April 4 2020 weekly Lending update

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Good afternoon to a heads up – Corona Virus

Mortgage Rates: Time is Now

– DON’T MISS OUT

Keeping real about Covid-19, while trying to calm the stormy waters of doubt and uncertainty, is the goal. The below facts are a good backstop to any level-headed guidance. This is especially true for those owning real estate and have need for financing. Thus our focus will be on monies available for lending and finding options, and solutions, best meeting your financial needs. 

HAPPENINGS:

Forebearance and Caution: Be careful of what you hear. This week a regular talking head on CNBC, came out advising people to forgo making mortgage payments, telling them how missed payments would be added to the end of the loan term. NOT CORRECT !!

The proper term is Forbearance. This means you will have a period of time (could be very short) to make up the payments, along with your regular payment, after the emergency is declared over. This is not a Deferment program where payments are skipped and then added to the end of the loan period!

SBA: Two helpful programs. 1) The $10 K grant that comes directly from SBA, under the SBA -EIDL program. 2) Then there is PPP or Paycheck Protection Plan, a program where daily, there have been adjustments. This includes changes to the initial application form. And because it is intended to be administered by member banks, please talk with the bank institutionsyou have a working relationship with. For more general info, call me. We can talk further, as to the more specific limitations – one’s you should be aware. 

With this, here are few questions we can discuss and are important for you to know more about, as you decide to move ahead: 

Here are four: 

  • 1)  Do the banks know where the money is coming from to fund the PPP loans?
  • 2) Do they yet have specific guidelines and necessary supporting documentation?
  • 3) Are there repercussions if the obligations of the “loan” are not met ?
  • 4) Who is responsible to compile and submit the documentation?

Two fun points: .

In the first 2 hours – on Wednesday – BofA, booked 10,000 applications.

There is no clear understanding as to Brokers – like me – being compensated, to whom should documentation be submitted, and where? Yet let this be clear. This is a neededand great program for Small Businesses, even if there a few important details to be worked out. Call me.

Keep in mind, this is new and critical to the meeting cash needs of Small Business. It is moving at lightening speed and the fact it has made such progress, is truly remarkable. Amen.

Regardless unresolved issues, we continue to gather helpful information. For businesses and sole-proprietors, with payroll – (including 1099 people AT 11AM I heard yes, by 5 PM I head no)– you can receive about 2 1/2 months of salary, as a loan. There are provisions whereby such a loan, can become forgiven. Let’s talk. 

Be sure to call. Let’s make sure you know how best to move forward. 

MARKET SEGMENTS:

US Federal Reserve: The waiting is done, actions are happening:

Actions:

  • – Fed Funds rate are now effectively zero (target rate now 0.25 %)
  • – Adding / pumping liquidity into the market – approx $600 B
  • – Buying both Treasuries and Mortgages, doing so in ways to best stabilize and maintain a healthy balance within the financial system. Prepared to purchase close to an additional $200 B of mortgages. 

Goal: Provide greater confidence in the banking system – their ability to act as need and to act now, not later. This injection of liquidity – directly or by lowering interest rates – should keep the wheels of our economy turning and people confident.

Federal Government actions:

Good News: Removing liquidity restrictions put in place by Dodd-Frank. In short, banking money, frozen by this law, is now available. Amount: $1.5 Trillion. 

Mortgages:

Underwriting– Priorities have shifted. Non-QM loan products are mostly gone. 

Funding sources utilizingWall Street, haveall vaporized. Wells and Chase may both be pulling out of Jumbo loans, due to uncertainties. Many of our mainstream sources are gone.

However, We DO HAVE sources remaining. Please know we have lenders ready

to lend. Keep your eyes on this blog for updates. Or Call Us. Details matter. 

Staffing, appraisals, signing.. Technology is allowing most staff to work from home. Locally, some appraisal companies are closed.

Good News: Many States allow are allowing electronic signing of papers, and Washington DC is looking at making it legal Nationwide. We are getting it done!

Pricing:To gain an appreciation for these crazy days, a 1/ 8 change in rate – 50 basis

point s– in the same day, was veryrare. Yet in 13 of the last 20 days, we saw movements in excess of 100 basis points. The Federal Reserve seemed to this memo saying too hectic. Movement in the last 4 of 7 days, was less than 100 basis point. Huge help with more price stability making a smoother market. This help clear the logjam in processing as rates will move in alignment with the rest of the market. 

Stock Market:

Company earnings, in this crazy world, are the big unknown. The corona-virus has shut down employment, while at the same time causing: low oil prices, very low interest rates, and Congress throwing money at the problem. Add to this, thelow oil prices are stressing the oil business while benefitingairlines who are suffering cash-flow concerns, dues to corona-virus. 

If you have not sold stocks, hang in there. My guess: The worst is near over. If you have cash, keep it. Let the market stabilize – become less volatile, as many so-called smart investors, trying to play volatility, have watched their money vanish. Right now, there are few safe havens. 

Please – Don’t let the low interest money tempt you to play the money game called Wall Street. Even such investments as Treasuries and Mortgage Backed Securities have sold-off, as well as the king of safe havens, gold. 

Speak of the unexpected, due to increased ‘risk pricing’ of long-term mortgages, mortgage rates are not falling like Treasuries. Even more, when a rate is ‘locked’, the actual money to be loaned, is for now, held as a derivative or in a margin account. As a result, if a time extension is needed, the new lock price will be hard predict. Start today, lock tomorrow.

WHAT CAN YOU DO? 

Potential Strategies:

Refinance Strategies:

A) Debt consolidation reduces overall payments, puts cash in the bank, and builds a safety net. Home improvements can also increase home value and salability.

B) No Cash out / Lower rate loan. Get into the system now. Then let underwriting, appraisal, all.. do their thing, while you watch / wait / execute when interest rates hit a low point.Good News: Appraisals are good for 4 months, with a simple update. So too, all the paperwork with a quick update. Start today.

Purchases:

A) Fear creates opportunity, storms can create deals. Those ready are in the driver’s seat. I am a long-term Bull with California real estate market. The fundamentals remain the same – lack of Supply + one of the best places in the World to live, and home to high tech. These will continue to drive demand.

B) With rates this low, consider a low down payments options. Keeps you in control of your cash and remember, cash is king during an economic slow down. Even better, when the market kicks back in gear and rates double from here, you will be smile at your low rate, while enjoying your cash for other investments. 

CAVEAT:

Being a SBA broker, along with our Commercial and Residential work, our phone is ringing. I will return any missed callsas quickly as I can. Sadly I have no crystal ball, nor does anyone else. Instead, oursis to make some sense of the market, the day you call. But predicting tomorrow is impossible. So finding safe and secure lending is critical and what we do best.

Key to success: Being diligent in gathering up all your information. This has become a time-sensitive market and your extra effort will help assure the success, we both desire. Like you, we are doing whatever is needed, to get it done. Being prepared, we can be the team that wins.

We Believe in You and You Matter to Us

Thank you for trusting me with yourself, your friends and family. Referrals are appreciated.

We are working hard in these stressful time, and are doing our best to keep things moving smoothly. Sadly, I am only human, with human and life limitation. But my motivation for you to succeed, has not diminished. 🙂 

Call me. Your success is my priority. 

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