As we continue to navigate the rapidly evolving COVID-19 situation, our first thought is for the safety and well-being of all individuals and businesses impacted by these difficult circumstances. As part of our mission to make home ownership simple transparent, we’re committed to providing the most accurate and up-to-date information available to everyone in our community. Here’s what you need to know this week.
- Economic hardship increases likelihood of default
- Lenders tighten standards to mitigate risk
- Title agents struggle to work around county office shutdowns
As unemployment spikes, lending standards tighten
6.65 million people applied for new jobless claims last week, causing lenders to anticipate a higher number of defaults if these economic conditions persist.
To mitigate the risk, many lenders are imposing stricter credit standards. Here’s a sample of what that looks like:
- Wells Fargo adjusted its minimum score requirement to 680 for all government loans (FHA, VA, and USDA)
- US Bank requires a 680 credit score for FHA, VA, and USDA loans, and 640 for conventional loans
- LoanDepot is requiring a 620 minimum FICO score for VA and FHA loans with a higher score (660+) for cash-out or streamline refinancing
- Flagstar is requiring a 640 score for both purchase transactions and non-cash out refinances
Even further, some lenders are preventing borrowers from locking their rates or postponing rate-lock until the loan is cleared to close. This effectively forces borrowers to proceed through the loan process without knowing their rate until days before closing.
Title agents struggle to keep closings on track during lockdown
Title agents, or escrow agents, impacted by Corona virus containment measures now have to work around county office shutdowns to keep closing procedures on track. They’ve turned to remote signing and recordation to smooth bumpy workflows. The American Land and Title Association reports that, as of April 6, only 11.8% of jurisdictions are open and operating as usual whereas 43.1% are operating in a modified state. Although title insurance companies have begun to offer gap insurance, challenges will remain for businesses not set up for all-digital transactions.
Collective Concepts’ title partners are exploring options for hybrid and remote online notarization options, and there are currently zero counties unable fund a loan due to office closures.
For more on homebuying, homeownership, and the entire process, call or message us any time.