The Federal Housing Administration has been busy making changes, and the changing equity environment presents an embarrassment of riches for borrowers. In the September edition of 3Points, president and CEO of United Wholesale Mortgage Mat Ishbia, explains these changes and what it means for originators.
- Changes to cash-out refinance requirements
Refinances have been keeping originators busy all summer, and cash-out refinances are a great option for a lot of borrowers. Originators should note, however, that some cash-out requirements have changed. FHA cash-out requirements were lowered from 85% to 80% LTV, while VA cash-out requirements were lowered from 100% to 90% LTV for their traditional pools. (It is possible to go to 100% with custom pools, but the price adjustment makes it less advantageous to go that route.) Not only does this limit the equity that certain borrowers can access, but it also signifies that lenders are tightening up on refis across the board.
Now that individual condo units can get approved for FHA loans without the entire development having to be approved, the door to homeownership could literally open for thousands of borrowers. It improves the credit availability for buyers who may not have other options and could reduce the stiff competition for limited units. This means that those clients who thought they couldn’t afford a condo might be mistaken, and originators who aren’t up to date on the new guidelines could be missing out on business.
- Equity reaches an all-time high
Home values have done very well in recent years, and tappable home equity has reached an all-time high of $6.3 trillion. Ishbia says that with 45 million homeowners able to access up to 80% of the equity in their home, and 49% of those borrowers currently holding rates higher than 4.25%, there’s plenty of easy ways for originators to help their clients improve their financial situation, and also gain new clients. “Stay in front of your past clients. Make sure you’re talking to them, because almost everybody—I won’t say everybody, but almost everybody—could benefit from a refinance right now. It’s a big opportunity.”