The risk is that a large chunk of the U.S. population is going to get completely priced out of the market.
MERIDIAN, Idaho (PRWEB) March 31, 2020
Premier Mortgage Resources, LLC, (PMR) is calling on the federal government to consider the needs of low-income homebuyers who may be unable to purchase homes in the wake of the COVID-19 (Coronavirus) crisis.
Many low-income borrowers who don’t qualify for loans through Freddie Mac and Fannie Mae could soon be out of alternatives to obtain a home loan. This is largely because lenders across the country are being forced to increase the minimum FICO score requirements on Federal Housing Administration (FHA) loans to levels that traditional borrowers of these programs would have never qualified for in the past (in some instances to as high as 660, according to Housing Wire). The same could apply to VA and USDA loans.
With many homeowners being extended the opportunity for forbearance over the next several months, lenders across the country could face billions of dollars in losses. This is forcing qualification guidelines to become more strict.
The Mortgage Bankers Association, along with several other housing and banking associations, put out a statement recently that said:
"To give one a sense of scale, if 25% of the nation receives forbearance for only 3 months, servicers will have to cover payments of roughly $36 billion. If they received it for 9 months, then the cost would exceed $100 billion … It is critical that policymakers work together to create a vehicle to provide lenders and servicers with access to the liquidity needed for the nation to weather the national emergency resulting from COVID- 19."
PMR Chairman Cory Swain recently sent a letter to Sen. James Risch and Sen. Mike Crapo calling on the U.S. Senate to take action by sending assistance to lenders looking to extend loans to low-income borrowers.
"The Fed has pushed on one lever and completely ignored the loan aggregation side, which is grinding to a halt and hurting low-income borrowers," Swain said. "We are doing what we can to provide pricing and locking on what we can, but government loans are being hit particularly hard on price and on the lower FICO score loans are vanishing. We are calling for relief to the consumer and to companies like ours as soon as possible. The culprit here is not just the Fed, but Fannie Mae and Freddie Mac. They should immediately price in step with the market and stop trying to act like a private company. Frankly, I am not sure that their charter even allows them to do this, and for lenders it’s extremely perplexing and negative in so many aspects."
The risk is that a large chunk of the U.S. population is going to get completely priced out of the market. This has a negative impact on housing now and in the future. The real estate market is an important part of our economy and by not protecting it appropriately, it could end up widening the wealth gap in our country.
Additionally, the Fed’s bond purchases has forced a freeze in liquidity and caused a lot of pain to lender hedges. This, as detailed by Yahoo! Finance, has put pressure on brokers to dump more money in trading accounts or sell off holdings.
“PMR is calling our Senators and the federal government to hear our call to get the mortgage market working again,” Swain said.
About Premier Mortgage Resources
Premier Mortgage Resources (PMR) has been helping customers achieve the dream of homeownership since 1991. With 31 licensed locations west of the Mississippi and staffed by over 120 loan officers, the company offers a full menu of mortgage products and is delegated to underwrite Conventional, FHA, VA, USDA, and several state bond programs. PMR has branches across seven states (Washington, Oregon, California, Idaho, Nevada, Minnesota, Hawaii and Missouri). For more information, visit pmrloans.com.