Equity Relief

Approximately 63% of U.S. homeowners have mortgages and their equity increased 5.4% in the fourth quarter of 2019 over the same period a year earlier.  ATTOM Data Solutions, in its fourth-quarter 2019 report, showed that 14.5 million residential properties were considered equity rich.  That means the combined estimated amount of loans secured on those properties was 50% or less of their estimated market value.

The equity in these homes are assets that homeowners could access to raise cash to use to weather the economic downturn caused by Covid-19.  Normally, this equity might be used for home improvements, or a lifetime event like weddings, college, or investing for retirement.

Lenders typically like homeowners to maintain a 20-25% equity position and will consider a loan for the difference in the existing first mortgage and 75-80% of the fair market value documented by an appraisal.

As unemployment has increased in the last month, it has become more difficult for homeowners to access the equity in their home through cash-out refinancing or HELOC, home equity line of credit.  Many lenders have increased lending restrictions to current bank customers and in some cases, have raised their minimum required credit scores for borrowers.

Further restrictions regarding jumbo loans are being experienced by borrowers for purchases as well as refinancing.  Jumbo loans are those that exceed the dollar amount limits put in place by FNMA and Freddie Mac.  In most of the U.S., the amount for a single-family home is currently $510,400 but areas deemed high cost could be higher.