Carrington Mortgage Services (CMS), a California-based company, sees opportunities in the mortgage industry.
Millions of borrowers were able to obtain mortgage rates below 4% as a result of actions taken by the Federal Reserve (Fed). In the fall of 2022, however, the Fed’s actions triggered the increase to more than 7% of mortgage rates.
As a result of the Fed’s dual policy, home prices are high and mortgage rates remain at 6%, which causes a lockdown of mortgage rates. As a result of low inventory and high rates, many buyers are paralyzed waiting on the sidelines.
In order to solve this problem, CMS is relying heavily on an assumable mortgage, which is a mortgage product that is rarely used.
It is not a new product. A few decades ago, it was fairly common. By assuming responsibility for the current mortgage balance and interest rate of the seller, qualified buyers who have government loans can purchase a home.
In most cases, the fees are lower than those on new loans, and there is no need for an appraisal. Like any new mortgage, the buyer must apply for a loan and go through an underwriting process.
A former Ginnie Mae president, Ted Tozer, argued in October that assumable loans could benefit the market if government changes are made. Assumable mortgages allow homeowner-occupants to partially capitalize their mortgage savings into their home’s sale price, outbidding even cash investors. Additionally, it allows home sellers to receive the highest possible price for their property.
CMS announced on Tuesday that it is informing eligible homeowners about the possibility of assuming a low-rate mortgage from a new buyer since most homeowners do not know this is an option.
Agents at Vylla Home, the company’s real estate division, are also introduced to the program so they can work with potential clients.