For many, having their refinance or new home purchase halted due to a “temporary” lay off as a result of the COVID-19 “stay home, stay healthy” order, has come as quite a shock. We are talking people who have been with the same employer and in the same line of work for many years.
To help all parties better understand the why behind this, it only takes a gander down memory lane to remember the level of default from the 2007/2008 crash of the real estate market. Post-crash, the Dodd-Frank Act placed mandates on Lenders requiring they confirm a Borrower’s ability to repay their mortgage based on their current income and existing debt. The income must be “likely” to continue, so when a Borrower is laid off, that stable income that they were receiving can no longer be counted until they return to work and the Lender is able to confirm that their rate of pay and hours worked provide for that same level of income used to qualify them.
Most Lenders are questioning Borrowers upfront if they are working and getting paid by their employers during the COVID-19 “stay home, stay healthy” order, but if they aren’t the current transaction in process could end badly for all parties concerned. The Underwriter will absolutely confirm before funding that the Borrower is working and being in a stand by or laid off status does not meet lending guidelines.
If you are the Borrower in the middle of a mortgage transaction, a Realtor on either side of a purchase transaction or a Seller, ask the question yourself! Can the Lender confirm that you are both still employed at closing and still being paid your full wage despite the fact that you may not be working or at work
Questions? Give me a call, 360-459-1200!