Down Payments, Mortgage Loan Amounts Reach New Highs – Industry Outlook

By March 22, 2021Industry Outlook

Cash-out Refis Surge to Highest Levels Since Financial Crisis – According to Freddie Mac’s data, cash-out refinances are on the upswing, to the likes of numbers that haven’t been seen since the financial crisis. But economists say they aren’t concerned at least not yet. After all, home prices are still rising. During the financial crisis, home prices started to drop. Cash-out refis surged 42% year over year in 2020. Homeowners cashed out $152.7 billion in home equity last year, the highest level since 2007. Low interest rates are part of the reason leading to the surge in cash-out refinances. With a cash-out refi, homeowners pay off their old mortgage and start a new one that allows them to have extra cash left over. Many homeowners have withdrawn some of their home equity to be able to purchase larger homes or take on home renovations. “There are genuinely a lot of people who want to buy homes to live in,” Daryl Fairweather, chief economist at real estate brokerage Redfin Corp., told The Wall Street Journal. “They’re not just buying them to buy them or speculating that home prices will continue to rise. People are buying because they want them and they’re not trying to sell again the next year.”

Source and link to the full article:  “Cash-Out Refinancings Hit Highest Level Since Financial Crisis,” The Wall Street Journal (March 11, 2021)  

FHFA Extends Alternative Appraisal, Employment Verifications – Based on the Federal Housing Finance Agency’s recent announcement, it is extending its relaxed lending and appraisal standards for Fannie Mae and Freddie Mac backed loans by a month. The eased standards were originally put in place due to the COVID-19 pandemic, as lenders and appraisers tried to keep loans on track while navigating new social distancing measures and delays in verifications. The relaxed standards include alternative verifications for employment and appraisals. The standards have been extended to April 30th. They were originally set to expire on March 31st.

More specifically, the extended measures include:

  • Alternative appraisals on purchase and rate term refinance loans.
  • Alternative methods for documenting income and verifying employment before loan closing.
  • Expanding the use of power of attorney to assist with loan closings.

Source and link to the full article:  FHFA.gov

Down Payments, Mortgage Loan Amounts Reach New Highs – According to ATTOM Data Solutions’ fourth quarter 2020 U.S. Residential Property Mortgage Origination Report, home prices have surged to double-digit percentage gains over the past year, which means home buyers are having to either bring more to the closing table or borrow more. They’re doing both. Down payments are at record highs. The median down payment on a single-family home and condo purchased with financing in the fourth quarter of 2020 was $24,500, up 82% compared to the fourth quarter of 2019 ($13,441), according to the report, with records dating back to 2000. The median down payment represents 7.7% of the median sales price for homes purchased with financing during the fourth quarter of 2020, up from 5.2% a year prior. Home buyers are borrowing more to afford the higher home prices. The median loan amount was $280,000, another record high, according to ATTOM Data Solutions’ report. The amount buyers are borrowing for their mortgage jumped nearly 25% compared to the fourth quarter of 2019. The National Association of REALTORS®’ latest existing-home sales report, reflecting January housing data, showed the median existing-home price for all housing types was $303,900, a 14% increase compared to a year prior.

Source and link to the full article:  ATTOM Data Solutions

Mortgage Rates Continue Slow Climb Over 3% – Based on Freddie Mac reports, the 30-year fixed-rate mortgage continued to move higher recently, now averaging 3.05%. “It looks like rates in the 2% range are over while current mortgage rates will likely be the lowest,” Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®, writes on the association’s Economists’ Outlook blog. “Since the pandemic struck our country one year earlier, year-over-year comparisons for most of the economic indicators are going to be much higher for the next several months.” Many of these higher readings will put upward pressure on the 10-year Treasury yield, which mortgage rates tend to follow. Still, mortgage rates remain historically low, if in the 3% range. The all-time low for the 30-year fixed-rate mortgage was set in January, averaging 2.65%. “As the economy improves given labor market optimism, continued vaccination roll-out, additional stimulus pending and mortgage interest rates increased,” says Sam Khater, Freddie Mac’s chief economist. “But even as rates rise modestly, the housing market remains healthy on the cusp of the spring home buying season. Home buyer demand is strong and for homeowners who have not refinanced but are looking to do so, they have not yet lost the opportunity.”

Source and link to the full article:  Freddie Mac and “Instant Reaction: Mortgage Rates, March 11, 2021,” National Association of REALTORS® Economists’ Outlook blog

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