• Matt Joy

A Cash-Out Refi… Hangover


This week was Cinco de Mayo… which happened to land on a “TACO TUSEDAY” (shout out to Lebron James) I hope everyone stocked up on tums. Look… let’s talk about some facts. Last year, the New York Post ran an article that detailed the polling of 2,000 Americans where they had asked them the, oh so difficult question… “What is the REAL reason Cinco de Mayo is a holiday”? Can you believe that only 22% knew what the real celebration commemorates? To be honest, yes… because until this morning I didn’t know the exact reason I just knew that it’s commonly confused with Mexico’s Independence Day (held on September 16) which, like our Independence Day is a big deal to our friends (are we still friends, btw?) south of the border. In Mexico, Cinco de Mayo is observed in remembrance of the Mexican Army’s defeat over the French Empire in 1862. In America, Cinco de Mayo is observed in remembrance of all college kids and “young professionals” that got rip roaring drunk and blacked out before it was black out.

As Americans you must admit we like to take things to the absolute BRINK… especially when it comes to drinking… I mean look what we have turned St. Patty’s Day into (shout out to St. Pat!). It’s no wonder why banks and mortgage lenders are taking precautions to prevent another melt down. In 2006 Americans cashed out $320.5 billion dollars in home equity and that was just on loans owned by Freddie Mac. As you all know (and because it’s pumped into our heads every day) interest rates are historically low… lower than they were in 06’ and like I mentioned above we have to take EVERYTHING we do to the max, so why should using your homes equity be any different? Like the 200-year-old ESPN College Football Analyst Lee Corso would say… NOT SO FAST MY FRIEND!

Wells Fargo, JPMorgan Chase, Penny Mac, Flagstar, loanDepot and trust me the list will continue to grow… have implemented some sort of overlay or loan level pricing adjustment to turn away Cash-Out Refinances. Flagstar and loanDepot came out with a nice cushy 500 basis point adjustment for any Cash-Out. Wells Fargo pulled the plug on the entire program itself while companies like Chase and Penny Mac slapped nice little overlays atop the program – 700 to 720 FICO gets you a nice 6% rate – so yeah, it’s safe to say that the Cash-Out Refi is being taken out to pasture.

As we all try to recover from our hangover… whether it be from tequila or new regulation I hope everyone has… or had by now a safe and happy Cinco de… Whatever.

Stay safe. Stay healthy.

Talk to you soon,

MJ

Photo by Willis Stout on Unsplash

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