What’s going on in the mortgage industry and why does it matter?
I’m sure you’ve heard – lenders don’t have any money, they are not funding loans, We cant record deeds and in general the sky is falling in regards to lending and the rest of the world… Right?
Well, those things are simply not true.
What is true, is that we must be smarter & more responsible about our lending.
Rest assured, this is not a repeat of 2008 and here’s why:
Banks are being used as the solution in 2020, rather than creating the problem in 2008
In 2008, solvency of banks was core to the crisis due to the implosion of subprime mortgages, whereas in 2020 the effects of COVID-19 will have the most severe consequences concentrated in the transportation and hospitality sectors
The initial Federal Reserve response is directed at preventing a credit crisis from evolving into a full-blown financial crisis. Banks are at the center of the Federal Reserve efforts to prevent financial market credit stresses from becoming a full-blown systemic financial crisis. The challenge is to utilize the banking system, which remains relatively healthy, to get credit to non-bank financial institutions, households and businesses that need access to credit
The US alone is scheduled to issue an additional $1 trillion in bonds to fund its fiscal stimulus, with Europe and Asia scheduled to issue massive amounts of government bonds as well to fund their economic stimulus plans. This unexpected avalanche of bond supply, coupled with ongoing uncertainty regarding the impact of the
COVID-10 / Coronavirus is creating enormous amounts of volatility in the market.
The government is proposing a 12-month forbearance for borrowers making payments. What you need to know about government loans is that if the government enacts a 12-month forbearance to the borrower, the servicer of that loan would need to advance the principal and interest payment for the borrower for that 12-month period. At the end of the 12-month period, the borrower would not be forgiven the 12 months, but rather be required to make up the payments.
This could be life changing for a borrower and not in a good way. Most likely, the borrowers wont have the ability to make a lump sum payment at the end of the forbearance – which could put them into a default status.
I feel personally responsible for the employees & their families that work at NOVA
AND my borrowers and their families. Market liquidity is at the top of our list. We are currently experiencing unprecedented Federal Reserve stimulus that is creating market behavior never seen before.
Thankfully, NOVA positioned ourselves to avoid collateral damage from the volatility.
All Lenders are in the same situation, no one is immune or has “portfolio money” or “special pools set aside” at lower rates. If they hear that in the market, its just a sales person selling something. If they shop on the internet right now they will be shocked at the rates they see. If they see “low rates” it will have upfront Points & fees associated with it, otherwise it is just a bait & switch quote.
We are your Trusted Mortgage Professional that will look out for the best needs of the client – we will be honest and help them navigate the scary & uncertain times we are in regarding their finances.
As a Country, we will come through this virus pandemic even stronger & better than before.
These times require that we stay ahead of the curve and do not fall behind to ensure that we are in the best possible position to serve our borrowers by under promising and over delivering.
It is the motto that NOVA was built on and needs to continue.
We are Open for Business.
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