Can I Refinance My Way Out of Being Behind on My Mortgage Payments?
Probably not, and the door for that closed a little further this week. A refinance is a new loan, and a new loan gets underwritten before anything else happens. Somebody 60 or 90 days behind usually fails the payment history test before the rate or the equity ever get looked at.
How Much Did Mortgage Rates Move This Week?
Freddie Mac’s Primary Mortgage Market Survey printed at noon Eastern on September 17, and the 30 year fixed rate averaged 6.95 percent, up from 6.76 percent the week before. A year ago it was 6.26 percent. The 15 year rate averaged 6.26 percent, up from 6.09 percent.
One week alone is noise. Four in a row is a direction.
August 27: 6.66 percent
September 3: 6.71 percent
September 10: 6.76 percent
September 17: 6.95 percent
The jump in the last week is bigger than the previous three weeks put together, and those three only added up to eleven basis points between them.
Is 6.95 Percent What I’d Actually Be Offered?
No, and that’s worth being clear about before anything else. Freddie Mac’s own survey covers conventional, conforming, fully amortizing purchase loans for borrowers who put 20 percent down and carry excellent credit. It isn’t a quote for anybody with thin equity, damaged credit, or an FHA or VA loan, and it isn’t what a lender would put in front of somebody trying to refinance out of a missed payment.
Why Can’t I Just Refinance to Catch Up?
Because a refinance isn’t a repair. It’s a brand new loan, and a new loan asks three questions: what’s the equity, what’s the income, and what’s the payment history. Somebody behind on payments usually fails the third one before a lender even looks at the first two. And a rate from 2021 near 4 percent would be getting traded for something close to 7 percent even for a borrower who passed every test.
What Do I Do Instead If I’m Behind?
Loss mitigation with the servicer you already have. That’s a different call to a different department than the one that handles a refinance, and it’s built for somebody who’s behind rather than somebody shopping for a better deal. What it can look like varies by loan and by lender: a repayment plan, a modification, a short sale if the numbers don’t work any other way. Which one applies comes down to the loan documents and the servicer, not a general rule.
Also of note today, a homebuilder’s own numbers landed this week and they cut the other way in Florida.
Does a Builder Cutting Prices Mean I’m Underwater?
Not automatically, and the Florida number actually moved up, not down.
What Happened With Lennar’s Prices?
Lennar, one of the two largest homebuilders in the country, reported its third quarter on September 16. The average sales price of the homes it delivered nationally was $372,000, down from $383,000 a year earlier. New orders fell 9 percent to 20,879 homes. Stuart Miller, the company’s executive chairman and CEO, put it plainly in the release: “Our average sales price was $372,000, reflecting approximately 12.0% in incentives, along with base price adjustments necessary to sustain volume in a market where affordability remains the defining constraint.”
Is Florida Part of That Drop?
No. Lennar breaks its numbers into four regions, and its East division, which covers Florida, New Jersey and Pennsylvania together, is the one region where average sales price went up year over year, on both the homes it delivered and the orders it took.
East (Florida, New Jersey and Pennsylvania): $372,000, up from $366,000
Central: $365,000, down from $379,000
South Central: $230,000, down from $235,000
West: $571,000, down from $599,000
National total: $372,000, down from $383,000
The national number is being pulled down by the West and Central regions. East went the other way.
How Do I Know If I’m Actually Underwater?
Arithmetic, not a headline. What’s owed today against what the house would bring after costs. A builder discounting new construction nearby can put pressure on the comparable sales around it over time, since new closings in a subdivision become the comps for the resales next door. But a national average sales price falling doesn’t mean a Florida house lost value, and the way to find out is a payoff figure and a real look at the comparable sales, not a builder’s press release.
Jacksonville, Florida is where I work, and distressed property is most of what comes through the door here. Happy to talk through where your situation fits into any of this.
JimArmstrong904@gmail.com, or (904) 671-4161 if talking beats typing.
Jim Armstrong, REALTOR® · Momentum Realty · SFR® (Short Sales and Foreclosure Resource) certified. This is general information, not legal, tax, or financial advice.
Momentum Realty is not associated with the government, and our service is not approved by the government or your lender.
