Are Banks Still Lending?

It’s no secret the global pandemic has changed our lives in ways never imagined.

But what type of effect will this have on the Mortgage Industry?

Will you still be able to get a mortgage?

Who will be affected the most and what should you do to protect yourself?

Which Lenders Are At Risk?

Lenders who swim in the riskier part of the pool are most vulnerable.

Hedge Funds and REITs (real estate investment trusts) have come to dominate the market for riskier, commercial real estate loans filling the void left by Banks after the ‘08 Financial Crisis.  Private Equity firms have recently joined Hedge Funds and REITs in this space.  PE firms, once positioned higher up on the capital stack, have seen their risk tolerance decrease; increasingly concerned about the danger of investing at this point in the cycle.  Still, PE firms are programmed to seek high yields on value-add or development projects, so they morphed into debt platforms that offer high-leverage, super-stretch, senior loans.   This transformation enabled them to cap their last dollar at 80% or 85%, and thus, generate superior risk adjusted returns while limiting their exposure to a lower level on the capital stack.

Hedge Funds, REITs, and PE firms fund these riskier loans with short-term, ultra-high leverage loans from banks.  This enables them to allocate only a fraction of their balance sheet vis-à-vis what they’re actually lending to borrowers.  This high leverage loan structure allows them to enhance their ROA (profitability as a function of capital).

Hedge Funds and REITs have also infiltrated the residential space, providing non-QM financing for those individuals whose documented income does not enable them to qualify for the financing they seek.  These are often referred to as “No Doc” or “No Income Verification” loans and are not subjected to the same regulatory scrutiny as Bank loans.

Unfortunately, these firms are now getting margin calls. The banks lending them money are demanding more cash collateral.  In some instances, they’re being asked to post billions of dollars.  To compound issues, during this most difficult of times, Borrowers have stopped making their payments.  Consequently, shares of the top mortgage REITs have plummeted; some by as much as 55%.  Those that are well capitalized have continued to lend.  But many have put their lending operations on hold and sprinted for the sidelines.

Residential Mortgages

The US has had a record 10,000,000 initial jobless claims in the past 2 weeks and BofA forecasts that figure to triple in the months to come.

Many of these potentially 30,000,000 unemployed folks will not be able to make ends meet.  Many will default on their mortgage payments.

The CARES ACT encourages millions of Americans affected by coronavirus-related income disruptions to seek forbearance on their mortgages.  This means no payments for 3 months, at a minimum.  That, in and of itself, is a great thing for homeowners.  It provides tremendous relief when it’s needed most.  However, there are some unintended consequences.

The companies that service the mortgages must continue to make the payments to investors during the forbearance period.  At the same time, many investors who traditionally purchase Jumbo mortgages have exited the market.  This has caused a liquidity crunch.  These two, concurrent dynamics have culminated into the perfect storm.

Wells Fargo has both ceased purchasing mortgages from other lenders while they tighten their own lending policy with higher FICO requirements, lower LTV’s and the elimination of cash-out transactions.  They have the capacity to lend another $384 billion in loans to consumers and businesses trying to get through the crisis but they’re unable to make those loans due to the asset cap imposed on them by the Federal Reserve in response to WF’s 2016 forged account scandal.  The Bank has asked the Fed to remove the cap in light of current circumstances and the extraordinary demand the Payroll Protection Program is putting on their balance sheet.  The Fed may be forced to comply.

Collectively, this medley of circumstances has dried up demand for jumbo mortgages resulting in pricing compression.  This has pushed rates up (more on this next week).

As a result, many residential lenders have left the lending business.  Those that remain are raising their minimum FICO scores, decreasing their LTVs and progressively weakening pricing on their loans.  Some have even pulled Commitment Letters, something not witnessed since the Financial crisis of ‘08.

What should you do?

If you have a loan in process, ask your lender to send you updated disclosures articulating your terms.  If you have been approved, ask that they send you your Commitment Letter.  Make sure the expiration date of your CL does not fall short of your anticipated closing date.  Ensure your rate is locked!  Finally, talk with your banker.  Make sure everything is ok and confirm there are no surprises (i.e. guideline amendments) coming down the pike.

Fortunately, Citizens is still actively lending and committed to continuing their position as an industry leader.

Since this crisis began, we have honored our Commitment Letters, continued our high volume of closings and have many more closings scheduled in the weeks to come.

Virtual Closings

Over the past two weeks we have managed to get all scheduled closings consummated and funded by seamlessly transitioning to a virtual closing protocol.   Although we were early adopters, acclimating to this new reality on the fly, we have continued our delivery of flawless execution.

If you’re contemplating a refinance, please give us a call as our rates remain extremely low.

If you are in contract to purchase a new home and are seeking financing or are being subjected to a restructure by your current lender or have been told your financing will not be honored, please give us a call.  We will do what we do best – CLOSE LOANS!

Seth J Dolce

Citizens Bank

Mortgage Rates In Free-Fall – Economic Update

By Seth Dolce

Citizens Bank

The Dow is on the rise in early morning trading as the benchmark attempts to pare back losses and the 603 point bludgeoning it endured Friday.

The selloff was rooted in Coronavirus fears and the disruptive economic potential of the virus as well as a waning confidence in the economy.

Chinese Markets continue their plunge Monday as China’s Central Bank injects $174 Billion into the economy in an attempt to stabilize the nation’s financial system.

This medley of concerns is causing money to exit equities and seek safe haven.

With money flowing in, bonds have rallied pushing yields down to the 1.5% mark on Friday, its lowest level since September.  The Benchmark is down 22% so far this year.

Part of the yield curve inverted again Friday.  That marked the second time it has done so in a week, broadcasting what many view as recession smoke signals.  Along with the 10-Year falling, the entire long end of the curve has fallen.  This tells a story of concerns surrounding macro growth.

This concern was echoed by the Fed, which indicated they’ve moderated their stance on growth.

All of this has applied downward pressure on mortgage rates.

These lower rates present a great opportunity for both homeowners and those looking to become one.

Homeowners can refinance and lower their monthly mortgage payment immediately.  In some instances saving thousands per month. Refinancing also makes sense if you have a variable rate mortgage and can lock into a new, longer term. Or reset the clock on your existing term.  Homeowners may also want to pull out money from their home with a cash-out refinance.

For those in the market looking to buy a home, your buying power just increased.  And your monthly payment on the house you were considering just went down dramatically.  Perhaps the new, lower monthly payment now makes that dream home affordable?

If you’re contemplating a refinance or the purchase of a new home and want to see how much you can save with these lower rates, please give us a call.

Will This Refi Opportunity Suddenly End…Or Will Rates Drop Further?

By Seth Dolce – Citizens Bank

U.S. Treasury yields were volatile over the course of the week, as the ongoing trade dispute between the U.S. and China continued to generate uncertainty among investors.  Rates were up early in the week, rallied briefly mid-week and then pared back their earlier gains on Thursday and Friday.  The Dow closed flat after a strong week with traders taking their profits and checking out early for the holiday weekend.

The Euro continued to weaken, roiling markets and foreshadowing lean days ahead for Europe.  The Euro is now down 6% over the past year; a seismic drop for currency.  Brexit fears are anchoring this sentiment, and overall, risk warnings are on the rise.  Compounding matters is the softening of the Yuan, which reached new lows.

Overall, Mortgage rates increased for the first time since July 12th.  As a consequence mortgage applications to refinance dropped 8% with purchase apps falling 4%.

Some folks believe rates have more room to drop and we’re one tweet away from a sub 1.40 10-Year.  Others believe that any type of reconciliation between Washington and Beijing could trigger a Treasury Sell off and force rates to rocket upwards.  If a deal is struck, it would move investors out of treasuries and back to equities; causing a sharp spike in yields on the long end of the curve and pushing mortgage rates materially higher.

With this dichotomy of outlooks we’re advising our clients to ensure their rate is in a position to be locked.  This is achieved by initiating the refinance process but floating (not locking) the rate.  Then, if they see a rate that is compelling or a deal is struck between the U.S. and China and we see a sudden upward swing in rates, we can lock in the rate immediately, ensuring you don’t lose out on this exceptional refinance opportunity.

The Fed Cuts Interest Rates

By Alon Gibely Jex

This past Wednesday, July 31st, the Federal Reserve cut interest rates by 25 basis points (one quarter of a percentage point), this was the first cut since the economic recession in 2008. In general this move was seen as a move to stave off a possible economic slow down in the near future, as for the present, there are additional benefits for those looking to take a loan, specifically a mortgage.

One would expect a drop in the interest rates for a fixed rate 30-year mortgage, as the two, a drop in Federal interest rates and a drop in mortgage interest rates, goes hand-in hand. While currently  the average mortgage interest rate is the lowest it’s been since November 2016, one could expect mortgage rates to drop even lower.

As potential buyer, this is great news since that means an even more competitive mortgage rate, but also as a seller this can be good news since that means that a buyer may be more eager to pull the trigger on a property to take advantage of the low rates.

That being said, everything depends on pricing, it doesn’t matter how low interest rates are, if a property is overpriced, we can expect it to stay on the market for longer than three or four months, and, if that property is overpriced AND expensive (in Manhattan think mid to high seven-figures or more), then both seller and agent are in for a long wait.

Rooftop Hero

By Alon Gibely Jex

While recently the weather has been far from predictable, it’s a (hopefully) pretty fair assumption that eventually it will be consistently warmer, and less rainy, and down here in the Financial District, that means rooftop weather!

With all the tall buildings down here, it can get to feeling sometimes that everything around and above us is just concrete and stone, or glass and steel, and you wouldn’t be completely wrong in thinking that. But, once you get the chance to get atop one of these giant high-rises the perspective switches, and the entire city is laid out before you.

When it comes to luxury residential skyscrapers down here, it’s basically spin and point and you’ve found one, and well, it seems like all of them are offering some kind of outdoor space, and that usually means roof decks. And even when it’s not the actual roof itself, it’s bound to be pretty high up, and with only more buildings going up, and more conversions from office space to living space, there seems to be an endless supply of residential buildings touting the beauty and comfort of their towering open-air territories. The competition is fierce and it seems every building has their own, and while some are higher than others, and some larger, a lot just depends on preference. Really, the fact that the choice exists is enough to convince prospective renters to keep their search limited to the Financial District, Seaport area, Tribeca, and Battery Park City.

At NY Living Solutions our agents all have their preferences; for some it’s all about the views, while others need to have greenery, or a place to grill, and for everyone there is always the back and forth between privacy and popularity. Is it a social scene you’re looking for? Or do you prefer a less popular space with few people around to disturb your meditation?

As far as we can tell though, the type of roof deck available is lower on the checklist when choosing an apartment for prospective tenants; size, price, and location naturally take precedent, but still the need for one seems to be a must for anyone choosing an apartment downtown, especially when it can provide a much needed escape from roommates, or just for additional space to your studio apartment. And as the weather gets warmer, NY Living Solutions expects to hear more from clients about the importance of roof decks in the Financial District, where at times the height of the surrounding streets can make sunlight when walking down the street feel precious.

So we say, get out there, and enjoy living on top of the world! Or at least in a building that has a common space that can make you feel as such, whether that means a luxury rental right in the heart of the Financial District, a co-op in Battery Park City, or a seven-figure condo in Tribeca!

15 Park Row


Manhattan skyline 1902 – Park Row building at center

by Alon Gibely Jex

15 Park Row! For those of you unfamiliar with this building I need to ask where you’ve been for the past 118 years??? That’s right, completed in 1899, for more than a century 15 Park Row has been an integral part of New York City’s skyline and today it’s still going strong! While presently its impressive twenty-nine stories may seem less so with the proximity to the Financial District and its mammoth skyscrapers, but for nine years after the completion of The Park Row Building (as it was known then) it was the tallest building in the world! That’s right, not just in the Financial District, or Tribeca (neither terms being applicable at the time of course), or Lower Manhattan, or the entire island of Manhattan, or the entire City of New York, or the… well you see where this is going.

Sadly, in 1908 the completed construction of the nearby Singer Building, at 47 stories, took the title of the world’s tallest. If you’re looking for the Singer Building these days though you won’t find it, as it was demolished in 1968 (take that Singer Building!), and these days that space is occupied by One Liberty Plaza.

In the early twentieth century 15 Park Row occupied a portion of Park Row that was then known as Newspaper Row, it being the center of the New York City newspaper industry at the time, and the building even housed one of the first offices of the Associated Press. Other notable tenants over the years include the headquarters of the IRT (Interborough Rapid Transit), the original operator of the New York City subway system, as well as most recently the offices and retail space of J&R Music World, the famed New York City music and electronics retailer.

These days the building has been converted to a luxury residential building. In 2001 the top half of the building was converted into residential units, and since 2014, the bottom half, from floors 3 to 8 were converted to residential units as well. Currently there are over 300 apartments at 15 Park Row, and the building is presently working on restoring the lobby to its former early-twentieth century glory, as well as adding some more modern touches like a large gym, yoga studio, a residents lounge and children’s playroom, bike storage, cold storage, and an immaculate roof deck as well. For over 100 years 15 Park Row has and continues to prove itself as a bastion of the neighborhood that surrounds it, whether that’s Tribeca, the Financial District, or whatever they may call it in the future.

This certainly won’t be the only blog about 15 Park Row that NY Living Solutions will bring you, but if you’re interested to learn more about the architecture and history of 15 Park Row then check out the link below to the Wikipedia article:

Will Britain’s impending exit from the European Union affect the New York luxury real estate market?

It appears that both luxury buyers and institutional-sized investors may soon be choosing NYC as an alternative to London. 

Britain’s economic and political turmoil may prove to be good news for New York’s real estate market as the value of the pound dropped to its lowest since 1985 after the U.K. officially voted on June 23rdto leave the European Union. Sorting through 43 years of treaties and agreements is no easy task, and it may take a full two years for the country to negotiate its withdrawal and officially cease being a member. 

According to Manhattan-based international real estate attorney Ed Mermelstein in a June 2016 article featured on Brick Underground, he’s observed an influx of investors over the last six to eight months choosing New York over London to do business and invest in the luxury real estate market. This may be an indicator that real estate investments were slowing across England even before the “Brexit” issue. New capital gains tax for foreign investors implemented in 2015 and more stringent visa requirements seem to have already created issues for foreign investors looking to live in England.  
What could the Brexit vote mean for prospective buyers in the New York market for properties in the million-dollar range? Probably not much as the vast majority of foreign buyers are typically in the market for condos over $5 million. Additionally, foreign investors purchasing in New York typically do not consider co-op’s. 
New York Living Solutions, a boutique real estate firm located in Lower Manhattan has access to a multitude of preeminent luxury properties in Manhattan. Our devotion to highly personalized service has resulted in many pleased clients. We look forward to working with you on a time-efficient and cost effective search for your perfect property.