Mortgage Misconceptions!

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Anthony Lamacchia: Good morning everyone. I’m here to do a weekly Crush It in Real Estate update. I’m going to talk to you about few different real estate updates, little bit about what’s going on in the market and then we have a special guest today. A little bit different. Today we are bringing on the number one mortgage broker in America by transaction and by sales volume, Mr. Shant Banosian of Guaranteed Rate Mortgage. He’ll be on with us in about 15 minutes. I just have some training tips and different things that I want to go over with you on what you can do to help your business and then we will jump into that interview with Shant.

Number one. Number one thing realtors need to be thinking about right now is projecting and exuding safety. Talking about helping people achieve their real estate goals still being able to help them achieve them but doing it in a safe manner. That’s super important. It has become particularly in the last two weeks, I’m hearing about it more. It has become part of the conversion process. If you are a realtor and you’re not telling your sellers precautions that you’re going to take, you are not going to get a listing. I shouldn’t say a listing, you may lose out on a listing. There might be some sellers that don’t care, but for everyone that isn’t concerned about COVID, there’s five that are very concerned.

You’ve got to be talking about how you’re going to have people come in their home with masks, with booties, with gloves. I don’t know whatever you decide I’m talking now to open audience. Obviously the Lamacchia Realtors know that we are requiring masks. We have distributed over 1,000 masks out to our agents. We’ve distributed booties and we’re working on several other personal protective equipment items but for the other realtors that are watching, you’ve got to make sure that you are talking about that to your potential sellers, to your buyer. See, it’s our job as realtors to educate the public, the people that are wanting to buy, wanting to sell that they can do that and be safe. Obviously, six, eight weeks ago, there was a period of time that I think even we were like, “Whoa, are we going to be able to do business here?” But we’ve proven that we can do business in this environment. We’ve adapted to doing business in this environment, but it’s very, very important that realtors do a good job and make sure that they are doing all they can to be safe.

Safety is part of the conversion process. It’s very, very important. We created a page on our website,, that’s, that will actually walk buyers and sellers through how you can have a safe home showing. We’ve also created other pages on our website, on our Lamacchia Realty page for various COVID-19 information resources, all different kinds of things that realtors can get blogs, et cetera. Lindsay, if you want to put them on the screen, why don’t we give them a quick little walk through our COVID-19 resources page. Thank you very much.

Well, that’s Massachusetts real estate updates. What I want to do, Lindsay, I can drive here, hang on. I’m going to go over here on the top of our website, you’ll see COVID-19 Real Estate resource page and there’s a whole bunch of different things in here. Blogs, how to win a bidding war. Well, how to win a bidding war is not necessarily related to COVID but we are seeing a lot of bidding wars because of the fact that there’s low inventory so people are competing, but look at this, there’s all kinds of information about remote notaries, what homeowners should know about forbearance, showing a home safely, fire inspections. Guys, don’t forget realtor friend. There’s another reminder for you. Make sure when your buyer and seller sign that addendum, when you are represented buyer, that addendum needs to be sent to the local fire department so they have a record that their home was sold, and they expect the inspection to be done later. There’s a whole bunch of other information in here.

I wanted to mention that to you all because that’s a resource for you to help you out and make your life of working in this corona COVID-19 environment substantially easier. I talked about safety. I talked about fire inspections. I also want to spend– and it’s not just safety and you being safe. You have to exude about safety. Talk about it. Let your clients see that you’re wearing a mask when you show up to their home. You don’t do that they’ll think, “How serious is this person?” If they say it’s okay to take it off, fine. There’s all different walks of life out there. I was telling a story last Friday. I was walking down the street with a mask someone walking towards me with a mask last Friday. No, Thursday night and the woman literally stopped in her tracks 10 feet before me, went 8, 10 feet away from me around, I’m like, “Wow lady, take it easy.”

Then I got invited to a friend of mine’s parents’ house because they made some food that I like. They say, “Come by pick up some food.” I go over to their house you would have thought COVID-19 didn’t exist. “Come in. Come in. You want to stay, you want to eat?” It’s just so funny how people view this so differently. Me and my brother had to give my dad a speech about wearing a mask when he goes out to estimate jobs because my dad just doesn’t really care. Don’t be fooled by those one or two people that don’t care so much into thinking, “Oh, everybody feels like that.” No, no, no. There’s far more people that are concerned than not concerned and if you as a realtor aren’t taking that serious, you’re costing yourself money so I wanted to mention that.

Also, I wanted to just show you a quick market update. I know many of you have been tuning in Monday as well so I’m going to jump over to our page right here. I’m going to share that screen again. Lindsay, I believe we’re in that right. Let me check here. We’re going to share that page in a second. I’m going to show it to you. If you look and see, there’s a bunch of links to other things but if you log on to and you scroll down, here’s homes listed per week in Massachusetts. Guys look at this data. It shows very, very clearly that the market did fall off a cliff in March, bumped on the bottom for a few weeks, and took back off. 2,048 homes listed for sale last week. That is the most since late March.

Then you go down even further, you look at home showings. Home showings are way up. The percentage of home showings have increased dramatically. This is how many homes are for sale in Massachusetts every Saturday? If you take a look at this, it’s staying pretty full. Now some people see that and they think, “Well, what do you mean, Anthony? You said people are listing their homes, but there’s no more on the market? Yes, that is because of the Pac-Man effect. Remember the game Pac-Man? I always say this. When I was a kid we’d go to a restaurant with my dad, I’d be dying to play Pac-Man. All those dots, every time new dots came in the screen Pac-Man ate them. Same thing. That is the effect of supply and demand in real estate. The demand is so high the supply is not increasing that much.

Here’s pending homes for sale. Look at that last week, 1991. If you go across here, that’s the highest in one week since the middle of March so it’s coming back the whole thing is turning back on again. That’s sold stats. This is percentage of properties in a given week that sell and you can see 17% of homes went under contract last week. That’s the highest since the middle of March. Average prices for April if anybody tells you, “Oh, prices are going to collapse this in that,” look, they’re going to stay right there. See, the crazy thing about this situation is the virus is going to be the savior for housing prices. That’s what’s bizarre. Yes, housing activity, home sales, those are decreasing, but the average price is really not going to get impacted because the only way that that could happen is we’d have to have a major surplus in inventory. We don’t have that.

That’s why you can see pricing is about the same. There’s the April pricing, and don’t be fooled into thinking, “Oh, went down 7,000 from March.” No, that’s not how it works. It just depends on what sales are out there because that’s an average. Take a look at this information. I thought this was great. Our marketing team did this. March 2019 to March 2020, look at the differences. Homes listed down 10%, pending down 10%. You get down to April, down 51%, down 48%. You measure only May 1st to May 10, homes listed is down 50%. Homes pending down 40, you measure May 1st to May 17th, look at it, it’s easing because a lot of inventory is coming on. It’s very clear that the activity in the market is coming back in a very strong manner. and we are well on our road to adjusting back to having a strong market. There’s no doubt that the demand is there, and it’s there substantially.

What I’d like to do in about a minute, I’m just going to go over a couple of more reminders for everybody. Then I’m going to bring Shant Banosian on in about a minute or two and he’s going to get started. He’s going to talk about all things mortgages. I’ll say this, if you’ve got a question for me on anything I just went over, please post it right now. I could answer it. If you’ve got mortgage questions start posting those right now. We’ll have Shant go over those at the end but just comment right there on Facebook. If you’re connected with StreamYard then it’ll flow your question right through and put it right up on the screen.

Remember when I said my friends, the biggest tip of the week, “Let’s be safe and let’s project about safety. Talk about how we’re being safe.” It’s super important to do that. Let’s face it, guys, let’s be safe. Many of you probably saw the video I did over the weekend, I was pretty damn frustrated because I heard of the story of a buyer’s agent and a buyer promising to wear a mask when they went to see a listing and they didn’t do it and they got caught on camera. Now we have a pissed off seller and one of our realtors and our company that we’re dealing with and I’ve heard of this happen in other companies.

It is very important that us realtors work together and cooperate together and abide by each other’s rules and guidelines that we have at listings because there’s no time for realtors to be working at odds, we should be working together. I said that from the beginning. Way back six weeks ago, I was saying “Work with the buyer’s agent, work with the listing agent. Get an extension, keep deals together”, we talked about all those things and everybody agreed. Now, it’s getting busy again and people are forgetting that they agreed to work together. Let’s make sure that realtors are working together. Let’s all put our best foot forward and do that.

I don’t see any questions. Let me just take a peek here. I don’t see any questions. Awesome. What I’m going to do now without any further ado is bring out the man himself, Mr. Shant Banosian of Guaranteed Rate mortgage, who last year, I think, did what, Shant, two loans or three?

Shant Banosian: About 10.

Shant: We had a good year last year. Hopefully, this one’s even better.

Anthony: I know. Look, you do a great job with our realtors and I appreciate that. I wanted to get a mortgage update for everyone and I thought– You know how I roll, buddy, it’s “I go big or I go home.” I’m not just bringing in anybody, I got to bring the best.

Shant: I appreciate it.

Anthony: I want to talk to you about a whole bunch of things. First and foremost, people say to me at cookouts, “Hey, how’s the market? How’s the market?” What is everybody say to you, “How is rates?”

Shant: Yes. Things are awesome right now. I know you’re a numbers guy so I came prepared with some numbers. Here’s what’s amazing, right? Purchase applications, right up five weeks in a row from the mortgage side of things. Purchase applications, I couldn’t believe it, actually. They’re only down 1.5% versus this time last year. Think about that, we’re in a pandemic. State of emergency and mortgage purchase applications are up five weeks in a row and barely different than they were last year.

Now, refinance applications, up 160% versus this time last year. Rates were actually started coming down a little bit. At one point, a couple of weeks ago, they were up 200% versus the last year. Interest rates are at their all-time low levels in most mortgage categories, not in all of them but we’re seeing stuff in the low 3s, high 2s, it’s unbelievable right now what’s going on.

Obviously, we’ve got some challenges but I know I got a lot of realtors on this call, I think it’s pretty amazing what the industry has been able to do over the last two months considering how much activity is going on. I just want to obviously say, we’re thankful and grateful for all the work you guys have put in to keep this housing market going because obviously, we have a health issue that’s turned into an economic issue. We’re trying to do everything we can to prevent it from being a housing issue. I think all the realtors out there are doing a really great job so thanks for all your efforts and hard work.

Anthony: You know what? Thanks to you and I have to say, all the mortgage brokers out there, all the attorneys out there. When this first came out, one of the first blogs we wrote is on the coronavirus. We called it The Coronavirus Log Jam and how we expected a tremendous amount of delays in closing and yes, we saw more but I have to say, the delays did not turn out to be what we expected. That is a function of people like you, mortgage brokers getting the money to the table in time to close. Attorneys, getting the parties together, making closings happen and it’s been great. I have one question, did you say purchase applications year to date are up 1.5%?

Shant: No, they’re down 1.5% from this time last year. It down only one and 1.5% from this time last year. [crosstalk] Just based on the up to date information.

Anthony: That tells me in four weeks, that’ll be up.

Shant: Yes. I think personally, our economy was humming right along up until this, eight weeks ago. Our economy is really strong and lots of pent up demand due to inventory issues that we’ve had for years. It just shows that like, I can’t believe how many bidding wars are still happening, how properties are flying off the shelves, obviously, part of it is do inventories even tighter.

Especially specifically here right in Boston, the surrounding suburbs and up central Mass, western Mass, our economy’s really good. Obviously, certain segments have been impacted worse than others but things are still going. I expect when things open back up and we go, I think you’re going to see it become even– You’re right, 100%. I do think when we look at the numbers a month from now, the purchase application is going to be up year over year.

Anthony: The economy was obviously on fire like we’ve never seen. That drove a lot of the demand. Obviously, the demand decreased when this started but it’s still there. The fact that we have multiple offers on properties, literally, we can’t go a day without having multiple offers on listings. It shows that people are still out there.

Shant: It’s a testament to like– Here’s what I would say and this regards to like you were saying, the attorneys, the real estate agents, mortgage people all working together. I think that’s been the silver lining in this in terms like everybody’s come together to figure things out. We’ve been getting ready for this without even realizing it for years and years and years.

The technology’s a lot us between use of video, digital docu signing, there’s a lot more we can do now without actually being in person with each other and even in the properties than we could have years ago. I think this would have been a different story in real estate, had it been even 10 or 15 years ago. I think technologies allowed us to keep things moving. I haven’t seen a client in person in two months but even before that, it’s not like we were seeing a lot of people in person. I think technologies really allow this to keep moving along which has been super impressive to see.

Anthony: Yes. You know what? You’re absolutely right about that. It’s a great point. If this happened 20 years ago, we would not have been able to continue at the rate that we have as an industry. Okay, I’m glad to hear about that. Obviously, with the economy hurting, can we bet that rates will probably stay pretty low, at least throughout the year?

Shant: Yes. Here’s what’s going on. The Fed has stepped up in a massive way, and I think they’re right to step up. I watch 60 Minutes this week, the Fed chairman was on and he echoed some of the comments he made a couple of weeks ago at the last Fed meeting. They’re ready to act and act big and they already have. At the height of financial crisis 10 years ago or 12 years ago at this point, the Fed was buying about $40 billion a month in mortgage-backed securities as a part of their quantitative easing program to keep the markets liquid.

This month, they’re going to buy over a hundred billion dollars in mortgage-backed securities. Think about that. They’re doing everything they need to do to keep the market moving. Now, all those purchases of mortgage-backed securities are in government-insured loans. Fannie Mae, Freddie Mac, FHA, those type of things and those are keeping rates low. When you’re seeing the lowest rates out there, those are for the government conforming limits of– In and around Boston, 510 or 690,000 and less, those are the best rates.

Conventional mortgage rates are actually better than jumbo rates right now which has not been the case the last couple of years. It’s because Fannie Mae and Freddie Mac are doing what they need to do to keep things moving along and keep the housing market humming and keep home buyers saving money and keeping them active and obviously, in financing activities as well.

Anthony: Yes, that makes sense. The refire activity, that was part of why I thought there would be such a log jam but you guys have made it happen. When I say you guys, I mean all mortgage brokers, all attorneys, it’s been fascinating and I’m impressed by it. Talk to me about the jumbo market because we have had people– It’s kind of funny. You and I talked about this a lot over the phone or over the weeks but there’s been some misconceptions out there, both in the jumbo space, call it high end and then FHA which tends to be on the lower end.

Let’s start with jumbo because everybody wants to get an update on what’s going on there.

Shant: Yes, absolutely. There’s a lot of accurate information and misinformation. What’s going on in the mortgage business is lenders and banks are making logical decisions on terms of how they can manage risk. We have to take a step back. What happened over the last couple of years is guidelines eased up, home prices were going up, default was low so higher loan to values came back.

Lower FICO score requirements were allowable because there’s confidence in the housing market. Now there’s a little bit more unemployment, reduction in income, all that has happened due to corona. You’re starting to see lenders just re-evaluate risk. Now, why they’re doing that is because they want to keep the housing market strong and they want to keep their employees employed and they want to make sure that we recover from this just like we did in 2008.

What we’re seeing is higher FICO score requirements, we’re seeing some reductions in downpayment. With jumbo especially, you’ve seen a lot of the FICO score requirements before we were lending down to 680, that’s jumped up to 700 credit score so they’ve raised that a little bit. The biggest change you’ve seen in the jumbo market is that a lot of the programs with less than 20% down have been eliminated. They want more skin in the game.

Jumbo lending is alive and well. You’re seeing really good borrowers qualify for great loans with low rates but you’re seeing some of the stuff that came back like 5% down, 10% down, 15% down. That’s definitely harder to get than it was. Now what you’re also seeing two. That change first and then the second change that happened is we used to call it like a piggyback loan ways to avoid– To get jumbo loans with lower down payments. Where you do a first mortgage in a home equity line. Home equity lines are also starting to get harder to obtain as well. In my opinion the biggest impact in Jumbo has been you just need a bigger down payment than you did eight weeks ago.

Anthony: Okay.  I was just thinking when you said that about the down payment. It’s only been, correct me if I’m wrong-

Shant: A couple years.

Anthony: A couple years that they’ve allowed below 20%.

Shant: Yes, there was ways around it. There’s always been ways around it. There’s still ways around it today. Is there banks out there that are still doing or mortgage companies that are still doing 15% down or 10% down? Absolutely. There’s just a whole lot less of them than before. Before it was kind of wide raging product that was available whereas now it’s like select few that are still want to take that risk. Every single mortgage company and bank has reevaluated everything over the last couple weeks.

Two months ago, 3% of Americans were unemployed. Lowest unemployment ever. Today it’s almost 20%. Even some of the people that are employed have taken– The people that are still remained employed some of them are greatly reduced their income. We don’t know what’s going to happen. It’s leveled off and actually some great news was that of the 30 million people that are unemployed or claimed unemployment, 6 million of them have already found new work. That’s super positive.

However, and like I said, the government’s done a great job with mortgage without securities that I also think they did a great job with the PPP program in terms of like helping small businesses. But that money is generally good for like two and a half, three months. Nobody knows what’s going to happen when that money runs out and is there going to be a bigger spike in unemployment. Until there’s a vaccine or a cure or a combination of all those things I think lenders don’t know how it’s going to impact things and so they’re just being a little bit more conservative. They’re not– We’re lending, we’re lending at levels at like– We’re having our biggest production months ever this month.

Anthony:  never ever.

Shant: Yes, we’re doing. Everybody’s doing more business than they ever have, production numbers, but it is some of the riskier guidelines lower down payments, lower FICO scores, higher debt ratios, those have been pulled back. It’s not because they don’t want to help everybody, it’s they want to protect the housing market. They want default to remain low, they want qualified borrowers to say. They want to avoid short sales and foreclosures. Again, they don’t want this to turn into a housing crisis. It’s smart if you step back and look at it. They’re not looking to take away housing from anybody but they just want to lend to the people that should be in the market, and should the market change a little bit and prices come back they don’t want that to turn into a wave of short sales and foreclosures and all that kind of stuff.

Anthony: Okay. Bottom line, biggest thing you’re seeing with Jumbo is the less than 20% brought down products have mostly gone away.

Shant: Correct. 100% accurate.

Anthony: I’m just making my notes. Now, let’s move on to FHA. That’s the other end of the spectrum. I was fascinated, Shant, and you and I spoke about- [crosstalk]

Shant: I was frustrated.

Anthony: Yes, I bet. I’m one of these people that I lived back in– I make myself sound old but back in ’08, 9, 10, 11 if we didn’t have FHA, we would– If people think the housing market was bad, they have no idea how bad it would have been without FHA. I couldn’t believe it April 10, April 15 people were like, “FHA is going away.” I’m like, “What are you talking about? No, it’s not.” Can you clarify that?

Shant: Yes, no there was a lot of misinformation out there a couple weeks ago, a couple months ago at this point so kind of blurred together. FHA has not changed their guidelines. The FHA is a mortgage insurer, they’re not a lender, we’re the lenders. FHA insurance products through banks and mortgage companies. They have not come out and made it harder to use their products at all. Not one change. They haven’t raised FICO scores, they haven’t changed their guidelines, any of that stuff. What’s that?

Anthony: FHA themselves.

Shant: FHA themselves, right? The lenders that offer FHA loans, those are riskier loans. Like in my opinion I offer a client an FHA loan when I can’t offer them a conventional loan or something. I evaluate based on their credit, their income, their assets. I evaluate what they’re looking to do and I put them in the best product for them. Typically if I can put them in something outside of FHA I do because FHA has got higher PMI, up front PMI, all that kind of stuff.

FHA allows for lower FICO score requirements. They allow for the highest debt to income ratio standards in the industry. They don’t require any– Like you can get your entire down payment gifted. You don’t need to have reserves in most of their products. Those loans are riskier. They defaulted higher rates. Certain lenders that offer FHA products they instituted their own overlays because they didn’t want to start defaulting at higher rates with their FHA products.

There was some issues with the secondary market in terms of what they would buy and how they were pricing out their FHA loans but I saw lenders putting out information like FHA is not lending, FHA is making changes, FHA this and FHA that and that’s inaccurate. One of the big biggest pieces of advice that I gave to people that were looking for FHA loans is– Or even loan officers for that matter was just because your company is not offering FHA doesn’t mean the product doesn’t exist. If FHA is a big source to your business, it sounds like you should go work somewhere else. Because there’s plenty of lenders out there that are still doing business and same thing to consumers or realtors for that matter. If your lender is not doing FHA anymore that doesn’t mean that FHA stopped lending. That just means that the company that they work at it doesn’t want to do that business for right now and you should find some more loan officers in your arsenal to be able to service your clients.

Anthony: That makes perfect sense and I appreciate you explaining that. When you were just talking about FHA, I was listening thinking what a great product.

Shant: It’s awesome.

Anthony: We all know everybody’s been through it. I remember when I started my business, when you did out of college. Everybody goes through a period of time in life that money is a little tighter, right?

Shant: 100%.

Anthony: It is gold for those people but to your point that’s why the default possibility is higher and that’s why some lenders added some overlays on top of things, but that doesn’t mean that FHA itself has made some crazy changes.

Shant: I couldn’t agree more. Like I said they made this business decisions for what was good for them. The FHA product is an amazing product. We utilize it every single day. And they do promote homeownership. They want to help people, again, like you said lower FICO scores, higher debt ratio, lower down payment availability. It is a pathway to homeownership to somebody that otherwise would not qualify, but those loans tend to go bad first when the economy changes and the economy has changed. If somebody’s got three and a half percent down and all of a sudden they’re not employed and they can’t make their mortgage payments and home values go down in certain segments, there’s risk there.

It’s a great product. I would say FHA is also we’re doing more FHA business than probably were even before. Same thing, I think FHA is– They haven’t changed anything so I think they’re going to help us through this again and continue to support housing. But a lot of the information out there was inaccurate and some of the segments of FHA that most lenders have stopped doing like the really low FICO scores, stuff in the 500s and whatnot, we weren’t doing a ton of that stuff before anyway.

A lot of homeowners out there if somebody’s got a 580 FICO score not a ton of those people are actually looking to buy homes right now. A lot of times the advice we’re giving those people is clean things up before you take on a huge step like homeownership because you know it’s a big responsibility. You want to make sure you’re prepared and that’s what we’re doing with those clients that maybe didn’t qualify anymore. We’re just spending a little bit more time with them and giving them really great advice about what they can do to improve their credit, their savings, their budgeting, all that kind of stuff. We’re not saying no permanently. We’re just saying no right now but we can set you up in a three or six month plan.

Anthony: Well, and one thing you’ve always done well for our clients over the years is you operate like I do. You will tell a client sometimes, “Hey, you know what I don’t think you should buy right now. You’re not ready. Could I get you through? Yes, but you need to save a little money, you need to fix your credit, you need to–” That’s frankly the right way to treat people so I appreciate you saying that. I’m getting text messages from management saying there’s tons of questions and I have to leave time. Let’s go over one more topic Shant and then why don’t we take some questions a little bit?

Appraisals. There were appraisers that were scared to go out and conduct appraisals two months ago and it seems that that’s backed up. I did hear some stories, “Oh, they didn’t go in so they didn’t realize how nice the home was. They under appraised it.” I heard some stories here, there but from what I can tell it didn’t seem to turn into some systemic issue. Could you shed some light on that and what you’ve seen and what you expect moving forward?

Shant: Yes, absolutely. I think that was another thing that almost changed overnight. It was really nice to see. We’re doing desktop appraisals on anything that’s not a new construction or new conversion for the most part. When I say we, I mean our industry. That that was the verdict that came down from Fannie Mae and Freddie Mac and FHA. Generally speaking when they speak, everybody else fallows in terms of their guidelines. Now I’m not speaking for everybody-

Shant: Yes. We’re doing desktop appraisals, drive by appraisals. As a real estate agent, especially as a listing agent you got to realize that now it does create room for errors. The appraiser is not going to go into the property, a lot of times they’re not going into the neighborhood, they’re not driving by anything. They’re sitting in their office, safe at home and healthy and they’re doing the work based on what the information they can gather. Now, the advice I’ve been giving all the agents I work with, if you’re a listing agent listing a home, your MLS sheet should be perfect. Your picture should be all the money, you should have all the details. If there’s a nice finished basement or a pool or a finished attic, you got to mention that ’cause the appraiser is not going to know unless– If it’s not on an MLS and it’s not your listing, they’re not going to know ’cause they’re not going inside the property.

We have seen some stuff where bedroom counts have been off, important information is missing and the appraisers not factoring because they don’t know ’cause they’re not going to the property so it’s really important. A lot of times the appraisers are still calling– If I was a listing agent I would request from the lender to still– Even if the desktop appraisal, have the appraiser call the listing agent just to make sure. I’ve seen some listing agents just give virtual tours of the properties, using FaceTime or even just have the clients FaceTime or Skype, or have them walk through just anything you can do, just to make sure that the appraiser has the real deal in terms of what the story is with the house and all the little added benefits and whatnot.

Anthony: That’s interesting. Those are some good tips that people could be using and I appreciate you saying that, but do you agree with me that it’s not some systemic issue?

Shant: I don’t think it’s systemic issue. I just think there’s little tiny things we can do just to make a little bit better, but if the appraisers got– You guys know, the appraiser is in and out of that house usually in 15 or 20 minutes, sometimes even faster. They’re there to take pictures and they’re there to measure a lot of times but a lot of times you’ve got the pictures online on MLS and if your measurements are spot on, what can they really miss? At that point they’re looking for safety hazards and issues and stuff like that. I know you have questions, there is one point that I know I got a lot of good realtors on there, and not to take over, but I just wanted to make one point, I think it’s really important for all realtors to listen to.

Anthony: Go ahead.

Shant: What’s changed in our business again, is what lenders are doing is that they’re watching out for unemployment, they’re concerned about unemployment and loss of job and all that kind of stuff. We’ve changed all our processes across the industry. Two months ago, we used to update, if we get a pay stub and a bank statement would pretty much be good they wouldn’t expire, but now because people are losing their jobs and they’re losing income, those things can change, they change based on the decisions that we’re going to make from a lending perspective. I think it’s really, really important especially on the buy-side of things to push out your mortgage contingency dates, as close to the closing date as possible, push them out a little bit further. It’s a tip.

I know that there’s negotiating and bidding wars and all that kind of stuff, but if your client gets a clear to close or gets an approval but prior to closing either has a loss in income or reduction in income it’s going to change what they qualify for. I think it’s really, really important to protect your buyers, and make sure they understand the importance of a mortgage contingency. We came from a market where everything was about fast and speed and eliminate risk and wave this and wave that and just because it’ so hard to get an offer accepted but now there’s some inherent risk of things changing because of unemployment.

I think it’s really, really important to understand that if your client doesn’t have a job the day of closing or the day before closing even if they did before they could potentially lose– Not only are they lose their job now, losing the house and potentially losing their deposit. I think as real estate professionals, I think it’s really important to have those conversations with them ’cause it’s the reality of the situation that we’re living in right now.

Anthony: That makes perfect sense and the example that you gave of God forbid someone loses their job or salaries and wages get reduced which has been– I’ve heard of more companies decreasing wages than I’ve ever heard in a 60 day period of my life, and employees have been like, “Yes, no problem”, in many companies because they get it, but for you doing the mortgage, that’s presents a huge problem.

Shant: Well, things have changed and the other thing that everybody should be doing right now, obviously, there’s less listing and we both have agreed that we think there’s going to be a massive tidal wave of listings coming out and activity over the course of next couple weeks and months, every single person that’s been pre-approved over the last three or four months should get re pre-approved.

What I mean by that is just update their information ’cause certain products don’t exist, some of their information is changed, income might be different, their assets might be different, and the guidelines are different and some guidelines. Some mortgage products haven’t changed at all, and others have. If you’re at home and looking for something to do and you want to buy a house this year, I think updating your pre-approval letter right now is more important than ever, and it’s an easy touchpoint as a real estate agent, just let your clients know, “Hey, just checking in, things have changed.” Take 10 minutes, let your loan officer know the price range you’re still looking in, the downtime you’re looking to make, and just re update your credit income and assets, you just get a new letter dated today because if I was a listing agent, I wouldn’t accept a pre-approval letter that was dated two months ago at this point, that might as well but two years ago.

If I was a buyer agent, I’d want to know that my clients that I’m going to start showing houses to and make offers to are still qualified because so much has changed and the clients don’t know how much has changed because they’re busy with life, they’re distracted with all the other stuff craziness that’s going on, they don’t know what’s going on the mortgage market or the housing market. That’s not their job. Our job is to do that stuff.

Anthony: Well, thank you for explaining that Shant. You know what I just made a note on buddy is I want you to come on to the Lamacchia– Remember, right now you’re on Crush It in Real Estate. This is 95% a realtor audience, 98% of realtor audience but I think I want to have you on the Lamacchia Realty page at some point in a couple of weeks to talk about these things ’cause I want buyers to hear directly from you and the different-

Shant: I’d love it.

Anthony: -tips and I think that’d be great. Lindsay, why don’t we start posting some questions and allowing Shant to answer them. Let’s keep it to questions, not just comments ’cause we need to be able to filter through them or we’re going to be here for two hours. Go ahead, Shant, what’s this? Can you see the question, Shant?

Shant: Yes. “Please talk about commitment letters? Thank you! Shant rocks!” Thank you. I’m not sure, we’re still– I don’t really understand the question in terms of regarding the commitment letter.

Anthony: Well, Shant, let’s do this. Obviously, realtor crowd they know people get a commitment letter close to closing and the you get the thing close, but let’s talk about pre-commitments for a second and let’s talk about– I don’t know if it has to be pre-commitments, but let’s make sure everybody understands that even if a lending institution gives a commitment letter, if someone loses their job between time of commitment letter and time of closing, or their wages get cut 25% or even 10% that could be the end of you guys doing the mortgage. Can you elaborate on that a little bit?

Shant: 100%. What we’ve instituted, again across the industry, what lenders are doing right now is– Before two months ago, as long as you re verified employment 10 to 15 days prior to closing, you just did a verbal to confirm that they’re still employed, that was good. Now they want that 24 or 48 hours before closing. Before if you gave a pay stub two months ago, that was good. Now we need your most recent pay stub and your most recent bank statement as close to closing as possible. We know what that’s going to be just based on the dates and those things. We’re really making sure that the application was submitted at the beginning is the application that you’re actually closing on based on your income credit and asset data. That was part of the reason I gave my tip is just ’cause you have a commitment letter even in the world before, you could add a commitment letter a year ago if everything changed afterwards, it’s null and void.

It says it right there on the commitment letter that this is assuming that your information doesn’t change. A commitment letter is still accurate, it’s great in the sense that it’s saying the bank saying we’ve signed off on everything, but it’s that in between period between that and closing that makes me a little bit nervous because things are changing fast. I have listing agents call me all the time, and asked me a question which is impossible for me to answer, they say, “This pre-approval is great, can you assure me that your clients not at risk of losing their job over the course of the next 30 days, 60 days.” My whole thing is like, “How the heck am I supposed to know, I”m not the CEO of the company, I’m not in their HR department. I don’t know what the plans of the company are?”

No matter what you do, and I think we make we make all these chances like in our minds, we create paradigms that like, this industry is good or that industry is good, and this person is safe and that– We don’t know, right? There’s no way to know. Anyways, bottom line, lenders are still issuing commitment letters. We’ve stopped our pre-commitment program and we stopped it intentionally. We’re still doing pre-approvals obviously. We stopped our pre-commitment program because what it was was because there’s so much change happening so fast, it was giving buyers a sense of confidence that maybe they were almost like confidence or cockiness, whatever you want to call it, that made everything and all of a sudden they’ve got that they’re like, “I’m committed.”

Even if we tell them, “Hey, this means this.” But if anything changes, they forgot the whole if anything changes, and people don’t realize the massive job loss that could be or reduction in income or reduction in assets. We forget that two months ago, the stock market came down 30%, everybody’s 401Ks, investment accounts, all that stuff changed and we evaluate all that stuff as a part of the decision that we make. Things are just changing so fast between income and assets, and eventually that will impact credit that we didn’t want people out there running around with commitment letters because we just felt like it was just given them confidence they probably shouldn’t be taken advantage of right now or utilizing.

Anthony: Awesome. Go ahead.

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Shant: Brad, question, “Does an FHA appraisal stick to a property?” The answer is yes. FHA logs the appraisal to the case number and the case number is tied to a property. Usually it sticks to the property for six months. If an appraisal is done on an FHA loan and we can utilize that if they switch lenders or whatnot. If it’s a new client though the new client usually gets a new appraisal on that case, the old case number, it goes null and void. If it’s for the same borrower, then it can move from lender to lender. If it’s for a new borrower, what’s supposed to happen is that previous case number is supposed to be closed out in a new case number for the new borrower’s supposed to be issued.

Anthony: Awesome. Frank McManus. “What is the impact on the closing time for lenders? Is it still 30 days or is it being pushed out longer?”

Shant: Surprisingly, and again, that was one of the things I was nervous about across the industry when this first happened. I was like, how are we going to maintain the turn times? But everybody just made it happen between appraisers, lenders, attorneys, inspectors we’re not finding that it’s taken longer. Honestly, the other part was that for a while, when this first started, it was really hard to get some of the documents because clients went from being in the office to at home where they didn’t have access to some of their information or employers were hard to track down, some banks were closed.

Now everybody’s utilized technology and new efficiencies to make it normal. The bottom line is that we’re still closing loans just as fast as we were closing them before. It’s because everybody adapted really quickly, lenders and all the other people associated. Because keep in mind, it’s not just up to the lender to close on time. There’s a lot of data that we need in other parties that we need to help us get there, but I haven’t noticed any changes in terms of closing time, not just with us but others as well.

Anthony:  didn’t come to the extent that we thought. Deb O’Hanlon, “Are you finding that the attorneys have figured out closings with social distancing smoothly?” I think you can answer that quickly.

Shant: I think they’ve done a great job with that. I think they’re taking safety precautions and being really mindful of the clients and I’ve seen closings happen in parking lots and picnic benches in offices, everything. I think the attorneys are doing a phenomenal job there.

Anthony: Thank you. Next one, Lindsey.

Shant: “Do buyers need to higher FICO scores to be approved for loans?” In some instances, yes. I would say across the board, Fannie Mae, Freddie Mac VA FHA, they haven’t changed their FICO score requirements really at all. On jumbo loans, we have seen a lot of the lenders in the jumbo space increase FICO score requirements lend to higher credit worthy borrowers only because those loans are not insured by the government. If that loan goes bad, then it’s on the bank to take the losses. Short answer, jumbo loans do require higher FICO scores. Most of the government insured loans haven’t made any FICO score requirement changes for the most part at all.

Anthony: Bill Wendell, “Surveys that revealed that four out of five home buyers have put their search on hold and 20% not coming back because of what’s happened.” Well, it’s not really a Shant question but I would say that 20% is right. I said that back six weeks ago that we noticed about 20 or 25% less demand. The good news for the market is demand was so high. I said this from day one back in the middle of March. Demand was so high even if it went down 20%, no one would really notice. If you get 12 offers on a home, instead of 15, nobody cries about that. You get 10 instead of 15, no one really notices. Hopefully that sheds light there, but we have other mortgage questions?

Adam Briggs. “Folks that are in forbearance at the moment will be out of forbearance hopefully soon.” Yes, go ahead. You know that one. That’s a good question.

Shant: Interesting. Good question, Adam. Right now, as of a few days ago, about 9% of all homeowners in the US had entered forbearance which is a huge number, right? There was a lot of misconceptions around that. That was actually probably the most difficult topic that’s happened over the last 60 days with misconceptions from a mortgage standpoint. The good news is that Fannie and Freddie actually, I just read an article this morning that said that as soon as somebody comes out of forbearance they are eligible to get a new mortgage and refi as long as they’ve stayed current on their mortgage. The misconception was last week, we were unclear if that was going to be the case, they were saying that somebody had to be out of forbearance for up to 12 months before they’d be eligible to refinance or buy. They just clarified that within the last 24 hours.

Now, again, like I said, when Fannie and Freddie come up with stuff everybody tends to follow. Now it’s up to all the lenders to start interpreting that information and make their own decisions. The good news is that with the last day we got really positive information that the minute you step out of forbearance, make your payments stay on time, not fall behind. You’re good to go. Just like it never happened.

Anthony: That’s great news and that’ll really help. Now, let me ask you a question. Is it a certain amount of months, like instead of a year, is it okay? You got to make one payment or two?

Shant: That’s the way I read it. Again, it’s one payment as long as you’re current and not in forbearance. To me that means one. That doesn’t mean that companies aren’t going to put in their own rules over and above that, but that’s what’s coming from Fannie and Freddie right now.

Anthony: I didn’t even know do that. You just updated me, buddy, thank you. Katherine “What options, if any, are there for homeowners who want to refinance, but have had to go on unemployment temporarily?” That’s a frustrating situation to be in. Go ahead, Shant.

Shant: Unfortunately, that that’s tough. There isn’t really– If that person that’s unemployed right now is the only borrower, then it’s really– We have to wait for them to go back to being employed because we’re required to show an ability to repay the mortgage. It’s on us to show that we know that there’s income that’s going to make the payment. If somebody is probably unemployed or furloughed, and that’s the only source of income, then we need to wait for them to get a new job or go back to work. A lot of cases we’ve been lucky where they have a spouse or significant other or another co-borrower that can jump in and either co-sign or be an additional borrowing, and we can make it work with one income versus two. It’s really been– I hate saying no to somebody they can save money, but if they don’t have income, we can’t do it right now.

Anthony: Of course. “Can you quickly explain why someone would go do 10% down conventional compared to 10% down FHA?”

Shant: Great question, Stephen. With the conventional loans on 10% down deal, the PMI is going to be generally speaking significantly cheaper than in the DFHA PMI. Then it goes away. It can go away without refinancing, whereas FHA not only do you have monthly PMI, that in a lot of cases is permanent, but there’s also an upfront PMI that you find instance loan that’s a significant amount of money. In my opinion, generally, a 10% down conventional deal is going to be financially a better deal for them, both short term and long-term than a 10% down FHA deal.

Anthony: Makes sense. Let’s take one more question and then we can wrap it up. Go ahead. Susan. “I read that if a homeowner requests a forbearance, even if they went ahead and paid their mortgage on time, they cannot get approved by Fannie or Freddie for year.” You just answered that.

Shant: Yes. That was a misconception or maybe it wasn’t even a misconception. There wasn’t any guidance on it, but they just cleared that up with my last answer about 24 hours ago.

Anthony: That’s great news. We’re going to get our website updated to reflect that as well. Lindsey, we can take one more. Adam, “Doesn’t that only show next year taxes aren’t done yet for this year?” Well, taxes is a interesting question that some people are dealing with. A lot of people’s taxes are delayed now. How does that impact people when they’re getting a mortgage, Shant?

Shant: The question was if you file for unemployment. I’m not sure if you’re a rep, I guess asking the question regarding an employed borrower by a company or a self employed person. What lenders are doing is they’re looking into that. They call your employer to find out if you’re currently employed, we asked for updated pay stubs. If we see unemployment benefits coming into your bank accounts or your employer or the consumer lets us know we found out right away. Is that the question?

Anthony: No. Well, that helps, but what I want to know is people’s tax returns. There’s always some people, particularly business owners, the tax returns tend to get delayed. Well, now there’s masses of people that their taxes are getting delayed. How big of an impact is that? Or is it not as bad as I think?

Shant: The government is not requiring– They moved the filing deadline back from April 15th. We can’t require you to file your tax return at all. We would then go off of your 2017 or 18 numbers on your tax return. If you’re self employed, with a lot of self employed borrowers now we’re looking for profit and loss statements year to date, profit and loss for last year to show your business is still viable. In a lot of cases for self employed borrowers, they’re also looking at your most recent business bank statements to see that revenue is still coming in because the tax return might not be a good review of what’s going on currently.

What they’re really– From a mortgage lending and banking industry, the people that are actually worried about the mostare small business owners, because those are the people that have been hit the hardest with this. They want to make sure that revenue is still coming into your business, which is typically not something that we looked at before, but times have changed drastically. Again, it’s our responsibility to make sure we’re putting you into a good situation and that you can afford your mortgage payment, not skirt around the guidelines and figure out a way to get you the house. We want to make sure we’re being responsible and put you in a good spot. That way default or foreclosure short sale doesn’t happen.

We’re digging deeper across the industry than we did a few months ago. You know what, as much as that leads to sometimes things that we don’t want to see or uncover, it’s also the responsible thing to do right now, because it’s all about doing the right thing by consumers, even if they think if you want to do something, it doesn’t necessarily mean that you should be ding something, I guess. I always tell my clients and my friends and my referral partners, like I only get paid when I say yes, right? I don’t get paid– When I say, no, that means we’re not doing it alone, but we got to do the right thing.

Anthony: That makes sense. Listen, Shant, I appreciate you coming on, answering these questions, doing the presentation that you did. I’m already game-planning in my head, how we’re going to have you on the Lamacchia Realty page in a couple of weeks because I think we could put together a great segment for our buyers to hear directly.

Shant: This was awesome. | appreciate it and I appreciate all you guys that have been on here to listen again. Thank you, guys. It’s been really impressive to see what’s happened in our industry. Kudos to all you guys. It’s been great watching everybody come together and help all these homeowners.

Anthony: Thank you, sir. I’ll see you soon. Take care.

Shant: Bye.

Anthony: Bye. Bye, everyone.