A warning about calling your bank to ask about loan forbearance. It has been confirmed to me by multiple lenders and Realtors that merely contacting your loan servicer about forbearance options (even if you are just asking questions) is currently being held against you, and may impair your ability to obtain future financing or refinancing. By merely asking questions, even if you have no intent on seeking a forbearance, you are deemed a risk. So beware.
Non-conforming (“jumbo”) financing is presently more difficult to obtain (and with less favorable terms). The availability of non-conforming financing is more difficult to obtain right now. “Conforming loans” are backed by quasi-federal agencies (Fannie Mae and Freddie Mac) and must follow strict guidelines. Conventional and FHA loans are “conforming” loans. However, there are limits on the size of a conforming loan. These limits are adjusted annually and vary by market. The 2020 loan limits for Washoe County are as follows (this limit is on the amount of loan, not the total purchase price):
FHA: $437,000
Conventional: $510,400
If a loan in excess of the conventional limit of $510,400 is required to purchase a property, a borrower will need to secure “non-conforming” (also known as “jumbo”) financing. Lenders who originate jumbo loans need investors to whom they will sell those loans. Due to risk concerns arising from an increasing rate of loan forbearance, increasing unemployment and business disruption, liquidity issues among many investors, and a preference for mortgage bonds for federally-backed conforming loans where a greater measure of payment is assured, many investors have temporarily left the jumbo loan market. Many major jumbo loan investors have suspended the purchase of non-conforming loans from other lenders (though still originating jumbo loans for their own customers). For example, according to the Washington Post and Bloomberg, Wells Fargo, which produced $70 billion of jumbo mortgages in 2019, halted purchases of jumbo loans from other originated and has limited refinancings of jumbos to customers with at least $250,000 in Wells Fargo accounts.
The effect for borrowers is that it is harder to find jumbo financing. Further, the terms of the loans are generally less favorable and the requirements stricter (higher credit rating required, higher down payment, higher interest rate, etc.). Jumbo financing can be found, but more work is required and the terms will generally not be as good. More reason to shop around and find the best programs and the most resourceful lenders.
Inventory is still really low. The Reno-Sparks real estate market is still struggling with very low inventory. On Friday, May 17, 2019, one year ago, there were 1,376 homes on the market (including condos and manufactured homes). As of this moment (Friday evening, May 15, 2020), there are 1,083 homes actively on the market. (Note: this figure does not include 23 homes that are “listed” but are still on “coming soon” status. I excluded these homes because such homes were not included in the 2019 figure). In short, inventory is 21.3% less than this time last year. And Friday night typically represents the highest active inventory for a typical week—inventory will drop as homes go under contract Saturday through Wednesday of next week.
Anecdotally, I attest that buyers are buying. Today alone, I had three properties I requested to show clients, only to learn they had gone under contract last night or this morning (this was the case for two separate clients in different prices ranges). I will provide firm numbers on buyer activity in an upcoming post.
I suspect there are sellers who intend to list their homes this year who would have already listed their home but for Covid-19. Such sellers may want to consider if now is the right time to list their property while inventory remains low. Buyers are actively searching; and for many buyers, the only reason they aren’t buying this weekend is because the selection of homes is very limited or they are getting beat out in multiple-offer situations.
If you want to discuss any of this in more detail, give me a call.
