Weekly questions and answers on mortgages and real estate: return of urban housing, end of tolerance


While people didn’t exactly flee cities in droves during the coronavirus pandemic, the movers certainly preferred to go to neighborhoods and suburbs that were a bit less densely populated.

Dan Holtz, co-CEO of Sovereign Lending Group, said as the pandemic is increasingly under control, cities are likely to experience growing popularity again.

Here’s what he said about monitoring real estate and mortgage trends as COVID eases. This conversation has been edited for length and clarity.

How do you think evolutionary trends will change with the rise of COVID vaccinations and things (hopefully) on their way back to normal?

With the pandemic and the closures, there was an exodus taking place. Lots of people were leaving and looking for bigger spaces.

On the mortgage side of things, we’re also seeing investors looking to travel to the San Francisco and Los Angeles areas to see if they can find something that makes more sense with the numbers. There seems to be a feeling that there is light at the end of the tunnel. It’s fun to live in the suburbs for some people who have larger families, but they lack the element of the big city and all the benefits that come with it as well.

How hard is it for people to refinance when their mortgages are forborne? What should these people do?

The pandemic has happened so quickly and so quickly and the government, rightly so, has put in place measures to stem the losses that could have happened.

One thing they learned from the last recession is that they made tolerance too restrictive. They did not obtain the desired level of participation

This time they opened it up a lot more. We have had people who did not have a drop in income, but they were worried about their jobs and as a precaution they abstained. They might not have needed to do it, but it was easy for them to do it.

Maybe a few months later they wanted to take advantage of these low interest rates, but they realized they couldn’t refinance because of the forbearance. Most lenders will want to see six payments on time before they can refinance. I had friends who abstained because they were being cautious about it, and then they called me and they had to wait three or four months before they could refinance.

Is the refinancing wave receding with rising rates?

It definitely is. When rates were low or there was high demand. Today, many mortgage companies are seeing lower demand rates. Instead of saving $ 200, $ 300 on their mortgage, they are now only saving $ 80 or $ 75.

On the refinancing side, there is certainly not as much demand as in November or October, but historically the rates are still fantastic. There are still a huge number of people who could benefit from refinancing, we just don’t have the huge wave that we had last year because usually the first to be right, and the rest need to. a little more encouragement. to help them lower their interest rates.

What are other key trends to watch out for right now?

The issue of tolerance has been a big topic, a lot of people are talking about what’s going to happen when that expires. We have a lot of forborne loans and most of them are gone. We don’t have a lot of files that are having problems.

The clients were good clients, and now that they are returning to work or seeing their confidence level back up with the pandemic diminishing, I don’t think that will be a big deal.

Plus, equity increases because it’s a good buying season. This makes it less likely that a customer will leave a home. They would look to find a solution with their lender or sell the house if they needed to.

How important is this increase in stocks in the market today?

90 percent of the homes in forborne have at least 10 percent equity there. We are seeing very strong upward trends in house prices as the lack of supply, low interest rates and appreciation continue to rise.

What does this mean for the owner?

They have more access to this capital if they need a nest egg or to repay their debts. It also makes the lender more confident. This gives the customer assurance that they have that money, even if they don’t have access to it. Maybe they’re hacking a house, renting a room, or getting an Accessory Living Unit (ADU). People will do this if they have equity and value in the house, they don’t if they don’t have equity and the asset has no value. It gives people the will to understand this stuff.

Nothing else?

We believe appreciation levels will continue to rise. Basically there just aren’t enough houses there. This puts pressure on home values, and with the housing shortage and rates unlikely to rise suddenly.

We are seeing continued upward trends in appreciation due to the housing shortage and we are seeing a lot of cities and states realizing that there is an affordability issue. This is why we are seeing more of these ADUs coming. It is also a quick and efficient way to help part of the population.

With more confidence in the owners, there is more confidence in the banks. We open our credit buckets. It will start to open up more because the confidence level is up with us, we are confident with the rise in the stock levels, and with the rate hike as well, these products become more beneficial for the banks because the margins are better. A year ago everyone was risk averse because everyone was scared they thought we were going to 2008 again.

We are going to have an increasing number of types of products for different owners. People who haven’t been able to buy because of credit issues, income issues, they will be able to enter the market, now we just have to know what they are going to buy?

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