Event Coverage
COVID-19 Has Squeezed Credit Availability
SILVAR Global Business Council's first virtual program on "Loan Program Changes During COVID-19" held this week was packed with information provided by Lisa Wendl, a mortgage broker with General Mortgage Capital Corp. Wendl discussed the impact of COVID-19 on credit availability and on loan programs for local and foreign buyers.
Wendl said COVID-19 has squeezed credit availability, reduced the availability of loans to borrowers with lower credit scores and higher LTV ratios. Due to a drop in liquidity, there has been a large pullback from jumbo loans and non-Qualified Mortgage (QM) loans.
Most lenders now require foreign borrowers to have a U.S. bank account. Some lenders may not take power of attorney from foreign nationals. Wendl mentioned foreign buyers should be prepared for a longer wait time to sign loan documents at U.S. embassies/consulates.
While the CARES Act let millions of Americans claim forbearance from their mortgage payments, Wendl reminds homeowners, "Forbearance is not forgiveness, it merely suspends payments for up to 12 months."
Wendl warned being in forbearance will impact a borrower's credit. She advised REALTORS® to caution clients about seeking mortgage forbearance if they don't have to, as it may be more difficult to get a loan, or even disqualify them from certain types of loans.
While loans are available, lenders are tightening underwriting by requiring higher credit scores, more reserves, additional down payments and requiring lower debt to income ratios. Some lenders are restricting qualifying income like rental income and some stock income.
It is also difficult to get cash-out refinancing for both primary residences and investment properties. Some lenders have suspended investment property loans and no longer offer home equity lines of credit (HELOC); if they do, they will only offer HELOCs to current customers.
There are some positives. Wendl said some pre-COVID products are being restored and there are "niches" that can be explored by certain groups, like borrowers engaged in a doctoral program may be able to use future income to qualify for a loan. Some market liquidity is returning, and more investors are expected to return to the market in the next two to three months.
See Wendl's presentation with more information HERE.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
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