hardship.
United Wholesale Mortgage, the second-biggest mortgage lender in the country, recently announced that it will require re-verification of a borrower’s employment on the day their loan is scheduled to close. The purpose is to ensure that borrowers are actually still employed when their mortgage closes. Most lenders have made this move. It’s the fear that a buyer’s job at the beginning of the process of purchasing a home may be in jeopardy and they now require the Verification of Employment (VOE) the day prior to settlement. Obviously, lenders want to make sure that borrowers have cash flow.
The bottom line of all these changes is lenders are attempting to protect themselves and borrowers from getting into a mortgage that is not in their best interest.
While United Wholesale and JPMorgan Chase are some of the biggest names to make these changes as a reaction to the market, they’re likely not the last.
In 2008, I remember how loan programs were disappearing on nearly a daily basis. In large part, that was a good thing. The meltdown was in fact spurred by corporate greed and borrowing money to anyone who could fog a mirror and hiding them in large wholesale bundles sold on secondary markets.
I suspect that these changes will last beyond the local and national re-opening of our economy. Only time will tell.
In the meantime, our lender still has access to mortgages with as low as 3% down payment and interest rates at historic lows. Making this a great time to take advantage of buying opportunities as they relate to the cost of homeownership. Give us a call and we’ll put you directly in touch with our preferred lenders to get the ball rolling.