The Seven Real Estate Stages of the Pandemic

By now, some of us have lost a loved one, friend or community member to COVID-19.  Though if the cavalier denialism exhibited by some Americans is an indicator, there are still many who have yet to share the magnitude of such a loss.  But even putting one’s head in the sand about the medical realities of the coronavirus cannot spare us the social, emotional and economic impacts. 

It’s accepted as true that though we all grieve a loss, everyone grieves in a unique manner.  One of the most referenced works on the topic was written in 1969 by Swiss-American psychiatrist Elisabeth Kubler-Ross, in her book On Death and Dying. This philosophy is popularly referred to as the “stages of grief,” and whether comprised of five emotions or seven, it feels increasingly as though we are traveling through ‘stages of the pandemic’ in both our professional and personal lives.  Sometimes we mourn the loss of our “past life” in a linear fashion and sometimes we jump along the steps chaotically, but without a doubt we have been presented with an event that has impacted our world and is in the process of shaping our future.  If I think back to February or March, and reflect on today, here are some examples from my journey through the stages: 

1) Shock and disbelief

Wait, no broker tours, no showing of property?  Here we go again a la Lehman, 2008 or 9/11 — investors leaving the market and loan programs being suspended or canceled.  Tremendous rate chaos.  

2) Denial

No way they will shut businesses down — that’s crazy.  What do you mean the kids are not going to go to school?  The Junior Warriors basketball season is canceled?

3) Guilt

I should have been more forceful with our clients who were on the fence.  How did we get lulled into complacency with credit availability?  Why did we let our guard down and not consider existential risks in our assessments of the market?  

4) Anger and bargaining

Why are we, here in CA, subject to shelter-in-place while people in other parts of the country are still conducting business as usual?  What do these “health experts” really know?  Man, I HATE Zoom meetings!

5) Depression/loneliness/reflection

My 85-year old dad is 2000 miles away and I’m not sure when he’ll see his grandson next.  I’m not going to see the inside of a bustling conference room for many months. Some of the skills, habits and personality traits I’ve used to build my business are going to be sidelined indefinitely.  Put the professional wardrobe in mothballs…

6) Reconstruction and working through

Yes, this is the landscape of our new reality — it is not temporary.  Embrace, learn and master the tools and tactics necessary to maintain momentum.  Contemplate what it will take to grow in a remote world.  Reinvest marketing dollars accordingly.   Rethink all iterations of “it’s just the way we do things.”

7) Acceptance and hope

The way we did business is over.  What remnants exist are gifts but my mindset must accept that I am in a foreign country now and I need to first learn and then speak their language.  I can still think in my native tongue, but the longer I hold out and do so, the more difficult it will be to assimilate.  The sooner I embrace the good and bad of the new culture, the sooner I will be open to its wonders.

Months into the COVID-19 pandemic, I can find myself cycling through several or even all of the above stages on any given day.  My guess is that most others do as well — unless they are stuck.  Maybe they’re stuck in denial.  Maybe they’re still pissed off — at their governor, at their clients, at themselves. Then again, maybe some are well on their way of reconstructing their businesses but  require help they never previously needed; with new technology, with new tools, with new ideas.  My point is that we have all lost a loved one — our pre-pandemic way of life and business.  It’s now up to us to move on, yet before we do we must confront the grieving process.  Recognizing that is part of a healthy healing process too.

In loving memory,

Rob Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959 
rob.spinosa@rate.com

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709
 

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Can I Refinance a Mortgage on a COVID Forbearance Plan?

Back at the end of the first quarter of 2020, the president might still have wanted to downplay COVID, but many real American homeowners suddenly found themselves in dire financial straits and quickly took advantage of the forbearance plans offered by the servicers of their mortgages.  This payment relief allowed them to navigate the most uncertain and immediate impacts of the pandemic and for some, provided a bridge to re-employment and/or firmer financial footing.  Now that some of these borrowers have made readjustments to the new normal, they may wish to take advantage of the historic low interest rates that have stemmed largely from the Federal Reserve’s response to this same pandemic.  So can a borrower refinance if there has been a forbearance or deferral on the current loan?  Let’s examine the options available today if the borrower has a conforming/conventional loan.  Jumbo loans and government loans (FHA and VA) behave differently and I’ll cover those in a separate post.  But here’s what we need to know today:

  • If you are or were in forbearance with no missed payments, then we must verify that all payments were made to terms of the agreement AND the payoff of the existing loan cannot include any funds due. 
  • If you were in forbearance, had missed payment but brought them current prior to making your refinance application, then we just need verification that your mortgage is current and no funds due to complete any reinstatement are included in the loan’s payoff.
  • If you were in forbearance, had missed payments and brought them current after making your refinance application, then we need verification that your mortgage is now current and we need to source the funds used to bring the loan to that status.
  • If you have a plan for payment deferral then you must provide a copy of the agreement issued by your servicer and you must have made at least 3 consecutive payments following the effective date of the deferral agreement.  The payoff of the loan can, in this case, be used to satisfy the full amount of the mortgage, including the payments deferred.

The low rate environment that exists today is unprecedented, a lot like the adjustments we’re all being required to make as we confront our new reality.  If you’ve taken advantage of the forbearance or deferral agreements available to you, and have adhered to the terms, there’s a good chance you can refinance your conforming or high-balance conforming mortgage today at historic low rates.  You’d be incorrect to assume otherwise.  Get in touch if you think we can help. 

Mask it or casket,

Rob Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959 
rob.spinosa@rate.com

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709
 

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Expertise Unmasked

A couple of years ago, we found a home we really loved.  The market was competitive at the time, but we choked on the list price and thought about going in a bit under it.  Our Realtor, someone recommended to us, someone possessing a proven track record in the community and someone garnering much respect among fellow agents, highly advised against lowballing the offer.  Eventually, we bid a little over list and got the home.  One of the reasons the home was so desirable was the school district.  The teachers, overall, have a tremendous reputation and years of experience that just seem to best position the student body to learn in a great environment, test well and excel later on as they go to high school and college.

Back to buying, when we consulted one of the county’s top-rated mortgage professionals about locking the interest rate on our loan, he urged that we get things nailed down and not take needless chances.  With a 25-day escrow, he reminded us that there was not going to be much time to pray for a correction if the financial markets moved in the wrong direction and that we could really get burned by trying to control something over which we had no control.  Personally, we thought rates might go lower so we were tempted to float things a bit longer, but fortunately we took his advice and landed on our feet.  Oddly enough, the financial markets got detrimentally volatile about a week into our escrow, though thankfully we were spared that agony.

The new home needed some work, so we eventually hired a contractor that our neighbors referred with honors.  We also decided to kick out the garage to fit a third car.  The contracting firm suggested that we replace the aging and failing sewer lateral before pouring the new footprint, since the line ran under it.  While this would be a short-term financial hit, it would save us a ton in the long run and it proved to be a smart move, as some of the new appliances would also require more efficient capacity in the plumbing.  So the forethought and competency of our contractor proved to be a smart investment all the way around.

In the new garage, we keep a car that we mostly use when we go into the mountains and on road trips.  We’re lucky to have a great mechanic who helps us keep the vehicle in reliable running order.  If the brakes, belts or fluids need replacing, he gives us good advice and advance notice on replacement and this has always served us well.  Yeah, I’ve tried to DIY some car repairs but I have to admit, they have the tools and techniques that promote a far better result.  Plus, they can do in two hours what takes me six, and without the busted up knuckles and epic tirades of profanity characteristic of my home projects.

When we hit the hills, we love to fish in mountain streams and are grateful to have a local tackle shop that keeps our gear in top shape.  Now I’ll admit we’re a bit of gear junkies ourselves, but these guys know angling hook, line and sinker.  The only tough part is that we can’t get out of the store without dropping a few hundred bucks each time we go in.  Come to think of it, that’s not the only tough part — every time I step foot in that door I usually fritter away a couple of hours talking the joy of fishing.  They are like human encyclopedias.  But I guess if you don’t appreciate the finest nuances of the sport, you wouldn’t get it.

Back in March, though, this COVID-19 pandemic thing really threw a wrench in the works and now I feel like we’re trapped in our home and being oppressed by these officious elected officials and misled by the hysterical mass media.  These high-minded epidemiologists, virologists, medical professionals and so-called “experts” are telling me I have to wear a mask, I have to avoid indoor gatherings, and I should keep physical distance in public.  Well, I’m not gonna do it.  I’ll follow my instincts and set my own guidelines and they can just leave me alone.  I mean, seriously!  Who the hell do these doctors, with their fancy degrees, hours of residency and years of experience think they are?  I know better than the experts — in fact, you give me a choice between my gut and their brains and I’ll choose my gut every time.  I’m smart and I know what the facts are and besides, if I want to learn about something, I can just read about it on the internet or tune into my favorite network and get their opinions.  Experience and expertise are overrated and I can see right through that mask. Especially with matters of life and death.

Live and let die,

Rob Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959 
rob.spinosa@rate.com

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709
 

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

N/O/O:  Jumbo Mortgage’s Scarlet Letters 

May 1, 2020

Day 46 of Shelter-in-Place

If you are a real estate investor at this time, in this market and looking for a jumbo mortgage to buy a non-owner occupied home (N/O/O), you may feel like our industry sees you with a scarlet letter(s) on your chest.  Before the pandemic, everybody wanted to talk to you, but now…now, you cannot find a mortgage lender to make you a jumbo loan.  Many of the options that existed before are gone.  The ones that remain have been restricted, their guidelines whittled down to the ultra-conservative.  Each day, you struggle to learn what’s still possible in the realm of mortgage lending, because you sense that during the economically challenging months ahead, you’ll come across a real estate investment opportunity.  Sot at least for today, we can affirm the following:

  • The conforming loan limits in most counties are $510,400 for a one-unit property, $653,550 for a two-unit property, $789,950 for a three-unit property and $981,700 for a 4-unit property.  Some counties in higher cost areas have an additional tier, known as “jumbo conforming” or “super conforming” or “high balance conforming” that allows a borrower to reach higher in loan amount with a conforming loan.
  • In the California Bay Area, the high balance limits go as follows; 1-unit to $765,600, 2-unit to $980,325, 3-unit to $1,184,925 and 4-unit to $1,472,550.
  • One-unit properties allow a maximum 85% loan-to-value (LTV), or a 15% down payment, on an investment property purchase using a conforming loan.  PMI would be required.
  • Two- to four-unit properties require a 75% LTV or a 25% down payment with conforming scenarios, but remember, the conforming loan limits are higher for these properties.
  • With a 35% down payment, we can lend to a loan amount of $1.5MM (purchase price of approximately $2.3MM or higher), using a jumbo mortgage.

Investment property financing, also known as financing for rental properties or “non-owner occupied” homes, is still available to the real estate investor.  Once above he conforming loan limits, the options are no doubt more limited, yet still exist.  If you need help navigating the world of the shunned, recruit our help today.  Things will get better and we’re here to help until they do.

Twice-told tales,

 

Rob Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960
Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

10% Down Payment Mortgage

But I don’t get it.  2020 started just like the many of the years that preceded it.  Sure, there was a seasonal slowdown in home buying activity as we got through 2019’s holiday season and got the new year underway, but with interest rates at historic lows, a strong seller’s market in the San Francisco Bay Area and lots of buyer competition for any desirable home that came on the market, it looked like deja vu all over again for anybody looking to purchase a home.  In other words, here we go again with having to come up with a large down payment (or even all cash), a push to offer without any contingencies in your contract and a general sense that it was going to take an act of God to actually get into contract.

Well, we got the act of God part.  Just not the one that any of us, save for the disbanded Global Health Security and Biodefense Unit, had planned on…

So, here we are, going into the heart of the spring buying season, in the middle of shelters-in-place and a COVID-19 pandemic.  Yet with all due respect given to the very real health concerns most of us share, real estate is an essential activity and some buyers and sellers have no choice but to be “on the market.”  For a handful of these buyers, who are not yet in a position to have saved a full 20%, or who have seen the value of their stock portfolios decimated by recent market volatility, a 10% down payment may be the only realistic way to purchase a home during the months to come.

The good news is that they can still do it.

“What is 80-10-10 Financing?”

I remember my grandmother calling the refrigerator a “Frigidaire” and our jeans “Dungarees.”  So it is with 80/10/10 financing.  It’s sort of the brand name we bandy about when what we’re really discussing is a concept, and the manifestation of that concept is subordinate financing, AKA as a “piggyback loan.”  Most simply described, a buyer using this structure will be obtaining two loans instead of one in the purchase of a home.  This is often referred to in broad strokes as an “80-10-10” loan.

“How Do 80/10/10 Loans Work?”

When we say “80/10/10” we are specifically implying the following:

  • A first mortgage to 80% of the home’s purchase price.
  • A second mortgage equal to 10% of the home’s purchase price.
  • A buyer’s down payment for the remaining 10% of the purchase price.

Since the lending world is replete with guidelines, it doesn’t always play out exactly this way, and for any number of reasons.  Just keep in mind that “80-10-10” could also just as easily be 75-15-10, or sometimes when we need to use a conforming first mortgage, you could even see a 62-28-10, for example.  You get the idea, we don’t always have to be at a strict 80% and 10% for the loan amounts.  But no matter how we structure the transaction, the sum of both loan amounts plus the down payment will equal 100% of the purchase price.

“Can I Qualify for a Piggyback Mortgage”

 When obtaining a jumbo 80-10-10 loan, the first mortgage will typically be a fixed rate loan (30-year fixed) or a hybrid ARM (10/1 ARM, 7/1 ARM or 5/1 ARM).  The second mortgage is most often a home equity line of credit (HELOC).  There can be different qualifying criteria for both loans and your loan officer will have to navigate two sets of guidelines in most cases.  Not all loan originators are adept at subordinate financing but for my clients, the pre-approval process for a piggyback loan is identical to the process for obtaining a single loan — we understand it on every level.  While an 80-10-10 can sometimes be harder to obtain than a single loan, there are also cases where it can enable an approval that otherwise would not exist.  For example, a buyer may not qualify for a single loan of $750,000, but may pass with flying colors if the loan is restructured as a first mortgage of $625,000 and a second loan of $125,000.  Same total sum borrowed, but two very different outcomes.

In a very uncertain time, we presently have the capacity to allow a buyer to make a 10% down payment, using the 80-10-10 structure, on a purchase price almost as high as $2,200,000.  And here in the San Francisco Bay Area, this is not an uncommon scenario.  Sellers may not have the luxury of waiting around to get multiple offers in a market defined by the great uncertainty we all face today.  But in these challenging times of being shut in, will lie opportunity for the buyer who may have previously been shut out.  If I can help you better understand the inner workings of a 10% down payment mortgage option, we are available and open for business.

Take care and stay safe,

Rob Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com
Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960
Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

The New Abnormal

We’ve just turned the corner from March to April, but here in the San Francisco Bay Area, we are still sheltered in place (SIP).  Everybody in our home is making adjustments to our new abnormal and it’s a good lesson for today’s homeowner too.  We may not be able to move around or go out, but can we hunker down and tweak our financial situation so that it better positions us to weather the next few months?

First, a little perspective.  Even if the health implications of the pandemic miraculously prove to be short-lived, my sense is that the economic ripples will reverberate well beyond that timeline.  Why?  Because in finance we tend to see credit capacity build slowly and steadily, but evaporate suddenly and even violently.  Even though we are in the early innings of dealing with COVID-19, much of the mortgage industry has seen significant pullback in loan options for the consumer.  Among them:

  1. The all-but-complete disappearance of non-QM loan product (bank statement programs, asset-depletion mortgages).
  2. The tightening of guidelines on jumbo and portfolio loans (lower loan-to-values, restrictions to cash out).
  3. Higher rates on riskier loan options.

This is the underlying market’s way of saying that it feels it’s time to be more conservative, trim expenses and reduce risk exposure.  As consumers, it might be beneficial to follow that lead.

So how do we accomplish our own rebalancing of risk and expense when we’re homeowners?  The primary way we’ll see our clients do this is through a refinance.  Of course, if you already have a low, fixed-rate loan, you may be set.  But some of our clients who may have previously not been excited by saving $150, $250 or even $350 per month are now suddenly looking at the prospect of reduced work hours or possibly unemployment of one of the working spouses.  Viewed in this light, any savings can take on new urgency.  And of course, I am never one to advocate for refinancing a loan for short-term benefit while not considering the long-term implications, but current circumstances do, we must admit, change this paradigm.  Everybody must first navigate the present’s choppy waters in order to sail into the safe harbor of a better future.

Home equity lines of credit (HELOCs) are another strategy the savvy will use.  Remember, a HELOC has no payment if you don’t draw against it.  Some homeowners keep a home equity loan as a safety net.  Some take a new line so they have a source of capital during a downturn and a way to make an investment that other, cash-strapped buyers cannot.  Sure, there is risk, but how many people do you know who say they wished they had bought at the bottom of the last crash?  Let me let you in on a secret.  There are two reasons they didn’t; first, they didn’t have the resources to do it.  Second, they were scared, like everybody else.

Make no mistake about the COVID-19 pandemic — this is wildly unfamiliar terrain for everybody.  It’s also our new, daily existence for some time.  We can hope and wish and pray it will blow over soon, and like you, I’m optimistic it will.  But in the meanwhile, I am taking financial matters into my own hands and advising my clients to do the same.  Some of the old rules don’t apply here and even the ones that do must be viewed in the light of our new abnormal.

Stay weird,

Robert J. Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

 

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709
*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283