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FHFA Raises Conforming Loan Limits for 2021

Nov 30

2:59

Category | Mortgage Industry Updates & Announcements

On November 24, 2020 the Federal Housing Finance Agency (FHFA) announced an increase in the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2021.

The maximum loan limit for one-unit properties will be $548,250 an increase from $510,400 in 2020. Release.

The decision was based on the recovery of housing prices under the Housing and Economic Recovery Act of 2008 (HERA). They require that the baseline conforming loan limit be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price.

FHFA third quarter 2020 House Price Index (HPI) reported that house prices increased 7.42%, on average, between the third quarters of 2019 and 2020. The baseline maximum conforming loan limit in 2021 will increase by the same percentage.

For areas in which 115 percent of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit.

A list of the 2021 maximum conforming loan limits for all counties and county-equivalent areas in the country can be found here.

WHAT DOES THIS CHANGE MEAN FOR HOMEOWNERS AND HOMEBUYERS?

This means YOU may be able to:

Purchase a higher priced home with more financing options, possibly including lower rates.
Refinance an existing, higher-rate “jumbo” loan and possibly drop mortgage insurance.
Combine 1st and 2nd mortgage

Contact your Greenway Mortgage loan officer today for more details about how the increase can impact you.

2021 Conforming Loan Limits Effective January 2021

Goodbye LIBOR, Hello SOFR for ARM Rate Index

Nov 17

6:23

Category | Mortgage Industry Updates & Announcements

A change is underway in the world of adjustable-rate mortgages and mortgage-backed loans such as revolving home equity lines of credit, known as HELOCs. For decades, the rates on those loans and a variety of other financial products were determined by an index called the London Interbank Overnight Rate (LIBOR). This is now being phased out in favor of a new index called the Secured Overnight Financing Rate (SOFR). Sometime after 2021, LIBOR is expected to be discontinued. However, the transition has already begun.

If you have an adjustable rate mortgage, a home equity line of credit or a reverse mortgage, it may be a good time to check with your servicer about which index your mortgage loan is tied to. Why? It could affect your rate the next time you’re due for an adjustment. To understand how this change might affect you, let’s dive into the key differences between LIBOR and SOFR.

LIBOR? SOFR? What’s the deal?

LIBOR and SOFR both measure the cost of short-term borrowing, though they measure that cost differently.

The London Interbank Offered Rate (LIBOR):

A benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.
A forward-looking average rate, computed daily, at which a contributor bank can obtain unsecured financing in the London interbank market, in a process overseen by the ICE Benchmark Administration (IBA). Based partially on market-data “expert judgment”.
Based on 5 currencies: the U.S. Dollar, Euro, British Pound, Japanese Yen and Swiss Franc.
Incorporates a built-in credit-risk component because it represents the average cost of borrowing by a bank.
LIBOR has 7 varying rates on terms of one day to one year.
LIBOR is a critical component of the financial system, hardwired into not only global derivatives but also business loans, securitizations, floating rate notes, adjustable mortgages, and student loans.

Secured Overnight Financing Rate (SOFR):

Unlike LIBOR, SOFR is a secured overnight (backward looking), risk-free rate based on actual transactions collateralized by Treasurys.
It is an influential interest rate that banks use to price U.S. dollar-denominated derivations and loans.
Purely a daily rate.
Seen as preferable to LIBOR since it is based on data from observable transactions rather than on estimated borrowing rates. Also, because these transactions can be observed by anyone, it’s also less easily manipulated.

Why the change? LIBOR came under scrutiny in the aftermath of the Great Recession because bankers were manipulating the rate. In turn, SOFR was developed to be a more accurate metric that would be harder for a small pool of banks to manipulate.

Out with the old, in with the new!

Sometime after 2021, LIBOR is expected to be discontinued. However, the transition has already begun and is being overseen by the Alternative Reference Rates Committee (ARRC) of the Federal Reserve Board and New York Fed. According to the ARRC, by the end of 2020, mortgage holders with interest rates pegged to LIBOR should hear form their servicer about the SOFR transition for their specific mortgage loan.

The change will affect loans that use LIBOR as the index such as:

Some adjustable (or variable) rate loans and lines of credit like adjustable-rate mortgages (ARMs)
Reverse mortgages
Home equity lines of credit
Credit cards
Auto loans
Student loans
And any other personal loans

What does the switch to SOFR mean to Mortgage Holders?

Most mortgage-holders and applicants may not be affected by this change. Why? Adjustable Rate mortgages aren’t as popular as they once were and have lost even more appeal during the COVID-19 pandemic with general interest rates at all-time lows. Mortgage holders who have fixed-rate mortgages will not be affected as they are not tied to LIBOR or SOFR.

However, the changeover does mean that some loans could see slight adjustments when their underlying index is switched. If you have an adjustable-rate mortgage, home equity loan or reverse mortgage, now is a good time to revisit the fine print and find out exactly how your rate is determined. For instance, if it’s SOFR- or Treasury-based, nothing will change, but if it’s a LIBOR-based loan, you’ll want to speak to your servicer about when it will change over and what that could mean in your individual situation.

What You Need To Know About Trigger Leads

Nov 1

12:08

Category | Mortgage Industry Updates & Announcements

If you’re a potential home buyer, a realtor working with clients, or a homeowner considering a refinance, then this PSA is for you. Don’t be caught off guard by unwittingly becoming a trigger lead. You’re probably asking yourself, “What is a trigger lead? How can this affect me?” We’ll explain it all so you can protect yourself against them.

Your Credit Score

Your personal credit score is a major factor in mortgage qualification and determining the rate you are offered from a mortgage lender. Having your credit run can reduce your credit score. A recent development in the credit arena is the introduction of what are called trigger leads.

What's a Trigger lead?

Say you decide to buy a home and get a mortgage. You call a mortgage company recommended to you by a realtor, a family member or friend. You complete the loan application and receive a letter of pre-approval. Then, out of the clear blue, a different mortgage lender calls you. The lender may say that they are affiliated with a credit bureau or give some other red-flag reason for calling. You may be wondering, “How did they know I was looking to get a mortgage and why are THEY calling me?”

When you apply for a loan, the mortgage lender (like Greenway) “hard pulls” your credit from one of the 3 credit bureaus (Equifax, Experian, TransUnion), your information is transmitted to them and your credit information is returned. The mortgage lender (Greenway) is charged a fee for this report. This triggers an inquiry.

What happens next? The credit bureaus then turn around and sell your name to other mortgage companies. It’s not against the law for credit bureaus to sell your information to third-party vendors. This is called a trigger lead. Even those Greenway Mortgage does not send your email address or cell phone number, the credit bureaus use big data to determine both. This is when you become flooded with calls from other lenders (LOTS OF THEM).

Trusted Mortgage Professionals

Here at Greenway, we do not deter clients from shopping around. We hope that you choose to work with someone who is a trusted professional because after all you’re about to enter one of the biggest transactions of your life, and the last thing you need is a telemarketer calling you. So, it’s important to deal with a trusted professional like Greenway Mortgage.

Until recently, there was no way around this issue. Greenway must run your credit in order to determine qualification. And, even though we usually only run 1 bureau up front, we have to run all 3 once you have a loan in process. Every time we add another bureau, a new wave of trigger lead calls hits our clients.

What is Greenway doing about this?

(1) The NAMB is lobbying congress to outlaw trigger leads. We are supporting that effort.

(2) We now have access to "soft pulls" for qualification purposes. Soft pulls will not impact your credit score and DO NOT initiate trigger leads. It's important to note that once you have a loan in process, we will need to hard pull your credit. But we have a solution for that too, read on.

What can you do to protect yourself against trigger leads?

Put your name and phone number on the National Do Not Call Registry for your credit report. Go to https://www.optoutprescreen.com/ and process your opt-out request.

There are 2 options for opting out (we recommend you do both):

#1: The first can take up to 5 days before it's in effect and lasts for 5 years. (Make a note to re-register every five years!)

#2 The 2nd requires that you complete a form and print, sign and mail it. This will take some time so if you're planning to apply for a mortgage, get the process started NOW! Note: If you're already receiving trigger lead calls, it may take some time for the opt out request to propagate to the callers.

The sale of your personal information can continue after the mortgage has been funded and closed. Who knows, you might be a targeted candidate for a mortgage refinance. So, it’s very important to protect yourself now. Greenway is starting to use soft pulls to prevent the trigger leads up front and we're suggesting our clients start the opt-out immediately so they are protected when we need to do a hard inquiry.

Many clients have reached out to us in regards to trigger leads and the constant barrage of calls. Don’t be caught off guard and don’t become a trigger lead. Act Now! Here’s the link again: https://www.optoutprescreen.com/ . As an FYI - This also pertains to consumers seeking financing for an auto loan. You too can opt out of having your information sold as a Trigger Lead.

Mortgage News Announcement | Beat the Rush on a Refi

Sep 2

4:24

Category | Mortgage Industry Updates & Announcements

In mid-August, Fannie Mae and Freddie Mac imposed an “adverse market conditions” fee on conventional refinance transactions equal to one-half of one percent of the loan amount causing an industry uproar and spike in rates.

Last week, they offered a short reprieve by delaying the fee until December 1st. However, this fee will likely begin to impact refi rates well before since lenders cannot be certain if a loan will be delivered before the deadline.

Rates are currently near all-time lows but will trend higher as the deadline nears. It is imperative to start the process as soon as possible and get your file in queue before volume leads to longer turn-times.

If you are interested in saving money each month; accessing cash from your home’s equity for any reason; or shortening your loan term, please reach out as soon as possible to discuss your scenario.

December may seem far away, but a lot of interested homeowners are likely to pursue a refinance before the fee increase, and the sheer volume may lead to delays. It’s wise to get started now.

How to Test-Drive a Neighborhood While Sheltering in Place

Jun 2

5:37

Category | Mortgage Industry Updates & Announcements

Staying at home doesn’t mean your search for a new place needs to come to a standstill.

Check out these tips on how to explore other neighborhoods virtually in the homebuying process. You may find a spot that better suits your needs without ever leaving your living room!

#1 - Check out neighborhood publications and local social media

An active neighborhood community will sometimes have a print publication or local social media groups that connect residents. These can provide information on local events and activities that will give you a better feel for the neighborhood. In addition, you can also browse Facebook, Twitter, and Instagram for groups or accounts that document what's going on in the neighborhood where you're interested in moving. Try interacting with locals in the community who can give you their opinions of their locale.

#2 - Take a Walk with Google

Stroll around your potential new neighborhood without leaving the couch! It's easy. Google street view is a great way to view the street and neighborhood virtually. You can access Google Street View by clicking here. Each listing on realtor.com features a link to the Google Street view for that address as well.

#3 - Browse Websites with Neighborhood Data

Gather as much information as you can on your next neighborhood. There are many websites that can help you! City-Data provides detailed city profiles about everything from cost of living to weather to average home prices. Plug in your ZIP code to AreaVibes to get a livability score. This will he you narrow down the best places to live. Yelp provides not only reviews on local cafes, restaurants, and nightlife, but also unfiltered reviews from local residents.

#4 - Search other Real Estate Listings

If you want to learn about the typical architectural styles and ages of home in a neighborhood, browse online listings on sites like realtor.com.

#5 - Call a Real Estate Agent

A real estate agent can help by using technology to test-drive the neighborhood for you. Once you've found a home you're interested in, get in touch with your agent for more information on the neighborhood. They will have a insider's perspective on the area and knowledge on home there too.

#6 - Investigate Schools & Educational Data

Areas with good schools typically maintain property values, and its neighborhoods are high coveted.

#7 - Check Crime Rates

Safety is a priority for both buyers and renters, and crime rates can give you a picture of how safe or dangerous a neighborhood is. Low crime rates are not only safer but can also help keep property values high.

8- Plan Daily Commute

Get a feel for the neighborhood by monitoring traffic and your work commute. You can use tools like Waze or Google Maps which will help predict the level of traffic during your commute hours.

A real estate professional can help you with all of the additional steps along the way, so you’re ready to make your next move. Be sure to get in touch with Greenway Mortgage for all your home financing needs.