The best news last week came on Wednesday when the DTI Loan Level Price Adjustments, or LLPAs were rescinded! The FHFA had a rule in place that was due to start August 1st 2023 that would issue loan level price adjustments an all loans delivered to Fannie Mae and Freddie Mac with debt to income ratios higher than 40%, which let’s be honest is the majority of conventional loans submitted these days. This DTI LLPA was actually supposed to be released earlier in the year, but was delayed due to severe industry and political pushback once it was announced months ago.

Put this into context, this would have come at the heels of the May 1^st credit score loan level price adjustments that just went into place. It is possible that the credit score LLPAs could suffer the same fate? Absolutely. Why is that? This credit score loan level price adjustment is equally as unpopular at the DTI LLPA that just got rescinded (if not more so). Additionally, there is still some doubt that it was brought to the market in the appropriate manner in order to be made a rule, but that will have to be left to the lawyers. We’re watching this story develop in the event that it might get rescinded as well even though it would have to be done retroactively.

Also last week the year-over-year CPI (consumer price index) came in at 4.9% just below the projected rate of 5%. The month over month CORE CPI came in at 0.4% just over forecasted 0.3%. IN summary, the short-term reading came in just a tad higher and the long-term reading came in a tad lower. Does this mean that inflation has finally met its match? or does this mean that there is still more room for the Fed to increase their key interest rate at the next meeting and then take yet another pause?  If we look back at the last Federal Reserve press conference on May 3rd, Jerome Powell said their future decisions would be “data dependent,” and these two measurements right here are two of the measurements they will be depending on for sure.

…

So what does that mean for mortgage rates Andy?

Mortgage rates this week trended sideways as we have been telling you they would during times of uncertainty and lack of definitive direction in rates. The highs and lows this week in rates were very close together and there were no volatile swings to the high end or the low end on any day of the trading week and it should be no different this coming week.

In the local marketplace we have seen the resurgence of buyer interest, buyers outbidding one another, sellers pulling back their concessions – and we even had a client this week whose offer was accepted over 30 other buyers. Which means there are still 29 remaining buyers just in this one instance out looking for homes. This kind of demand is always contingent on the price of the home, neighborhood, amenities, etc. however, the point here is that the buyer leverage that we saw at the end of 2022 and beginning of 2023 is all but gone and the market sentiment has flipped back to sellers having the upper hand. We’re staring to see deals come together where sellers do not have to offer concessions in order to sweeten the deal for potential buyers, and now buyers are back to resetting their expectations on how to get their offer accepted above all others.

…

Here’s a quick look at what we’re watching in the markets this week:

Monday: Empire state manufacturing index

Tuesday: Core retail sales / retail sales

Wednesday: Building permits and Housing starts

Thursday: Unemployment claims

Friday: Fed Chair Jerome Powell Speaks

We should also note that the remaining fed members are speaking throughout the week at various events, and it should mostly be the same prepared commentary and remarks about the economy and banking stability that we’ve been hearing as of late.

Since there are no policy decisions expected or earth shattering, it could actually be a calm week.

And that’s it for this episode. Let us know how we can help you win in mortgage and real estate!

…

Thanks again for tuning in to Monday Mortgage Minute.

Remember to like, subscribe and turn on notifications so you see this show right when it posts each week.

Share this video with someone you care about so they can WIN in mortgage and real estate in 2023.

We’ll see you again next week!

Last weeks Fed rate hike decision and press conference was mostly what we were expecting. Jerome Powell and the Federal Reserve increased their key interest rate by 1/4 percent which takes their new target range to 5.00% to 5.25%, which is in line with exactly what they said their average terminal rate of 5.1% would be in 2023…this essentially gets us there.

After issuing their decision and prepared statements Jerome Powell took several questions from reporters. A few instances he was talking out of both sides of his mouth saying that he believes there is still the possibility of a soft landing, while at the same time stating that the risk of inflation continuing at the same time unemployment rising is still a threat to the plan. The problem with answering one question a certain way to a reporter, and then answering that same question a different way with another reporter just a few minutes later causes confusion, and uncertainty which leaves us all feeling a little bit directionless. And that’s exactly the main takeaway from last week’s Federal Reserve press conference: I think they’re directionless.

You can’t come out and say the banking system is “strong and resilient” 2 days after another massive bank failure (First Republic Bank), then admit you had to make exceptions of current rules in place in order for JP Morgan Chase to acquire them. And it all happened over the weekend, so that on the reopening of business on the following Monday, depositers could access their accounts. (Noticing a pattern here?). Oh, and also, “Strong and resilient” isn’t how I would describe the system that the FDIC, the Fed, and the Treasury have all had to step in an assist, change rules for, and make back room deals with, in the face of imminent failure of really large banks. But sure keep telling the public “Strong and resilient” …sounds to me like this term will be the new “transitory”…where’d that theory go?…

At least they admitted that they have seen substantial slowing in the business and personal credit sectors, including real estate. This brings into question what will happen at the next meeting, and the meeting after that? The industry at large is left to sift through any clues and hints of what might be next day by day, and week by week, until there is a defined direction set forth by the markets as a result of fed policy making.

…

So what does that mean for mortgage rates Andy?

The Fed being directionless, means that the mortgage industry could probably become directionless for the duration of 2023. Will we see more strict lending, or an ease in lending? Will the Fed’s next meeting help or hurt the rate markets? Outside of an actual need to move, where will more listing inventory come from? Can we avoid mass foreclosures since homeowners can sell their house and access their equity if they are in personal financial duress? Doesn’t the resurgence of homebuying that we’re regionally seeing indicate that the price correction has run it’s course? There’s a lot of questions up in the air right now. Yes, these are always questions that we ask ourselves in mortgage and real estate; However, when there is so much broad uncertainty at the macro level these types of things become much more localized and hypersensitive in the micro markets of major cities, and San Diego is no exception.

And what about interest rates? You already know they’ve left us to our own devices since they stopped purchasing billions of dollars of mortgage backed securities that were keeping rates at historic lows for a very long time. Since they backed off their buying program, you all have seen rates, they rose and rose and rose, then stopped, came down from their most recent highs in the summer and fall of 2022, but have mostly sputtered around in 2023. And that’s what we should expect between now and the Next Fed meeting in June. Rates will continue to react positively or negatively within a tight range while we remain generally “directionless” economically. Just last week alone, rates declined Tuesday the day before the Fed meeting, declined Wednesday the day of the Fed meeting, wrestled around sorta stuck in place on Thursday, and BACK up again on Friday to where the whole week began. Which essentially leaves us exactly where we started off – AND ON A FED RATE DECISION WEEK. As a little dose of extra nerdiness, this week’s 10y yield (which mortgage rates closely follow) traded in the EXACT same price range as it did the week of the PREVIOUS Fed Meeting back on March 22. Interesting…)

…

If you are looking for any hints in the marketplace this week keep your eye on CPI that comes out on Wednesday and PPI that comes out on Thursday. Both readings will give us a sense of the most recent month over month and year over year inflation readings and it’s expected that they come in at or below their forecasted numbers. There is no big surprise if they do, but given how big last week was due to the Fed meeting, this week will be light on impactful news, at least for now. That being said we always keep our eyes on the markets and watch for anything unexpected that could cause disruption. Right now it’s BOTH eyes open…ALL THE TIME!

 

…

Thanks again for tuning in to Monday Mortgage Minute.

Remember to like, subscribe and turn on notifications so you see this show right when it posts each week.

Share this video with someone you care about so they can WIN in mortgage and real estate in 2023.

We’ll see you again next week!

The fiery comments of disdain over the new Fannie Mae and Freddie Mac fee structure continued into last week as we are now at the May 1st juncture where these new fees will take place on all conventional loans. In case you missed it, there are new higher fees imposed on borrowers with credit scores of 680 and higher, and lower fees imposed on borrowers with credit scores of 680 and below.

This is an effort to even out the cost to borrowers, at least on paper, but what its doing mathematically is charging higher credit worthy borrowers MORE than those with less than stellar credit. Yes, borrowers still have to qualify in underwriting in order to purchase or refinance a home, and now once you do you will get fee-ed accordingly.

The only hope for this to reverse course is for it to suffer such scathing public backlash that they have their arm twisted to roll it back. Unless there’s enough political pressure or public uprising, it will land in the hands of the industry on it’s own – whom are already up in arms and loudly, very loudly, telling the FHFA how BAD of an idea this is. There’s already petitions circulating around the internet calling for the reversal of this fee structure, but as for now, we’re rolling…and until people really start to see the inverse impact it makes, the powers that be don’t have to do anything about it. Great!!!

…

Last week consumer confidence was lower than projected but fine, Core PCE came it exactly as expected so no surprise for the better or worse there…but the Biggie was Advanced GDP…this came in VERY weak at 1.1% vs. 2.0% projected. This is evidence of market pain upon us. Please remember, the Fed said we needed to see “below trend” growth in order to know they’re making progress in their fight against inflation. So now, after 13 months of raising rates, there’s become ENOUGH pressure to make GDP slump to a figure low enough to make them now calculate how much longer to leave their current rate in place where it’s at before ratcheting it back down.

Watch, just watch, at the next fed meeting and press conference this Wednesday, May 3^rd you’ll hear Jerome Powell mention “below trend” GDP as a reason for them to come to a pause soon, even if they don’t actually pause this week. With that being said, keep your eyes open for a possible rate hike of 0.25% this week in what could be the finale to the fed tightening we’ve all been experiencing since March of 2022. Next they will turn our attention to unemployment – remember that needs to get to 4.5%, and then they’ll tell us about price stability again. These are all the hallmarks of driving down inflation back to 2% by 2025. Yup, they’re still calling for it it 2025.

…

Here’s what to look for this week.

This week is really all about the Fed. Yes, we will have job openings data, employment change unemployment rate and all that, but let’s be real – EVERYONE’S WATCHING THE FED OKAY!?! Wednesday May 3^rd the Fed Funds rate will be announced and it’s only gonna be 1 of 2 things: a quarter percent 0.25% rate hike, or a pause. That’s it. There will be NO rate cut this meeting.

…

So what does this all mean for mortgage rates Andy?

Mortgage rates continue to bounce around while we digest a lot of jobs and employment data, but what will really move the markets this week is Jerome Powell’s prepared statement at the Press Conference, and the answers he gives reporters during the open Q & A. If you’re locking your loan this week I recommend you see what happens Wednesday during the press conference and then go from there. You’re likely to see a lot of neutrality prior to that meeting and my bet is that rates will be better 1 of the days near the end of the week and most likely sputter around otherwise.

And that’s it for this week. let us know how we can help you win in mortgage and real estate!

…

Thanks again for tuning in to Monday Mortgage Minute.

Remember to like, subscribe and turn on notifications so you see this show right when it posts each week.

Share this video with someone you care about so they can WIN in mortgage and real estate in 2023.

We’ll see you again next week!

Nothing dominated the mortgage and real estate space more last week than the proposed loan level pricing adjustment program that would charge loan applicants with better credit scores and larger down payments a higher fee than those with lower down payments and lower credit scores. Essentially an inversion of responsible personal credit strength and large downpayments.

When this came out last week the entire industry turned its focus 100% to this topic in what is essentially loan level price adjustments that negatively impact borrowers with higher credit scores compared to lower credit scores.

Under the new rule high credit borrowers with scores ranging from 680 to above will see an increase in the cost to deliver a mortgage to Fannie Mae – Understand, this fee is passed on to borrowers, not absorbed by the market.

These new credit score ranges make some before after comparisons tough to swallow if you’re a borrower with above 680 credit, and more than 15% downpayment in hand.

Without overburdening you with the nuances of the details the overarching take away here is that they are attempting to even out the cost to deliver loans to them across the spectrum of applicants based on credit score, which in short means it will cost less to deliver a loan to them if the borrower has a qualifying score below 680 and it will cost more to deliver a loan to them if the borrower has a credit score above 680.

This is only conventional loans. Unless noted otherwise FHA, VA are excluded from these adjustments.

Some of you may remember that during the refinance heyday just a few years ago there was a pricing adjustment added to every person doing a conventional refinance based on what their loan to value ratio was and the type of home, ultimately this was a penalty imposed on the homeowner for refinancing their property for better terms, a lower rate, during the time when by the way the Fed was buying billions of dollars of mortgage-backed securities and in the end the entire industry knew it was just a cash grab on homeowners trying to advance their personal financial position. Why am I mentioning this? I’m mentioning this because once again you’re having a agency imposed fee structure placed upon people who are responsible in order to shore up their coffers at the expense of those same people. No matter where you lie in disliking or liking this program, looking back at other similar program changes like this, they were eventually rescinded or reversed due to unpopularity, illegality, or industry pressure.

Expect that this will be the same in the weeks and months to come. As there are new changes and new details emerge about how this will impact borrowers, we will of course let you know.

…

Here’s what to look for this week.

On Tuesday we get the consumer confidence reading and we’re hoping for this to be a positive reading because two weeks consumer sentiment was good so there’s no reason this should be any different. But over the course of time we’re going to probably see consumer confidence get weaker as the Fed continues to fight inflation.

On Thursday we will have the advanced GDP reading and unemployment claims both of which are going to be looked at very carefully by the markets to determine if we are making progress against sustained high inflation.

Friday, Friday is the important day this week! Core PCE….the FEDS FAVORITE READING TO gauge their success (or struggle) with inflation. I’m personally expecting it to be AT or below the projection of 0.3%, man I really hope it is.

…

So what does this all mean for mortgage rates Andy?

Mortgage rates continue to bounce around within their recent highs and lows with no breakout for the higher or lower definitely. As I’ve stated before, when there is wild uncertainty, you have to stay on your toes and closely connected to your loan office so that on a day when rates take a dip you can snag that “lower on the day” rate.

Let us know how we can help you win in mortgage and real estate!

…

Thanks again for tuning in to Monday Mortgage Minute.

Remember to like, subscribe and turn on notifications so you see this show right when it posts each week.

Share this video with someone you care about so they can WIN in mortgage and real estate in 2023.

We’ll see you again next week!

Here is a quick recap of what went down last week.

Needless to say, last week was really good, in the bad kinda way…which is still good!!!!  Here’s what I mean.

Wednesday the CPI numbers came in just below what was expected which means we could actually be seeing the beginning of the flattening of inflation that’s required before a REVERSAL in inflation. This is a welcome sign right now.

The PPI numbers came in lower than expected and THIS TIME had the negative sign before the number. For those of you who have been following our inflation talk and it’s impact on rates, you know that we need to see negative PPI numbers in order to see negative cpi numbers which eventually will help bring reduced rates back to the market…it just takes time. THIS was a really good PPI reading!

The Federal Reserve’s Meeting Minutes were released and this is when we found out that everything was pretty much as Jerome Powell delivered on March 22. No big changes in the notes means that he was pretty upfront and transparent during the press conference about what the Fed’s plans were BEFORE the SVB failure, and what they have to adjust POST SVB failure in order to accomplish their goals while also shoring up confidence in the banking systems stability.

Friday The retail sales data was worse than expected and contraction in this sector was already the base expectation. This is where the rubber meets the road. Consumers spending less money pulling back eventually causes prices reductions at the retail level which thus reduces inflation. This is what the Fed wants to see. Even though they have to say things like “easing in consumer spending” what that really translates to is “we need to see y’all make retail sales go negative for a bit”

But despite retail sales figures coming in negative, the preliminary consumer sentiment was higher than expected.  So we have Consumer inflation possibly cooling, producer inflation going negative, retail sales in the negative…but sentiment is up?….weird right?

…

So let’s quickly cover what coming up this week: Comparatively, it’s going to be like a mini-vacation.

Monday is the Empire state manufacturing index

Tuesday we get Building Permits & Housing Starts

Thursday Unemployment Claims & Existing Home Sales come out

Friday Flash Manufacturing PMI & Flash Services PMI

…

So what does this all mean for mortgage rates Andy?

Mortgage rates continue to show signs of getting better, but bit by bit. People who are ready to strike while the iron’s hot are actually seeing their offers get a good solid look with sellers, and those who are willing to sell are still getting the price they want because some of the cost of borrowing money has eased since the highs of Summer and fall of 2022.

The limited economic data coming out this week means the market is expected to function with minimal interruption that could uproot this most recent progress. In general though, please remember that we are still in what we call the “needs-based market”. If you are unsure what you should be doing over the next 12 to 24 months with your property, please let us know when we can discuss this with you to create a game plan that best suits your family’s personal financial needs.

Wherever we can help you win in mortgage and real estate we want to help you win. We want you to feel confident about your financial future when it comes to your mortgage options and your real estate holdings. Tell us how we can help!

…

Thanks again for tuning in to Monday Mortgage Minute.

Remember to like, subscribe and turn on notifications so you see this show right when it posts each week.

Share this video with someone you care about so they can WIN in mortgage and real estate in 2023.

We’ll see you again next week!