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Self-employed borrowers still struggle to qualify for government-backed loans – Press Telegram

Fannie Mae launched a new program last week called RefiNow to help high-debt, low-income borrowers qualify for mortgages.

The standard for qualified borrowers is that their debt must be no more than 50% of their income. Under Refi Now, the eligible debt-to-income ratio rises to an astronomical 65%.

OK. fair enough. But what about taking a break even for debt-ridden self-employed borrowers?

Their answer seems to be Refi Never.

The Draconian COVID-19 self-employed underwriting restrictions by Fannie Mae (and Freddie Mac), which came into effect just a year ago, are still ongoing.

The focus of COVID has been on all businesses of the time and today.

In addition to filing a business tax return for at least one year, the borrower was required to file interim financial statements.

The year-to-date income statement had to keep pace with last year’s income. The underwriters assumed that the year-to-date decline in revenues would indicate that the borrower’s business is going around the drain. Refuse credits now. abort.

The new rules have killed the prospect of getting a cheap mortgage for too many people.

For example, my store refused because about half of the self-employed borrowers were unable to qualify for a loan. Yes, it’s half.

The year-to-date income statement has become an underwriting obsession. Some lenders did not tolerate a drop in income. Others have said that no dice have a dice of more than 10%. And at least one lender I know allows up to 25% decline as long as the borrower is still eligible for a decline in income.

Worth buying and refinancing borrowers who wanted cheaper interest rates on Fannie Mae and Freddie May also had to explain the details of the business bank statement that matched P & L to the mortgage originator. What is a better confession agent for Fannie Mae and Freddie May than those adjacent to a court audit?

Self-employed applicants were angry with the scrutiny. It was like a body cavity search. But they wanted the lowest mortgage rates in modern history, so they put up with it.

Others just said no. Some have expressed their anger in words that are unacceptable to offer to you.

How else can a lender decipher a financially strong applicant from a weak applicant? It’s safer in the eyes of F & F than regret.

Yes, many companies have crashed, burned down and closed. However, many people have survived and prospered through good luck and government support, such as the PPP program.

Bankruptcy lawyers Richard Golubow of Winthrop, Golubow and Hollander pointed out that reduced travel during the COVID period, reduced office overhead and no entertainment costs could increase profits even with lower gross income.

“People worked harder,” Gorbow said.

Business bankruptcy filings are on the decline. According to the Epiq AACER Bankruptcy Information Service, in 2020, Chapter 11 and Chapter 13 bankruptcy filings decreased by approximately 19% year-on-year in the United States. Each year, 2021 applications are reduced by more than 30%.

According to Epiq AACER figures, California’s number of business BKs fell by about 40% in 2020 and another 10% this year.

As of this week, mortgage grace has dropped to 4.16%, according to the Mortgage Bankers Association. Tolerance was 8.55% a year ago.

According to mortgage data firm Black Knight, more than 14 million borrowers can save an average of $ 283 a month by refinancing. There are about 1.9 million candidates in California who can save an average of $ 386 a month. There are 952,000 borrowers ready to refinance in the Los Angeles, Orange, Riverside, and San Bernardino counties.

How many self-employed borrowers can Fannie Mae and Freddie May support?

It was not possible to ask mortgage regulators’ Federal Home Finance Office officials for comment on whether Fan and Fred would return to pre-COVID self-employed underwriting rules.

Freddie Mac Rate News: The 30-year fixed rate averaged 2.96%, 3 basis points lower than last week. The 15-year fixed rate averaged 2.23%, down 4 basis points from last week.

The Mortgage Bankers Association reported that mortgage application volumes fell 3.1% from the previous week.

Conclusion: Assuming the borrower gets an average 30-year fixed rate on a fitted $ 548,250 loan, last year’s payments were $ 74 more than this week’s $ 2,300 payments.

What I see: Locally, qualified borrowers can get the next fixed-rate mortgage at a cost of 1 point: 30-year FHA 2.25%, 15-year conventional 1.99%, 30-year conventional 2.625 %, The traditional high balance of 15-years ($ 548,251 to $ 822,375) is fixed at 2.125%, the traditional high balance of 30 years is fixed at 2.75%, and the jumbo 30 years is fixed at 2.75%.

This Week’s Eye Catcher Loan: 30 years fixed at 3% at no cost.

Jeff Lazerson is a mortgage broker. He can be contacted at 949-334-2424 or jlazerson@mortgagegrader.com.His website www.mortgagegrader.com..

Self-employed borrowers still struggle to qualify for government-backed loans – Press Telegram Source link Self-employed borrowers still struggle to qualify for government-backed loans – Press Telegram

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