Today, Fannie Mae and Freddie Mac announced they would sign off on loans with down payments under 5.0 percent, offering a new program allowing eligible borrowers to put only 3.0 percent down, a move foreshadowed by the Federal Housing Finance Agency which indicated this fall that lower down payments would soon be possible.
Although there has been a reduced down payment requirement, qualification for these loans are limited to first-time buyers that meet the minimum income requirements, and they may be required to attend homebuyer counseling to be eligible. Fannie says its delinquency rate for single-family home loans has dipped below 2.0 percent, making the conditions better than just two to three years ago.
Minimum scores, debt-to-income-ratios, and more
For Fannie Mae loans, the minimum credit score will be 620, but lenders will continue to consider debt-to-income ratios, which will restrict some buyers from qualifying, while letting some newer buyers back into the market.
Freddie Mac’s revised guidelines will not go into effect until March 2015 and will determine eligibility based on the median income in a borrow’s geographical area, so if they earn lower than the median income, they’ll likely get the lower down payment option.
As with any mortgage with less than 20 percent being put down, mortgage insurance will still be required. Both agencies believe these 3.0 percent loans won’t become the norm since there are still hoops to jump through, and it is a far cry from the no-doc loans of yesteryear, they say the goal is to open up homeownership to people who are qualified to make the payments but don’t have the savings on hand to commit 5.0 percent down.
The key word is “responsible”
“Our goal is to help additional qualified borrowers gain access to mortgages,” said Andrew Bon Salle, Fannie Mae Executive Vice President for Single Family Underwriting, Pricing and Capital Markets. “This option alone will not solve all the challenges around access to credit.”
Bon Salle added, “Our new 97 percent LTV offering is simply one way we are working to remove barriers for creditworthy borrowers to get a mortgage. We are confident that these loans can be good business for lenders, safe and sound for Fannie Mae and an affordable, responsible option for qualified borrowers.”
The key word there is “responsible,” which has been echoed in the halls of Congress, economists’ offices, and journalists’ desks alike, and one we’ll continue seeing as lending continues to slowly become less stifling.
Evictions are mounting, affecting renters and landlords
(POLITICS) Eviction moratoriums both ending and extending are causing ripple effects of economic trouble for renters and landlords.
The United States continues to struggle to find a balance between public health protections to slow the spread of coronavirus and economic measures to prevent Americans from bankruptcy as a result.
While eviction bans initially provided relief for renters who lost jobs and couldn’t afford rent payments, the effects bounced up to property owners who lost those payments. Though the first coronavirus stimulus package renter protections extended to landlords, property owners say banks are still expecting mortgage payments as the relief expires. Many worry the expiration of the additional $600 added to unemployment will exacerbate the problem.
In Texas, the statewide eviction moratorium ended in May. Unlike other major cities which chose to use funds from the federal coronavirus stimulus package to pay for legal representation for tenants, Houston let local protections for tenants expire with the moratorium.
In Houston, there is little recourse for tenants served with an eviction notice. Tenants only have five days to appeal, and there is no legal defense for a tenant who can’t pay at least one month’s rent to the court registry. As a result, tenants facing eviction often surrender and leave. Unfortunately, the result is tenants moving in temporarily with friends and family while they look for new housing, causing overcrowding and presenting a health risk to everyone involved. The CDC has specifically named “poverty and crowding” as a top risk factor for COVID-19.
However, not all evictions are the result of unpaid rent. Marie Baptiste, a landlord in Randolph, Massachusetts reported to the Boston Globe that she has lost recourse against a tenant who not only stopped paying rent long before the pandemic started, but caused water damage and a rat infestation. The tenant argues the structural problems were her reason for withholding rent.
Consequently, Baptiste says she is now $19,000 in the hole for this property, and can do nothing about it. In July, Governor Charlie Baker extended the eviction moratorium to mid-October. In a survey conducted by MassLandlords, one-fifth of landlords are uncertain how they will keep up with mortgage payments. Many fear they will be forced to sell or face foreclosure without relief.
Without protections for both tenants and individual property owners, the eviction moratoriums could have long-term consequences for housing in large cities. Urban centers, already struggling with rent inflation and lack of affordable units as large developers take over, could see this problem exacerbated for years to come. It is imperative that the next stimulus package consider how relief for both renters and property owners can be leveraged to prevent these challenges.
COVID-19: NAR’s fight for independent contractor relief
(POLITICS) Economic relief is on its way for the self-employed and independent contractors like Realtors, with NAR pushing politicians to pay attention.
Earlier this week the U.S. Senate passed an unprecedented $2 trillion COVID-19 economic relief package. The bill is now in the U.S. House and is expect to be signed by the President without any issues.
Self-employed and independent contractors have been anxious about the bill since talks began. It would not be the first time theses types of workers were left out of key economic legislation. As the majority of the nation’s realtors are self-employed or commission-based, they have been hit hard by the economic effects of COVID-19.
Just last week home buyer disinterest tripled; few are looking to buy a home right now and social distancing restrictions have made it difficult to attract new clients or show property.
Realtors want to do their part to stop the spread of the virus, but just like everyone else, they need support during this difficult time.
During the last several weeks, the National Association of Realtors (NAR) has been in constant discussion with lawmakers to ensure that these groups are taken into account for the economic relief package.
NAR Senior VP of Government Affairs, Shannon McGahn stated, “We have worked closely with Congressional leaders and the administration during the past several weeks to ensure all three bills bring relief to the self-employed, independent contractors, and small businesses. The real estate industry is responsible for millions of jobs and is key to our national recovery.”
The economic relief package includes $350 billion for the Small Business Administration 7(a) loan program. Under the terms, eligible small businesses, which in this case are those that have 500 employees or fewer, can receive up to $10 million toward mortgage interest, rents, utilities, and payroll costs. A portion of these loans will be forgivable.
In addition to relief through the loan program, self-employed and independent contractors will be able to take advantage of unemployment insurance benefits. This program could cover benefits for up to 39 weeks, a huge relief as many find themselves and their businesses suddenly devoid of cashflow.
This is the third relief package to be signed into law, with a fourth expected to be signed in the coming months. These are stressful COVID-19 times and no bill will ever be perfect, but some relief is on its way.
COVID-19: Senate passes the relief bill, now it’s in the House’s hands
(POLITICS) Many people heard that the Senate passed a relief bill, but don’t quite understand that it’s not a done deal. Now the House gets to add their input.
The House can’t seem to agree on the COVID-19 relief bill. Yesterday, the Senate and the White House came to an agreement on a $2 trillion economic stimulus package. Today, House Speaker Nancy Pelosi has publicly stated that the House will be reviewing the bill, but there is no commitment as to whether the bill will pass or not. The Hill reported that some House Democrats are concerned that they have not provided any input.
What’s in the measure?
According to CBS News, the actual text of the measure hasn’t been released, but they did get information from Minority Leader Chuck Schumer about some of the contents:
- Expanded unemployment benefits to boost the maximum benefit and to give laid-off workers full pay for four months
- Direct payments to individuals making less than $99,000
- $130 billion for hospitals
- $367 billion in loans for small business
- $150 billion for state and local governments
- $500 billion for large businesses
- Creates an oversight board to govern large loans
- Prohibitions to prevent President Trump and family from getting federal relief
Will the measure pass?
Pelosi has said that this relief bill is a big improvement over the Republican’s first proposal. It seems as if she is working hard to move the measure through the House, but given the current state of politics, it’s hard to believe that anything will be done without some debate.
Many Democrats have pushed for a food stamp increase, which is not in the current measure. However, the Democrats did win on the oversight board that protects the employees of the companies who are getting loans. Money for states was another Democrat victory in the current measure.
If the bill can pass the House unanimously, lawmakers won’t have to vote on the floor.
If the House can’t agree, the House will need to reconvene and amend the Senate measure or pass their own measure.
Under the COVID-19 travel restrictions and quarantine issues, it might be difficult to get anything done quickly. The urgency is real, but so is the responsibility. Representatives want the money to do what Congress intends, not for CEO compensation or stock buyouts.
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