⏱ THE MORTGAGE MINUTE

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The Olympics are in full swing, which means by now you’ve already told your nephew the story of how you totally would have gold medaled in [ swimming / basketball / soccer / gymnastics ] if it weren’t for that dang bum knee. 

Luckily, we are all part of the greatest post-athletic career of careers. 

Let’s stick the landing this week.

Market Sentiment & Economic Calendar

Similar to Tupac’s greatest album, all eyes are on earnings this week. Once these earnings come into focus, we could see some volatile movements in markets. Everyone’s watching these companies' performance as a signal of economic health. 

We anticipate earnings to be down, which creates recession signal warnings, leading to faster rate cuts.

• Monday, July 29: McDonald’s, Vivendi, Philips, and more.

• Tuesday, July 30: Starbucks, Rio Tinto, Public Storage, Corning, Gartner, Archer Daniels Midland, and many others.

• Wednesday, July 31: Meta Platforms (formerly Facebook), Qualcomm, General Electric, PayPal, and more.

• Thursday, August 1: Apple, Amazon, Booking Holdings, and other major companies.

• Friday, August 2: Notable releases include ExxonMobil and Chevron.

Results from last week’s survey:  

How many lenders are you approved to broker with?

1-2 — 31.25%

3-5 — 12.5%

6-8 — 18.75%

9-12 — 18.75%

13-16 — 6.25%

17+ — 12.5%

We found these results to be a bit surprising. Having options to quickly pivot when a unique scenario presents itself helps both you and your borrower. To have nearly fifty percent of respondents under six lenders means many aren’t leveraging the full power of what makes a broker unique. 

In the coming weeks, we hope to share additional lenders that have proved clutch when deals may have otherwise fallen through, as well as the means to get approved with them.

What to Watch This Week:

Wednesday, July 31 at 2:00 PM EST

FOMC Interest-rate Decision

Fed will likely hold rates at 5.25% - 5.5%. However, we will listen closely to Papa J. Powell's press conference at 2:30 pm EST to see if he hints at a September rate cut.  Fingers crossed!

Thursday, August 01 at 10:00 AM EST

ISM Manufacturing

We expect a continued trend of slow growth or slight contraction, with a reading likely close to the 50 mark. This will indicate whether the manufacturing sector is expanding or facing challenges, which can impact interest rate policy decisions.

Friday, August 02 at 8:30 AM EST

U.S. Unemployment Rate and Wages

We expect the unemployment rate to remain relatively stable, reflecting a steady labor market. Wage growth is anticipated to show modest increases, indicating whether workers’ paychecks are rising in response to inflation and labor market conditions.

Pipeline Save LOSS of the Week ☹️:

Many deals are like walking a tightrope. You and your team are juggling near disaster after near disaster, just trying to reach that finish line and cross to the other side. Sometimes we miss, and the whole thing comes crashing down.

That’s what happened on this week’s Pipeline Save, where an error before the deal even hit the LO’s desk caused the whole thing to unravel.

A lot of people don’t know this about Fannie Mae (FNMA), but when it comes to condo projects, Fannie maintains eligibility through their CPM system. If work is being done, then Fannie Mae will flag a “Pending Work Order” on a condo association. And as we all know, it’s all fun and games until a condo HOA gets involved.

Well, believe it or not, the HOA had no hand in this matter!

Here’s what happened:

Escrow was opened on a new condo purchase. The lender prior had inadvertently reported that there was a pending work order when there was none. Fannie moved the condo project to an “ineligible” status until confirmation was received that the work was completed via vendor confirmation or completion of inspection.

And as we all know, sometimes even a simple error correction can take weeks. In Fannie Mae’s case, 2 to 4 weeks just to review the error in question and update their system! The seller had a backup cash offer with no need to wait for all the hoops that needed to be jumped. The deal went from an easy, cookie-cutter purchase to no deal at all before the LO could blink.

So, here’s something to add to your checklist the next time you encounter a property with an HOA (and with the rapid growth of HOA’s perhaps it should be every time): 

Check the HOA’s eligibility at FNMA before your client’s offer goes out.

You will need a seller/servicer number before FNMA will speak with you. You should already have logins if you are a lender. 

If you are a broker, you’ll have to wait until your lender’s condo team verifies eligibility, but that means it’s on you as the broker to keep them on top of it from the start. 

So, even though this week resulted in a Pipeline Loss, we hope this little tidbit helps you turn one that might be lost into a save down the road.

Reminder to send in your pipeline saves of the week to be featured in future newsletters!

Loophole Spotlight

Other People’s Debt

You’ve heard of other people’s money, or OPM, right? Well, how about other people’s debt? The world of credit is a complicated and varied system, and oftentimes we find borrowers with debts that truly are not theirs.

Maybe it was a sibling that needed help getting that first car. Perhaps it was a business buying a commercial building that needed to be tied to your borrower for approval. 

At The Mortgage Minute, we’ve seen them all.

But when it comes to DTI calculations, you don’t always have to count other people’s debt (OPD). The rules, however, vary depending on an FHA or conventional loan, so let’s get a bit into the weeds on this one. 

If it is a mortgage, regardless of it being FHA or conventional, you will need the person who pays the mortgage to be on the Note and payments must be made on time by that person for at least 12 months.

If there are other, non-mortgage debts and if it is FHA, you will need the person who pays to be on the Note (just like above). 

If other debts and if it is conventional, you will need proof of 12 months paid by that other borrower.

If debts are paid by a business, for both FHA and conventional, you will need to make sure it’s paid from a business bank account, and you will need to make sure the debt is claimed as an expense on their business tax return. 

For example, if a business pays their auto loan from their business bank account, then you need to make sure that auto is listed as a business expense on their tax returns.

You’ll need canceled checks or bank statements (if paid directly online) to prove other debts have been consistently paid on time in the most recent 12 months.

Worst case scenario, when you’re on the phone with the underwriter and have those moments of awkward silence, you now have something to talk about. Underwriters LOVE loopholes that give them more paperwork to sift through. Trust us on this one. Even if they complain about the extra paperwork, they secretly love it.

A Deadline Looms, a Hero Emerges?

As the August 17th deadline for the banning of sharing offers of compensation from the MLS quickly approaches, some new platforms are emerging via commission-sharing websites.

This can be risky, as many lawyers are champing at the bit expecting there to be violations, but the new platforms claim that data is not being pulled from the MLS, and simply provide data that is user-generated.

These new sites may have found a potential workaround, but this will be murky territory for some time, so approach with caution.

Gen X Trades Out Grunge for Garages

Turns out, Gen X - otherwise known as the Forgotten Generation - might be having the last laugh, as they still continue to make up one of the largest portions of homebuyers in the current market.

Across the largest metro areas in the nation, 21.25% of mortgage offers last year went to Gen Xers, according to this recent ranking.

In Dallas, the average loan amount offered exceeded $354,000, while in Los Angeles, that average amount crossed a whopping $580,000. 

Maybe it’s time to dig out that old Nirvana album. 

Stay Connected

See! We told you! Five minutes or less!

Crazy how much we packed in there, right?

Thank you for being a part of The Mortgage Minute community. Stay tuned for next week’s insights and tips!