2021: You did not miss the boat on Rock Bottom Mortgage Rates

Dear friends,

Heading into the very early part of 2021, if you find yourself looking to buy a new home or refinance your mortgage, rest assured… you did not miss out on the rock bottom mortgage rates that existed for most of 2020, at least for the time being. 

When it comes to predictions and forecasts regarding the future of the economy and interest rates, there are plenty of economists and average Joe’s out there who are willing to share an opinion.  Although, the economists are paid to make forecasts, they’re not always correct.  Some have better track records than others, and some average Joe’s might be just as good at predicting the future of the economy as the high priced economist?  Regardless, no one has a crystal ball.  Over time, even the best are not consistently correct.  In fact, in July of 2020, the MBA’s (Mortgage Banker Association’s) research team predicted that 30-year loan rates would average in the 3.2% to 3.3% range in the last 2 quarters of 2020 (*).  Thus, even the Mortgage Bankers’ Association was off in their short term forecast by at least 0.5% as we saw 30-year rates remain in the 2.625% to 2.875% range for the 720+ credit score borrowers. 

As we head into 2021, we see mortgage rates holding steady in the 2%’s.

Having graduated with an economics degree from Grand Valley State University, and as mortgage banker with over 30 years of experience, I have always paid close attention to the movements in mortgage rates (and the potential future movement of mortgage rates). It has been part of my job to do so as I am asked about mortgage rates almost daily, and to give my “average Joe” opinion. My responses to these questions of forecasting rates have always been simple. That is: “Whatever causes inflation will normally cause interest rates to hedge up, and vice versa.”  Hey, I said it was simple, didn’t I? But, I do go into a little further explanation from there; and that is essentially:  what is good news for the economy is bad news for interest rates, and what is bad news for the economy is good news for interest rates.  With that being said, I usually give some examples.

My 3 Month Forecast

With the all of the very unfortunate, economic destruction caused by Covid-19, we should see mortgage rates stay low until more businesses open again, and the economy gets back to more of a normal sense. This might not be until most people are of the opinion that the vaccines to Covid are working well, and that the vaccines are being widely administered? Until that time, the Federal Reserve is likely to continue buying mortgage backed securities, keeping mortgage rates low to inject liquidity into the economy, and to keep the housing market robust. There are always international developments that can arise which cause interest rates to rise or fall. There can also be governmental fiscal policy decisions that are designed to spur economic growth but are viewed to be inflationary, which could cause interest rates to hedge up. But, basically, there is no true crystal ball. What we do know is that mortgage rates are truly at historic lows going into 2021. We don’t know what the rest of the year holds, but at least for the near term, we will see extremely low rates throughout the first quarter of 2021. So, how’s that going out on a limb for a 3 month forecast!

With rates still in the 2%’s, right now is still a great time to buy or refinance. I have been very fortunate and blessed in the mortgage industry throughout my career, but especially in 2020, being able to close purchase loans and refinances for my clients at such rock bottom rates. Starting 2021, I am grateful to be rested and ready to build back up my pipeline, offering the same service and low rates that people have come to expect from me and my team. I appreciate everyone reading this for your past business, your referrals, and so much more than you know. I am hopeful for many things, but here are two of them as I conclude: (1) for your continued referrals that keep me in business, and mostly (2) that the Covid-19 virus is brought under control to the point of polio, small pox, and other viruses that have been brought under control in our history. This mortgage banker for one would be very happy with a much higher interest rate, but a Covid free environment, opposed to what we experienced in 2020. I am available for refinances and pre-approvals now!  Friend’s, let’s say good riddance to 2020, and welcome in 2021.

USDA Announces Polaris Home Funding as 3rd Largest RD Lender in Michigan

USDA Announces Polaris Home Funding as 3rd Largest RD Lender in Michigan

U.S. Department of Agriculture Rural Development kicked off this month by recognizing June as the ongoing role in supporting rural home ownership.

“Rural communities are rising to the challenge put forth by the coronavirus pandemic,” Brand said. “Under the leadership of President Trump and Agriculture Secretary Perdue, USDA is committed to being a strong partner in building prosperity in rural communities and for the people who call them home – especially those impacted by the COVID-19 pandemic.” – USDA Rural Development State Director for Michigan Jason Allen.

Allen goes on to say,

“Working with our partner lenders, USDA is helping rural Michigan families achieve the dream of home ownership,” said USDA Rural Development State Director for Michigan Jason Allen.  “Hundreds of lenders have participated in the program and it would be difficult to recognize them all, but I congratulate our leading lenders, Amerifirst Financial, Flagstar Bank, Polaris Home Funding and Mortgage 1, on their years of commitment to this program.”

In Fiscal Year 2019, USDA in Michigan invested more than $571 million to help 4,445 families and individuals buy a home. USDA also provided $2.4 million for home repairs to 435 very low-income rural residents.

Since the guaranteed loan program began in 1991, Michigan has obligated more than 100,000 loans totaling more than $10 billion, becoming the first state in the country to reach either of these milestones. USDA Rural Development provides loans and grants to help expand economic opportunities and create jobs in rural areas. This assistance supports infrastructure improvements; business development; housing; community facilities such as schools, public safety and health care; and high-speed internet access in rural areas.

PSA regarding Mortgage Forbearance, Rate Updates, and Changes in Mortgage Lending

Dear Friend & Past Client,

Normally, I will send out a mortgage lending update to my past clients, my future clients that I have been working with on pre-approvals, and local West Michigan Real Estate Agents.  However, this email is mainly for my past mortgage clients, and it is intended to be a public service announcement regarding the dangers and pitfalls of putting your mortgage in forbearance. Still, if anyone feels the information in this email will benefit someone they know, please feel free to forward it to them. 

If you are in a position where you absolutely CANNOT make a mortgage payment, car payment, credit card payment, etc., and the creditor tells you that they will not report you late over this period, please do yourself a huge favor and get that in writing!
Some mortgage lenders may agree, in writing, to not report you late, while allowing you to skip a payment(s) by adding the amount onto the balance of your mortgage. We still don’t know yet how mortgage lenders will treat those missed payments, if you are going to apply for a new mortgage within 12-24 months of forgoing those house payments.
Based on my experience from the 2008 housing bubble, I was able to see the ramifications of many people who ended up modifying their mortgage in order to lower their payments, or get caught up on their payments (or both).  Many of these homeowners were told that the modifications would not affect their credit adversely; but so often that was not the case. Even in situations where mortgage services did not report the homeowner as being late, reports were not made on the mortgage as being “modified”, preventing  thousands of homeowners from getting approved to purchase new homes after having their mortgage modified.

If it comes down to feeding your family and keeping the lights on vs. putting your mortgage in some type of forbearance program, then it becomes a no-brainer on what is the proper choice to make.  However, if you are looking to take advantage of low rates by refinancing or purchasing a new home in the next 12-24 months, you will want to reconsider taking advantage of some type of mortgage forbearance program unless it is absolutely necessary. The same may apply if you want to maintain your credit score, depending on how the modification is handled and treated. This belief is not just mine, but is shared almost unanimously throughout the mortgage lending industry.

Rate Update: Recently, the Federal Reserve has stepped in and has started buying mortgage backed securities in mass following the two most chaotic weeks in their history. As a result, mortgage rates are stabilizing and have come back down considerably from where they peaked on Friday, March 20th, 2020. In fact, rules are now within range for many people to discuss refinancing again. If your current mortgage rate is above 4.00%, or even above 3.75% but has mortgage insurance, please contact me to see if a refinance may be beneficial for you at this time, or possibly sometime in the near future if they continue to drop. I will be glad to work up a refinance loan estimate for you, combining it with a cost/benefit analysis; or I can put you on my watch list for when the market hits the target rate you are looking for. 

Furthermore, if you have been in the market for a new purchase, please make sure to freshen up your pre-approval. There have been recent changes in guidelines that may not allow you to qualify for as much home since some programs may have tightened up on the debt-to-income ratios. Likewise, some government backed mortgage programs have increased credit score requirements across the board and some lower credit score applicants may all of a sudden need to make some adjustments to improve their credit scores. 

We expect the listings to come out in droves after the quarantine is lifted. In fact, Greater Regional Alliance of Realtors (GRAR.com) has reported 127 new listings and 107 pending sales in Kent and Ottawa County between March 25th and April 4th!!  You don’t want to fall behind the competition by not obtaining a full pre-approval when your perfect home hits the market.

So, whether you are looking to drop your monthly payment, get cash out for debt consolidation purposes, or get yourself fully pre-approved, please contact me.  As always, I am here to help you.

Hang in there friends. We are all looking to be there and care for one another in every way possible. Life will go on and return to normalcy. Hopefully, that is sooner than later, and we will all have learned many lessons on the other side of this.

Why Mortgage Rates Will Go Back Up, And Why We Hope They Do

Dear Friends,

    If you have been tracking mortgage rates lately, you know that they have been trending on a slow, gradual decline. Buyers who were in the market just last summer, can now qualify for more home as a result of lower interest rates and many of those that have purchased a home just last year, can already stand to benefit by refinancing. However, these recent interest rate drops may reverse upward faster than they’ve fallen; and this time around, we hope that they will.

Although, the Federal Reserve has yet to comment on whether the Coronavirus will impose a threat to the United States economy, concern over the virus has already shown that it has the ability to significantly impact our markets.To date, most of the economic impact stemming from fears of the virus have been more global in nature, and we have been insulated from wide spread reported cases and economic effects here in the United States. However, being that we are part of the global economy, our bond markets have already been pricing in possible economic slowdowns that could occur for the past several weeks now; hence, the steadily falling “mortgage” rates. In fact, on Monday, February 24th we saw the Dow drop 1,032 points and another 879 points on Tuesday, February 25th for a loss of 7.5% of it’s market share. As a result, the many investors that fled stocks invested more heavily in long term bonds, and mortgage backed bonds, thereby driving interest rates downward even further.

Some feel the Corona virus is a serious international health threat, while others feel that it may be somewhat overblown? Regardless, many are prayerful, and I would think that all are hopeful that a remedy will be found soon as a way to combat the coronavirus. But, until the time comes when it is no longer considered a major health threat (here or abroad), we should continue to see a low interest rate environment. When the fears of the Corona virus spreading eases, interest rates will surely rise to their normal market levels.  And that will be a good thing this time around.

FHA Announces Long-Awaited Changes to Eligibility Requirements.

According to HousingWire.com, The Federal Housing Administration has finally issued a long-awaited update to its condominium rules, announcing Wednesday that it will now allow individual unit approval and is taking other steps to loosen requirements that make these properties eligible for FHA financing.

Written by Jessica Guerin, 

Under the revised guidelines – which take effect Oct. 15, 2019 – an individual condo unit in a building of 10 units or more may be eligible for spot approval if no more than 10% of the units are FHA-insured. For units in buildings with fewer than 10 units, no more than two units can have FHA insurance.

The FHA is also extending the recertification deadline for approved condo projects from two to three years, and it will insure more mixed-use projects, or those with more commercial space, to be eligible, stating that approved projects can now have up to 35% of their square footage dedicated to non-residential use.

The agency also loosened restrictions on owner-occupancy rules, stating that eligible condo projects can now be just 50% owner-occupied. It also said it will insure up to 50% of units in any given project. The FHA said it expects the updated guidelines to qualify an estimated 20,000 to 60,000 more condo units per year for financing. Currently, of the more than 150,000 condo projects across the country, only 6.5% are approved for FHA financing.

This is something the FHA is aiming to change with the updated guidelines, Department of Housing and Urban Development Secretary Ben Carson said on a call with reporters Wednesday.

“FHA is publishing a new rule in the Federal Register that we believe will offer significantly more options for individuals and families to buy a home, specifically the kind of home more and more people are looking for in order to achieve homeownership, and of course that is a condominium,” Carson said, adding that the new rules “will open many doors to buyers who have been waiting on the sidelines, waiting to become homeowners, waiting to share in the American Dream.”

FHA Commissioner Brian Montgomery said the agency has been working alongside stakeholders for three years to update its condo policies.

“It had become clear for many years that we needed to update our condo project approval regulations so that, while not exposing the agency to more risk, they are more flexible and less prescriptive and more reflective of the current market than the previous condominium project approval provisions,” Montgomery said on the press call.

The National Association of Realtors was among the of the first trade associations to applaud the agency for finally making the long-awaited move.

NAR said the changes, which it has championed for more than a decade, should help alleviate affordability issues for many prospective homebuyers.

“We are thrilled that Secretary Carson has taken this much-needed step to put the American Dream within reach for thousands of additional families,” said NAR President John Smaby.

“It goes without saying that condominiums are often the most affordable option for first-time homebuyers, small families and those in urban areas,” Smaby continued. “This ruling, which culminates years of collaboration between HUD and NAR, will help reverse recent declines in condo sales and ensure the FHA is fulfilling its primary mission to the American people.”

We greatly appreciate your time and hope to hear from you again soon.
Phone: 616-292-6703
Email: bob@prioritymortgagecorp.com
www.bobheinmortgage.com
– Bob Hein, Mortgage Lender
NMLS 162989

Source:Guerin, Jessica. “FHA to Make Financing Easier for Condo Owners.” HousingWire.com, HousingWire, 14 Aug. 2019, www.housingwire.com/articles/49851-fha-to-make-financing-easier-for-condo-owners.