Sign Oregon Banking Forbearance Agreement Safe

Industry sign banking oregon forbearance agreement safe

good morning everyone it's Michael here and I'm joined today by joshuachannel flag Star Bank Josh was a rock star local lender loved working with them and we thought it would be helpful to do a quick discussion and we did a longer one later if there is need for it on what's happening from a lender's perspective right now it is early April as we film this Joshua thanks for joining us and how are you doing today I'm doing well thanks so much for having me on today and good to see you're doing well and and just getting through getting through it day by day like everybody else's pretty much yeah so I will try to make this the the quick version got a few quick questions for you want to talk about you know interest rates and turn times and timing in general from a lender's perspective and then focus a little bit more of course on what's happening with mortgage deferrals so if we just get right into it what is happening with interest rates because I think there's a lot of misunderstanding from people who aren't mortgage brokers about how that's working right now absolutely so you know interest rates are actually they're really good they are they're they're kind of back to the lows that we saw in 2016 but we've seen we're seeing a lot of volatility which has in the last three days that the change the feds policies is helping kind of smooth that out we were the the Limi market to dealing with a lot right now this is this is something that's uncharted territory and it kind of started out with rates dropping so fast which was great we started seeing Drake's drop refi business really kicked out but then what happened is it overloaded the linear systems to wear and lock like something like four hundred ninety percent of the normal volume in like a week and so that just caused a huge backlogs that started putting some challenges there but then as the the virus kind of took hold and you started seeing cities and stuff two home quarantines it started causing volatility in the stock market and to give you an idea a normal day we might see a mortgage-backed security flexurally 25 basis points yet where we're seeing 300 basis points wings in a single day and this becomes a problem for lenders in that short time because they have to hedge when they lock alone they hedge it but when you place a hedge if you get too much movement the market you get what's called margin calls and margin calls were causing issues Marketing was causing issues for us for lenders and stuff that had this huge lock volume of loan that just did like a week ago then you had all this volatility and some made the cost of those hedge is really expensive and I started calling as in mark margin call so he started seeing race kind of creep creep up because of that and then we got into some of their issues with the forbearance which we'll talk a little bit more but the feds basically what they stepped with all that volatility stepped in and they started buying mortgage-backed securities which at first seemed good and you started seeing that the bond go with the direction you think rates would go really low with but again you weren't getting the reflection in the rate sheet because of that cost of hedging and those margin calls and stuff so why three days we've seen the feds back off and now they're buying just the triumph at Goldilocks zone don't buy too much don't buy too little buy just enough to keep it stability in the market and keep those hedge margin calls low and they're doing that now so that I think as we start to cycle through that big loft volume we had beginning the last month you'll start to see race improve even a little bit more but overall rates are still good but where people get really confused as they hear the feds fund rate zero right think of that as being interest rates and they call me the error rates like zero that's not the same rate they're not the same the press just doesn't explain that so yeah that's that makes sense so so the rates are volatile and they are good there's good rates to be had there's just a lot of work going on behind the scenes to make that happen on a daily basis for about two weeks there you had to wear it one day your rate should be just like I don't know let's just say three and a quarter and a government I the next day or actually by the end of the day it went up one percent was four and a quarter I mean you just never see a 1 percent jump and rate what was going on there you know and you look at the mark you think well the market didn't move that much what was going on behind the scenes margin calls and stuff that was causing that volatility I think that's starting to level out but we still do have some changes in the loan programs and participate in turist rates for lows lower score borrowers that are and kind of responds to the forbearance thing that the government has has placed out there okay and so you know from from a lender's perspective is this a good time to be buying or refinancing is that what you're finding for yeah for refinancing for sure I mean rates are really low so if if you qualify for the refire at these little rates the benefit can be multiple one is I mean as always it needs to make sense so you got to be able to reduce your your your payment enough to offset the cost cuz there's cost associated right but if you can there's a couple of things you can get to manager one if you're going to plan on stay in the home long term not selling takes three to five years you're saving on the interest - depending when you close you might have - one to two months of no payments after you finish through the refinance and then this time right now we're things a little uncertainty not having to that payment and not do the forbearance can be a very positive and helpful thing and therefore a lot of my clients - is you know over the last four or five years we've seen tremendous equity growth and home values and so a lot of my clients have a lot of equity and now they're able to do that refinance lower the interest rate rolling a lot of that consumer debt into the loan and on some of the reprise we've done we're freeing up six hundred nine hundred dollars a month of cash flow which during and of course they missed out one or two payments really impactful so it's kind of a stimulus package that doesn't require the federal government for those that qualify so so that they can be a very good time for that now on purchases I think yes I think now is a good time to buy if you feel secure your job I mean that's that's really key and there's a lot of industries while we're working from home we're still working and so for those those buyers and stuff that I think the home market is very good I think it's gonna be robust we're gonna you know we're gonna see a little blip here as people try to figure out what's going to go on but we had a very strong ally market going into this the cause of the recession is not fundamentally it's not the economy it's something different and so once that's resolved I think we will have a quicker recovery they won't go back to a the word a month ago overnight but I think we'll see a big bounce when that happens and buyers start to feel comfortable that okay my employments good were past this and rates are low I think you might see even will live a surge of people wanted take advantage of those flow rates to get into housing and so you'll see a spike there I think I I think the same thing from a real estate perspective there's there's still a lot of deals happening right now despite what's going on out there and we're not naming the you know this the name of what it is because then you get demonetised on YouTube as if I monetized anyway right now but but but I think we're gonna hate a really big rubber band effect excuse me we're this summer you know later on this year everyone still needed to move and rates are still going to be good and we're gonna have just a gangbusters market so regarding that since there are a lot of people refinancing right now as well as still buying and selling what do you seeing for appraisal term times you know I should have been surprised at how well appraiser turn times have stayed but they have got a little bit longer and I think going into it we were probably getting appraisals back in about a week and a half and now we're seeing maybe two and a half weeks some of the more rural areas might go three but for the most part I think we're getting back about two and a half to three weeks and so for our purchases and stuff we're still seeing that we're comfortably closing purchases in the 30 days he never hurts to ask for 45 days just in case yeah and I think part of what's helping the appraisal turn time in this market compared to back in 2016 when the appraisal turn times went to two months the big difference is here is one is I think 2016 we had we had more inventory of homes so with all the buyers we had made a lot more sellers and so there was just more transactions but because inventory levels are so low now there's just not as me purchase of transaction to go through because there's just not enough inventory plus we're seeing a lot more appraisal Labor's on refi so a lot of my clients would say maybe 30% or so on a on a rate term reef I would we get a waiver where the system says yeah we set the value and you're good to go now with a cash out you don't typically get that a couple got cash out but what great turns we're seeing within 30 percent so that's helped as well and that helps the reef eyes closed faster than and frees up the appraised yeah the other reef eyes and the purchases so that's good yeah all right cool and the biggest topic on our minds of course which I think you could talk for an hour on if not more is you know what is happening with mortgage deferral and forbearance right now you know I myself am seeing things on the news but I'm not sure I even have a really good understanding of the difference between those terms if there is one and you know how this can impact our everyday people out here and it's and be advantageous yeah well depth forbearance is definitely have an impact right now the money market and so there's a few things I think it's really important to know so I mean this this program is nice but the administration kind of came out and threw it out there without having really thought it through and so it's caused a lot of confusion and we'll talk about why this is important and and the damage it really is causing the lending world and then the headaches that we're having and why it's actually made it now more difficult for lower scored borrowers on government programs but what a forbearance is is basically governments like still loans just like deferral difference as you say look if in my understanding is there's not really a whole lot you have to prove that basically due to the virus impact if you've experienced economic hardship you can call your servicer so don't you know the necessaries the lender who did your loan it's the service or here you say your check to you right and you can request a forbearance and what that means is that you just don't have to make that payment and on your credit report it's going to show up as you know payment on made in forbearance so it's not like a late payment because it's approved but it is going to be noted that it was a forbearance which is actually kind of asterisks to how lenders are going to treat that in the future we just don't quite know how that will be but a forbearance doesn't mean you don't have to pay it's like it's not free right they're just gonna leave it on the loan and so that means that you're gonna be paying interest on the interest you didn't pay and it becomes basically like a negative amortization loan where your loan balance has got to be growing there you've got that payment still the question is how is your server serving and recaptured that forbearance when it's done are they going they're gonna have you pick back up in each two years or just from the end alone and just pay it back but the important thing for bars know is there is an impact to you so it's not a free ride in the sense that you could be eating away at your equity because the power compounding interest is gonna be working against you because you just keep adding interest to your loan and that's been growing eaten into the equity that's so it's great for those who need it for sure if you're if you're had an economic impact and money's tight if this is this is great for you but if you can make your payment you got the reserves I think my suggestion do you make your payment don't get behind don't leave that negative equity get there again now why is this causing issues for lenders and why is this causing interest rate on an FHA particularly FHA VA USDA go up well so think of a service or like this servicers like a property management company and then you have the note older note holder they're the landlord okay the property management company and the lending world has to still pay the landlord regardless if they collect rent or not and so all of a sudden servicing is used to having a certain amount of people not pay and they have the reserves and the money for that but all of a sudden you've seen a huge spike of people who's calling in say hey I can make my payment yet the servicer still has to make that payment okay this is Zoey they're taking a large amount so now the feds are trying to figure out were they gonna do are they gonna set up a discount window with the services because servicers are not banks they don't get to ignore the Fed window the feds fund rate that 0% they don't get to go to that window to take money at 0% to cover this they're not the same they're non-bank so it's causing a lot of troubles there and so what we've seen in those races servicers in your rate the pricing there's lots of components there but what that component is is when the loans done the servicer page the right to be able to take that job on and it usually takes about three years to recover the cost they paid up front of the lender if not right to service it well because of the forbearance they don't they don't want to buy more you know want to service things because of this liability I want to take on loan and we've already seen this people closing loans the very next week calling the further forbearance right off the bat and and so the servicers are not willing to pay for that which means it's priced in the range me now the consumer has to pay for it so of course highest risk are going to be those the highest debt ratios for credit scores which you know a large percentage that falls into your government programs and so that's a big concern and the other big concern was people don't realize that WIC so when a lender does a loan of funds it if the borrower does not make that first mortgage payment it becomes an ineligible loan it can't be sold now to the GSEs or the government back programs because it's they say first payment default and so that was a big scare we're here in FHA is coming out with some clarification saying no we will we won't treat that as a first payment default but that's just FHA right now the industries really want to see well what's guy named Freddie USDA MVA you want to say about that because the big concern to the winner is by turn around and give somebody a loan at six twenty credit score with a fifty five percent debt ratio which FHA allows and then they call in for that first forbearance I have a loan as Nolan or sellable and that causes all kinds of Quigley issues as well which I went into that that's what the farm Baron says so it's a good thing I definitely would caution people though who don't really need the forbearance to use it because it's not free you're gonna pay it back with interest but it's definitely there if you need it and take advantage okay so there's there's no free money with these forbearances and the pearls it's really just postponing it and in fact if if there is a you know a lump sum do a few months later that's a very different story than just tacking it onto the end of the loan and affecting your equity I mean the I imagine most will probably do it back to loan but that's again I think somebody's being left up to service or just service or how they're gonna handle that forbearance but even on the back of th loan you can just look at an amortization schedule how long it takes to pay down to balance but when you start adding payments to it because you're not paying it you can eat into your equity and so just just you know something to be aware of and again I mentioned the credit reports will show forbearance so the question is and this is we just don't know will that impact underwriting in the future when lenders go to to do loans and say oh you did six months for Barents will that somehow factor into how they're gonna improve you or what kind of down payment you need or max that ratio I don't know so right so don't don't take advantage of these programs unless you really need to because they couldn't abiding you anyway if you end up wanting to buy a house next year I mean that could affect goods we don't know yeah that could affect there and it it could affect your abilities so it certainly will affect your equity position right so well that's that's really helpful and you're a wealth of knowledge so I really appreciate you being up for joining on the call and doing this if it turns out that we need a much more in-depth version we'll bring it right back aboard but thank you so much for taking the time and for your hard work as always do you have any I guess as we close out today's call do you have any remarks in terms of you know all the legalese type stuff we need to make sure we include you as always in this video we weren't putting interest rates rank that you know as far as whether or not refinance is good for you talk with your lender there's a lot to it where's you know one of the high points but and of course if anybody thought were given legal advice wasn't doing that so I guess no peers so yeah but no I'm happy to answer questions and people got more specific questions you know just reach out to them okay thank you again and Joshua Kidd a little flag star Bank we work together obviously here in Oregon but you're licensed nationwide now correct yes all 50 states so thank you so much have a great rest of the day we'll be in touch all right thanks thanks for tuning it everyone bye for now [Music]