How To Sign Hawaii Banking Forbearance Agreement

How to industry sign banking hawaii forbearance agreement

okay Duncan how are you are you doing well considering the situation yeah do you have kids or you going insane her is a pretty mellow got a four month old and he's making this ditch shelter at home so much more enjoyable I'm sure my four-year-old is 4 months I'd say that's a bit more challenging actually he's a challenge but he's awesome he makes it so makes time fly by so fast that's true Wow congratulation they didn't know that thanks jump in here real quick too just a little bit about you what is your full name you're the owner and company so how long you been a loan officer what's your background my full name is Duncan Shaw I've been in the mortgage business for eight years I have a business degree from Wharton Business School I have an engineering degree from the University of Pennsylvania so I was in a dual degree program wasn't sure which way to go I ended up staying with both I ended up working as a consultant for energy consulting for a few years worked in the in California and in Paris for a year and then I came back to California and I started working for a company called PeopleSoft and I managed there there was it was a company based in the East Bay in the Bay Area and I managed their services there consulting group in the western region and that was the account manager the manager of the account management group so customer service and technology and then that really gave me a good background for the mortgage business going back to Hawaii there's not a lot of tech business here and so the mortgage business is one of the few businesses where you can do as well as on the mainland with the home values here very similar to California so it's something that made a lot of sense because I like working with numbers like like working with people and customer service so it's something that that worked real well I also in between I kind of when I left PeopleSoft I was working here for good saw for a little while but they ended up restructuring and I was I was trying to work remotely my contract back with them for a little while but then I ended up just going on my own as a trader and investor and so I've got a lot of experience in the financial markets too from from that background and I was looking to start a hedge fund with a partner but the infrastructure for what we were going to do automated trading of futures and ETFs it was this infrastructure wasn't set up for a small business like ours so we put that on hold and and got into the mortgage business and the rest is history and I started my own company last year and got four loan officers hired an Operations Manager last month so we're looking to grow I've got a great great team of people here that people looking to grow in the middle of this pandemic so you're sure I'm glad to hear that you're doing well I expected nothing less yeah we're doing great thanks a lot of actually never asked so good information ok we'll dive into the lending questions because that's what people are really curious about and myself overall and a really just broad scope short paragraph what changes are you seeing in the lending market the biggest changes we've seen are in the non-qm market which is loans that don't fit in the normal conventional or VA or USDA or FHA type of loan they don't fit in the normal boxes and not even jumbo but we would do loans I just closed one right before all this happens where it was investors and an LLC they bought a place where the whole financing was based on the potential rental income where the pre and so they didn't have to show any documentation for income no there was purely based on the potential ran income from the property that market has really dried up there are still some lenders that will do those we still can do those types of loans but the lot of lenders have left that market some letters have gone out of business from that market and some have just suspended that market so that's really where I've had some borrowers that were interested in that type of loan I told that we can't do them now or we can but not at the lower down payment amounts that we're looking for they really the ones that still remain in that market they really tightened up on their rules so you can do it if you have big down payment and you have a very strong debt service coverage ratio or you have high income expected from the rents so that market is probably the market that's tightened up the most because a lot of people aren't paying their rents and when you have wrench that are not being paid that makes it really difficult to use the rental income for for qualifying that's the biggest change other markets other types of loans have been affected not nearly as much and there are our lenders that have stopped lending in certain types of loans some have stopped lending completely so it varies by lender so with that what changes are in your underwriting process I know that I know one but I didn't know if you could let others know one or more major changes that a borrower can see through the underwriting process that maybe they need to provide prior if they're inexperienced they're used to the process the biggest changes have to do with rental income so if you're somebody who has rental income as part of your qualifying income a lot of lenders are requiring additional reserves additional six months of what they normally would require for reserves and they want to make sure that you have the reserves in case your renters don't pay because a lot of renters aren't paying their rent now so that's one of the biggest changes we also are seeing some lenders tightening up on their credit score requirements requiring higher credit scores cutting up on their debt to income ratios especially up if you have a lower credit score some are requiring more reserves they just want to see that you're gonna be able to pay the mortgage back sorry can you be a little more specific on what types of loans they're increasing and looking for higher credit scores and lower debt income that you know 5% your FHA is your VA yeah it depends on the lender I've seen a lot on FHA FHA we used to be able to do lot of loans and even number five hundreds on FICO scores some requiring at least 680 but it varies to Pam the lender and and we work with a lot of different lenders and it's not across the board that it's all the same it buries and so that's why it's good to work with a broker that works with a lot of different lenders I were working at one specific lender that had tight rules I'd be stuck and and it would be a lot harder but well you can go to a lot of different lenders and you can go to other ones that aren't as tight on the rules that apply to you so it's good to have that flexibility another big change that we've seen is with a lot of people losing their jobs or going on for alo lenders are requiring them to do a verification of appointment the day before funding so right funny they want to make sure that you still have that job so you know they don't want someone to lose their job and not be able to make their first mortgage payment okay so that's that's including in addition to having the reserves they want to verify that you still have your job that you have on your application and a lot of lenders are requiring you to sign attestation is that closing to make sure that everything in your application still applies that you haven't lost your job or you haven't taken on new debt or have missed any mortgages on any any mortgage payments so that's something that some people the government makes it seem like you can take a forbearance or defer on a mortgage payment that can affect you qualifying for a loan so if you have a rental property that you decide you want to do a forbearance that can affect you if you're trying to buy a place and you say okay I want to go into forbearance in this they think it's you're not going to lose anything but you actually are it is something that that can affect your qualification for purchase so be very careful oops yeah so be very careful before you decide to accept any forbearance or modification that that will actually they said that it wasn't going to show up in your credit report but Fannie Mae came up with a restatement of that guidance last week saying that they are gonna have actually reported to the curb euros it's not going to show up as a missed payment but it is going to show up or he won't show up as a late payment but it will show up so that is something that can affect you so be very careful before you do accept to do any forbearance or deferment because it can affect your borrowing capability so to sum up that sort of topic you guys are silly to do all of your standard conventional 5% loans and up here FHA is your bas where you're really limited on your seen dry up is the more creative loans and sometimes self-employment underwriters are requiring either excess reserves or decreasing the in self-employment income by 25% so it's tougher for self-employed or investors to qualify unless you have a lot of reserves a strong credit and all the different factors will play in your loan to value ratio so if you're very leveraged and you don't have much and as far as reserves and you have a bad credit then it's harder to get along than before but you know for most loans we were able to do we can some lenders we're not be able to do them at the same rates as we were before the rates is another thing it varies quite a bit between lenders some lenders that we used to work with a lot they have their rates a lot higher now they're trying to decrease the volume lower their risk in this environment they tell us it's temporary so we may go back to them later on but we're going with a lot of other lenders that we don't work with normally but they have in this environment they have the best rates and so we're we're having to adapt and use lenders that work better in the current environment for our borrowers again a pro to being a broker because that leads into my next question is right now what's going on with the interest rates for the average credit score for stable income non self employee not investor what are you seeing right now today which if anyone doesn't know interest rates fluctuate daily based off of the market what are you seeing today when the market opened rates rates are great now they're near all-time lows and unconventional and jumbo loans we're we're having borrowers in the low 3s and if they're willing to pay any points we can get even lower than that on VA we can get into the higher twos I yeah most of our loans were closed and are in the low 3s or upper twos so it's amazing rates for 30-year fixed loans yeah reef eyes in the same range generally some lenders are adding because the refi secondary market or the investors in some loans really pull back because a lot of mortgages normal mortgage payers are going into forbearance not paying the mortgages then there are fewer investors in the secondary market so a lot more lenders are cutting back on the reef eyes that they're doing and some are adding additional points to refi so it's a little bit higher than it has been in the past but still great rates still much better than historically I know I'm gonna I'm gonna be refining my refinancing my house you're still seeing jumbo loan interest rates in the low threes yep okay but Jumbo's we always hear Hawaii have had or as far as I remember we've always had better rates on Jumbo's because it's pretty competitive with the banks here so we've had better rates on Jumbo's than the national lenders we've seen the national lenders pretty much dry up on the jumbo market but they've always been higher than thin here so we haven't been affected too much here in the hawaii market for jokes that's actually my question i know you mentioned that so right now with jumbo loans here on oahu FHA and VA are 720 150 thousand and for conventional 756 600 thousand 756 665 600 thank you are you finding underwriters signing up for those jumbo loans or meteor borrowers having a more difficult time qualifying for them no we haven't seen them jumbo underwriting generally is a little stricter than a conventional loan it varies by by institution and jumbo loans the underwriting guidelines are written by theirs for their portfolio loans so they're not sold in a secondary market so the guidelines are set by the banks that do them and so we haven't seen real tightening up on them maybe a little bit fewer on the and exceptions and they they're tighter to make sure that you have the reserves that you have the credit score so I think the credit score and the reserves are we looked at a little more strictly but in general it's pretty much the same because it's always been pretty strict on Jumbo's when you have the higher dollar amounts the the banks tend to be strict and want to make sure that you can qualify and it's it's a big risk for them it's a big loan amount they want to make sure that they not to fear for those who are looking to qualify for loans I know that that's sort of a big topic for the mainland borrowers and Realtors as a lender what is your average timeline I'm closing right now are you seeing and experiencing any delays at the stay at home orders we have seen some delays on appraisals I actually had an appraiser just went AWOL recently and we were worried about whether whether he got covin so we don't know the borrower called him he was scheduled to finish his appraisal and he stayed all happened to you by Wednesday and Wednesday came no answer no appraisal a week we waited for a response from him nothing happens to be transferred it to another appraiser and we were able to get another praiser to do a drive-by appraisal and we're able to close that was on a refi so it was a we had to extend but we covered that the borrower was super happy he got a I think he was right at 2.8 75 and a 30 year fixed so he is real happy closed and we just closed yesterday so that ended up taking a little over 30 days whereas we we were pretty consistently under 30 days on reef eyes before all this happened we can still do loans another under 30 days closed one yesterday that was three little over three weeks on a purchase they wanted to they were going against another buyer who was offering ten thousand more but they were saying there's gonna take at least 60 days so the agent asked can you close in a lot faster I said yeah we can close big closed a lot faster even in this car environment we closed in three less than three and a half weeks so we can close fast still they we were delayed on that particular transaction the title report and saying we were that's okay we were delayed on that closing by the title reports we did a rush on the appraisal and we were delayed on the insurance because we were gonna try to close early but the insurance find her they didn't they didn't get it the change in time so we couldn't close early what we did close on time on the short escrow so we can't close under 30 days on purchases and reef eyes but it depends on the lender we work with sometimes a lender if you want to go with a lender with absolute best rate sometimes they they can be a little busier and they can take closer to 45 so generally under 30 but sometimes can be closer to 45 but we can still do standard 45-day escrow and I purchases usually 30 as well awesome yeah I'm experiencing the same thing with us too we got for under contractor on the same time and two out of them were able to close in less than 30 days and the others were you know staying 45 to 60 so I think it definitely matters who you're using that's usually the longest thing and and these days appraisers are taking a little bit longer than normal and sometimes we'll get an appraisal waiver or we can do a drive-by appraisal so it really depends on the transaction the appraisal and some other things that might come up but generally it's not too much different from normal so nobody has a crystal bomb of course but based on the trends that you're seeing so far and your research what you're just hearing do you think that the lending will only get more strict or do you think that it will loosen up as the second quarter comes no I think I think there are a lot of lenders that are put in temporary restrictions and some lenders they have to when when they lock loans they have o hedge and a lot of lenders got squeezed on the hedging and that make that caused a lot of losses especially as the government came in and they were buying they announced they were buying some more each backed securities so that caused some losses from a lot of lenders when the government came in and buying a mortgage-backed securities were rallying rates generally would be lower on mortgages but a lot of lenders got hurt by that because they had positions for hedges on loans and when borrowers don't close on those loans then they can suffer big losses so some of the recent changes to is some lenders are not locking up front someone there's say you got a lock after you you can only look for after you get your loan approved or after you give your pretty-girl in so that that's one of the things I didn't mention if the lock restrictions on buyers nothing letters that we usually work with but some lenders are definitely not letting you lock up front because that is the more exposure when they do a lock up front have to hedge and the market has volatility but I think all the things that they're most of the conditions they're putting in are temporary so I don't think I don't see things getting tighter but I see them loosening back up where they'll remove some of those or loosen some of those restrictions as the market returns more to normal we're still in a situation where some lenders are having these losses from the short squeezes on their hedges or they're having people not pay their mortgages when they're forbearances but the government has stepped in on the FHA and VA loans Ginnie Mae they're extending credit for servicers so they can have the liquidity so they can cover their losses so that's that that's kind of a temporary situation there are Fannie and Freddie they haven't done that yet or their lobbyists that are pushing to do that and so the worst case you might see some services go out of the business and you might have more of a large servicers still around but you're still gonna have the market and the restrictions are probably going to be going away as the market returns to normal and most of these are temporary and especially if if we can get back to normal in certain parts of the country not well relatively normal then you're gonna see that's not so tightened up so I think it only gets better from here mortgage lenders if you look at the spread between mortgage-backed securities and 10-year Treasury traditionally historically they've been tied pretty closely but when this all started 10-year Treasury took a dive and mortgage-backed securities actually the rates went up so in early March the rates actually went up on mortgages and when the Fed announced a 0% rates and and a 0% is just short-term Fed Funds rate so it's not the same as 30-year fixed mortgages and so at that time you saw mortgage rates actually shoot way up while the 10-year Treasury went way down and that was a result of those losses that lenders were having and they also had a huge amount of volume because before all this happened mortgage rates hit their historic lows so you have a huge pipeline of reef eyes and lenders didn't want to take on a lot of new business so they kept their rates high and they had to because of those losses they were suffering in other areas so we had rates a lot higher than expected and and you still have rates higher than what used to normally would see if you look at the 10-year Treasury as the benchmark so if that spread goes returns to normal you should see mortgage rates over the next few months they should return to actually they should at least stay at low levels and if they return to normal relative to 10-year Treasury as long as a 10 year Treasury rate stay low you're likely to see mortgage rates drop slightly as the months go by yeah I think a lot of this and the unemployment numbers it scares a lot of people and I think people are gonna expect the market to sort of follow after these unemployment but a lot of it's temporary and just the opportunities have shifted and these numbers are gonna be really high for right now into a lot of these businesses bring them back you know even some of my own family they were put on furlough for one week out of four so they get to find employment just for the one week so those all count to the tally of unemployment and I mean let's not forget like historically in 1992-1993 when unemployment rose the home sales increased and the same thing with 2001 to 2003 unemployment rose and home sales increased the last I think the last four or five recession is the only recession where home prices decreased was this last one where the housing prices housing prices within this current environment where you have such low inventory and as long as the economy doesn't completely falter think things are probably gradually get back to not quite normal we'll probably have some things that will change for be changed for quite a while with a distancing but I think we're gonna see things gradually return more to normal and the restrictions that we've seen on the lending market gradually loosened I agree Thank You Duncan for your time sorry for all of my interruptions on my end working from home has its pros and cons as I'm sure you understand where can people contact you if they have more lending questions they can find me they can just search my company's name infinite financial ether infinite financial llc.com is our website's infinite financial or they can look up my name Duncan's I look at reviews and Zillow or Yelp or Google and they can my phone numbers on all those on those websites my number zero eight four eight nine one zero six seven thank you and thank you for this smiley face Buddha thing that holds my phone working I know I found this the other day and that's I forgot that this is good branding because I forgot and I've been using it recently yeah we use it all the time especially now we can watch all these videos and things especially with the baby a lot of videos we well thank you Duncan I really appreciate your time and doing this last minute and I'll be in touch with my find some more questions and you have a great rest of your day my pleasure you too thanks Ashley