The mortgage refinancing business grew more than 200% in Pennsylvania, New Jersey and Delaware in 2020 during the pandemic, with growth rates for black and low and moderate and moderate homeowners ranging from 85% to 178%. The refinancing growth rate for black and youth and moderate homeowners was about 50-75% of the growth rate for borrowers as a whole.
In an environment of low interest rates, refinancing mortgages is important during an economic downturn caused by a pandemic because they can reduce a homeowner’s monthly mortgage payment, cash flow and even reduce the risk of default.
For example, if you had a 30-year fixed rate mortgage, $ 100,000 for three years at an interest rate of 6.5% and you refinanced at a rate of 5%, you would save $ 114 a month or about $ 29,000 on for life. credit, according to Freddie Mac Mortgage. Thanks to this savings, closing costs can be paid in advance or included in your monthly mortgage payment.
In January 2021, interest rates on a 30-year fixed-rate loan fell to an all-time low of 2.65% and then rose again, making it an ideal time to refinance. Several district bankers have said they expect 2022 to be a big year for the refinancing business.
A report released by the Federal Reserve on Tuesday explored disparities in race and income in refinancing the mortgage business in the three states.
According to the report, black and low-income homeowners were denied refinancing mortgages at a higher rate than applicants in general.
For black homeowners, the most common reason for refusing to refinance a mortgage was a bad credit history, the report said. For low- and moderate-income homeowners, the most common reason for denial was a high debt-to-income ratio.
“These findings explain government policy talk about the role of mortgage refinancing and affordability in supporting homeowners in economically challenging times,” said Kyle Demaria, author of the Federal Reserve’s report, in a statement.
“We recognize that there is a significant gap between whites, non-Hispanics, and minority households in the U.S.,” said Ernest Campbell, manager of Wells Fargo Mortgage Market in Pennsylvania, Delaware and Maryland. “Decades of systemic inequalities in the housing sector have created these gaps in housing ownership and are causing unrest in the housing loan industry, even when it comes to refinancing.”
For the past 10 years, Campbell said: “We are very proud that Wells Fargo has issued more home loans to black and Hispanic consumers than any other bank, and is one of the major lenders overall.”
In fact, he said, Christy Fercho, head of Wells Fargo’s home lending department and chairman of the Mortgage Bankers Association, recently wrote an article for American Banker and National Mortgage News that covered some of the key issues and what the industry is doing to address them.
For example, Fercho said in her article that Wells Fargo is working hard to close these gaps and create a more inclusive housing system through targeted advocacy efforts and new proposals, including:
The Community HMC Wells Fargo program provides a mortgage presence in bank branches to advocate with the community through seminars, workshops and other prominent events to meet with clients where they are on their financial path to housing.
In 2021, we launched the Wells Fargo Dream.Plan.Home.SM mortgage, which offers a down payment of 3% and supports the approval of those who have unconventional credit.
Mara. Plan. Home.SM’s closure loan – currently available in eight markets – can provide up to $ 5,000 in one-time closure costs, making it easier for low- and middle-income families to purchase housing.
The NeighborhoodLIFT Initial Payment Assistance Program provides a zero-paying, non-mandatory, endorsement loan that home buyers eligible in selected markets can use for down payment and mortgage closing costs.
During the pandemic, which began in 2019, many homeowners lost their jobs and wages the following year, damaging their financial security, the report said. But not all households have experienced the same financial shock from the pandemic because some professions and industries have suffered more than others, such as the restaurant business.
For example, employment rates have fallen most for black and Hispanic men and women in Pennsylvania, New Jersey and Delaware, especially those with a high school diploma or less, the report said.
According to the U.S. Census, about 12% of homeowners said they did not have time to pay their mortgages, and about 15% said they did not think they would be able to pay their mortgage next month.
These rates were higher for blacks, Hispanics, and low-income homeowners.
During the pandemic, the federal government provided assistance to homeowners with financial problems. For example, the Coronavirus Assistance, Assistance, and Economic Security Act (CARES) has established recommendations that homeowners with a federal mortgage should have the right to defer redemption payments. The law also introduced a moratorium on foreclosures with federal mortgages that lasted until July 2021.