Home lending in the time of corona: “Underwriting is really difficult right now”
Experts in a recent TRD Talks Live panel discuss the highs and lows of home financing during Covid-19
How do you underwrite a home mortgage when the economy is in flux and everyone is forced to stay indoors?
Alan Rosenbaum, CEO and founder of GuardHill Financial Corp.; Ace Watanasuparp, senior vice president and national director of strategic sales at Citizens Bank; and Mark Favaloro, president of the New York Association of Mortgage Brokers joined editor James Kleimann for a TRD Talks Live discussion Monday, where the panelists addressed the challenges — and bright spots — in securing a mortgage for homes in a time when most Americans cannot leave their house.
The experts on the panel noted that they have yet to see home valuations drop, but because governments around the country have mandated that nonessential workers stay home, it has become difficult to undertake some of the due diligence needed to close on mortgages.
Mortgage applications are still rolling in and rates are dropping, but employment situations are changing rapidly, Favaloro said. Scores of companies across the country have laid off millions of workers because of government-imposed closures aimed at preventing the spread of the coronavirus.
“Underwriting is really difficult right now because we want to make sure we’re providing people mortgage loans, but at the same time we have to make sure that people are employed,” Favaloro said.
There also are stop orders on some property appraisals — or sellers do not want appraisers in their homes — in some cases slowing down that portion of the lending process.
“We are at a little bit of a pause in some of those cases, where the appraisers can’t get to the property,” Favaloro said. “What we’ll do is we’ll continue to keep the documents up to date, continue to keep the file going, move in every direction that we can move in.”
Watanasuparp said in situations where sellers do not want appraisers entering their homes, Citizens Bank is allowing “desktop appraisal” or an exterior appraisal — but such steps could impact property values.
“The show must go on, so we will continue to do the appraisals,” he said.
And while realtors and home buyers also may be unable to physically access homes on the market, there is still “quite a lot of refinancing activity right now,” Favaloro said.
“At least we have that business going,” he said.
Closings also are happening remotely, Watanasuparp said, with bank attorneys and title companies still being able to close. Loans can too, but he noted that “it takes more of a village to get the deals done.”
In the New York City real estate world, e-closings have hit a hurdle, trying to secure the green light from co-op’s managing agents and co-op boards, who still have to sign off on refinancings remotely — which would put more money in people’s pockets, Rosenbaum said.
“I think a huge thing that we could all do … in the New York City area is [have] co-op board members, shareholders, real estate companies come together and make an easier process to get these rate-and-term refinances,” Rosenbaum said.
And while the number of deals getting done has slowed as people are forced to stay inside, there may be one benefit on the horizon.
“People have been cooped up for awhile,” Rosenbaum said. “They’re going to analyze their housing situation.”
“I think you’re going to see pent-up demand and I think you’re going to see a huge late spring buying market,” he added. “There’s going to be a lot of euphoria out here and I think things are going to get back to normal.”
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