Morning! This is MF Lending - the Pacific Surfliner of mortgage newsletters. We’re the fool-proof way to serve up mortgage and real estate market knowledge without any of the guesswork. So you’ll look like the smartest agent in the room (and you are!)

It’s a slow news day today after the massive swings from last week's CPI report.

Here’s what we’ve got for you today:

1. Federal Student Loan Payments Resuming: How it Affects Your Clients 📖

2. View From the Office Today 🚊

By the way, this article on Market Mover: CPI Print is the most clicked link in this newsletter, you should check it out if you are interested.

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Nuwave Rates Today 📈

Federal Student Loan Payments Resuming: How it Affects Your Clients 📖

After the Supreme Court voted to strike down Biden’s one-time student loan forgiveness plan, Biden signed a federal spending bill, codifying the end of the student loan pause.

Here’s everything you need to know about the payments and how to get ahead of it:

When do loans start accruing interest again?

Starting September 1st - federal student loans will revert back to the “normal” interest rate that was in effect on the original loan. Most student loans are on fixed interest rates, so the new interest rate market conditions will not affect most students.

First payment will be due October 1.

Debt Relief Initiatives

1. 12-month “on-ramp” period

   During this time payment will be due and interest will accrue. But borrowers won’t incur late fees, penalties, or negative credit reporting for missing payments.

2. “SAVE” Plan

   This is essentially a revision of the Pay As You Earn Plan and is an income-driven repayment option

3. “Fresh Start”

   Borrowers currently in default will have one year after the forgiveness is lifted to make their loans current without negative payment recording or collections.

What can clients do today?

1. Verify Loan Servicer

   A “servicer” is the company collecting the monthly payments. During the payment pause, your loan could have moved servicers without you knowing. This confusion can lead to missed payments.

   Verify your current servicer here and update your contact information - StudentAid.gov

2. Evaluate Repayment Plan Options

   Borrowers can apply for IDR plans prior to payments resuming. The Education Department is temporarily allowing borrowers to self-report their income with no additional documentation.

How does it Impacts Clients’ Mortgage Pre-Approvals?

For every client currently preapproved and planning to purchase something after September 1, it is absolutely imperative to have them review their loan approval.

During the loan pause, mortgage companies were required to take 1% of the loan balance as an assumed monthly payment for clients.

[Example - if the student loans totaled $60,000, the assumed monthly payment was $600.]

As soon as the first billing statement is released (estimated Sep 1), mortgage companies will now need to take the actual payment being charged to clients for their loan preapproval.

With potentially a much higher monthly payment than 1% of the balance, it could mean clients’ DTI changes significantly.

If you have clients out looking today with student loans - they need to determine what their actual payment is going to be.

They should be calling their servicer, looking at previous billing statements, or something similar to make sure there are no issues when the payments start again.

Additionally, the loan officers should be looking at every client’s preapproval in their pipeline. Especially for those with tight DTI’s, it could affect how much a client can qualify for.

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As always - if clients need a second opinion or review of their preapproval - they can send their scenario to [email protected]

Last week I had a new client send over a “Second Look” - we were able to get them a rate 1% lower than their current quote, which saved them over $400 per month.

View from the office today 🚊

Brought to you from the Pacific Surfliner heading from Santa Barbara to LA.

Thanks for reading - that is all we have for today 😎

Please forward this to your friends and colleagues if you found it valuable.

— Michael F DiLucchio