Author: Preferred Customer

Volume 17 Issue 9 September 2023

This Newsletter
Is brought to you by:

John Doe
Senior Loan Officer
Ajax Mortgage
111 Mortgage Way
Mortgagetown, MD, 11111
(301) 555-1212
(800) 555-5555
Ajaxmrtg.com

Specializing in
Residential Purchases
Residential Refinances
Commercial Properties
Home Equity Loans

The Disappearing Recession

For about a year now we have been talking about the predominant forecast of market analysts projecting a recession as early as the second quarter of this year. And for a year we have been stating emphatically that it is tough to have a recession when the job market is hot. Well, the job market may have cooled off a bit, but it is still strong. And the preliminary measure of the economy’s growth in the second quarter came in at 2.4%, which is stronger than the first quarter. No recession seems to be coming.
We also make a habit of not predicting the future. Thus, we are not saying there will not be a recession. But we will take note of the fact that these economic analysts are now saying that a soft landing is more likely. What is a soft landing? In economic terms, it means the economy will slow down, but not fall into negative growth territory. Or if we have negative growth during a quarter, it is only slightly negative.
A stronger economy is good news for everyone but the Federal Reserve. The Fed has been trying hard to stop the economy in its tracks. The stronger economy just gives the Fed more fuel to
either raise rates again or keep them at this “higher” level for a longer period of time.
If inflation continues to cool, we could have the best of both worlds – a strong economy and waning inflation. The July inflation numbers showed that things continue to move in the right direction, though the numbers were slightly higher than expected...q

Continued on Page 3

Did You Know…
Analysis of Google search data by Value Walk reveals that searches for HELOC skyrocketed 305% in the United States as of July 2023—the highest level in internet history for America. This represents an unprecedented increase in Americans looking to remove equity from their property, according to Google search data analysis.

Selected Interest Rates
August 24 2023
30 Year Mortgages———7.23%
2022 High (Nov 10)—–—–—7.08%
2022 Low (Jan 6)———–-3.22%
15 Year Mortgages———6.55%
10 Year Treasuries—–—–4.21%
Sources—Fed Reserve, Freddie Mac
Note: Average rates do not include
fees and points. Information is
provided for indicating trends only
and should not be used for
comparison purposes.
.

In This Issue

P2 The Home As A Piggy Bank! || P2 Dealing With a Home As Part Of a Divorce
P3 The Disappearing Recession || P4 America On The Move
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The Home As A Piggy Bank!

With home values remaining strong across the country, Americans are tapping into their home equity to pay for renovations and debts. With low inventory in most housing markets across the country, home prices have held firm after surging during the pandemic.
That means homeowners are now sitting on nearly $30 trillion in home equity, according to the St. Louis Federal Reserve. As a result, originations of Home Equity Lines of Credit (known as HELOCs) and home equity loans increased 50% in 2022 compared to two years earlier, according to the Mortgage Bankers Association. “Home renovations and remodeling drove demand for home equity products in 2022, with roughly two-thirds of borrowers citing it as a reason for applying for a home equity loan,” said Marina Walsh, MBA VP.
Other reasons that borrowers gave for taking out a HELOC or home equity loan included debt consolidation and emergency cash management. A HELOC is a revolving source of funds, kind of like a credit card, that can be tapped as needed. The lines of credit are secured against the value of a homeowner’s equity, which is the difference between how much the home is worth and how much is owed on the mortgage...q
Source: CNN

Dealing With a Home As...

Getting a divorce is typically a stressful and traumatizing time. Because of the financial implications, the experience can become even more stressful. There are a multitude of financial issues to deal with during a divorce, from making sure each party can afford to live on their own to the division of marital assets.
In this article, we will be dealing with just one important financial issue – the disposition of the couple’s home. Though this is not an isolated issue, it is a very significant concern and it will be connected to many other financial considerations that must be dealt with during a divorce. It is important to address these issues up-front and the majority of these concerns should be specified in the formal Settlement Agreement*. What follows is a discussion of some of the important factors which must be addressed with regard to a divorcing couple’s home.
What is the desired disposition of the home? There are basically three things that can be done with a home after a divorce: The home could be sold and the proceeds split, assuming that there is positive equity in the home;
One spouse could live in the home – either by gaining ownership or possibly a continuance of joint ownership;
In a less likely scenario, the home could be leased.
Selling the home/ The most straightforward scenario is to sell the home and divide the proceeds.
For example, in this case the mortgage is paid off and there is no worry of future joint liability. Generally, this process is cleaner than having one spouse buy out the other, however it should be noted that there are potential complications which can arise during the sale of a home and couples should be prepared to work on solving these issues when they arise during the sales process.
One very important consideration is the selection of a Realtor®. It is important to select a real estate agent that is used to dealing with divorce situations as the agent many times will work as an intermediary not only between the selling agent and the seller, but also between two spouses that are likely not to see eye-to-eye on every decision — from the sales price to improvements which must be made in order to make the home saleable.
Of course, if the sales price is below the amount of the mortgage, a condition known as negative equity, this makes the process much more complex because it is likely that the couple must bring money to settlement. There is also the possibility of accomplishing a short sale in which the bank accepts a lower mortgage payoff. As attractive as that scenario sounds, one must remember that a short sale will affect each spouse’s credit in the future, including their ability to purchase another home.
One spouse could be the purchaser. In another scenario, one spouse could purchase the home from the other. This could be accomplished by refinancing the current mortgage and removing the spouse from the loan and title to the property. If there is positive equity, a cash payment may be required from one spouse to the other. A “cash-out” refinance could provide the capital necessary by increasing the loan amount, or the assets may come from other marital assets.
Of course, the alternative of refinancing assumes that the spouse purchasing the home can afford and qualify for a new mortgage on their own – and the mortgage payment may rise if the loan amount is increased to generate cash during the refinance. Working with a mortgage and financial advisor, it is important to assess budgetary constraints as well as the limits to qualification. Speaking of qualifying, this brings up two issues:
The purchasing spouse might be using child support and/or alimony as income to help qualify (for the new loan) and it is important that the Separation Agreement is finalized (signed by both parties) and a precise history of these payments can be tracked. Typically, the lender will need to verify that at least six payments have been received by the lender in order to utilize the income to qualify.
In some situations, the purchasing spouse may not have enough credit in their name to qualify for a mortgage, even if the income is sufficient. Therefore, it is important that any divorcing spouse in this situation establish credit lines early in the separation/divorce process.
It should also be noted that the time line for closing on a refinance can range from 30 to 60 days. If there are qualification issues, this timeline could be extended significantly, for example, to allow for the tracking of child support and/or alimony payments. Therefore, the Separation Agreement might have to address the financial arrangements of a temporary living situation before the permanent solution is implemented.
Keeping the present mortgage. Perhaps the spouse remaining in the home can’t qualify for a new mortgage. In this case, the Separation Agreement must determine which party will be responsible for making the payments. The concern with this scenario is that the mortgage and ownership of the property officially must remain in both names. Thus, if the spouse is responsible for making the payments, but does not do so on a timely basis, this will adversely affect the credit of the other spouse. This is why it is important that all credit and bank accounts are clearly separated in a divorce. For example, if one spouse tries to purchase another home, they may find that debts run up by their ex-spouse may affect their own qualification.
Leasing a home. As indicated earlier, leasing the home is not a likely scenario. However, it may occur in a situation where the divorced couple leaves the area and the home is in a negative equity situation. Because refinancing is also not likely, joint ownership would continue and the spouses would have to become “joint” landlords, not a preferable situation in most divorce situations.
In summary, the disposition of a home during a divorce can be a very complex situation which requires careful consideration of the options and serious planning...q

“…It is important to select
a real estate agent that is used to dealing with divorce
situations…”

Page Two

…Part a Divorce

The
Disappearing Recession
Continued from Page 1

“....the job market may have cooled off a bit, but
it is still strong....”

©2023, All rights reserved
The Hershman Group www.originationpro.com
1-800-581-5678

Page Three

My goal is to
provide expert
advice and
direction for my clients with an overall goal of providing a real estate finance transaction that exceeds their
goals and
expectations.
— John e
Senior Loan
Officer

America On The Move

More than one-quarter of homebuyers nationwide are looking to move to a different metro area, reported Redfin. The figure increased from 23% a year ago and less than 20% before the pandemic.
The Redfin Housing Migration Report said a record share of homebuyers are relocating because high mortgage rates have made housing more expensive, which makes relatively affordable areas more attractive. But that doesn’t mean more homebuyers are looking to relocate, Redfin noted. In fact, the number of homebuyers moving to a new metro is down 7% from a year ago, the biggest decline on record.
Still, out-of-town moves are holding up better than in-town moves: The number of homebuyers looking to move within their current hometown is down a record 18%. “In other words, the overall homebuying pie has shrunk, but buyers moving to a new metro make up the biggest piece of that pie on record,” the report said. “Climate risks haven’t yet stopped many homebuyers from moving into areas that don’t have enough water and places that could eventually be underwater,” Redfin Chief Economist Daryl Fairweather said. “That’s because even though Sun Belt home prices soared during the pandemic, those metros remain a bargain for people relocating from expensive coastal cities.”...q
Source: Redfin

In This Issue:
The Disappearing Recession

Joe Customer
Joe’s Appliance Center
111 Center Way Drive
Suite 1005
Happyville, VA 20000

Address Correction Requested

John Doe
Senior Loan Officer
Ajax Mortgage
111 Mortgage Way
Mortgagetown, MD, 11111
(301) 555-1212
(800) 555-5555
Ajaxmrtg.com