Company News

Last Week in Review: Coronavirus Fallout to Hit Homeowners

The Coronavirus has impacted millions of Americans across the country due to job loss and furloughs making it difficult, and sometimes impossible, for homeowners to make their mortgage payments.
The U.S. government has stepped in to offer homeowners financial relief during this unprecedented time with the Coronavirus Aid, Relief, and Economic Security (CARES) Act. With this new Act, government-sponsored agencies such as Fannie Mae and Freddie Mac will offer forbearance agreements with protections for those homeowners in need.
What is a forbearance? A forbearance is an agreement between a homeowner and their mortgage servicer (to whom they send their mortgage payments) to suspend payments for a period of time. The homeowner does not incur late fees or other penalties during the forbearance.
Additionally, mortgage terms are unchanged, and the homeowner agrees to make up the accrued interest and payments in the future. Typically, a forbearance will affect a homeowner's credit rating, however, there are a few differences in forbearances during COVID-19 which can be found on the Fannie Mae and Freddie Mac websites.
Loan servicers have been instructed to provide mortgage relief options which include:

• Ensuring payment relief by providing forbearance for up to 12 months.
• Waiving assessments of penalties or late fees.
• Halting of foreclosures and evictions of borrowers living in homes owned by the mortgage servicer until at least May 17, 2020 (Freddie Mac).
• Suspending the reporting to credit bureaus of past due payments of those in forbearance due to the COVID-19 emergency.
• Offering loan modifications for payment relief to keep mortgage payments the same after the forbearance period.
• Borrowers are eligible regardless of whether their property is an investment, second home, or owner-occupied.

Bottom line: homeowners who have the ability to pay their mortgage should do so. Homeowners who are unable to, should contact their mortgage servicer immediately and request assistance on forbearance under the new CARES Act.

Last Week in Review: Liquidity Defined

This past week, thanks to the Federal Reserve, home loan rates declined. The high uncertainty around the coronavirus and its impact on homeowners and mortgage payments created a dire need for liquidity in the mortgage-backed security (MBS) market.
This is where the Fed came to the rescue by providing liquidity.
What is liquidity?
Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market at a price reflecting its intrinsic value. In other words, it's the ease of converting it to cash.
Last Sunday, the Fed announced that it would purchase an unlimited amount of MBS in order to provide the much-needed liquidity to get the MBS market to perform correctly.
As a result, MBS prices showed more normal trading activity which resulted in lower rates and more stable pricing this week.
We expect more stabilization in the days and weeks to come as the Fed is committed to getting the MBS market to function as normal.
Bottom line: the Fed's unlimited MBS buying doesn't mean home loan rates are going to improve much further, but it will rather stabilize the market and keep rates near current levels, affording homeowners the ability to refinance and secure a low home loan rate.

Overview

Carrington Mortgage Services, LLC (CMS) is actively monitoring the spread of COVID-19 (coronavirus) throughout the United States and its potential impact to our borrowers and loan originations. Our ability to continue to serve our customers is a top priority. As the Agencies provide additional Appraisal guidance, this bulletin will be updated and republished.

FNMA Temporary Appraisal Requirement Flexibilities

These temporary flexibilities are effective immediately for all Mortgages in process and remain in place for Mortgages with Application Received Dates on or before May 17, 2020.

Effective immediately, Fannie Mae is allowing temporary flexibilities to their appraisal inspection and reporting requirements. As described below, FNMA will accept an alternative to the traditional appraisal required under Selling Guide Chapter B4-1, Appraisal Requirements, when an interior inspection is not feasible because of COVID-19 concerns. FNMA will allow either a desktop appraisal or an exterior-only inspection appraisal in lieu of the interior and exterior inspection appraisal (i.e., traditional appraisal).
If a traditional appraisal is not obtained and there is insufficient information about the property for an appraiser to be able to complete an appraisal assignment with a desktop or exterior-only inspection appraisal, the loan will not be eligible for delivery to FNMA.

*Excludes new construction and construction-to-permanent loans.
NOTE: For all loans with LTV ratios greater than 80%, FNMA require mortgage insurance in accordance with their standard Selling Guide policy. Lenders must consult with their mortgage insurance companies to confirm coverage for mortgages using one of the temporary appraisal flexibilities.

Desktop appraisals

For purchase money transactions when an interior and exterior appraisal is not available, lenders are encouraged to obtain a desktop appraisal rather than an exterior-only appraisal.
The minimum scope of work for a desktop appraisal does not include an inspection of the subject property or comparable sales. The appraiser relies on public records, multiple listing service (MLS) information, and other third-party data sources to identify the property characteristics.
When a desktop appraisal is performed, reported on Form 1004 or Form 1073, and submitted to FNMA through the Uniform Collateral Data Portal® (UCDP®), the appraisal will be scored by Collateral Underwriter® (CU®). All loans with a CU risk score of 2.5 or less will receive value representation and warranty relief under Day 1 Certainty. With desktop appraisals, lenders will have the added risk management and efficiency benefit of being able to use CU to aid in the appraisal review process.
The table below provides the appraisal report form that must be used to complete the desktop appraisal for each property type.

Exhibits for Desktop Appraisals

Each desktop appraisal report must include the following exhibits:

• a location map indicating the location of the subject and comparables, and
• photographs of the subject property. FNMA recognizes that it may be challenging in some instances to obtain photographs; however, it is expected that the appraiser utilize available means to obtain relevant pictures of the subject property.

Exterior-only Inspection Appraisals

An exterior-only inspection appraisal may be obtained in lieu of an interior and exterior inspection appraisal for the following transactions:

• Purchase money loans
• Limited cash-out refinances where the loan being refinanced is owned by Fannie Mae

Lenders will not receive value representation and warranty relief under Day 1 Certainty® for loans with exterior-only appraisals.
The table below shows the appraisal report form that must be used to complete an exterior-only inspection appraisal for each property type. Because there are not appropriate exterior-only appraisal report forms available for two-four unit properties and manufactured homes, FNMA will accept an exterior appraisal scope of work completed using the applicable forms listed below.

Exhibits for Exterior-only Inspection Appraisals
Lenders are reminded that the following exhibits to the appraisal report are required for an exterior-only inspection appraisal:

• a street map that shows the location of the subject property and of all comparable sales that the appraiser used;
• clear, descriptive photographs (either in black and white or color) that show the front of the subject property, and that are appropriately identified (photographs must be originals that are produced either by photography or electronic imaging); and
• any other data−as an attachment or addendum to the appraisal report form−that are necessary to provide an adequately supported opinion of market value.
  

FHLMC Temporary Appraisal Requirement Flexibilities

These temporary flexibilities are effective immediately for all Mortgages in process and remain in place for Mortgages with Application Received Dates on or before May 17, 2020.

Freddie Mac understands that due to the COVID-19 pandemic there may be instances where a Lender is unable to obtain an interior inspection of the subject property. As a result, Freddie Mac is allowing temporary exceptions to their property eligibility and appraisal requirements.
Freddie Mac is revising its appraisal inspection and reporting requirements. As described in detail below, for certain Mortgages, when a Lender cannot obtain an appraisal with an interior inspection as a result of the COVID-19 pandemic, Freddie Mac will accept either an appraisal with an exterior-only inspection or a desktop appraisal (as described below) in lieu of the interior and exterior inspection appraisal required under Section 5601.5(a).
There may be instances where there is insufficient information about the property for an appraiser to complete an appraisal assignment with a desktop appraisal or an appraisal with an exterior-only inspection. In these instances, the Mortgage will not be eligible for sale to Freddie Mac until the appraiser has sufficient information to complete the desktop appraisal or an appraisal with an exterior-only inspection, or an appraisal with an interior and exterior inspection is obtained.
The following table provides appraisal requirements based on Mortgage purpose, loan-to-value (LTV) ratio, occupancy type and Mortgage ownership.

*These flexibilities are not permitted for Construction Conversion, Renovation or new construction properties.
Note: For all Mortgages with LTV ratios greater than 80%, FHLMC will require mortgage insurance in accordance with Guide requirements. Lenders must consult with their mortgage insurance companies to confirm coverage for Mortgages using one of the temporary appraisal flexibilities.

Appraisals with Exterior-only Inspections

The table below provides the appraisal report form that must be used to complete an appraisal with an exterior-only inspection for each property type. Because there are not appropriate exterior-only appraisal report forms available for 2- to 4-unit properties and Manufactured Homes, FHLMC will accept an exterior-only appraisal scope of work completed using the applicable forms listed below.

Mortgages with appraisals with exterior-only inspections will not receive the appraised value representation and warranty relief described in Section 5601.9(b).
Exhibits for Exterior-only Inspection Appraisals
Lenders are reminded that the following are required in connection with an appraisal with an exterior-only inspection:

• A street map that shows the location of the subject property and of all comparables that the appraiser used
• Clear, descriptive photographs (either in black and white or color) that show the front of the subject property, and that are appropriately identified. (Photographs must be originals that are produced either by photography or electronic imaging); and
• Any other data (as an attachment or addendum to the appraisal report form) that are necessary to provide an adequately supported opinion of market value

For Purchase Transaction Desktop Appraisals

Lenders are encouraged to obtain a desktop appraisal in lieu of an appraisal with an exterior-only inspection when an interior and exterior inspection is not available.
The minimum scope of work for a desktop appraisal does not include an inspection of the subject property or comparable sales. The appraiser relies on public records, multiple listing service (MLS) information or other third party data sources to identify the property characteristics.
When a desktop appraisal is obtained using Form 70, Uniform Residential Appraisal Report, or Form 465, Individual Condominium Unit Appraisal Report, and submitted to the Uniform Collateral Data Portal® (UCDP®), the appraisal will be assessed for valuation representation and warranty relief in Loan Collateral Advisor®. All appraisals with a risk score of 2.5 or less that meet the requirements in Section 5601.9(b) will receive valuation representation and warranty relief and Lenders will have the added risk management and efficiency benefit of being able to use Loan Collateral Advisor to aid in the appraisal review process
The table below provides the appraisal report form that must be used to complete the desktop appraisal for each property type.

Exhibits for Desktop Appraisals
Each desktop appraisal must include the following exhibits:

• Photographs of the subject property. Freddie Mac recognizes it may be challenging in some instances to obtain photographs; however, it is expected that the appraiser utilize available means to obtain relevant pictures of the subject
• A location map indicating the location of the subject and comparables.

VA Guidance for Property inspections

Appraisers should continue to conduct business as outlined in Chapter 10 of the Lender’s Handbook.
Appraisers should contact the RLC of jurisdiction if they have been impacted by COVID-19 and are unable to complete an appraisal assignment. The email addresses for each of the RLCs are available at: https://www.benefits.va.gov/HOMELOANS/contact_rlc_info.asp.

FHA Guidance for Property inspections

The FHA is continuing to require Appraisals with Property inspections for Single Family Programs. The FHA Roster Appraiser must complete all required appraisals in accordance with acceptable Appraisal Reporting Forms and Protocols.  Appraisers should stay informed of CDC Coronavirus updates, and incorporate prudent measures in their business practice regarding personal contact with the borrower and/or occupants. FHA is closely monitoring the situation and will provide updated guidance, as needed.

USDA Guidance for Property inspections

USDA has not announced any temporary guidance as of 3/24/20.

Contacts

Please contact your Account Executive or Account Manager with any questions.
Carrington thanks you for your business.

Overview

Carrington Mortgage Services, LLC (CMS) is actively monitoring the spread of COVID-19 (coronavirus) throughout the United States and we understand there may be concerns about its potential impact to our borrowers and loan originations. Our ability to continue to serve our customers is a top priority. As the Agencies provide additional guidance, this bulletin will be updated and republished.
Effective: These temporary employment and income verification flexibilities are effective immediately for all Conventional product only loans in process and remain in place for loans with application dates on or before May 17, 2020. Please note that the Guidelines/ Matrices and AUS messages will not be updated to reflect these temporary policies.
Verbal Verification of Employment
In cases where there is difficulty in obtaining the verbal verification of employment (VVOE) due to disruption to operations of the borrower’s employer, the following temporary process applies:

• Written VOE: Obtain an email directly from the employer’s work email address that identifies the name and title of the verifier and the borrower’s name and current employment date within 10 calendar days of the note date.
• The Work Number: We will continue to accept automated verifications such as those from The Work Number, although the last date of employment verified must be within 10 calendar days of the note date. In situations where the automatic database upload has not been refreshed within the last 10 calendar days, we will have to wait for the next refresh period.
• Paystub: Provide a year-to-date paystub dated within 10 calendar days of the note date.
• Bank statements: Provide a bank statement evidencing the automatic payroll deposit reflecting the employer’s name within 10 calendar days of the note date. (The 10 calendar days is calculated from the date of the payroll deposit, not the bank statement date.)
• Self-Employment: Verification of self-employment will follow existing guidance, but must be dated within 10 calendar days of the note date.

Continuity of Income:

It is important to remind our Associates of ensuring sustainable homeownership for our borrowers in light of recent events.
Given the current economic climate associated with the COVID-19 pandemic and its impact on employment and income, our Underwriting team will practice additional due diligence to verify the most recent information is obtained. This will ensure any disruption to borrowers’ employment (or self-employment) and/or income due to the COVID-19 pandemic is not expected to negatively impact their ability to repay the loan.

Contacts

Please contact your Account Executive or Account Manager with any questions.
Carrington thanks you for your business.

Non-QM Update

Carrington Mortgage Services remains committed to the Non-QM market as one of the key leaders in the industry. Unfortunately, we have to temporarily discontinue offering Non-QM loans due to current secondary market conditions. We’re happy to say that any approved loans that are locked will be honored through the remaining locked term. Unfortunately, we will not be accepting any new Non-QM submissions for our Carrington Flexible Advantage, Flexible Advantage Plus, Investor Advantage, and Prime Advantage products.
Non-QM Loans that have been submitted or approved without rate lock cannot proceed under this program. For locked loans, we are not offering lock extensions at this time.
As the market stabilizes, Carrington will be at the forefront and will re-introduce our Non-QM product line.
We sincerely apologize for the temporary inconvenience this may cause and look forward to serving your Non-QM borrowers in the near future.

On the Brighter Side

Carrington continues to offer its full suite of government loans including FHA, VA & USDA loans full doc and streamlines. And don’t forget about our conventional Fannie/Freddie loan products.

• FICOs down to 500
• Manual underwriting (for those out of the box borrowers)
• Expanded DTI on FHA loans available
• So much more...

[btn link="/loan-products/" color="crimson" size="size-l"]See Our Loan Products[/btn]

Last Week in Review: Home Loan Rates Rising

This past week, home loan rates ticked up again despite the Fed recently cutting rates by a full point and the 10-year Note remaining just above 1%.
Why?
Mortgage backed securities (MBS) are Bonds that price home loan rates. This week, the spread or difference in yield between the 10-year Note and MBS spiked to the highest level in decades. This means that despite the record low yield in Treasuries, home loan rates continue to rise.
This has to do with MBS investors having less of an appetite for MBS, given the uncertainty of the current economic environment. The only way you can attract investors to buy MBS is by increasing the interest rate or yield to the investor. We are seeing this today.
Also, there is a reality that $1T in Bonds will be coming to the Bond market in the near future to pay for the economic stimulus package in order to help the economy during and after this coronavirus crisis. That huge amount of new Bond supply dilutes the Bond market and pressures prices lower and rates higher.
We may not see a more natural interest rate spread between Treasuries and MBS until we get past the worst of the coronavirus and its economic impact. Until then, expect more price and rate volatility.
Bottom line: home loan rates remain very close to the best levels ever, and with the Fed buying MBS for the foreseeable future, we are not expecting home loan rates to go too high any time soon.

Overview

Due to current market conditions, effective March 20, 2020 and until further notice, Carrington Mortgage Services, LLC (CMS) will temporarily no longer permit a lock until the loan is Approved and the appraisal (where applicable) has been received by CMS.  Please see revised lock policy below.

Lock Extensions:

• Maximum of up to two extensions
• Maximum extension period of 15 days in the aggregate
• Current extension fee charges remain in place (see rate sheet)

Contacts

Please contact your Account Executive or Account Manager with any questions.
Carrington thanks you for your business.

Last Week in Review: Rate Movements Explained

This past week was a head-scratcher as home loan ticked up slightly week over week despite the 10-year Note yield hitting a historic low of 0.31% and Stocks enduring heavy losses. Typically, when Stocks drop, so do rates -- especially after historic Stock losses like those this past week.
So, what happened?
Home loan rates are determined on the pricing of mortgage backed securities. Due to all of the recent refinance activity as a result of the low rates, the Bond market was flooded with an enormous supply of Mortgage Bonds.
When additional supply comes into any market, prices can move lower, and that is what we saw last Monday as mortgage backed securities touched a six-year price high and started to reverse lower.
Once Mortgage Bonds started to drop in price, thereby increasing rates, something very interesting happened. The sell-off in Mortgage Bonds really gained steam causing a further bump up in rates.
Why did mortgage backed securities drop so fast?
Mortgage backed securities carry prepayment or refinance risk, which limits how fast rates drop when they are dropping. The opposite is also true. This means when rates start to rise, the prepayment or refinance risk goes away causing a sharp move lower in prices and higher in rate.
Bottom line: home loan rates remain within a whisker of the best levels seen earlier in the week. And there is an old saying, "the cure for higher rates, is higher rates," meaning at some point as prices drop and interest rates tick up, investors will buy Mortgage Bonds and stabilize interest rates.

Overview

Due to current market conditions, effective March 13, 2020 and until further notice, Carrington Mortgage Services, LLC (CMS) will temporarily suspend offering 30-day locks. CMS will still offer 15-day, 45-day, and 60-day lock terms in accordance with the revised guidelines for available lock terms outlined below.

Contacts

Please contact your Account Executive or Account Manager with any questions. Carrington thanks you for your business.

Last Week in Review: How Low Can Rates Go?

Home loan rates touched all-time lows this past week, fueling refinance activity and creating a sense of urgency for homebuyers to lock in purchase loans.
The question many people are asking is, "how low can rates go?"
The short answer -- no one knows. A lot will be determined by the economic impact of the coronavirus and that is impossible to handicap at the moment.
What we do know:

• The coronavirus outbreak is improving in China and the outbreak numbers here in the U.S. have not exploded, as of yet. This is good news, and should it continue, it is unlikely we will see much lower home loan rates in the near future.
• Home loan rates have not improved in lockstep with the 10-year Note yield, which has also declined, though much more sharply, to a historic low of .66%. The reason -- mortgage backed securities (MBS), where home loans are priced, carry a different risk profile than that of Treasuries. Investors in MBS are subject to refinance risk when rates go lower. To offset that risk, investors demand a premium within MBS which creates a higher price to both the lender and ultimately the homeowner.
• Mortgage lenders are so busy they can hardly keep up with the business. What is one thing you don't do when business is so busy? Lower price.

Bottom line: today represents a golden opportunity to lock in the best rates in the history of the U.S. and should be taken by those who can benefit.