Late Payments & Lending: Understanding Your Options After Financial Hardship

Mortgage rates have stabilized around 6.5-6.625% as markets await the September Fed meeting where rate cuts are highly anticipated. Financial experts believe the Federal Reserve has waited too long to implement rate cuts and will need to be aggressive with multiple cuts through year-end to catch up.

• Friendly Reminder - Fed rate cuts don't directly dictate mortgage rates but heavily influence the bond market which affects mortgage pricing

Did You Know...
• Late mortgage payments don't automatically disqualify you from future home purchases
• With 12 months of on-time payments after delinquency, many borrowers regain qualification options
• Even one 30-day or 60-day late payment in the last 12 months doesn't prevent mortgage approval
• "Extenuating circumstances" like job loss can justify past late payments when applying for new mortgages
• Manual underwriting can help borrowers who don't receive automated approval
• Resources exist for homeowners experiencing financial hardship whether they want to move or stay put

If you're experiencing financial hardship or have questions about qualifying for a mortgage despite past payment issues, reach out to us. We can help develop a roadmap to homeownership regardless of your current situation.

Chapters

• 0:00 Welcome Back and Market Update
• 2:03 Fed Interest Rate Cut Expectations
• 4:52 Late Mortgage Payments Explained
• 7:46 Overcoming Financial Hardship When Buying
• 11:31 Removing Blinders and Finding Solutions
• 14:44 Closing Thoughts and Resources

Transcript

Speaker 1: 0:37

welcome to the monday market update. It is august 18th and nikki, welcome back yes, thank you.

Speaker 2: 0:45

Thank you. It's been quite the road trip. So we took a two and a half week long road trip up and down the coast of california and into some national parks and stuff. So it was very adventurous, it was awesome. So, yeah, well, I wanted to just say hello again to everyone. I'm back in the office and excited to be live again on the Monday update.

Speaker 2: 1:06

From an interest rate standpoint, we are seeing things kind of hold steady right now into that mid 6.5% to 6.625% range from a 30-year fixed conventional mortgage, which has been really nice because we haven't experienced a ton of volatility and the bond market seems to be holding and waiting for the highly anticipated Fed meeting in September. So right now, like I said last week, everyone is kind of just waiting and seeing from a Fed meeting standpoint to see when and if the Fed is going to cut that interest rate in September. There's a high probability that they will. Most of the people who are voting members of the Fed have basically said yeah, we're ready for a cut and it's probably been too long, and so the feeling is is that Powell has kind of waited too long for economic factors to play into wanting to drop this interest rate. And if you remember back, if you've been watching these updates for a while, three, four months ago I was talking about the economic factors that Powell wanted to see happen before he would be willing to drop the interest rate. And what has been happening since, you know, probably five months ago up until now, is that you know the economy's met these factors, They've met these, you know determinations from a Powell standpoint and, for whatever reason, he'll keep adding on another factor not wanting to drop these interest rates. So the feeling out there is is that they are way too late on dropping these interest rates. So now they're going to have to be super aggressive, starting in September through the end of the year with these rate drops, the idea being that you know, when the Fed drops an interest rate by a quarter percent, they have to drop it by minimally that amount. If they do drop it by a quarter percent, usually it's for certain reasons, but when they start to have to see a half to three quarters throughout the end of the year in order for them to do the catch-up that the economists want to see and that everybody is talking about, where they feel that rate needs to be, there's no signs of recession from that standpoint, which is a good thing, and so it should work itself out. I know we've been talking about this for 24 months when are these rate drops going to drop? When are these interest rates going to drop? And, mind you, last year at this time we were having this discussion of when are we going to get out of the sevens. Well, now we're solidly out of the sevens and so we're hoping that by the end of the year we'll be into the fives.

Speaker 2: 3:36

From an interest rate standpoint, on the mortgage side and I know I say this every time reminder Fed interest rate does not equal mortgage interest rate, but it does heavily influence what the bond market does. Therefore, generally speaking, when the Fed interest rate lowers, mortgage interest rates lower as well. So that's kind of the idea is to kind of just to do a wait and see approach to it. But from a purely mortgage standpoint, I want to talk a little bit about people who currently own homes and have late mortgage payments and how that affects their ability, or doesn't affect their ability, to purchase a home, their next move up home or their next home. So I had a client recently who you know I've been talking to for quite some time. She had some late mortgage payments in 2024, but she has, you know, since we've been talking, she has made on-time mortgage payments for the last 12 months.

Speaker 2: 4:32

So one of the requirements when we talk about having late mortgage payments is how many times were you 30 days late, how many times were you 60 days late and how many times were you beyond 60 days late? If you go, you know, 90 to 120 days late on your mortgage, the mortgage companies most likely is going to start foreclosure proceedings. In other words, they're going to contact you. They're going to say, hey, we either need to modify your mortgage or we need to, you know, start foreclosure proceedings. So if you do get behind that far so when we think about, on the other side, you qualifying for a mortgage loan at any moment to move from one house to another, if you have 90 or 120 day lates on your mortgage, that part is going to be about how much time has passed since that happened. If you have 30 or 60 day lates, there are certain rules and regulations of how many you can have in order to qualify for the next home. So I'll give you an example If in the last 12 months, you've had zero mortgage late payments.

Speaker 2: 5:28

That's a really good thing because what usually happens is your credit score is able to start recovering from having those prior late mortgage payments and so we're going to start to see credit scores and usually like the low 600s to 640 range and then that gives you options. If you have one 30-day late in the last 12 months, you still have options to purchase a home. You still have options to get a mortgage. If you have one 60-day late in the last 12 months, you again have opportunity to still get a mortgage. It's when you have more than that or your credit score is not sufficient enough to get an automated approval through the automated underwriting systems. That's when we start to have to look at a longer time frame. So, for example, let's say you have been making on-time mortgage payments and your credit score is a 640 and we run it through automated underwriting and everything is. You know it's approved. We don't have to look deeper into that mortgage or into that loan scenario or into your credit report to qualify you for another mortgage.

Speaker 2: 6:30

If you've been going on and maybe you have one late payment in the last 12 months or one 60-day late payment in the last 12 months and we can't get an underwriter approval automatically because of your credit score and because of those mortgage leads, then we have to do what's called a manual downgrade to your file, In other words, we have to send it and the underwriter physically has to look at it to make a decision on a loan. So when that happens, that timeline of what we look at from a late mortgage payment extends from 12 months to 24 months. Does that make sense? So we have to look at the entire 24 months of your payment history, not just 12. And so it really becomes opportunity for you to look with a lender to see if you can get that automated approval, if you can, and then just keep doing what you're doing until you find the house.

Speaker 2: 7:18

So, needless to say, my whole point is is just because you've had late mortgage payments in the past, and just because you might've had one or two late mortgage payments even in the past 12 months, that doesn't automatically disqualify you from getting a mortgage. There's just some things that we need to look at and some circumstances that could be surrounding why you had late mortgage payments in order to be able to approve the loan. So there is opportunity like even, let's just say, you had a job loss and therefore you went 90 days late on your mortgage. That doesn't necessarily mean you can't qualify for another mortgage. That is what's called an extenuating circumstance.

Speaker 2: 7:54

That something happened in your life that was not of your own doing In other words, you didn't get fired from your job but you got laid off is an example. That is a financial burden that is beyond your control. That prevented you from being able to make those on-time payments. So there are certain instances, you know, where we can I don't want to say ignore the late payments, but justify the late payments in order to be able to make that loan approvable. So just FYI for you, if you do have some financial hardship or you know, it doesn't mean you can't ever move. It doesn't mean you have to. You know, never get a mortgage again. It literally just means that we have to run with different options and work out a plan to get you approved and do an approved state again.

Speaker 1: 8:38

Yeah, no, and I think that's timely because I don't know if you have the stats, but it's a real thing and a lot of people are struggling. So I love that you bring that up today, because there might be people feeling you know that they're stuck or that they can't do anything. So I love that you brought that up.

Speaker 2: 8:58

Yeah, absolutely. You're not stuck. You can do it. And you are correct, there's a lot more people having financial hardship right now than we've ever seen, and so it's just good to know that if there is something that you need to do, you need to relocate, you need to move, you need to. You know your family's growing. Whatever those circumstances are that you feel like you need to, you know get into a different house, mortgage is still an option for you.

Speaker 1: 9:19

Yeah, absolutely, and I was just thinking something as you were talking, but I think that it goes along the lines of you know when I would meet a lot of first-time homebuyers and this was back when I first got into real estate and we met with our buyers face-to-face before we ever worked with them and did an actual buyer consultation and they just didn't know what they didn't know. You know, I had more, I would say probably at least 60% of the first-time homebuyers that came and met with me. I get them over to lender and there'd be in their house within two to three months and their whole perspective or the perception of the process was like oh, I just probably am like a year out or at least nine months, I just have so much I have to do, and they just didn't understand the process or how this works or what options you have as an amazing mortgage officer and lender that you are. I mean, there's just so many different tools, resources, programs, and that's why I stay in my lane and I give them to you.

Speaker 1: 10:23

I know enough to be dangerous, but I don't stay up. You know my CE's in real estate. Yours is in all these programs and tools and resources and it feels like and you can speak to this or correct me if I'm wrong but it feels like, within your industry specifically, programs are coming out and we're watching what's happening and then they're responding not necessarily kind of reacting, but responding to what's happening so that it can be more fluid and we can get more people the help and the resources and the programs they need to make this happen.

Speaker 2: 10:55

Exactly, and that's exactly what happens a lot of times is that we'll have, like, for example, we'll have an economic event, like you know lack of inventory, for example. How can we get more people qualified to purchase homes in the idea that, you know, if there's a bigger pool of buyers, then there's going to be a bigger pool of sellers? Or if there's sellers that changed the rules that Fannie and Freddie you know allowed in order to make it more available for homeowners to be able to, you know, move around and to try to stimulate that housing market. Because, if you really remember, I've said it before the housing and shelter is the main component of the CPI and the Consumer Price Index.

Speaker 2: 12:00

So when there isn't a lot moving around, from a housing standpoint, that CPI number looks really bad. And so what can we do to get more people in homes? Well, right now, again, the push is what can we do to get more people in homes? And it's lower that interest rate, Because making it easier to qualify is all great, but that didn't work. So how do we get people into homes? We have to lower interest rates to stimulate people to want to move and to get that CPI number looking healthy again.

Speaker 1: 12:26

Yes, perfect, all good. I love it. So glad to have you back live. I appreciate the videos, but nothing's quite like the discussion, right? No, it's great. No, this is really really good, really timely.

Speaker 1: 12:41

I think that, as agents going off of the call today, I think it's just being human and checking back in with your.

Speaker 1: 12:51

But you could I mean, depending on your relationship but just coming, just checking in and saying how are things going, how are the home, you know, and if you have that strong enough relationship and you built the rapport, you might find people that need to talk to Nikki right now, just to understand the full picture, because so many times, especially when people are in crisis or have something happen that they feel negative, affecting them negatively, like all of a sudden the blinders go on. You feel like you have no choice, no resources, you stick yourself almost in the mud and it doesn't have to be that way. So, yeah, that would be my thing today for the agents listening, or even if you are a homeowner and experiencing any type of hardship, reach out, reach out to Nikki, for sure, or me, and we'll get you to someone that can at least give you you know, peel the blinders back, give you a holistic 360 view and start putting a roadmap together, if that's what it is.

Speaker 2: 14:00

Absolutely, and I can definitely help. You know, if you want to stay in your home and you're still experiencing that financial hardship, there are resources for you as well, so I can help get you to those resources.

Speaker 1: 14:09

Love it. You're the best. Awesome, Well, good, Well, look up Nikki, look up myself. I'll drop below any. The way to get ahold of us in whether you're watching on YouTube or listening to the podcast, subscribe like, leave a comment. We read them all and we would love to help in any way we can. So Absolutely. All right, till next week, go sell something, and we'll see you then. All right, bye-bye guys, bye.