How are Lenders Responding to the Pandemic?
Even as much of America starts to re-open for business, the consequences of the Pandemic are also just starting to hit Main Street. The latest statistics are that despite the Trillions in money pumped back into the business community and into the pockets of those who lost wages, about 1/3rd of America is now at least 30 days late on their lease or mortgage payments.
Let that sink in! For a large part of the pool of potential homeowners, they are now disqualified from borrowing a mortgage to buy a home for 24 months! Congress has talked about legislating a “do over” for those who suffered credit “lates” as a result of the Pandemic, but whether main stream lenders will go along is not clear. Morgan Stanley and other lenders have stared into their crystal balls and have discontinued “marginal lending”, e.g., loans to borrowers with credit scores under 700 and without a large down payment. All of this provides the back drop for the dreadful news today:
How much did they crash? April applications were down 25% from March but under a 15% drop from last April. While this means bad news for many industries that depend on real estate closings for income, our firm looks at the good news in all of this:
- Despite a third of American’s being a month late and therefore ineligible for most standard “A” paper loans to buy a home, the other 2/3rds are seeing opportunities to buy their first home or a “move-up” home.
- New lenders are emerging who will underwrite mortgages based on common sense underwriting, even approving some borrowers with credit scores as low as 500!
But the most important opportunity we see in this situation is that it gives a “full service law firm” a chance to distinguish itself when compared to many “lay settlement agents”. The “big box closing mills” are not trained, skillful, or even in most cases, legally allowed to use knowledge of the law and underwriting to help a struggling borrower get a deal done. For attorneys savvy in the overall lending environment, attorneys looking to build life long relationships and not just do a volume of “vanilla closings”, there will be advocacy!!! We can step in and help your lender and the underwriting team reconsider an application and help push it across the goal line. We are more than just passive conduits of news between the borrower and the lender. We work with our borrowers and their realtors to FIGHT for loan approval.
There are many indicators saying that loan underwriting will get tighter before it eventually loosens up. And with the rates as low as they are now, every opportunity is precious to buy into the “American Dream” at 3 or 4% interest! Let us help and show you what a difference it makes on your next closing to hire a law firm which is Accessible, Motivated and Resourceful!