I want to first circle back to our April buzzword, forbearance, and before I get to the good news let us start out with some statistics. The MBA is reporting that nearly 10% of mortgages backed by the FHA and Veterans administration are in forbearance…and a report from Black Knight shows that 1.5 million Fannie and Freddie backed loans are also cuddled up and in forbearance. For those of you keeping track at home… approximately 6.5% of ALL mortgages are in some sort of forbearance status.
If you’re looking for answers as to why pricing is choppy, and lenders are hesitant about taking on additional risk, look no further than the numbers that I just supplied. Who in their right mind would want to invest in a servicing asset that won’t begin to pay you back until month 5 or 6 or possibly even longer… wait, what? I’m sorry what’s that? Casey Crawford and Movement Mortgage will? Well, kinda. Straight out of North Carolina (c’mon and raise up) comes news that the Movement Mortgage machine will reduce overlays and min credit scores for FHA and VA loans… ummm excuse me? Yup, in a move so BOLD… General Custer was in his grave, like “Yo, dawg… that’s aggressive.” What’s even more interesting is that while MM made this move… Mr. Cooper (the largest non-bank servicer) boarded up the doors to their Wholesale Lending Division. Remember Feb 2019? Mr. Cooper acquired Pacific Union who was notorious for gobbling up low FICO, government backed loans… the acquisition put $25 billion worth of Pac U’s loans into their $600+ billion servicing portfolio.
Now, I’m not going to speculate… I’ll let ya’ll or yous (for my Philly folks) and my favorite of course yinz take that information and do what you want with it.
Oh, that’s right I missed the GOOD news! Of course… right after I posted my blog from last week the agencies (Freddie & Fannie) came out and announced that they will be buying “some” loans that are in forbearance… but those purchases come with a small 500 basis point (for first time homebuyers) & 700 basis point (for everyone else) Loan Level Pricing adjustment. Look it’s not pretty… but it is a lifeline to help get a loan off the books.
The biggest news though out of D.C. is that Freddie and Fannie will only require servicers to advance just 4 months of missed payments. After the 4-month period has ended the servicer is under no further obligation to advance payments. Again, it’s not perfect, but it is a lifeline that could help small to mid-sized servicers gasp for air while they navigate unchartered waters.
Even as states begin to “re-open” and we experiment with injecting Clorox directly into our blood stream… we’re all still grappling with tons of uncertainty. I don’t know about everyone else, but the hardest thing for me personally is not knowing when. When will the curve flatten? When will we be able to go back to work? When can we brunch again? When will this be over, because if it affects football season for 1 second, I’m going to lose my mind?! The fact of the matter is… no one knows. We can speculate and argue, but it’s all up in the air. I just hope that every stays healthy!
Stay safe. Stay healthy.
Talk to you soon,
Photo by Nikola Radojcic on Unsplash