Category: Mortgage

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.

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.

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!!!

Have a Happy & Safe 4^th of July!

OUR LOWEST RATES EVER!

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.

 

We are living in a generational-defining moment. How we cope and change amid this COVID-19 pandemic will define humanity for years to come. While I hope we bounce back quickly, I fear we have a long road ahead; medically, socially & financially. Even then, “normal” will have a very different feel compared to life before the pandemic.

On the economic front (the only front I really should dip a toe into on this blog), each week in March has seen unprecedented events, only to be outdone the very next week. It has truly been MARCH MADNESS!!! Mortgage rates, for example, hit their lowest levels ever on March 6th, but then saw rates climb faster than any other time in recent memory on March 13th. Then on March 19th, The Federal Reserve Bank began injecting a record amount of funds into the mortgage market to stabilize rates. Their intervention had positive effects for standard mortgages, but this week we are seeing irregular mortgage products (ie – Jumbo loans or alternative documentation loans) essentially vanish from lender’s rate sheets, terribly reminiscent of the 2008-2009 “mortgage melt-down” crisis.

It has been an astonishing roller coaster ride, & I’ve been recording short videos in recent weeks to keep clients up to date on these mortgage market developments (click here for the YouTube Playlist).

Today’s video (see below; complete with fun green-screen effects!!!) is a recap of some of the latest developments, most notably this week’s jobless claims and stimulus package details, and also a forecast of what to look for in the days and weeks ahead.

Here’s why I feel this is important insight for my clients. Over the last 40 years, every US economic recession has forced mortgage rates lower. Many folks argue COVID-19 will push us into a recession; how could it not!!?? This week’s unemployment claims figure of 3.3 million is nearly 5 times higher than the previous high, and our government is poised to pass a 2+ trillion dollar stimulus package, which may stop the bleeding but it alone will not turn the tide on this crisis. It’s very possible mortgage rates will push lower in the near future, so as a community we should be prepared for that opportunity.

But it’s not as simple as saying a recession automatically leads to lower mortgage rates. The mortgage market has tremendous hurdles currently facing it that could push rates higher. Either watch today’s Mortgage Market Video here, or keep reading below:

 

• RISK of buying mortgage bonds has increased dramatically – With millions of people being laid off each week with no end in sight, investors of current mortgage bonds are worried about higher delinquency and foreclosure rates. This withers away the value of their current investments, and makes them leery of purchasing more new ones. If you got food poisoning from eating at a particular restaurant, would you go back right away? That’s the dilemma facing mortgage bond buyers at the moment, and rates have to go up to lure them back.
• Lenders are UNCERTAIN if they can sell new mortgages for a fair price – when we start a loan with you, we lock in the rate upfront with a bank. That bank has to then guess what the value of that mortgage will be on the open market when we close in 30-45 days. This is known as “hedging,” and the more volatile the market the more expensive it is for the banks to hedge. With unprecedented market swings, banks are spending a ton of money hedging their bets, and this cost gets passed on to you via higher mortgage rate offerings.  Some lenders are suspending locks until loans are underwriting, creating further problems and uncertainties for banks and borrowers.
• Most lenders will have CAPACITY issues to handle a big surge of refi applications – With the unknowns of today’s economy, most banks are not looking to hire new staff. But, if mortgage rates drop dramatically they’ll need more staff to handle all of the new refinance applications OR take much longer to underwrite files. To keep a “governor” on the speed they receive new applications, banks may keep their rates artificially higher even though normal market conditions would suggest rates should be lower.

Due to RISK, UNCERTAINTY & CAPACITY issues, the current market requires a different game plan. In years past, if mortgage rates suddenly dropped I’d call as many clients as possible to jump on a refi application. In today’s environment, however, we have to be more pro-active. We need to have an application in place BEFORE the rate drop. Doing so allows us to serve more clients during those short windows when mortgage rates fall. And doing so gets you ahead of everyone else who is sitting on the sidelines. If your application is in & the underwriter has approved it, you’ll be in the front of the line for record low mortgage rates.

Will mortgage rates fall below 3%? I don’t know for sure. If the last few weeks have taught us anything it’s that nothing is for certain, but I’d like to spend my time & talents helping you to prepare for such an opportunity. If you’d like to discuss further your potential refinance goals, please get in touch with me. We’ll lay out a game plan, whether it be for a low rate, cash in your pocket, or a big reduction in your monthly payment. Let’s prioritize goals, gather needed application documentation, and work together to stay apprised of mortgage market developments.

Stay safe out in this world, and sane inside your cozy home!

 

The last two weeks have been filled with dramatic headlines about our financial markets and global economy. The Fed had an emergency meeting, stock trading was halted for a brief period, and US government bond rates hit record lows. The markets have been in “panic” mode.  I’ve always said  mortgage rates improve when there is bad news, so mortgage rates are surely in a  free-fall, RIGHT???

In short, no. Mortgage rates don’t tend to move as quickly as other markets during extreme swings. For example, the rate on 10-yr US bond rates fell .42% last week while 30-yr mortgage rates fell only .08%. There are a number of reasons for this inconsistency, but the point worth making here is that mortgage rates are not in a free-fall…yet!

I believe mortgage rates will fall further in the near future, and last week’s volatility is a clear reminder of just how fragile our economic markets have become. We have spoken to a ton of clients in recent days, and most are deciding to wait for lower rates before taking action. I think this is a wise move for a number of reasons.

First off, significant mortgage rate declines tend to lag behind other market movements. If the world economies and governments continue to grapple with the spread of Covid-19, it will give mortgage rates a chance to “catch-up” and fall further.

Secondly, I believe the financial markets are fatigued and vulnerable to further volatility. Much like a heavyweight boxer in the twelfth-round, it doesn’t take much of a hit to knock out an exhausted fighter. The US Stock market has been on its longest “bull” run in history; it can’t go on forever. The recent market hysteria over the Covid-19 fears and of a potential price war in the oil markets prove it doesn’t take much for the current markets to get scared. I strongly believe the world’s financial markets are “on the ropes,” and the next knock-out punch will be coming soon.

Finally, it rarely pays off to chase markets. A few lucky clients did lock in great interest rates last week amidst the crazy market swings, but most of them had already been in previous conversations with us about a transaction. Thus far this week we’ve seen the markets “rebound” and give back much of the rates drops experienced last week. Rather than regret the missed opportunity of chasing last week’s market, I would advise everybody else to get ready to pounce on the next opportunity.   Luck favors the prepared, so begin discussions with us now about potential refinance goals. Doing so will allow us to monitor the markets for your particular situation, and swiftly act when the opportunity presents itself.

Please give me a call or email so we can set up a 10-minute phone appointment. I’ll be working nights and weekends as needed in the coming weeks, so I look forward to finding a time and method to communicate with you soon.

The stage is set this week to be an incredibly volatile one filled with newsworthy headlines.  These stories could have huge implications for mortgage rates.  Generally speaking, mortgage rates fall when economic indicators are sluggish or uncertain.  This week’s scheduled events could make markets very nervous and, depending on the outcomes, push rates lower.

Here is a list of stories in the making this week:

December 10^th – The World Trade Organization (WTO) will cease to operate.  This multi-lateral trading system underpins 96% of global trade, but our American government has put a block on appointing new judges.  Two judges are retiring this week, so there will not be enough judges to hear new cases. While this event has been in the making for months (if not years), its significance is noted, especially given the rising trade war tensions around the world.  With no “sheriff in town,” the “gun-slinging cowboys” of global trade may feel brazen to impose stiffer trade rules and costs.

December 11^th – The last Fed press conference of 2019.  After two back-to-back rate reductions in the Federal Funds rate, most analysts are expecting The Fed to not take any action in this week’s meeting. However, what they say in their press conference could have ripple effects through the world’s financial markets

December 12^th – British election that will shape the fate of Brexit.  A special election is being held on the hope that the Prime Minister’s party will win majority in their parliament.  If that takes place, the Conservative Party’s agenda, which includes a quick exit from the European Union, will forge ahead more swiftly.

December 15^th – New round of tariffs set to take effect on $160,000,000,000 of Chinese goods (that’s a lot zeros!!!). With no sign of a written trade agreement between the two biggest economies on the globe, it is possible the next round of scheduled tariffs on Chinese imported goods will take effect.  While prior tariffs have targeted production materials, this tariff will directly apply to finished Chinese goods sold in America, including cell phones and other electronic and household products.  With less than a week to go, it is still uncertain if this latest tariff is a threat or a promise.  Its anybody’s guess how the next few days will play out in the financial markets, and its by far the most important story to follow in the coming days.

Indeed, uncertainty is high, and I think there is potential for mortgage rates to fall in the days ahead.  Peek back at my August and October blog posts that share my thoughts on these story lines in the past, and give me a call if you want my forecast on whats ahead.