If you plan to buy a property in New York City post-Covid-19 and you’ll need a mortgage, why would you work with any other team than the Espinal Adler Team? 

I’m going to attempt to tell a story in a way that I hope sounds less than arrogant, because this is not at all about arrogance it’s about logic.  

Marie and Jeff hired me almost a year-and-a-half ago. They plucked me from the mortgage industry where I thrived for 15 years, consistently in the top 1% amongst loan originators.  

Now, it’s my job to guide the team’s clients on anything related to mortgages. I prepare. I find the best rate. I find the best fit! Then I hold the lender accountable and I make sure our clients are getting treated fairly. (I found a $30,000 bank error and I resolved it for one of our clients last year!) I know some of the best loan officers in New York, and I know the strengths and weaknesses of most of the relevant mortgage lenders in the area.  

The Espinal Adler Team is the only team in the city — perhaps in the entire country — that has created a position like this. Nobody else can offer this service. And now, it’s even more important than ever before. I’m going to tell you why. 

The mortgage industry looks nothing like it did in early January.  

Some banks are actually paying their loan officers a salary based on last year’s income to sit on the sidelines and NOT write loans (loan officers are typically paid 100% commission). 

Lenders are terrified of taking on risk. They’re thinking: “Will property values fall? Because that effects our collateral.” They’re thinking: “What happens if I lend this money, and the borrower loses their job because their company can’t rebound from a damaged economy?” They’re thinking: “What happens if a massive number of our customers opt to go into forbearance, and we’re left collecting a fraction of the money we need to survive each month?” 

In response to all the “what ifs,” lenders have either completely suspended the origination of certain types of loans, or they are tightening their guidelines with a vice grip; They’re even declining once commonly issued exception requests that allowed an applicant to go slightly outside lender guidelines. For example, a lender might require a 25% down payment in a certain situation. But, if the applicant had excellent credit, an excellent debt-to-income ratio, and they had sufficient reserve assets, upon request, the lender might issue the loan with a 20% down payment instead of the written requirement of twenty-five percent. There are 953 other examples I could give you, but the point is, it doesn’t matter. For now, it’s better to assume that no exceptions are being made.  

Some lenders are still in the game and others are completely out. Each of their circumstances dictate their approach to risk and ultimately, the type of loans they’re willing to make, and whether or not customers will pay a premium to obtain the loan.  

Condo and Coop guidelines are being re-written too; When we’re back to business as usual, lenders are going to evaluate each building to see if it suffered an economic impact before they agree to lend to someone buying in that building. 

Bringing it full circle, let’s go back to the original question, the first line written in this column: If you plan to buy a property in New York City post-Covid-19 and you’ll need a mortgage, why would you work with any other team than the Espinal Adler Team?  

With all the recent changes, does your real estate team know which condos and coops in the city are compliant and which ones aren’t? Does your agent know which banks are still originating jumbo loans and whose rates are most competitive? When you also consider our experience and know how – The Espinal Adler team has transacted over $1 billion in deals, and we were the #5 team at Elliman in total transactions last year; isn’t working with us the logical thing to do? 

For the first time in forever… Jumbo rates are higher than conforming rates

That headline almost sounds like it could be a Frozen 3 lyric. 

When I entered the mortgage industry almost 17 years ago, mortgage rates were probably in the high 5s or low 6s. Back then, wherever conforming rates were, Jumbo rates were always a little bit higher. 

**A “jumbo loan” is any loan above Fannie Mae’s conforming loan size limit. In New York City, the current max loan size limit is $765,600. If a mortgage loan is made for an amount higher than that, neither Fannie Mae nor Freddie Mac will purchase it. Lenders still issue loans for amounts greater than that, but they typically keep them in their own portfolio, or if they’re a broker/correspondent they’ll sell to another institution that will put it in its portfolio.  

With Fannie and Freddie out of the mix, and fewer options to sell, lenders likely believed holding mortgage loans and servicing them instead of selling them, presented a greater risk (borrowers going into default). In turn, rates were higher on jumbo loans. Eventually though, all of that changed.  

My memory is fritzing on me right now, so don’t hold me to the exact date, but I think the switch was flipped somewhere in 2009 or 2010, when we first started noticing jumbo rates being offered at a lower rate than conforming loans. The competition for market share was fierce. The mortgage divisions of a lot of major banks were probably losing money writing jumbo loans, but that didn’t stop them from conducting an all-out rate battle royal! Competing for clients that were taking out multi-million mortgages was another level. It was more cut-throat from a client/customer point-of-view. Too often, it boiled down to rate and rate only. The pressure and the competition drove jumbo rates down, comfortably below where most conforming loans were pricing at. That was true for the better part of a decade. 

But then, just about two weeks ago, I called around for rate quotes. A major mortgage bank quoted 3.25% for a conforming 30-year fixed and 3.5% for a Jumbo 30-year fixed. I almost didn’t pick up on it. I thought the loan officer made a mistake. So, I asked again. But my ears did not deceive me.  

10 years was a long time for Jumbo loans to hold the lowest rate title. When the dust settles though, it wouldn’t completely surprise me to see Jumbo take back the crown.