Let me show you how we stack up to the rest of the industry
Mortgage rates fell .75% in the second-half of June, which was a welcome change to the steady increases we’ve seen for much of 2022. During that same time period, our lenders dropped their rates by nearly 1%, making ours some of the lowest around!
As a mortgage broker, we have the ability to secure the best rates offered by our wide array of wholesale lenders. This means the rate we find for you is generally lower than anything else you may find at a traditional retail bank.
Here is a chart showing how our 30-yr fixed rates* recently compared to the industry at large. The blue line is the Mortgage News Daily Index, a broad sample of rates offered by various mortgage companies. You can see it dropped considerably in late-June (more on that in another post). But our rates dropped even more, making our rates nearly ½% lower than others in the industry heading into this past holiday weekend!
We love doing business as a mortgage broker because we can find the best rates around. We never work with just one bank, because banks are always changing their rates. Sometimes one is overwhelmed so they raise rates to intentionally push business away. Other times they have a “sale” and discount their rates more than others. During the month of June, we had 5 different “lead changes” amongst our lenders, meaning our top lenders are constantly outdoing one another to try and offer the lowest rates. Our job is to find those opportunities to get you the best interest rate possible.
And what’s even better is you do not pay us for our services; the lender does! When you combine our experience & service with great interest rates, you get the best of all worlds! .If you or someone you know has been waiting for a rate decrease to refinance or purchase a home, give me a call.
I’m forecasting falling home values, and this summer breeze on the cooling market should make buyers feel fine!
My oh my, a lot can change in a few months. At the beginning of the year, home prices were rising at an unsustainable 4% per month and selling faster than ever before. And then a war broke out! Needless to say, Russia’s war sent shockwaves around the world & we’ve all been impacted by the war’s economic ripple effects (gas prices, food costs, interest rates, etc).
The typical red-hot summer real estate market has changed too. Sellers have watched buyers become more hesitant due to the fastest rise in mortgage rates since the early 80s.
As a result, 30% fewer home sales have occurred this month compared to the same time frame in 2021. This significant decrease in volume will force motivated sellers to drop their prices to attract a buyer, and eventually this momentum should lead to declining home values by summer’s end.
Some may read those figures and suggest this post’s musical title be changed to “Cruel Summer” or “Summertime Sadness.” But they would be wrong. Rather, this cooling “Summer Breeze” is simply returning the market metrics to pre-pandemic levels. We are approaching 7,000 homes for sale in the Sacramento market, a similar amount we saw in the spring of 2020. This equates to 2 months of housing inventory on the market, again a comparable figure seen before the pandemic.
For some, this market slowdown is wonderful news! A more balanced, normal market will lead to more opportunities for first-time buyers. With younger Millennials now hitting their late 20s/early 30s, there are literally millions of them looking to purchase their first home. This will help soften the fall for home prices, particularly for lower priced homes.
If you have been considering a home purchase, now is the time to get prepared for buying opportunities! You have more options, sellers are more eager, and prices are no longer increasing. Give me a call to discuss ways to best capitalize in today’s market as a home buyer.
You probably noticed recent news articles that went something like this…
“For the first time in 3 years, The Fed raises interest rates!!!”
This headline gets overly-simplified and makes the reader believe that ALL interest rates, including mortgage rates, increased overnight because of the government. That is simply not true. In fact, mortgage rates LOWERED slightly immediately after The Fed’s recent rate rise announcement. Let me paint a more accurate picture.
The Federal Reserve Board (aka- The Fed) has direct control over a single rate, The Federal Funds Rate. Some types of loans are indeed coupled to this rate, so The Fed’s decisions have a direct impact on these loans. But fixed rate mortgages ARE NOT one of these types of loans. Mortgage rates move not based on government decisions, but rather by open-market supply & demand.
Below is a graph that shows both the Federal Funds rate (the blue line) and 30-yr fixed rate (the gray line) over the last 5 years. You can see there is no direct correlation. Surely, in 2019 they both were generally declining, but not at the same time nor pace.
As in most things, open market dynamics force changes more quickly than bureaucratic decisions. The chart shows the gray line’s peaks and valleys all pre-date the blue’s, with the exception of The Fed’s decision to plummet the Federal Funds Rate to nearly 0% at the onset of the Covid-19 pandemic. With the Fed’s rate finally rising, it doesn’t necessarily mean mortgage rates will continue to rise along with it. Perhaps mortgage rates have already hit their peak??
Here’s the takeaway…last week’s headlines of rising rates are old news for mortgages, and don’t ever assume that mortgage rates will change due to a Fed rate change. Actually, mortgage rates have slightly improved since The Fed’s recent rate increase!
30-yr rates are now over 4%, so where do they go from here? Much of that answer depends on the war in Ukraine, the cost of gas at the pump, and evolving expectations of this year’s mid-term elections. Good luck correctly predicting the outcome of those story lines!!!
But, I will leave you with one more graph to consider as potentially a glimpse into the future. Below is an illustration that shows the difference in interest rates from long-term to short-term US government bonds. When the short-term bond has a higher rate than a long-term bond (a very unlikely event), the line’s chart goes into the pink negative territory. Economists call that an “inverted yield curve,” and this financial anomaly has taken place before every US economic recession over the last 60 years.
Presently, the difference from long to short term bond rates precariously sits at only +.2%, and has been falling in recent weeks. If this figure indeed becomes negative and an inverted yield curve is realized, it could foreshadow an economy headed for a recession. Mortgage rates nearly always fall during recessions, so its conceivable we will see lower mortgage rates in the near future. Stay tuned, and thanks as always for reading!
Last year I posted a ton about mortgage rates and refinance opportunities. This year to date I’ve been rather silent, largely because rates have trended higher and unfair government-imposed fees on refinance loans made them less attractive. But that’s yesterday’s news! Today its time to jump for joy and proclaim that mortgage rates are as low today as they have EVER been!!!
For starters, market conditions in recent weeks have been more favorable for mortgage rates. Initial fears of widespread inflation have subsided, which has allowed mortgage rates to drop. Furthermore, today the Federal Housing Finance Authority (FHFA) rescinded a fee applied last autumn that added a .5% charge to nearly all refinance transactions. This is pleasant, unexpected, and well-needed news.
Here’s a brief history lesson on the matter: the prior FHFA regime (under director Mark Calabria, appointee of former President Trump) suddenly and unilaterally imposed this fee in August 2020 under the guise of increased risk and costs associated with buying mortgages during the pandemic. In reality, it was a good ‘ol fashion money-grab by the US government. As soon as the law allowed (literally, a supreme court case was decided on the same day granting authority for removal from office), President Biden appointed current director Sandra L Thompson to replace Mr Calabria. Within 30 days of taking her position, the Agency has removed this unnecessary fee for American homeowners.
This means mortgage rates are at record lows!!! Like crazy low. Like 30-yr rates well under 3% & 15-yr rates near 2% low!!! If you haven’t refinanced in the last 12 months, we should chat ASAP. Or, if you’re looking to take cash-out for home improvements or debt consolidation, its never been cheaper to borrow money from your home. Tell your friends. Tell your family. Lets collectively shout this news from the figurative roof-tops to help all homeowners save money!
I know the world is starting to get back to normal (for the moment) and that there are more fun things to do in the middle of summer than apply for a refinance. But, I would recommend you take a few minutes to call me soon to crunch some numbers and see how these developments can help you save money every month.
Last month I covered an announcement by the Federal Housing Finance Authority that was going to make refinance loans significantly more expensive. Essentially overnight, closing costs increased by ½% of the refinanced loan amount for applications not yet locked due to this “Adverse Market Fee.”
This would have been similar to deciding to buy expensive item at a store with an advertised price on the shelf, and then having the price change while you’re in the check-out line!
If that happened to you, you’d be upset & probably ask to speak with the store manager! Many mortgage and finance stakeholders did just that, and lobbied to the director of the FHFA to reconsider the surprise fee. While the fee was not reversed, the FHFA recently announced a delay to the implementation of the Adverse Market Fee until later this year. As such, there presently is a narrow window to close a refinance application before closing costs skyrocket.
But this window is closing quickly. Lenders are already starting to announce when they’ll be implementing this Adverse Market Fee. Some of my lenders have set dates between now and October 5th as the deadline for a loan to be locked to avoid this fee.
Lots of refinance applications are going to rush through the system in the coming weeks, so its important to get your application in early and follow my “Ready. Aim. LOCK!” plan I detailed in my last blog post.
When you combine the incoming fee increase with the current crazy low interest rates, it makes a compelling case to take action now. Rarely in our industry do we have a certain forecast as we do now guaranteeing closing costs will be higher in the near future. Rates are literally on sale, but the sale is ending soon!
My wife & I are following my own advice and recently began a refinance application for our mortgage. I would strongly encourage you to do the same if you have a fixed rate over 3.5%.
Mortgage rates have been on a wild roller coaster ride for much of the year due to unpredictable and unprecedented Covid-related events. When rates suddenly began climbing this Spring, I advised refinance clients to submit applications but hold off on locking a rate, as I was optimistic rates would fall in the coming months. Nearly all of those clients who followed that advice benefited greatly as they locked record low rates this summer.
Now, mortgage rates are poised to take another dip after rising during most of August. With the stock market having an awful day today, mortgage rates are creeping back to their record lows seen earlier this summer. New season, but same strategy; get an application in ASAP and get ready to lock a rock bottom rate!
Please watch this video detailing how my Spring-time refinance clients followed my advice to lock a low rate, and why you should do the same as we head into Fall!
If you have considered refinancing in recent months but have hesitated moving forward, now is the time to get an application in with me! Doing so will help us get prepared to lock a record-low interest rate. Here’s what I need from you, and you can upload them safely using this link to Document Guardian:
Returning Clients Recent pay stubs from the last month 2019 w-2 (or 1099 if retired) An email authorizing me to pull your credit report Last month’s bank statement for checking and savings accounts 2019 & 2018 tax returns (only if self-employed or own rental properties) New Clients In addition to the documents above, complete an application at https://mattsundermier.zipforhome.com/
This week has been a wild one for mortgages! Let me breakdown the major headlines for you…
On Monday, one of our lending partners, United Wholesale Mortgage, began offering 30-yr fixed rates at 1.999%.Many clients have seen posts on social media about these never-before rates, and have asked if they can get on the action. Unfortunately, the marketing pieces don’t tell the whole story. While these rates are technically available, the closing costs are so high most clients will sour to the idea of this offer. I’m happy to discuss your options with you, but in general I do not recommend applying for these ultra-low rates just yet.
Then on Tuesday, mortgages had their single-worst day all summer, as most programs saw rates climb nearly .25% in a matter of hours due to mortgage investors lowering their demand to buy mortgage bonds.
Finally on Wednesday night, the US government imposed added closing costs for refinance loans. Yes, they can do this (whether they should is another matter I’ll dive into in this post), and ultimately these costs are passed on to homeowners looking to refinance.
Mortgage rates change because of these three entities: banks, investors, and the government. Here is a little insight into each, and while all of them influenced rates higher this week, I believe lower mortgage rates are ahead. Feel free to read the entire post to educate yourself a bit on the dynamics of the mortgage industry. Above all, however, I want to encourage you to still pursue a refinance application with me as I fully expect mortgage rates to settle down after this volatile week.
Banks – Banks are the connection between you (the consumer) and the market (bond investors). Think of them as the Amazon of the mortgage biz. When banks get overwhelmed with loan applications (as they have for the last several months) they make tons of money and take longer to process loans.
This is just like Amazon, which has made record profits during the pandemic but is also taking longer to deliver items. When business activity becomes unsustainable, banks raise their rates to slow down new applications. This is why our position as a mortgage broker is so important; we know which lenders are pushing business away and which are putting their rate “on sale” to encourage more business. Unlike Amazon, mortgage banks do not hold a market monopoly, so we navigate the market to help find you the best rates and terms available.
Investors – Investors are the “free market” component of the mortgage industry, where good old-fashioned Supply & Demand influence the price of a product, in this case the rate on a mortgage. As economic conditions change, it changes the value of mortgage bond investments.
This value to an investor is the rate and “points” you pay for a new mortgage. Generally speaking, when the economy is doing poorly, investors want to buy mortgage bonds because they are seen as a safe investment. And when the economy is doing well and/or inflation is running high, investors shy away from buying so rates must go up to entice investors to keep buying mortgages.
Government – Whether we like it or not, our US government literally owns the mortgage industry. The mortgage banks and investors utilize Fannie Mae and Freddie Mac to have standardized rules for mortgage underwriting and to “package” mortgages into investments. Fannie Mae and Freddie Mac are owned by the US Government (a result of the mortgage market collapse in 2008), and their Board of Directors (US Congress) has given orders to these companies to be as profitable as possible. They are not currently acting as a public service entity (as do most government operations); instead they are for-profit organizations for their shareholders (US taxpayers). To keep up with the Amazon analogy, if you are the consumer and the investor is the market, then the government is the provider of cardboard. Sounds benign enough, but in this world there is no other manufacturer of cardboard and all packages by law must be wrapped in cardboard. So when the cardboard company sees Amazon making record profits and consumers getting record-low prices on products, they see a market opportunity for themselves. They decide to drastically increase the price Amazon must pay for cardboard, so everyone in the supply chain must also increase their prices that the consumer ultimately pays.
This precise act just happened last night in the mortgage industry (read this article if you want to geek out on the details). In short, the US Government increased the price investors must pay to buy mortgage bonds from refinance loans, which means the banks now have to offer higher rates to offset this price increase.
In my opinion, this is a dirty “cash-grab” by a government forced to bail out an economy crippled by the pandemic with trillions of dollars in stimulus money. Their announcement last night references “economic uncertainty” as a justification for the added fee, but if that’s true why didn’t this fee come into play months ago when uncertainty was at its apex, and why not apply it to purchase loans? I don’t buy their story.
Congress is having a hard time passing laws to change taxes and other unemployment relief measures, so the government instead is changing “fees” to their services (you need a law to change taxes, but not fees) to raise money. As an example, a refinance loan of $400,000 now carries an extra $2,000 fee that wasn’t there yesterday, which ultimately works its way to the government. Multiply that by the millions of loans potentially closing in the coming months, and you can quickly see the government is taking advantage of their monopoly in the mortgage market. If you like Calls To Action, the Mortgage Bankers Association has already started an effort to reverse it. Click here to read their official statement and submit a message to politicians (use my company name in the business info section).
Simply put, this week was a bad week for mortgage rates, but I think better weeks lie ahead. Our economy is still on the ropes, and uncertainty remains high. An effective Covid vaccine may never make it to the market, the current state of USPS may make it difficult to have a timely presidential election during this pandemic, and millions of Americans may remain unemployed indefinitely as certain business sectors die under the weight of Covid. I know those are sobering points, but as long as they remain potential outcomes in the coming months it will keep downward pressure on mortgage rates. If you have a refinance application in with me or hope to be submitting one in the near future, I urge you to stay the course. Don’t abort your refinance mission, as I am confident rates will remain low and trend even lower in the coming months.
On Friday, we saw mortgage rates hit their lowest levels EVER! All month long, we’ve been helping many clients refinance to rates below 3%, and we anticipate helping even more through the rest of summer. Renewed fears of another spike in Covid cases around the country are impacting financial markets, leading to even lower mortgage rates.
Since Covid first swept the globe earlier this year, life has become incredibly unpredictable. This is true also for the world’s financial markets, as companies, banks, and investors were constantly re-calibrating the economic risks of Covid.
Typically, the more uncertainty and fear around the world the lower mortgage rates go, but that was not true for most of Spring. Other factors, which you can learn more about by watching my recent YouTube videos, kept the mortgage industry particularly vulnerable to financial losses, so rates did not go into a free-fall.
Now with a second round of Covid cases all but inevitable and a volatile presidential campaign right around the corner, mortgage rates may be poised to take another dip. If you have thought about refinancing, please get in touch with me ASAP. We are helping more clients than ever refi to lower rates, shorter terms, or take cash out to pay off debt, but keep in mind not all loan scenarios are able to capture these record low rates. Furthermore, underwriting a refinance is taking longer than normal, so its important to get your application submitted to us before any potential sudden rate drops.
I look forward to the opportunity to help you navigate your options and grab the lowest rates in our lifetimes!!!
As an independent mortgage broker, I have the ability to find you the best mortgage options in the marketplace. More and more mortgage banks are making drastic policy changes amidst the new Covid-economy. Some are pushing business away to avoid uncertain risks. For example, big banks like Wells Fargo & Chase have made it harder to qualify for loans with them. On the other hand, other firms are luring in business by offering competitive rates and reasonable guidelines. That’s why its so important that consumers like you utilize the services of a broker like me; to find you the best opportunities!
Case in point…one of our top lenders just introduced a program offering unbeatable fixed rates for certain scenarios! If you have been thinking about refinancing to get a lower rate or a shorter loan term, now is the time to act. This new program is not for everyone, as it doesn’t apply to cash-out refinances or rental properties, but for many folks looking to lock in a rate in the 2s, THIS IS IT!
Watch this video to learn more about the criteria & if you think you meet the criteria, give me a call or an email to discuss further. I anticipate a high level of interest in this new program, so I will handle inquiries on a first-come basis.
Times are uncertain, so skipping a few mortgage payments sounds nice, right? Not so fast.
In response to the economic turmoil caused by the Covid-19 pandemic, Congress passed an unprecedented 2.2 TRILLION dollar financial aid package for Americans. Known as The CARES Act, it aims at relieving businesses and individuals from economic hardships, including provisions to allow folks to request mortgage payment forbearance for the next several months. Awesome, right??!! Not so fast.
The intentions of this policy were wise, as a mortgage payment is often the single largest monthly expense for households. But, the unforeseen ripple effects of hundreds of billions of dollars in delayed payments has the potential to cripple the entire mortgage industry, put homeowners in perilous financial positions, cause grave damage to the overall economy.
To explain the economics of this issue, I’ll briefly touch on lessons of history, politics, English, and zoology. I know its long, but please take the time to understand the full story and the negative consequences you and society at large may face if pursuing mortgage payment forbearance.
First, A Bit of History
On March 27th, President Trump signed The CARES Act, a package of profound financial aid to Americans. The last time the federal government swooped in to save the economy, it was 2008 and TARP (“Troubled Asset Relief Program”) was passed to primarily bail out large (ie-“too big to fail”) banks in the midst of the “Mortgage Meltdown.” There was much criticism about how big banks were saved but the “little guy” was left out in the cold, so today’s policy makers didn’t want to repeat that same formula. The CARES Act is more focused on small businesses and individuals, and includes direct cash payments as well as the option to request to defer payments for the next 6-12 months without proof of financial hardship. As long as the mortgage is backed by a government entity, the mortgage servicer must honor the request. But, what the mortgage servicer must also honor is the monthly funds owed to the mortgage bond holders. In a nutshell, mortgage companies have to keep paying money out even though money is not coming in. YIKES!
Mortgage servicers will be facing incredible cash crunches and have repeatedly asked policy makers to establish a lifeline allowing mortgage servicers to borrow money from The Federal Reserve Bank to keep money flowing through the system. Without this form of aid, the mortgage industry as we know it could die.
Next, A Little Politics
As of this writing, the most influential politician on this matter insists that government intervention is not yet needed. Mark Calabria, the appointed director of Federal Housing Finance Agency (FHFA) who directs Fannie Mae & Freddie Mac, has a track record of disfavoring the government coming to the rescue in turbulent times. In fact, he’s gone on record to say if he were in charge during the Mortgage Meltdown of 2008 he would have let the very institutions he currently leads fail! Moreover, Mr. Calabria recently estimated “2 million borrowers would seek forbearance requests by May” and suggested if mortgage servicers get in trouble they could always sell their mortgage accounts to the larger mortgage servicers. Mr Calabria is either tragically miscalculating or misinformed on both fronts.
According to the Mortgage Bankers Association, the industry already processed well over 2 million requests by early April, and this number will only increase as our economy struggles to fully bounce back from shutdowns. Furthermore, the two largest mortgage servicers in the country, Wells Fargo & Chase Bank, have established policies in the last week to drastically reduce the amount and types of new mortgage
s they are willing to take on. There is no way the larger mortgage outfits will be a backstop to these new kinds of toxic mortgages with payment forbearance. Since the payment forbearance phenomenon was not created by the free markets, the free markets are not able to be the solution. Government intervention is essential, and at this time support to mortgage companies is only being offered to loans related to VA & FHA, which is a very small minority of the overall mortgage market.
Siri, What Does Forbearance Mean?
Unless you have a Jeopardy-sized vocabulary, forbearance is not a word you use often. Oxford dictionary says its “the action of refraining from exercising a legal right, especially enforcing the payment of a debt.” Simply put, forbearance does not mean forgiveness. Mortgage companies may temporarily refrain from collecting your payments, but they won’t hold back any longer than legally necessary, and likely won’t play nice when that time comes.
Survival Instincts Will Take Over
With inevitable liquidity issues and no sign of an immediate parachute from the federal government, mortgage servicers have impossible decisions ahead of them. Sadly, I believe this will force mortgage servicers to avoid favorable forbearance agreements at all costs. They will only play as nice as necessary to follow the law, but be ruthless otherwise. If you went through a short-sale or loan-modification process during the last housing recession, you know exactly what I’m talking about.
For example, there are no rules that govern when these deferred mortgage payments are re-paid. Even this video from the Consumer Finance Protection Bureau is vague. Potential options your mortgage servicer may offer: 1.) tack the payments on at the end of the loan; 2.) spread the missed payments over a period of time; or 3.) demand the payments be made in a lump sum.
What would you do if you ran out of cash and someone was overdue on a loan due to you? You’d force them to play catch up ASAP, right??!! Its not greed. Its not nasty. Its survival.
Mortgage servicers will do the same thing, forcing a homeowner who skipped payments at, say, $2000/month for 3 months & now pay $8000 in a lump sum in the 4th month. Obviously, most folks who truly need the payment relief in the coming months likely won’t be in a position to make a single catch-up payment, but tragically mortgage servicers are not in a position to float millions of skipped payments over the next few months and then patiently wait for reimbursement at the end of a 30-year loan. They have been backed into a corner, and will use any means necessary to try and survive.
I remain optimistic that policy intervention and clarity will eventually calm this situation down, but until it does every mortgage servicer is in a choke hold.
What Should I Do?
If you have suffered a big economic loss and cannot make your mortgage payment, by all means call your mortgage company and request payment forbearance. Yes, this may mean you are forced into a lump sum payment at some point, but that is tomorrow’s problem. You have bigger problems today; take the payment relief and hope repayment options are more favorable when you’re back on your feet.
BUT, if you are still able to make your mortgage payments, please continue to do so. Consider taking advantage of the delayed tax filing deadline (extended 90 days to July 15th!), but don’t delay making your mortgage payments unless absolutely necessary. Staying out of forbearance will allow you to keep your options open for refinancing if rates slip down (forbearance generally disqualifies you from getting a new mortgage) & will help you avoid a build-up of payments that will likely need to be paid all at once in the future. It is not only in your best interest, but also in the best interest of the mortgage industry and our country at large. If too many borrowers utilize payment forbearance, the mortgage system could face catastrophic failure that would result in a housing crash worse than the Mortgage Meltdown of the late 2000s.
Spread The Word, Not The Virus
Please pass this post along to as many friends and family as possible, and do your part to encourage folks who have been considering mortgage forbearance to know the full story. In the meantime, stay safe, stay inside, and stay sane!