My Mortgage Is Morphing to SOFR

 

The Secured Overnight Financing Rate (SOFR) is a comprehensive method of weighing the daily cost of borrowing cash overnight collateralized by Treasury securities. SOFR is the sum all trades in the Broad General Collateral Rate plus bilateral Treasury repurchase agreement (repo) transactions cleared through the Delivery-versus-Payment (DVP) service offered by the Fixed Income Clearing Corporation (FICC), which is filtered to remove a portion of transactions considered “specials”.   The SOFR is calculated as a volume-weighted median of transaction-level tri-party repo data collected from the Bank of New York Mellon as well as GCF Repo transaction data and data on bilateral Treasury repo transactions cleared through FICC's DVP service, which are obtained from DTCC Solutions LLC, an affiliate of the Depository Trust & Clearing Corporation. Each business day, the New York Fed publishes the SOFR on the New York Fed website at approximately 8:00 a.m. Eastern Standard Time .b For more information on the production of the SOFR, please see Additional Information about the Treasury Repo Reference Rates.

 

Secured Overnight Financing Rate (SOFR), is based on closed transactions in the Treasury repurchase (repo) market, where money trading happens daily. A repurchase agreement (RP) is a short-term loan where both parties (banks-lenders- financial corporations) agree to the sale and a future repurchase of assets within a specified contract period. The seller sells a Treasury bill or other government security with a promise to buy it back at a specific date and at a price that includes an interest payment. This is the market where investors offer borrowers overnight loans backed by their U.S. Treasury bond assets. It is a clearing house for cash where the rate of repayment is agreed upon. The SOFR is now considered the better way to view the American economic cash flow and rate of return on a daily basis that is averaged monthly.

COFI index became outdated as banks merged, fewer participants allowed for real market measure as the few big banks could control the index. The Federal Home Loan Bank of San Francisco will discontinue the three Eleventh District Weighted Average Cost of Funds indexes after the publication of the December 2021 COFI on January 31, 2022. The FHLB will no longer calculate the Semiannual Weighted Average Cost of Funds Indices for the 11th District and for California after the publication of the indices for the July-December 2021 period on February 15, 2022.  COFI index was used for most Adjustable Rate Mortgage loans prior to 2009. Lenders and servicers already began transitioning Adjustable Rate Mortgages to LIBOR some years past. Now we will see them roll to SOFR indexes.

London Inter-Bank Offered Rate – the index used to set many adjustable mortgage rates Due to interest rate manipulation stemming back to as early as 2003, LIBOR will be discontinued, on December 31, 2021. Approximately $350 trillion worth of financial contracts reference LIBOR globally. Lookup LIBOR scandal to see how Deutsche Bank (DB), Barclays (BCS), Citigroup (C), JPMorgan Chase (JPM), and the Royal Bank of Scotland (RBS) cooperated to control the index from 2003 to 2012.

SOFR has been selected by Fannie Mae and Freddie Mac its preferred alternate index for mortgage contracts sold to them starting next month.

SOFR ARMs eligible for sale to Freddie Mac and Fannie Mae will use an index based on a 30-day compounded average of SOFR (SOFR Index). The Federal Reserve Bank of New York (New York Fed) publishes 30-, 90-, and 180-day compound SOFR averages.

 

So you got this far into a dry discussion about why your mortgage index is changing to SOFR. New ARM home loans sold will start with the SOFR index. Older existing mortgage serviced or maintained by banks, mortgage lenders, entities etc. will transition to SOFR as the preferred index that measures the pulse of interest rates. Consumers won’t have much choice in the change, read your promissory note, typically the index can be rolled to like kind. The challenge now is for lenders and servicers operating systems to make changes in calculations in a time where the cost of servicing loans in forbearance and grey clouds may be difficult. As a consumer you can ask for a copy of your original promissory note and any ARM riders to check what you signed long ago.

If you need help just call me.

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Your Ducks in a Row

 It's been a difficult year. 

Maybe you took a forbearance or skipped a payment.

It's time to get the mortgage current or come up with a new plan.

There's no shame in this, we saw the crash of 2008 and we survived.

Let's chat about what options are available to lower your monthly or

increase your income.

Let's put 2020 behind us and smile that we overcame it all.

(949) 784 - 9699 

C G Caroline Gerardo Barbeau | Sun West Mortgage ...carolineg.swmcretail.com

Programas NO QM

 

Este otoño hablemos de cómo usted, como trabajador autónomo, puede obtener una hipoteca para la vivienda. Con un programa de extracto bancario, no es necesario que muestre los impuestos sobre la renta del IRS. Necesita una cuenta bancaria en la que deposite sus ingresos, una carta de su CPA, pago inicial o capital y buen crédito.

Hablemos de oportunidad

Forbearance News and Planning

Corona virus has been lurking in America for almost ten months now, Pfizer announced they have a vaccine that is ninety percent effective with is quite wonderful good news, but we still have not gone through final FDA approval, figured out how to safely deliver the thing in sub eighty below zero and manufacture enough for everyone in the United States. My guess is some vaccine will be in your CVS and Right Aid by July 2020. Meanwhile millions of employees in this country remain out of work. Millions of students who graduated college in June have not found gainful employment. Hundreds of thousands of people who owned a restaurant, a motel, a personal service or businesses considered human touching and not essential are file bankruptcy.

As the coronavirus continues to march on our lives many states issued shut-down orders for businesses. Forty million people filed for unemployment in May 2020  On March 27, Congress passed the CARES Act to offer economic relief. Unemployment benefits were increased to cover these devastating losses. Mortgage forbearance was offered to homeowners with mortgages backed or insured by the federal government, including Freddie Mac, Fannie Mae, VA and FHA. Courts were closed to evictions and foreclosures. Now that courts have mostly re-opened and the CARES Act funds shriveled up in Congress and the Senate stalemates, homeowners are not back to their normal income but no longer have the safety net of unemployment $2600 monthly income and forbearances may soon end.

FHFA has instituted a half a point pricing addition to all refinances in America after December first to try and cover the losses they expect Fannie Mae and Freddie Mac to suffer holding loans that made minimal or no payment for a year.

The CARES Act offered homeowners the opportunity to ask for forbearance from their mortgage servicer and suspend payments for up to twelve months. Approximately five million homeowners asked for forbearance since the program began. In September 2020, the number of households whose mortgage was in an active forbearance decreased.  

To request mortgage relief under the CARES Act there are two options:

1.    You call your loan servicer directly. Your servicer is the company that you send your mortgage payments to each month and the number should is on your payment coupon or search for them online, you know google it or ask siri.

2.    You write and mail a hardship letter affirming that you are enduring financial distress caused by COVID-19. This creates a written record that you are pursuing forbearance protection. Letters may be emailed, faxed, or physically mailed to your mortgage servicer.

Yes, if you have experienced job loss, reduced income, illness or other issues related to COVID-19 you could be eligible for forbearance. You will need to mention the actual hardship.

Yes, under the CARES Act, if you have a federally backed mortgage, you can request an extension of the forbearance for up to an additional 180 days after the twelve-month period. Your servicer contacts the owner/trustee of the note and comes up with a plan. Your monthly income is compared to the monthly mortgage payment to find a temporary solution until you get back to work or your health improves or the situation returns to “normal.”

If your servicer approves your request, you will be provided a forbearance agreement outlining the terms. During the forbearance period, the servicer cannot begin or continue with foreclosure proceedings. Default is put on hold during the twelve-month period. Every lender has different unique interpretations of the CARES Act. Your neighbor’s forbearance may not be at all like what you are offered.

Around month ten your servicer contacts you prior to the end of your forbearance plan to discuss options for bringing the mortgage current. However, you can contact them sooner to start this discussion and plan for the best option for you, based on your individual circumstances.

If you have returned to “normal” -say are back to the same job and have the financial capacity, the best option is to do a reinstatement or repayment plan. Reinstatement is the act of restoring a delinquent mortgage to current status. A reinstatement is when the borrower pays the regular monthly payments plus an additional agreed upon amount in repayment of the delinquency for a period of time. For example: make the old payment plus twenty percent until you get caught up. However, there might be additional options, including deferring missed payments until the end of the loan (payment deferral), payment relief options if needed (loan modification) or other alternatives such as short sale.

Home retention options may include payment deferral or a loan modification. If you recall in the crash of 2007-2008 it was not easy to get a modification. Proof of income to demonstrate you can make the payment and have “healed” the problems. If you have no income, or too low of an income to make some payment ongoing and you have equity, it may be most prudent to consider selling while markets in most of the United States have appreciated and held value.

While in forbearance you will not be able to close on another government loan. If you want to refinance most lenders will require you to bring the loan current and or certify you don’t plan to go into forbearance on the new lower rate mortgage.

Forbearances peaked the week ending April 4^th 2020. Those that stay the course on forbearances for twelve months, come off in April 2021, pending any additional government intervention. We do not know what corona virus has in store coming this winter. We might face further shut down.  No one knows what the future brings. Find ways to increase income, sell the boat and luxury items, don’t get divorced it adds double the expenses, and be kind to your neighbors who may be quietly suffering the burden of financial worry.

 

I will keep you all close to my heart.

Caroline Gerardo Barbeau

https://carolineg.swmcretail.com/

(949) 784-9699

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