Since the beginning of the year, two developments at the federal level signaled a shift in the assumable mortgages market that should have servicers paying attention.
First, the Federal Housing Administration drastically increased the fee lenders can charge when a buyer assumes a loan, doubling it from $900 to $1800. Second, the Department of Veterans Affairs also greenlit a fee change, introducing a regional variance fee that can be charged on top of the base fee to process the assumption of a VA loan. While assumable mortgages have been less viable in recent years, they鈥檙e making a resurgence given current market conditions 鈥� and these fee changes from the federal agencies are an unexpected opportunity for servicers.
Assumption loans help bridge the affordability gap for homeowners
The third quarter of 2023 marked the least affordable U.S. housing market since 1984. High interest rates and low housing inventory are keeping would-be sellers on the sidelines, and increasing competition among buyers for the inventory that is available.
That has put buying a first home out of reach for a lot of Americans, and assumption loans could help bridge the affordability gap many buyers are struggling with right now. Assuming a mortgage can give otherwise priced-out homebuyers access to interest rates that are considerably less than market rates today. Before now, rates had been so low for so long that it often made little sense for buyers to assume a loan. But since interest rates have risen and , assuming a mortgage at a rate of 3% or 4% is more enticing than it was a few years ago.
And it鈥檚 clearly an option that buyers are increasingly willing to explore, as home search websites have added options to search specifically for homes with assumable mortgages on them. Servicers need to be prepared to service assumable mortgages so they can find a competitive edge in a tight housing market.
Preparing your team to meet the moment
In order to take advantage of the increased fees on assumable FHA and VA loans, teams must be up to date on the regulatory requirements of assuming a mortgage, or there could be reputational and financial repercussions.
There are specific compliance requirements for both FHA and VA loans that need to be met. For instance, the VA published a circular in early 2024 detailing a new document the seller party must sign, acknowledging there could be scenarios where the seller鈥檚 VA benefits might be held up if someone assumed their loan. It鈥檚 crucial your team is aware of these scenarios so they don鈥檛 mislead customers or give them incorrect information.
Beyond checking whether their internal compliance guidelines are sound, servicing teams must be ready on the operational side as well. Assumable mortgages have not been on trend for a long time, and servicers may need to bring their internal processes for these loans back up to speed 鈥� especially for newer teams who may not have worked with assumable loans before now.
The 啪啪视频 Professional Services team can help servicers configure their technology so that servicers can handle the servicing of assumption loans and to support the servicer鈥檚 compliance with federal guidelines, by providing everything from consulting and process support to process engineering.
Servicers who are ready to handle assumption loans can gain a competitive edge with customers who are looking for ways to buy a home in a challenging market 鈥� and can now be better compensated for the time and effort it takes to process these loans.