Where is mortgage money going to come from?

David Goldsmith

All Powerful Moderator
Staff member
New York home loan delinquencies double.
Home loan delinquencies soar in cities
Risen driven by loans 30 to 59 days past due

The U.S. home loan delinquency rate in April 2020 spiked 70 percent above its level a year ago, according to a recent report from real estate data company CoreLogic. (iStock)
The U.S. home loan delinquency rate in April was 70 percent higher than a year ago, according to a recent report from real estate data company CoreLogic.
This growth was driven by early-stage delinquencies — loans with payments 30 to 59 days overdue. April’s early-stage delinquency rate of 4.2 percent was more than double the rate in April 2019. However, serious delinquencies, with payments at least 90 days past due, fell to 1.2 percent of loans, their lowest level since June 2000.

Although delinquencies have risen in each of the 10 largest metro areas, home loans in some places have performed better than in others. As a general rule, metros where governments enacted work and travel restrictions in March to curb the coronavirus outbreak clocked higher April delinquency rates than places that enacted restrictions later.
The major metro area with the highest delinquency rate was Miami, where the county’s mayor ordered all nonessential businesses to close in March but where coronavirus cases have recently skyrocketed. Miami’s home loan delinquency rate was the highest among the top 10 metro areas by population in April 2020, reaching 11.5 percent. That was a 6.7 percentage-point increase and a 140 percent increase from a year ago.

New York City
Next on the list is New York City, where the April delinquency rate climbed to 10.4 percent, more than double its level at the same time last year.
New York City was hit early and hard by the coronavirus outbreak and became its global epicenter in mid March, accounting for 5 percent of all cases globally. New York Gov. Andrew Cuomo and New York City Mayor Bill de Blasio at that point took aggressive steps to curb the virus’s spread by enacting restrictions on travel, dining, and all nonessential work.
Within weeks of the first confirmed coronavirus cases in the United States, thousands of New Yorkers lost their jobs as hotels, retailers and construction firms laid off or furloughed staff. Strapped for cash, New York borrowers were three times more likely to request forbearance on their home loans than the typical borrower, according to one analysis of 22,000 mortgages across the United States.

Las Vegas
The lion’s share of the Vegas workforce is in the leisure and hospitality industry, so hotel closures have sent unemployment claims skyward and decimated many residents’ budgets. The outlook in the coming months doesn’t look much better, with job losses related to coronavirus estimated to double those of the 2007-2009 recession. This has translated into poorer loan performance: In April 2020, the Las Vegas home loan delinquency rate increased to 8.5 percent, up from 3.2 percent a year earlier.

The delinquency rate in the self-proclaimed “energy capital” of the United States jumped to 8.2 percent in April 2020 from 4.5 percent a year before. Houston is suffering two overlapping global crises: the pandemic and cratering oil prices caused by a price war between Saudi Arabia and the Russian Federation. Major petroleum companies headquartered in Houston have laid off thousands of employees, and some 200,000 to 300,000 workers may lose their jobs, according to some estimates.

The Chicago metro area’s delinquency rate in April 2020 was 6.6 percent, up from 4 percent a year ago. Compared to other cities, that might seem relatively modest, but clouds have been gathering over the Chicago residential market for some time: Cook County, which encloses Chicago, ranked among the 50 most vulnerable counties in the United States by foreclosure risk, according to a recent report from ATTOM Data Solutions.

David Goldsmith

All Powerful Moderator
Staff member
Nearly 1 in 6 FHA mortgages are delinquent
Far more FHA borrowers are behind on payments than conventional mortgage borrowers

As the coronavirus pandemic continues to devastate the economy around them, an alarming share of people holding America’s most accessible and affordable mortgages are behind on payments.
Around 16 percent of Federal Housing Administration mortgages were in delinquency in the second quarter, according to Bloomberg. That’s the highest percentage in delinquency going back at least four decades to records starting in 1979.

FHA mortgages are generally made to first-time homebuyers and low-income borrowers with credit scores too low to qualify for traditional mortgages. They also allow borrowers to buy with a smaller down payment.
Delinquency rose from 9.7 percent in the first quarter. In the second quarter, 6.7 percent of conventional mortgages are delinquent.

Some borrowers stopped paying their mortgages after losing their jobs during the pandemic. FHA mortgage holders are protected from foreclosure by a federal forbearance program, at least in the short term. The program allows borrowers to delay payments for up to a year without any penalties, according to Bloomberg.

The pandemic is impacting the housing market in other ways. Federal interest rates cuts have sent interest rates on the 30-year conventional loan below 3 percent, their lowest in 50 years.
But home prices are at record levels in some markets and economic volatility has prompted some lenders to tighten their standards to the point of refusing borrowers they would normally accept. The nature of the pandemic has hampered the ability to close deals.


New member
I keep hearing that we are at all time record low rates......but im still yet to find a cheaper mortgage than my existing 30 year fixed of 3.25% that we signed up with some 4 or 5 years ago.
(Jumbo $875k on 2.4m coop, 740+ credit).

Id willingly love to refinance to a lower rate......but when you inquire all these sub 3% mortgages turn out to actually be higher than what we are paying today.....


New member
There is much more variance in the Jumbo market since it's entirely private and not backed the feds. There was just an article in the WSJ today about it: https://www.wsj.com/articles/jumbo-mortgage-rates-11597945255

That being said it is certainly possible to originate a jumbo mortgage for under 3% today (although it will likely require closing points and/or relationship pricing). However refinance rates in the non-Jumbo market run 0.25-0.5% higher than rates for new purchases, so it's not surprising that you are having trouble beating the 3.25% you already got.

David Goldsmith

All Powerful Moderator
Staff member
On Wednesday night, mortgage purchasers Fannie Mae and Freddie Mac, informed lenders that, starting in about two weeks, they will be adding a 0.5% fee when buying refinance mortgages. Known as an Adverse Market Refinance Fee, the charge is meant to offset the risks and expenses the firms say they have taken on due to the coronavirus pandemic. The costs of the new will surely be passed onto consumers, either in the form of higher closing costs or higher mortgage rates, experts say.

David Goldsmith

All Powerful Moderator
Staff member

David Goldsmith

All Powerful Moderator
Staff member
PIMCO warns of danger in Fannie, Freddie privatization
Bond giant fears plan could lead to another bailout

Pacific Investment Management Company, one of the world’s largest bond investment firms, said the housing market could be in trouble if Fannie Mae and Freddie Mac’s privatization plan goes forward — and it could lead to another government bailout.
In a letter Monday, PIMCO warned that if the Federal Housing Finance Agency’s plan to end government conservatorship of Fannie and Freddie proceeds, “mortgage rates will increase, homeownership will likely suffer, and the national mortgage rate will no longer exist.”

Newport Beach, California-based PIMCO is concerned that if the FHFA bypasses Congress to privatize Fannie and Freddie, investors — including some of its clients — would stop buying Fannie and Freddie mortgage-backed securities. These investors would be under the impression that the government is no longer guaranteeing these securities, according to PIMCO.

Mark Calabria, who leads the Federal Housing Finance Agency, is attempting to put together $240 billion in capital that Fannie and Freddie would need to hold to go private. Calabria, a former director of the Cato Institute who worked with Vice President Mike Pence, is facing immense pushback for some of his initiatives from the housing and mortgage industries and, at times, even President Donald Trump.

But now PIMCO has entered the conversation. With close to $2 trillion in assets under management, PIMCO is perhaps the most powerful player in the fixed-income universe and is one of the largest buyers of Fannie and Freddie mortgage-backed securities.

Fannie and Freddie do not originate mortgages, but instead buy them from lenders, securitize them and sell them to investors. Fannie and Freddie also help control mortgage rates.
The government took over the entities after the 2008 financial crisis to stave off insolvency because of their exposure to subprime loans.
PIMCO presented a list of reasons why it was important for the government to retain control of the two federal housing agencies. At one point in its letter, PIMCO argued that government backing helps keep mortgage rates the same in housing markets across the country.

“The explicit government guarantee facilitates this ability for otherwise similar borrowers to have access to the same homogenous rate across very heterogeneous regional markets,” PIMCO wrote.
PIMCO concluded, “Releasing the GSEs as private companies will not only fail to produce these benefits, but if past is prologue, will likely end in another bailout by way of conservatorship.”

Calabria recently announced the FHFA would look to impose higher fees on lenders on the refinancing of Fannie and Freddie mortgages. Mortgage groups said that would add $1,400 on average to a borrower’s refinancing costs. After pushback, the agency delayed the new fee from September until December.

Mortgage rates are at historic lows, fueling the housing and mortgage markets during an otherwise lagging economy.

David Goldsmith

All Powerful Moderator
Staff member

Fannie Mae Updates on Single-Family Delinquency Rate

Fannie Mae Conventional Single-Family Serious Delinquency Rate increased 59 basis points to 3.24% in July. One year earlier, this serious delinquency rate was 0.67%.
In weighing serious delinquency rates based on vintage, the highest level of problematic loans was in the 2005 to 2008 origination period (9.36%), followed by loans originated in 2004 and earlier (5.57%) and loans originated from 2009 onward (2.79%).
As of July 31, 5.8% of Fannie Mae’s Single-Family Guaranty Book of Business was based on unpaid principal balance in active forbearance and 5% of its loan count was also in active forbearance; in comparison. The majority of loans were active forbearance were attributed to financial problems related to the COVID-19 pandemic.
Fannie Mae’s Multifamily Serious Delinquency Rate increased 25 basis points to 1.25%, while only 1.1% of its Multifamily Guaranty Book of Business based on unpaid principal balance was in an active forbearance. As with the single-family side of the business, Fannie Mae attributed the majority of active forbearance conditions to the pandemic’s economic tumult.
Fannie Mae's Guaranty Book of Business increased at a compound annualized rate of 8.7% in July, to $3.55 billion, with $3.43 billion in mortgage-backed securities and $115.4 million in mortgage loans. In comparison, the Guaranty Book of Business was at a compounded annualized rate of 6.8% for a total of $3.31 billion.
Fannie Mae issued resecuritizations in July that were backed by $8.4 billion in Freddie Mac securities. Fannie Mae's maximum exposure to Freddie Mac collateral for the month that was included in outstanding Fannie Mae resecuritizations was $105.7 billion.

David Goldsmith

All Powerful Moderator
Staff member
Delinquencies up and sales of MBS jumping because the Fed has unlimited appetite. Does that sound at all familiar?
Mortgage-backed securities boom breaks monthly record
New high in single-family home category

Thanks to low mortgage rates and a surge in home-loan refinancing, the number of mortgage-backed securities has skyrocketed.
The value of single-family mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac was almost $322 billion in August, a new monthly record, according to an analysis by industry-research firm Inside Mortgage Finance cited by the Wall Street Journal.

However, yields for the securities have been relatively steady in recent months and even declined slightly. That’s partly because the Federal Reserve said in March it would purchase an essentially unlimited amount of mortgage bonds in an attempt to backstop the credit markets.

Banks have also increased their mortgage bond holdings as they have been flooded with deposits.
Applications for new home loans and refinancing have soared in recent months as pandemic shutdowns ended and interest rates fell.

David Goldsmith

All Powerful Moderator
Staff member

It hasn’t been this hard to get a mortgage in six years
An index measuring mortgage availability drops to the lowest level since March 2014, MBA says

Mortgage credit in August was the tightest in more than six years as a weak economy prompted lenders to tighten standards, the Mortgage Bankers Association said in a report on Thursday.
The group’s Mortgage Credit Availability Index fell 4.7% to 120.9 last month, the lowest since March 2014, indicating stricter requirements to get loans. The index plunged from record highs seen in late 2019 after the COVID-19 pandemic caused the worst economic contraction since the Great Depression.
The drop in the availability of credit was “driven by a reduction in supply from both conventional and government segments of the market,” said Joel Kan, an MBA associate vice president.
Measuring credit availability by loan type, the Conforming MCAI that tracks loans backed by Fannie Mae and Freddie Mac fell 8.6% to the lowest in the data series that goes back to 2011, the report said. The Jumbo MCAI measuring high-balance loans fell 8.9%, and the Conventional MCAI that measures loans not backed by the government fell 8.7%.

The Government MCAI that includes mortgages backed by the Federal Housing Administration, the Veterans Administration and the U.S. Department of Agriculture fell by 1.4%, MBA said.
“Credit continues to tighten because of uncertainty still looming around the health of the job market,” Kan said. “A further reduction in loan programs with low credit scores, high LTVs, and reduced documentation requirements also continued to drive the overall decline in credit availability.”
The MBA’s credit availability indices analyze data from Ellie Mae’s AllRegs Market Clarity covering several factors related to borrower eligibility such as credit scores, loan type, and loan-to-value ratios. The data comes from about 95 lenders and investors, MBA said.
Even with tighter standards, the lowest mortgage rates on record will push home lending this year to a 15-year high of $3 trillion, MBA said in an Aug. 20 forecast. Refinancing probably will reach $1.7 trillion, the most since 2003, MBA said.

David Goldsmith

All Powerful Moderator
Staff member
Banks required balloon payments, stayed mum on foreclosure moratorium
Report exposes questionable practices in federal program for mortgage borrowers

Big banks led some consumers into financially risky mortgage agreements instead of offering the full relief program touted by the federal government, according to a report analyzing complaints.
Detailing the practices of 13 large banks in those cases, researchers found that banks regularly offered forbearance as the only option to homeowners — sometimes requiring balloon payments at the end of the grace period, or putting the loans in forbearance without getting the borrower’s permission.

Banks also often did not inform those borrowers of other options to refinance their mortgage and did not publicly advertise the federal government’s broad restrictions on foreclosures and evictions for federally backed mortgages.

To gain insight into the practices of the banks, the Committee for Better Banks, which includes progressive groups, labor unions and current and former bank employees, analyzed 191 Consumer Financial Protection Bureau complaints for Bank of America, BNP Paribas, Capital One, Citibank, Fifth Third Bank, HSBC North America, JPMorgan Chase, PNC Bank, Santander, TD Bank, Truist Bank, US Bank and Wells Fargo.

A spokesperson for JPMorgan Chase said the bank had “actively promoted the CARES Act relief program” across social media and email.
A spokesperson for Truist said the bank is working directly with borrowers to find solutions and ensure they can sustain homeownership during this “extraordinary, challenging time.”

The other banks in the report did not return requests for comment.
Several banks — including Wells Fargo, Bank of America and US Bank — failed to tell borrowers that if they deferred payments, they would not be able to refinance. HSBC and Wells Fargo placed customers in forbearance without their permission, a practice for which borrowers sued Wells Fargo in August, citing the impact on credit scores.

Eight of the banks required borrowers to make lump-sum payments at the end of the initial 90-day forbearance period instead of offering the option to extend the term of the loan. Just five banks — Fifth Third, Bank of America, Citi, Santander, and Wells Fargo — publicly informed customers of the federal moratorium on foreclosures.

In response to the coronavirus, the government allowed federally backed mortgages to be deferred up to a year, without penalties or late fees, and required lenders to allow borrowers to keep those payments the same after the forbearance period. Borrowers must request the relief, but lenders are responsible for informing their customers of the program.

Nearly one in six borrowers now has a mortgage in delinquency, and 1 million did not know about the relief programs. Two-thirds of those delinquent mortgages are federally backed and would be eligible for relief through forbearance or loan restructuring.

Now, with 29 million people claiming unemployment benefits, the number of delinquent mortgages could rise as federal relief programs lapse. Enhanced federal unemployment benefits, which paid $600 per week, expired at the end of July.

Indeed, investors predict that many homeowners — who have gained $10 trillion in home equity since the housing crash wiped much of it out — will become renters when they can no longer afford to keep their homes. Firms including Blackstone Group and Brookfield Asset Management have recently invested hundreds of millions in single-family rentals.

David Goldsmith

All Powerful Moderator
Staff member
A foreclosure crisis is looming — but here’s what’s different from 2008
“The V-shaped recovery has been interrupted”

Though a foreclosure crisis is on the horizon, experts say recent fiscal policy will prevent a full collapse of the financial system.
“It’s a slow-moving process,” Bill Emmons, an economist at the St. Louis Federal Reserve, said during a presentation on housing insecurity on Wednesday. “It definitely looks like there will be another major event, but hopefully not as bad as the foreclosure crisis associated with the Great Recession.”
This time around, however, the financial system won’t collapse, Emmons predicted, thanks to measures taken in recent months which provided liquidity to the market. The Fed announced in March it would buy back $200 billion in mortgage-backed securities, and has signaled that its benchmark rate will remain low through 2023, which will in turn keep mortgage rates low. Emmons said public health policies, on the other hand, have “fallen short.”

The actual level of distress is difficult to determine because of eviction and foreclosure bans across the country. But Emmons said the level of past-due mortgages is now at levels seen in the beginning of the Great Recession.
The economist also noted that the impact of Covid is more regressive than in past crises: Lower-income earners are disproportionately impacted due to job losses in the service industry. Renters and young, lower-income homeowners with lower education levels have been hit especially hard, even as some sectors, like luxury homes, show “strength, or even froth,” Emmons said.

The uneven recovery has led to a growing consensus around the idea that the recovery from Covid will be K-shaped, lifting more affluent people out of distress faster while the lower-income population sinks further into poverty.
“Probably the clearest massive supportive income were one-time payments and unemployment benefits, but those provisions expired at the end of July,” said Emmons. “The V has been interrupted.”

David Goldsmith

All Powerful Moderator
Staff member
Subprime, No Problem? FHA Mortgage Delinquencies Hit Record 17.4%, as Fed Triggers Mad Land-Rush in Split Housing Market

Atlanta metro: 53,000 FHA mortgages are delinquent. Houston metro, 47,000. Just FHA, not including other delinquent mortgages. And when forbearance ends? By metro.
By Wolf Richter for WOLF STREET.
Even as the housing market is being whipped into a mad land rush, with new single-family house sales spiking 46% year-over-year, highest since 2007, with existing home sales jumping to the highest since 2006, and with prices in many metros soaring to new records, the other end of the housing market – high-risk government-insured mortgages – is falling apart, and delinquencies rose to another all-time historic high.
The Federal Housing Administration (FHA) which insures about 8 million high-risk mortgages with lower requirements – “low down payments,” “low closing costs,” and “easy credit qualifying,” it says – reported that an all-time record of 17.4% of its mortgages were delinquent in August, up from what had been the all-time record in July of 17.0%, and having doubled from a year ago.
The FHA’s mortgage portfolio always has higher delinquency rates than more risk averse portfolios. Over the past two years, about two-thirds of mortgages had credit scores at origination of 679 or below. To tamp down on the risks, the FHA began tightening up its lending standards in 2019. But it wasn’t prepared for what came next.
“Seriously delinquent” mortgages in the FHA portfolio – meaning, 90 days or more delinquent – rose to an all-time record of 11.2% in August, from 10.9% in June, having nearly tripled from 3.8% August 2019.

This data, released by the FHA’s Early Warning System, differs slightly from the data the FHA releases later in its official monthly report.
The delinquency rate for the top 169 metros (table at the bottom), which account for about 6 million of FHA-insured mortgages, rose to 18.0%, and seriously delinquent mortgages rose to 11.7%.
In 29 of these metros, the delinquency rates are between 20% and 27.7%! Other metros have much lower delinquency rates. Because of these huge differences by metro, we’ll look at them by metro.
The delinquency rates include mortgages that were delinquent and were subsequently moved into forbearance programs, where the lender agrees to not pursue its legal rights due to nonpayment of the mortgage, and where the borrower doesn’t have to make payments for a set period. A form of “extend and pretend.”
During the term of forbearance – six months, under the CARES Act, extendable by another six months – while the borrower doesn’t have to make payments, the unpaid interest is added to the mortgage principal balance, and eventually interest and principal payments will need to be made.
The FHA specializes in low-down-payment higher risk mortgages, including “subprime” mortgages (FICO credit score below 620). And down-payment requirements are minimal for subprime mortgages:
  • Credit score of 580 or higher: down payments as low as 3.5%.
  • Credit score below 580: down payment of 10%.
Many of these borrowers are precisely the ones who got hit hardest by the unemployment crisis.
These delinquencies are not happening because home prices have plunged and people could, but refuse to, make mortgage payments because they’re underwater, the sort of strategic default that happened massively during the Mortgage Crisis, often with investment properties. Home prices have risen, and most of these borrowers are not underwater. The delinquencies are occurring because people lost their jobs or their contract work and cannot make the payments for economic reasons.
In some of the Metropolitan Statistical Areas (MSAs), the FHA insures a relatively small share of mortgages, and a high delinquency rate among FHA mortgages in those metros has less impact on the market. But in other MSAs, the FHA insures a large share of mortgages, and a high delinquency rate in those MSAs puts the housing market at serious risk.
At some point, forbearance will end, and borrowers will have to make payments again, or sell the house and pay off the mortgage, or find themselves in a foreclosure.
The highest delinquency rates among FHA-insured mortgages occur in Nassau County-Suffolk County, NY (27.7%); and New York-New Jersey City-White Plains, NY-NJ (27.0%); in both MSAs, over 20% of the FHA mortgages are “seriously delinquent.”
In the Nassau-Suffolk MSA, the share of FHA-insured mortgages of all mortgages is 12.2%, whereas in the MSA of New York-New Jersey City-White Plains, its share is less than half, 5.9%, which makes that market somewhat less threatened.
The most at-risk metros are those where FHA-insured mortgages have a high market share and a high delinquency rate.

John Walkup

Talking Manhattan on UrbanDigs.com
Interesting - how do you think this will affect Manhattan/Brooklyn real estate? Coops tend to be more stable since they have much more owner equity, while condo mortgages are mostly in the jumbo range which has its own issues.

David Goldsmith

All Powerful Moderator
Staff member
I think it's more market psychology/overall market stability. We are currently seeing market weeken due to increased supply and decreased demand. Negative news about the market has always accelerated/exacerbated downturns. If people see reports of foreclosures and the resulting "fire sale" prices, they tend to ignore exactly where it's going on and go "chicken little."

John Walkup

Talking Manhattan on UrbanDigs.com
Agree on the market psychology bit. Reports of a second wave in various NYC hoods, even if not generally considered 'prime real estate' will most likely put some buyers on their heels. Still, it's all about the sellers. Once they start hitting low bids and reported prices tumble, it will be mayhem. Hopefully, we can get a floor under the bids to close out the fall busy season.

David Goldsmith

All Powerful Moderator
Staff member
Mortgage delinquencies jumped to highest rate in 20 years
July late payments spiked in Miami and New York, according to CoreLogic report

The coronavirus has managed to send the U.S. housing market surging in opposite directions simultaneously.
On one end, demand for new mortgages and homes is surging as buyers look to take advantage of rock-bottom interest rates and eager sellers.

On the other end, homeowners across the country are struggling amid the upended economy, and can’t make their loan payments.
Late-stage mortgage delinquencies rose to 1.4 percent among borrowers in July, the highest level since 1999, according to a new report from CoreLogic. The July numbers represent the latest available data and stand in contrast to pre-Covid March, when late-stage delinquencies — 120 days or more — stood at just 0.1 percent.

“Many homeowners are beginning to feel the compounding pressures of unstable income and debt on personal savings buffers, creating heightened risk of falling behind on their mortgages,” said Frank Martell, president and CEO of CoreLogic in a statement.
Miami, which was one of the epicenters of the housing crisis in 2008, reported one of the highest rates of mortgage delinquencies in July. In Miami, payments that were more than 30 days late rose to 12.1 percent, up from 5 percent in July 2019. Mortgages that were more than 90 days delinquent in Miami totaled 8.4 percent in July, up from 2 percent year over year.

New York City also recorded one of the highest delinquency rates in July. Mortgages with delinquencies over 30 days totaled 10.5 percent, compared to 5 percent in July 2019. Mortgages that were more than 90 days late rose to 7.5 percent in New York, up from 2.5 percent a year ago.
And in Los Angeles, mortgage delinquencies over 30 days totaled 6.3 percent, up from 2.3 percent year over year; delinquencies of more than 90 days totaled 4.1 percent, up from 0.6 percent in July 2019.
Nationwide, all states saw increases in delinquency rates of 30 days or more and 90 days or more because of the pandemic, the data shows. States that reported the highest rates included Florida and New York, along with New Jersey and Nevada.

Many state governments and federal agencies have enacted moratoriums on evictions and foreclosures, preventing foreclosures from happening even as delinquencies increase. A foreclosure moratorium on home mortgages backed by Fannie Mae and Freddie Mac extends through December.

David Goldsmith

All Powerful Moderator
Staff member
Homebuyers with bad credit increasingly locked out of the market
Despite surging supply of mortgage bonds and historically low rates, some Americans are struggling to qualify for home loans

Not everyone is reaping the benefits of a low-mortgage rate environment.
As mortgage lenders tighten their belts, available housing credit has hit the lowest level since February 2014, leaving hopeful homebuyers with poor credit scores struggling to qualify for loans, Bloomberg News reports.
The Mortgage Bankers Association’s index tracking available housing credit monthly has fallen eight of the nine months this year. The index is down 35 percent year-over-year.

One of the starkest examples is the tightening measures taken by Ginnie Mae, which guarantees loans predominantly for lower-income borrowers and first-time homebuyers.

In January 2019, 44 percent of Ginnie Mae’s purchase loans were issued to borrowers with FICO scores below 700 and debt-to-income ratios over 40 percent. This January, that number fell to 38 percent and by August it had slipped to 36 percent.
For Ginnie Mae’s refinance loans for borrowers of that same profile, the agency cut the number of loans from 38.5 percent in January 2019 to 12.8 percent this January. In August, those borrowers represented just 5 percent of Ginnie Mae’s refinance loans.
Ginnie Mae’s tightening up has meant its issuance of mortgage bonds has dropped by $3 billion, year-to-date, compared to the previous five years, according to Bloomberg News.

Meanwhile, the mortgage market overall is humming for borrowers with good credit, who’ve rushed to take advantage of low rates to buy or refinance. The supply of mortgage bonds is set to reach its highest level since 2003 this year with $2.8 trillion in gross issuance.

David Goldsmith

All Powerful Moderator
Staff member
Mortgage lenders tighten screws on NYC home buyers
Brokers say banks are scrutinizing borrowers more and expecting bigger down payments

This spring, Kevin Brunnock considered himself one of the city’s lucky brokers.
He was working with a client who wanted to keep searching for a home despite the pandemic. If the right property came along, the client was ready to commit sight unseen.

In June, they found such a place: a two-bedroom condo on the Upper West Side owned by Nigerian-born supermodel Oluchi Onweagba. The 1,300-square-foot apartment had a terrace overlooking the Hudson River and in-unit laundry, both major draws in the Covid era.
Brunnock’s client made an offer within two days and went into contract on June 25 with a mortgage contingency. But that’s where the deal’s momentum died.

The sale didn’t close until Sept. 30 to allow for the mortgage lender to verify the buyer’s employment and pore over income and assets, double and triple checking statements, Brunnock explained. The financing took double the time the broker had expected.
“We saw for the first time how much the banks were scrutinizing everything,” said Brunnock, who works at R New York. “Covid has turned mortgage lending into a daunting process.”
The hurdles to accessing financing for the few homebuyers seeking to purchase in New York City is a gut punch to the city’s depressed housing market — that reveals institutional uncertainty and a lack of confidence in the city’s future, according to experts and industry insiders. The biggest concerns center on declining property values, potential new taxes and rising unemployment.

It may feel counterintuitive. Interest rates have sunk to unprecedented lows. Homebuyer demand is propelling the U.S. housing market to new heights with prices soaring and supply hitting historically low levels. But that wave has yet to hit New York. Sales in Manhattan fell 46 percent last quarter from a year earlier.

Most buyers of late have counted on financing to get to the closing table. In 2019, the number of cash buyers dropped substantially for the first time in five years. But that dynamic has flipped yet again, particularly at the high-end. Part of the reason may be that financing is not as easy to secure as it used to be.

“Low rates in and of themselves doesn’t necessarily mean that you’re able to get a mortgage,” said Michael Berkin, a New York-based mortgage loan originator at Silver Fin Capital.
New scrutiny
It’s not just that banks are taking a more critical look at those with less traditional income streams — think entrepreneurs or gig economy workers. For attorneys, doctors and well-heeled borrowers in financial services, new layers of due diligence are slowing down the process.
There is a dearth of mortgage data monitoring originations for New York City’s residential market, but an analysis of property records by The Real Deal shows that the total volume of new home loans recorded year-to-date is down 20 percent, compared to the same period in 2019. (TRD’s analysis includes both purchase and refinance loans.)

Nationally, available housing credit has fallen nearly every month this year, indicating that homebuyers with lower credit are increasingly unable to secure home financing, according to the Mortgage Bankers Association.
Joseph Palermo, a mortgage loan officer at TD Bank, said he’s now reviewing bank statements and calling businesses to verify a borrower’s income and employment, something he never did or cared too much about before.
“We’re not just taking the two-sentence letter from the accountant like we used to,” he said. “We are double checking.”

Berkin recalled a recent lengthy process where a couple, one of whom was a doctor while the other was a lawyer, were trying to secure financing for their home.
“They should have no issue qualifying at the end of the day and it took nearly 90 days for them to close which is, in my opinion ridiculous,” he said.
In response, Chris Totaro, a residential broker at Warburg Realty, started advising his buyers to begin the prequalification process for a mortgage before beginning their search — and be prepared to shell out more cash than expected.

“The 10 percent condo mortgage is completely out the window,” he said.
While a 20 percent down payment is the rule of thumb for New York City buyers, 10 percent down for a condo was typical pre-pandemic in the city, as were loan-to-value exceptions. But now lenders are being stricter with down payments and, during the first three months of the pandemic, a 30 to 35 percent down payment became the norm, according to Berkin.
The mortgage broker said that’s “very slowly” changing and admitted it “obviously dramatically affects how someone approaches a purchase and what they’re willing to spend.”

Whether trouble landing financing is actually scuttling deals in New York City is hard to determine. So far, Totaro said he hasn’t lost out on any deals due to delays in mortgage financing, though it may only be a matter of time. The broker said he’s working with a buyer who refused to sign a contract on a two-bedroom apartment Downtown until they received approval for a mortgage.
“If someone else steps up, that property is gone,” he said.
A question of value
So what’s changed for the city’s biggest home lenders? The simple answer is risk.

Most home loans in New York City are too large to be securitized and sold to federally-backed home mortgage companies, Fannie Mae and Freddie Mac. This means lenders have to keep the loans on their balance sheet and bear the risks associated with them.
Banks held the largest market share of home mortgages originations in New York City, or at least they did before the pandemic. When contacted for this story, no institution agreed to an interview. Bank of America, Citibank and Wells Fargo declined to comment. First Republic and JPMorgan Chase, which tightened home lending standards across the board weeks into the pandemic, did not respond.

Initially, the concern for institutions was how borrowers would weather the city’s three-month lockdown and the staggering waves of layoffs and furloughs that accompanied it, according to Palermo. But now, he said the biggest issue is whether appraisals accurately reflect the true values of the property.
Comparative sales for deals closed during the pandemic are beginning to roll in and, so far, they indicate property values have fallen since March, Palermo said. This means the leverage for loans issued based on pre-pandemic appraisals are now looking “a little squirrely,” he said.

“Banks are a little afraid that if the values keep coming down, then the leverage grows,” he said. “If you have 80 percent leverage on something and the value comes down… now we’re at 90 or 95 [percent].”
That’s translating into banks wanting to get bad loans off their books, according to Mark Anderson, a partner at Anderson, Bowman & Zalewski who focuses on foreclosure defense.
Starting in July, he began to see getting calls from bank attorneys offering to settle the long-running cases — some that dated as far back as the Great Recession.

He would not elaborate on specific offers due to confidentiality agreements but said the number of offers is more than normal and the values on the table “much lower than was originally discussed pre-Covid.”
“A bank’s offer is dependent on their valuation of a property,” he explained in an email. “So it seems, despite what public figures may indicate, the banks are seeing darker times ahead.”
Not all lenders share those concerns.
“Quite frankly we’re not having issues at this time because there’s so few sales in New York City,” said Alan Rosenbaum, CEO of New York-based mortgage company, GuardHill Financial. “Valuations only go down when sales go down… If they don’t sell it, it’s not a comparable.”

Market data is on Rosenbaum’s side so far. Last quarter, median sale prices slid marginally in Queens and were flat in Brooklyn. In Manhattan, prices actually increased, though that was due to distortion from higher-end deals that went into contract just before, or amid the city’s lockdown, according to appraiser Jonathan Miller of Miller Samuel. The number of transactions in all three boroughs was down at least 40 percent year over year.
Miller said the sales data is particularly “thin” on deals above $2 million, which can make appraising a high-end home more difficult. He also noted that different lenders’ standards for conducting appraisals also continues to be a factor that can delay financing.

For the appraiser, though, he said the tighter lending standards are “actually really encouraging” to him “because during the financial crisis there was no risk management.”
There’s more to banks’ cautious lending than uncertainty over valuation, however. Part of the calculus is a lack of confidence in New York City, according to economist Dr. Sam Chandan, dean of the NYU SPS Schack Institute of Real Estate.
“There are concerns around what is the trajectory of New York’s competitiveness in attracting new jobs and residents will be, given our challenging fiscal outlook,” said Chandan. He pointed to discussions on introducing new taxes on city residents and commercial real estate as specific sources of concern.

When it comes to TD, Palermo stressed that, despite additional due diligence, deals are still getting funded.
“As long as we know the person is working and has the ability to repay, we’re lending,” said Palermo. “It’s not a harder loan for us. We’re just taking extra steps to verify it.”
Palermo said that he’s able to close a purchase loan in under 30 days “with my eyes closed,” though he admitted a refinancing can run up to 90, even 100 days. (He and Berkin confirmed that most lenders are prioritizing purchase loans over refinance business.)

But as more and more borrowers are pushed to their limits, many have second thoughts.
“Money is almost free but trying to get it is another thing,” said Vickey Barron, a broker at Compass, who nearly gave up on refinancing her own property earlier this year. “You question, is it worth it?”