Mortgage & Appraisal Market Updates

In last week’s Bean Group company Zoom meeting, we were joined by Mark McAuley, NE Regional Manager, and Delvin Arnold, Branch Manager, from CMG Financial. Mark shared a number of insights on current mortgage market conditions and changes, including appraisals. Here’s a recap:

Rates: One of the few silver linings for the real estate industry during this pandemic has been record-low mortgage interest rates – which currently sit at their all-time low. Average, daily rates dropped to 3.09% for a 30-year mortgage, and borrowers seeking a 15-year term are enjoying rates in the mid 2% range. According to this May 21 realtor.com article, we can anticipate that rates will fall to 2.9% by the end of the year – or lower. Since lower rates mean lower mortgage payments, buyers will be able to afford homes with a higher price tag, giving the real estate industry a much-needed boost. 

We also spoke recently with Corey Scott, Loan Officer at HarborOne Mortgage, who noted that the low mortgage rates have naturally resulted in a refinance boom, saying “From reports we’ve seen, refinances are making up approximately 60-70% of lenders’ current transaction volume across the northern New England area. Historically, this would be the opposite for the hot spring market.”

Loans: Traditional loan types are still readily available, however, some lenders have stopped offering products like new construction loans, equity, or second mortgages due to the level of risk associated with those loan types in today’s uncertain market. Let your clients know that they may need to shop around depending on the product that they need. 

Corey Scott notes that we’re just beginning to see an ease on restrictions for those loan types, saying “When forbearances started happening, many investors tightened up restrictions on government and jumbo loans. We are starting to see those restrictions ease off as things are leveling out and lenders have assessed the forbearance and default requests. This will open up buyers that may have been limited during that short period of time when things were tightened.”

Appraisals: As a safety measure related to COVID-19 and due to guidance issued by several federal agencies, most lenders have begun allowing for either an exterior-only appraisals, or a desktop appraisal. Understandably, some clients may prefer to have a traditional appraisal performed; check with the lender to determine if this is a possibility. 

Federal regulators are also allowing lenders to postpone appraisals on residential and commercial properties for up to 120 days after the mortgage has closed, a modification due to COVID-19 that sunsets on December 31, 2020.

Forbearance: With the record number of Americans who have lost jobs or have been furloughed in recent months, it’s no surprise that lenders are reporting increasing numbers of homeowners using forbearance programs. A recent report issued by the Mortgage Bankers Association (MBA) highlighted the scope of the issue and revealed that as of May 17, 4.2 million homeowners are now using forbearance programs.

However, the report does offer some good news – while the number of loans in forbearance continues to rise, the trend is also slowing down. Mortgage servicers report seeing only modest increases in the share of loans in forbearance as of May 17, 2020. 

Additional Sources:
More First-Time Homebuyers are Entering the Market
How Low Will Mortgage Rates Go?
Number of Mortgages in Forbearance Keeps Rising
Current Rate Data from Freddie Mac
How the Pandemic is Changing Appraisals