Episode 011 - Locked In - Appraisal, Lending & SBA Updates
Episode 011 - Locked In - Appraisal, Lending & SBA Updates
LOCKED IN – With COVID-19, (Coronavirus), updates are coming in daily. We want to keep you in the loop as quickly as we can with new information. Hopefully, we can help you understand more about what's changed and give you our take on the newest updates. Today’s episode covers changes in VA appraisal valuation, major lending changes coming down the pike, and--possibly--good news for real estate agents. Stay tuned for more updates!
SHOW NOTES
- 02:25 – Welcome! We're splitting information into two episodes, since there is a lot. Stay tuned for PART 2 to follow.
- 03:15 – Appraisal updates. 3/23, Fannie & Freddie allowed lenders to use drive-by and desktop type of valuations. Go back to episode 8 to review those updates.
- 04:08 – 3/27, VA appraisal updates are allowing appraisers to do drive-by appraisals.
- 05:20 – VA appraisal is ordered as an interior inspection and then appraiser can determine if there are risk factors to make the decision to make a drive-by inspection. This is different than Fannie and Freddie rules because the lender decides the type of report.
- 06:03 – If property is vacant, an interior inspection MUST be completed. Seller/owner of the property can deny entry, which will make the report a drive-by report. Appraiser must communicate that info with lender and VA.
- 06:50 – No updates on FHA yet.
- 07:00 – Huge lending changes that will affect borrowing in the coming weeks and months.
- 07:50 – Due to unemployment, cutting back of hours, layoffs, etc. the risk factors have increased, so fewer security backed mortgages purchasers will not buy high risk loans. As a result, lending criteria will tighten. For example, expectation of higher credit scores and lower Debt-To-Income (DTI) ratios.
- 08:45 – Example: last week a borrower qualified with a 620 credit score, today they likely will not require unless they have a 630, 640, or higher. Those score requirements are expected to increase even higher.
- 09:25 – A large number of people may not qualify for a loan in the next few months.
- 10:05 – Producer Christian: irony with the Fed trying to loosen monetary policy, but private sector working against this.
- 11:03 – Investors and lenders are very likely gun shy after the Great Recession of 2007 to 2009. Hopefully they have learned their lesson from that and are doing these things to stop a bigger issue.
- 11:18 – FHA and VA loans may become obsolescent for the short-term due to increasing credit standards. They are NOT done forever, just slowing down and not used.
- 12:20 – FHA and VA won’t pay to sell something. That is what is happening and that is why Ginnie Mae backed loans (FHA & VA) will likely go away for now.
- 13:10 – Important for agents, if you have a buyer that will borrow money to purchase, COMMUNICATE with the lender on lending requirements now and what they will do if those lending requirements change during the approval process.
- 14:00 – Check with loan officers to make sure approval letters are still good.
- 14:25 – Agents, if you are working with a buyer that does not qualify with current standards, provide some value to them to explain what is going on and get them connected with someone that can help them increase their scores in the next month or two.
- 14:45 – Verification of Employment (VOE): many employers are working skeleton crews so VOEs may not happen or be delayed, which can delay a closing. Suggestion: be proactive with your client. Have them reach out to their HR departments to manage expectations. Ask HR their timelines so lender can get the information they need.
- 15:45 – Is a furloughed employee considered “employed”? Lenders are making this decision. Most lenders are completing a verbal VOE and asking a simple question, “Is your employee still employed?” Depending on how the lender responds may alter the ability for the borrower to get a loan.
- 16:42 – It is very likely that lenders will ask more poignant questions with more specifics needed before final loan approval. Due diligence will increase on the lenders part.
- 17:05 – STAY TUNED! SBA loans and other benefits for agents to help them during COVID-19. CARES Act ($2 Trillion stimulus package).
- 17:35 – SBA will allow you borrow up to 2.5 times your average monthly wages. If wages stay the same, the SBA loan will be completely forgiven (not paid back).
- 18:40 – Most agents are paid as 1099 contractor by their managing broker, but you can still qualify if you pay yourself as a W-2 employee.
- 19:15 – So much more info to sift through and we will follow up very soon as we get it!
- 20:30 – WASH YOUR HANDS!
SHOW LINKS
- of VA Circular on Valuation Practices: https://www.benefits.va.gov/HOMELOANS/documents/circulars/26_20_11.pdf
- What is a good credit score? https://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-is-a-good-credit-score/
- Who is Ginnie Mae? https://en.wikipedia.org/wiki/Government_National_Mortgage_Association
- The Great Recession: https://www.history.com/topics/21st-century/recession
- SBA: https://www.sba.gov/
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