Zillow sets ambitious hiring goal for 2021

Zillow Group has announced plans to bolster its total workforce by 40% as the firm continues to ride the strong wave of demand for housing.

The real estate giant said in a Press release that it intends to recruit more than 2,000 employees nationwide – boosting its headcount by approximately 40%. The expansion offers job opportunities in mortgage, technology, product and software development. The new roles are categorized as remote and hybrid positions, including a mix of in-office and field roles.

Last year, Zillow extended the work-from-home option for its employees and launched its Distributed Workforce Model, which gives its staff more work flexibilities. According to the firm, the model has enabled it to onboard nearly 1,500 employees remotely since March 2020.

“Zillow is committed to reimagining traditional recruiting and working norms and being a leader in the future of flexible work to meet its ambitious hiring goal for 2021,” the company said in a statement.

“While we boldly reimagine how to buy and sell homes for today’s digitally-minded customer, Zillow is seizing the opportunity to reimagine how we work,” said Zillow Chief People Officer Dan Spaulding. “Our Distributed Workforce Model is a more inclusive, more personalized, more flexible, more efficient way of working. We are broadening our pipelines to attract more underrepresented talent and are providing career development opportunities that may have not otherwise existed for our employees.”

Source: mpamag.com

New Residential Investment Corporation: What You Need to Know – Motley Fool

New Residential Investment Corporation (NYSE: NRZ) is a mortgage REIT, or a real estate investment trust that primarily invests in mortgages, mortgage-backed securities, and related financial instruments. And it’s a fairly large one, with a market capitalization of about $4.4 billion as of March 2021.

In this article, we’ll take a look at what New Residential does, how it has performed for investors, and recent developments that investors should be aware of before buying shares.

New Residential company profile

The company’s portfolio consists of $23.5 billion worth of assets, including residential mortgage loans and mortgage-backed securities (residential MBS), mortgage servicing rights (MSRs), and more.

Unlike many mortgage REITs, New Residential is also a major residential mortgage originator and servicer, with $61.6 billion in origination volume in 2020 alone, making it one of the 15 largest non-bank mortgage originators in the United States. And from 2018 through 2020, New Residential was the fastest-growing mortgage originator in the market. The company originates mortgages direct to consumer, as well as through joint ventures and wholesale outlets.

On the mortgage-servicing side of the business, the company owns a servicing portfolio consisting of nearly $300 billion in mortgage principal balances and is one of the top 10 mortgage servicers outside the banking industry. About two-thirds of the loans it services were originated in-house (the company is known as NewRez to consumers), and the rest are third-party loans that were originated elsewhere. And the company owns an investment portfolio of mortgage servicing rights that makes it the largest non-bank owner of MSRs in the U.S.

Rapid spikes in interest rates can be bad news for mortgage REITs, but New Residential’s massive MSR portfolio gives it a unique advantage. When rates rise, mortgage prepayment risk falls, and it makes existing servicing rights far more valuable. In fact, the company estimates that a 100-basis-point rise in the 10-year Treasury yield from its year-end 2020 level would result in the value of its MSR portfolio rising from $4.5 billion to $5.2 billion, which would add $1.80 per share to the company’s book value all by itself. While higher rates would also likely lead to a slowdown in the origination business, New Residential believes its MSR portfolio would more than make up for it.

Finally, it’s important to point out that like most mortgage REITs, New Residential uses a rather large amount of leverage to achieve its returns. At the end of 2020, the company had a leverage ratio of 3.6 to 1, meaning that for every $1 million in assets, the company had $3.6 million in outstanding debt. This is completely normal for a mortgage REIT, especially one with lots of high-quality agency-backed mortgages in its portfolio, but it’s worth knowing that leverage can spell trouble in turbulent times (as mortgage REIT investors found out during the COVID-19 pandemic — more on that in a bit).

New Residential news

By far, the biggest news item New Residential shareholders should be aware of is the COVID-19 pandemic and how it affected the company (and the mortgage REIT industry in general).

The short explanation is when the pandemic swept across the United States in early 2020, it created a great deal of uncertainty, especially before the CARES Act and its various foreclosure protections were passed. As a result, the values of mortgage securities plummeted. Since mortgage REITs use lots of leverage in their portfolios, the plunging asset values resulted in margin calls, or the need to sell assets at fire-sale prices to deleverage balance sheets.

As New Residential CEO Michael Nierenberg said in the company’s first-quarter 2020 earnings release:

“Asset values in the mortgage market went into free fall as liquidity left the system. In response, we sold down approximately $27.9 billion in assets and significantly de-leveraged our balance sheet. Our investment portfolio as of April 30, 2020, is 61% smaller than it was on December 31, 2019, which we believe puts us in a strong position to navigate the current and forward environment.”

And not only did the company sell a huge amount of assets, it was forced to cut its dividend as well.

To be fair, New Residential weathered the storm as well as it possibly could have. The company’s asset sales were prudent moves, and New Residential took several steps to bolster its liquidity in the months that followed the initial panic. By the end of the second quarter, the company had started to recover, and the surge in refinancing and purchase mortgage activity provided a boost to the company’s profitability. And in the third and fourth quarters, New Residential started to aggressively invest billions to rebuild its residential mortgage portfolio, which represented the bulk of the asset sales at the start of the pandemic.

Since the early days of the pandemic, New Residential has recovered nicely. Origination activity has been very strong, and the company has been very opportunistic about building up its portfolio of agency mortgages in recent quarters. But it’s important to realize that the pandemic did significant damage to the company’s business in the early days of the pandemic, and the effects are still apparent.

Also, unlike many mortgage REITs, New Residential has been buying back its stock recently, presumably to take advantage of its valuation. At the end of 2020, New Residential had a book value of $10.87 per share, and the company repurchased one million shares during the fourth quarter at an average price of $7.44. And the company has said that its business is worth significantly more than its book value reflects. After all, its operating company (the mortgage originator) is mostly not reported as a balance-sheet asset. In February 2021, the company authorized a new $200 million stock repurchase program through the end of 2021, so it appears the buybacks aren’t done yet.

New Residential stock price

At first glance, New Residential Investment’s stock-price performance might not look too stellar. Since its 2013 IPO, the mortgage REIT’s shares have fallen by about 23% as of early March 2021. However, there are two big caveats here:

1. The COVID-19 pandemic was devastating on the mortgage REIT industry, as discussed in the last section, and the stock had about a 20% gain throughout its seven-year history prior to it.

2. Mortgage REITs are designed for income, not stock-price appreciation. New Residential Investment has paid a dividend yield of 10% or greater for much of its history.

With that in mind, here’s a chart of New Residential’s performance over certain time intervals and how it compares with the S&P 500 index:

Source: fool.com

Motto Mortgage full-year results top expectations

Motto Franchising delivered record-breaking full-year financial results on Friday, reporting a two-fold increase in closed loan volume.

The mortgage franchising company said in a statement that 383 loan originators across 140 offices and 40 states completed nearly $2.5 billion in loan volume in 2020 – more than double its 2019 results and a 99% rise in families served.

What makes the accomplishment noteworthy, according to the firm, is that 43% of the network’s 2020 volume was closed by Motto Mortgage franchise offices that have been operating for two years or less.

“Closing nearly $2.5 billion in loan volume as a network is a remarkable feat in any year, but especially in a challenging one like 2020 – only our fourth full year of operations,” Motto Franchising President Ward Morrison said. “That was only one of many achievements for our brand last year. 2020 was a record-breaking year for Motto franchise sales, and the fourth quarter was our best quarter yet in company history. Our momentum is real.” 

The network of independently owned, operated, and licensed mortgage brokerage franchises has already bagged several awards, including ranking 41st in Entrepreneur magazine’s annual Franchise 500 list and first in its Miscellaneous Financial Services category early this year.

Source: mpamag.com

ICICI Bank reduces home loan interest rate to 6.70% till March 31 – Economic Times

announced on Friday that it has reduced home loan interest rate to 6.70%.The revised interest rate is effected from March 5, 2021, stated the bank in a press release. Customers can avail of this interest rate for home loans up to Rs 75 lakh. For loans above Rs 75 lakh, interest rates are pegged at 6.75% onwards, stated the release. These revised rates will be available till March 31, 2021.

Ravi Narayanan, Head- Secured Assets, ICICI Bank said, “We see resurgence in demand from consumers, who want to buy homes for their own consumption, in the past few months. We believe that this is an opportune time for an individual to buy his/her dream home, considering the prevailing low interest rates.”

Other banks too have been coming out with limited period offers on home loans.
The State Bank of India (SBI) announced an interest concession of up to 70 bps with interest rates starting from 6.7% onwards for a limited period offer till March 31, 2021.

Kotak Mahindra Bank on Monday announced a 0.10 percentage point cut in its home loan rates for a limited period. Customers will be able to avail home loans for 6.65 per cent till March 31 as part of a special offer after the rate reduction, the bank said in a statement.

The country’s largest housing finance company HDFC has cut interest rate on its home loans to 6.75% from 6.8%. However, this is not a limited period offer.

Source: economictimes.indiatimes.com

How top workplace Civic lives and breathes investment in its people

Bill Tessar, president and CEO of Civic Financial Services, has been in the space for 35 years and there’s one thing that’s always worked for him: the investment in people.

“You can say it — oh, this year we’re going to go over and beyond — but you have to actually live, breathe, die by that,” he said.

Tessar’s current role as a leader is remarkably similar to his experience coaching his children, who were Division 1 athletes: bringing everyone together with one common goal. Fresh out of college or with 30 years’ experience, “people want to feel part of a team and my job is to make sure everyone here knows we are all part of a team,” he noted.

Every Civic employee carries a coin with the company’s core values on one side and its purpose on the other, and this serves as a reminder of everyone’s connectivity. Though the words on those coins carry beyond the office — act with honor in every aspect of your life, communicate clearly with everybody you meet — Tessar makes it a point to walk the walk within the Civic workplace. For example, a few years ago, one of the company’s top originators was caught falsifying a document and Tessar was sure people were thinking the “Golden Child” would get off with a slap on the wrist — but no, they were escorted out of the company.

“That goes a long way – they didn’t act with honor, but we’re going to,” Tessar said. “Everyone has to be rowing in the same direction, and our people feel that people-first approach because our senior team invests in it every single day.”

Civic, which was recently purchased by Pacific Western Bank, starts every day with daily huddles. First up is Tessar and his senior management team, and those managers then go and have a huddle with their teams and so on down the line. Typically around 15 minutes, huddles are disciplined in nature: “everyone has a word of the day, shares the top three things they’re working on, a stuck item and an announcement and then we break.”

“By 9:45 every morning, we have pulsed from my desk to the front desk at every one of our locations,” Tessar says. “It’s important because if somebody has a real issue, a problem, a ‘stuck,’ it getting resolved within 24 hours is paramount for us. It’s elevating the level of importance to all — and nothing gets by me.” 

They also have biweekly states of the union, which is a live feed from Tessar to every employee, and monthly sessions where everyone weighs in on “what we should keep doing, start doing, stop doing — many of the great things we do here as a company come right from our people,” he explained.

“We’re constantly inspecting what we expect. Does it open you up for corrective actions and for improvements? Yes, but you have to be willing – if your people are important to you, they should have a voice and it should be equal to any.”

Employees can also take advantage of Civic University, a library of on-demand courses for business and personal self-improvement — Tessar says he’s been known to jump on there too, adding there’s an old expression comparing learning to a piece of fruit: “if you get too ripe you rot, so you always gotta stay a little green” — and there’s a PTO donation system where team members can donate their time to someone in need. There’s also a peer-nominated High Rise Award that includes a trophy and a $1,000 bonus given at the monthly town hall, and Tessar says that kind of recognition by your peers is a powerful thing.

Though those town halls are virtual now due to the COVID-19 pandemic, Tessar says Microsoft Teams and Zoom have connected the company in a way that working alongside one another didn’t.

“You can have more meetings, with more people and less down time,” he said. “If someone said, give me something good that happened with COVID, the connectivity through those platforms is amazing – unlike anything it was before.”

Managing the pandemic was the toughest six months for him emotionally as he strove to make sure his 300 people, each one with something serious going on in their lives, were taken care of. Even though it’s not completely in the rear-view mirror, Tessar says people are coming out of that malaise.

“It was a crazy time – but I definitely see the finish line here,” he said.

Source: mpamag.com

IDEAS: The list we don’t want to be on: Most segregated cities in America – dayton.com

The Dayton Daily News has embarked on a new project, the Path Forward: Race and Equity. Reporters will look at, among other issues, housing, an area that still has significant equity issues more than 50 years after the passage of the Fair Housing Act.

ExploreCauses of racial inequity are identifiable and fixable, experts say

It’s not like 1984, when I came to town and an apartment complex manager told me there were no available apartments, despite the big VACANCY sign screaming right outside his office door.

Things today are far more subtle, Jim McCarthy, the fair housing center’s president and CEO, said. For example, housing providers may offer a lower rent to perspective white tenants. “This occasionally happens to our white housing discrimination testers who follow a Black tester inquiring about the same unit,” McCarthy said.

Black and Latino borrowers also still pay higher interest rates on home loans. “People of color are mostly unaware that they are being charged more and accept terms and interest rates that cost them much more than their white counterparts,” he said.

And the mortgage denial disparity continues to shock. In 2019, lenders denied mortgages to 16% of Black and 11% of Hispanic applicants, but just 7% of whites, according to data from the Consumer Finance Protection Bureau.

ExploreTell us how race affects your health care

So what’s the answer?

“The community needs to engage in the difficult discussions about race, racial segregation, and racial disparities that we have been avoiding,” McCarty said. “We have never committed the proper resources, in neither money nor personnel, to realize the promises of the Fair Housing Act. Housing will only become more accessible and equitable to all, especially for people of color, if we are intentional about committing the resources necessary, over a sustained period of several decades, to address the racial disparities that prevail in the Miami Valley, as well as the United States as a whole.”

It’s a stain on us all when these disparities still exist.

Ray Marcano, a former Dayton Daily News editor and a lecturer at Wright State University, is serving as interim Ideas & Voices editor.

Source: dayton.com

Greystone adds industry veteran to its Portfolio Lending Group

Commercial mortgage provider Greystone has announced the addition of David Goodman to its portfolio lending group as managing director.

In this role, Goodwin will be responsible for underwriting large-balance bridge loans. The CRE lender, which reported a record loan volume of $16.6 billion in 2020, said it had seen a rise in demand for its short-term bridge lending and mezzanine finance offerings.

Goodwin returned to Greystone after time spent at Wells Fargo. Twenty years ago, he served as managing director for Greystone’s structured credit portfolio and played a key role in its agency license and origination activities. Goodwin will be based in New York and report to Steve Germano, who heads multifamily loan underwriting for Greystone’s portfolio lending group.

“Rejoining Greystone after so many years is gratifying, as the firm has accomplished so much in my time away and is now poised to truly elevate the multifamily finance landscape with such a strong suite of solutions,” Goodwin said. “It’s truly an exciting time for the multifamily sector, and Greystone’s Portfolio Lending platform will serve a critical role for owners and investors that are driving part of the economic recovery after the impact from the pandemic.”

“I am thrilled to welcome David back to Greystone, particularly to portfolio lending, which will undoubtedly benefit from his expertise gained through the last several real estate cycles in high-caliber roles,” said Mark Jarrell, head of Greystone’s Portfolio Lending Group. “I am excited for the anticipated growth of our bridge lending platform and the scale that David will enable us to meet this demand.”

Source: mpamag.com

Why Bank of America, US Bancorp, and Synovus Financial Rose More Than 13.7% in February – Motley Fool

What happened

Shares of Bank of America (NYSE:BAC), US Bancorp (NYSE:USB), and Synovus Financial (NYSE:SNV) rose 17.1%, 16.7%, and 13.7%, respectively, in February, according to data provided by S&P Global Market Intelligence. All three banks had released their fourth-quarter reports in late January, and there wasn’t much company-specific news during February. The big monthly move was therefore largely due to the same macroeconomic factors.

The gains were no less intriguing, however, and if the economic picture continues to improve along the same lines, more gains could be ahead for these rock-solid bank stocks.

Bank exterior with columns and the word bank on it.

Image source: Getty Images.

So what

The common thread among these three banks is their dependence on interest rates and the yield curve. While the biggest U.S. banks are largely diversified among lending, investment banking, sales and trading, and wealth management, Bank of America is perhaps the most sensitive to straight-up lending among the four largest U.S. banks.

US Bancorp and Synovus also make a large part of their revenue from commercial banking and lending, though each has different proportions of different types of loans, spread across consumer loans, business loans, and commercial real estate. Synovus has a higher proportion of potentially problematic commercial real estate loans than the others, which is perhaps why it increased less than the other two bank stocks.

Still, a large part of each of these banks’ revenue comes from loans and fee-based revenue linked to spending on things like credit cards and debit cards, making them sensitive to overall economic conditions. And the economic outlook for the U.S. improved greatly throughout February.

Most notably, it appears the economy is headed toward a faster reopening than previously thought. The Biden Administration is ahead of its goals to administer 100 million vaccine doses in its first 100 days; in fact, after the recent approval of the Johnson & Johnson (NYSE:JNJ) vaccine, the administration has moved the timetable for vaccinating all Americans to the end of May, from the original target date at the end of July.

In addition, it appears Congress is on track to pass the $1.9 trillion American Rescue Plan, which will inject much-needed stimulus into the economy while it’s still partly shut down, and should ensure a speedier recovery once things reopen.

A faster reopening with more government stimulus has recently led to an increase in long-term bond rates, a benchmark against which many banks peg their loan rates. Yet at the same time, the Federal Reserve has pledged to keep short-term interest rates at zero for the foreseeable future, until the economy is back to full employment and inflation gets back to its 2% goal.

Since banks “borrow short term” and “lend long term,” a steeper yield curve should lead to expanded net interest margins for lenders. Given the loan-heavy makeup of all three banks, it’s no wonder that these three stocks rose in February.

Now what

There are also reasons to think that the recent moves upward in these bank stocks could continue.

First, thanks to fiscal stimulus and increased unemployment benefits passed throughout 2020, bank loans have held up largely better than many had thought at the beginning of the pandemic. In response, the Federal Reserve announced in late December that it would begin allowing banks to repurchase their shares once again, should the banks meet certain benchmarks for soundness. More share repurchases should help boost bank earnings, as share repurchases increase per-share earnings going forward, given the same amount of net earnings.

Second, banks are generally value stocks that trade at lower earnings multiples compared with much of the market. Rising long-term interest rates also mean investors will have to discount future earnings more than they did when long-term rates were lower. That means investors may gravitate more toward cheaper stocks that make more profits today, but may have lower growth, relative to the high-growth but unprofitable tech stocks that dominated 2020. In fact, we’ve already seen this shift begin in recent weeks:

^NDXT Chart

^NDXT data by YCharts.

Despite their recent moves, it’s quite possible bank stocks will continue to outperform in 2021 as the economy gets back to normal. For loan-heavy, economically sensitive banks, the economic reopening combined with fiscal stimulus is a recipe for continued gains in 2021.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Source: fool.com

Why Black homeownership rates are 35% behind whites’

New analysis from personal finance company NerdWallet has found that while homeownership rose to 75% among white Americans in 2020, only 44% of Black Americans owned homes. This puts Black Americans at the lowest homeownership point of the minority groups studied by NerdWallet, behind Asian Americans (60% homeownership rate) and Hispanic Americans (49%).

While the reasons behind such a stark racial disparity are complex and highly intersectional, analysis from NerdWallet points to the ongoing structural legacy of redlining as a key reason Black homeownership rates have lagged for decades.

Redlining originated during the New Deal when new government institutions, including the Home Owners Loan Corporation (HOLC) and the FHA, were created to back up the then-suffering housing market. Those institutions rolled out some of the first government-insured mortgages at low rates to homeowners nearing foreclosure. In doing so, they assessed mortgage risk by neighbourhood. That assessment was explicitly racist. Predominantly white neighbourhoods were considered “less-risky” and marked on HOLC maps in green or blue. Areas with large numbers of Black, Jewish, and Asian families were typically shaded in red, giving rise to the term ‘redlining’ and meaning, for whole populations across America, getting a home loan became effectively impossible.

While title VIII of the Civil Rights Act of 1968 (commonly called the Fair Housing Act) prohibited housing discrimination on the basis of race, color, religion, or national origin, many analysts have noted that the long-term legacy of redlining has never been fully dismantled. Between inadequate enforcement and the simple fact that Black Americans were prevented from building generational wealth through homeownership at a time of rapid economic growth, the legacy of redlining appears to be alive and well in American homeownership rates today.

“Even though the redlining maps are no longer used by lenders, the remnants exist today,” said Linda Bell (pictured), NerdWallet spokesperson and the author of its recent analysis on redlining. “We see it in pair testing studies across the country where equally qualified people of different races are shown different properties in white neighborhoods. We see people of color discriminated against here, being shown fewer homes in these white neighborhoods. We’ve even seen racially restrictive covenants still contained in deeds. They’re no longer enforceable under the law, but they’re still in the deeds, preventing sales to Blacks and other minorities.

“The remnants of redlining still exist today, and it’s quite unfortunate.”

Read more: Motto Mortgage full-year results top expectations

Bell attributes the lasting legacy of this racist policy to a failure of enforcement on the part of federal and state governments. Between the Fair Housing Act, the Equal Credit Opportunity Act and the Community Reinvestment Act, the legal framework exists to more meaningfully dismantle the legacy of redlining and systemic racism in American housing. To Bell, these laws just need to be properly enforced.

Beyond enforcement, Bell believes legislation aimed at repairing the damage done during the redlining decades could make a meaningful impact as it might make homes currently unaffordable to many Black Americans with no family history of homeownership more accessible. From a lender’s perspective, Bell believes that offering smaller-dollar loans will improve the overall affordability picture for housing across America, while helping to lift up Black homeowners in particular. She emphasized, as well, that lenders and underwriters can start looking at metrics beyond credit score when assessing borrowers. While credit is obviously crucial in assessing a borrower, Bell believes that track records of rent and utility payments should be more meaningfully factored into assessments. 

Bell also explained what individual mortgage professionals can do to help rectify the difficult situation facing aspiring Black homeowners. Through outreach and education efforts, she said, mortgage professionals can make a meaningful impact. As MPA has reported in the past, families that have been excluded from the housing market on a generational basis lack the ability to inform their children about the mortgage process. By offering personal financial resources and education to more Black Americans, mortgage professionals can close the knowledge gap. Bell believes that for any mortgage professional, making that effort is both the right thing to do, and a means of growing your volume even further.

“It’s important for Black households because it can close the racial wealth gap,” Bell said. “But that gap holds back the growth of the economy and the housing market as a whole. We need to take ownership of this situation and ask how we can improve it, because it’s everybody’s responsibility to make homeownership accessible to all Americans.”

Source: mpamag.com

How Long Does Underwriting Take? Is ‘No News Good News’? – The Mortgage Reports

What to expect from the underwriting process

If you’re applying for a home purchase or refinance loan, you’ve probably heard the term ‘underwriting.’

Mortgage underwriting is the process through which your lender verifies your eligibility for a home loan. The underwriter also ensures your property meets the loan’s standards.

Underwriters are the final decision-makers as to whether or not your loan is approved. They follow a fairly strict protocol with little wiggle room. But delays can still happen at different stages in the process.

Here’s what to expect during mortgage underwriting, and what to do if your loan approval is taking longer than expected. 

Start your mortgage loan application today (Mar 6th, 2021)

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How long does underwriting take?

Mortgage lenders have different ‘turn times’ — the time it takes from your loan being submitted for underwriting review to the final decision.

The full mortgage loan process often takes between 30 and 45 days from underwriting to closing. But turn times can be impacted by a number of different factors, like:

  • Internal staffing policies
  • Loan application volume (how many mortgages a lender is processing at once)
  • The complexity of your loan profile (for example, someone with issues in their credit history might take longer to approve than someone with an ultra-clean credit report)

Depending on these factors, mortgage underwriting can take a day or two, or it can take weeks.

Under normal circumstances, initial underwriting approval happens within 72 hours of submitting your full loan file.

In extreme scenarios, this process could take as long as a month. However, it’s unlikely to take so long unless you have an exceptionally complicated loan file.

When you’re shopping for a mortgage, ask lenders how long it’s currently taking them to close on a home purchase or refinance (depending on your loan type).

In addition to shopping interest rates and closing costs, turn times should be one of the final factors in your ultimate choice of a lender.

Compare top mortgage lenders (Mar 6th, 2021)

What’s involved in the mortgage underwriting process?

Regardless of whether you’re buying or refinancing, the underwriting process is very similar.  

1. Credit approval

Underwriters look closely at your financial situation. They need to verify the information you gave on your mortgage application by checking it against your documentation.

Most importantly, underwriters will look at your:

  • Credit — Your credit scores and credit history are indicative of your likelihood to repay your mortgage loan
  • Income and employment — Typically, lenders will look at your last 24 months of employment. Employment gaps may require a letter of explanation. You’ll also need to provide documentation such as pay stubs, W2s, and tax returns, depending on how you get paid
  • Debt ratios — The lender will look at your monthly debts compared to your income to determine your debt-to-income ratio (DTI). This helps verify you can afford your future monthly mortgage payments. Different loan programs have different allowances for debt ratios
  • Appraisal — The appraisal will determine your new home’s fair market value. This a vital part of the underwriting process. Lenders need to see that the home is worth at least as much as the contracted sales price; if not, you might need to re-negotiate the purchase price, down payment, or the entire loan
  • Mortgage program — The underwriter will verify your eligibility for the type of loan you want (e.g. a conventional loan or FHA loan). Different mortgage programs have different requirements

Provided your finances check out and the home appraises at or above the purchase price, you’ll move on to the next step, which is often a ‘conditional approval.’

2. Conditional approval

After the underwriter reviews your file, they will typically issue a conditional approval.

Being conditionally approved is usually a good sign. It means the underwriter expects your loan will close. However, you may need to help satisfy at least one or more conditions before that can happen.

This typically involves providing additional information and documents.

Some underwriting conditions can be fairly straightforward and easy.

For example, the underwriter may require a letter of explanation for derogatory information on your credit report. Past bankruptcies, judgments, or even late debt payments can warrant letters of explanation.

Sometimes, just a letter of explanation or two is all that’s needed to issue final approval. These types of issues can be solved quickly.

Other times, mortgage conditions may be more involved and take more time.

For example, final approval could be delayed if your lender asks for:

  • Documentation to support large cash deposits in your bank account
  • Additional details from the appraiser to support the value of the home
  • Certain debts on your credit report may need to be paid off in order to qualify
  • Bank statements, sometimes covering 12 months, may be needed to show proof of making a particular payment
  • If you’re self-employed, a year-to-date profit and loss statement may be necessary

In these cases, the underwriting timeline depends on the complexity of the issue and how long it takes you and/or your financial institutions to provide these additional documents.

3. Final approval

Ideally, once the terms of your conditional approval have been met, the underwriter will issue final approval. This means you’re ‘clear to close.’

If you’re denied, ask your lender why, and what you can do to have the decision overturned.  

A mortgage can be denied if the terms of the conditional approval aren’t met, or if your financial information has changed since you were pre-approved.

For instance, if your credit score falls between your pre-approval and final underwriting, you may no longer qualify for the loan terms or mortgage rate you were initially offered.

In these situations, the borrower might have to re-apply for a different type of loan or back out and wait until their circumstances improve before applying again.

Is no news good news?

Oftentimes, not hearing the words “Clear to Close” within the time frame you anticipated can be concerning.

However, no news can just as easily mean your lender is experiencing an unusually high volume of loan applications.

The best way to ease your concerns is to stay in touch with your loan officer.

Ask how often you should expect to receive updates, and in what form. For instance, should you be checking your email? Will your lender communicate via text? Or is there an online portal or app you can check to follow your loan’s progress?

Consistent communication is key. Ideally, your lender will reach out right away if there are any issues in the underwriting process. But if you’ve been waiting longer than expected, take it upon yourself to reach out and find out what might be causing the delay.

Does underwriting take longer for refinance loans?

Currently, most lenders are taking longer to process refinance applications than home purchase loans.

Home buyers have hard deadlines they must meet, so they typically get first priority in the underwriting queue.

The average turn time for purchases, from underwriting to closing, is approximately 30 days. Refinances are averaging 45 days.

But keep in mind, closing times vary by lender. The underwriting process could move much faster if a lender’s underwriting team has lots of bandwidth, or slow to a crawl if they’re swamped with loan applications.

When you’re applying for loans, you can ask lenders about their current closing times to help evaluate which ones will be able to approve your home loan more quickly.

How to speed up the underwriting process

In the mortgage world, underwriters are the gatekeepers between you and your home loan.

Because they are an essential aspect of the mortgage approval process, you’ll want to be prepared to supply all of the necessary documentation that’s requested.

Being responsive and providing documentation in a timely manner will help limit underwriting delays.

Issues as simple as a missed signature can stretch out underwriting and cause closing delays. So be thorough when signing and reviewing your paperwork.

And keep your communication lines open. If underwriting is taking longer than expected, reach out to your loan officer to see what’s causing the delay and whether anything is needed from you to move the process along.

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Source: themortgagereports.com