The Mortgage Heroes Podcast Episode 12 – Bank Failures, we have to talk about this #bankfailure

It’s hard to believe that we’re talking about bank failures AGAIN! I thought we already did this “once in our lifetime”? But now, it’s not Mortgage and Real Estate to blame…so what should you know? How does this impact mortgage rates? Will the Fed change their gameplan? The risks are becoming more and more known by the day, and this episode reveals what we really think having had a front row seat to the troubles of the past.

Monday Mortgage Minute – The FED MUST GET THIS RIGHT! #rates #thefed #inflation #economy

Before we jump into all of the economic expectations for the coming week we have to address all of the recent bank failures and the list of banks that are under financial stress and duress due to the most recent bank runs. At this point you have probably seen numerous news pieces about this as well as online videos and articles highlighting the potential risks that the United states banking system is under because of a variety of reasons. Not all of these threats to the system are equal because not each bank has the same type of risk at the same rate of risk.

The primary take away that I want everyone who watches this show to have is that the mortgage industry is connected to the banking industry, the Fed, the treasury, in a very specific regard as it relates to lending to residential real estate, and is more of a sidecar to the main show rather than the culprit. This is a stark contrast to 2008 and 9 back when mortgage and real estate were the primary catalysts with too easy lending standards, wild financial products, improper investment ratings of products and institutions, just to name a few of the issues. And more than anything else what I want you to know is that the current state of affairs when it comes to banking in the United states has very little to do with risk associated to residential real estate and mortgages at this time.

You should also know that we are out of the woods yet because every day we wake up to new news and information that was unknown the prior day. As more and more information unfolds it alters and changes the context for which we assess the forward-looking risk the banking system, which then impacts the type of backstops or bailouts the government and the Fed need to come up with in order to prevent all out collapses.

I have to admit, the solutions for the SVB bank run were astonishingly quick and did have a very familiar sense to it because it was handled over a weekend much like some of the other bank takeovers were back in the Great Recession of 2008 and 9. Again although there are much different reasons for why this happened, but the swiftness for which they backstopped this failure felt very familiar. My hope moving forward would be that other banks looking on would not continue to run high risks in the hope that they will also receive some sort of backstop if it goes too far and works against them, however this move to backstop SVB bank as quickly as they did signals that it is OK for these banks to overleverage, under regulate themselves, and do that all without consequence to their business.

Let’s quickly recap what went down in the data last week and talk about what’s coming next.

All the CPI news from Tuesday last week spells bad news for the fed because they were all pretty much what we expected…remember we need these to be going DOWN, not hitting their mark. Hitting the mark means that there is more time we have to wait before prices retreat and actually begin to decline.

All the PPI data last week spelled goods news because they ALL MISSED TO THE DOWNSIDE meaning that they were softer than expected…this is good news because easing on the producer side of things signals that we can eventually expect easing on the consumer side, but only more time will tell when that will be.

And once again the Empire State manufacturing index came in super weak WAY WORSE than expected and will remain a trouble spot for our economy for the months moving forward because of the variables that impact this reading becoming worse thus undermining this data each month. If we continue to see weakness in manufacturing, that sends ripple effects throughout dozens of industries connected to getting products made, out the door, delivered to their destinations, and purchased by businesses and consumers. It’s like the first domino in a string of 12 dominoes…when the first one tips eventually all the others do too!

Both Building permits and housing starts came in way better than expected which is a bright spot for housing in particular because we need both permits and housing starts to move in the same direction and provide more inventory for an extremely tight housing market. Above all other news last week this one is definitely going to carry us through 2023 into a more positive 2024 as it relates to real estate and mortgage specifically.

Preliminary consumer sentiment, and preliminary inflation expectations both came in well below expectations. This is bad when it comes to consumer sentiment but it is good when it comes to inflation expectations. We would like to see the consumer feeling confident about the market but the fact that they have a lower reading than was expected indicates that the reality of prices becoming more and more entrenched is souring to the consumers feeling about the economy. This is also is reflected in the inflation expectations being lower than expected in the sense that people see some prices flattening which also signals that there is potentially a top being met.

Despite all this information that came out last week, really everyone’s attention was on bank failures and other bank potential failures. In a week prior to fed meeting, this information would have been considered much more heavily than it was because it got caught in the deep long shadow of the systemic weaknesses of the banking system coming under heavy heavy scrutiny.

And now this week all eyes are on the Fed again, but not for all the reasons we thought just a few weeks ago. Instead of Jerome taking the podium to announce a rate hike as well as make a statement then take questions strictly from the economic data and monetary policy discussions they have over their two day meeting, they have to very carefully and narrowly weigh how much of their time spent in front of cameras will be dedicated to addressing bank confidence and how capable they feel our system still is.

Do not get this mixed up, this is a really big distraction for them. For months they have been talking about inflation needing to come down to 2%, they have been talking about needing the labor market to “soften” which means more unemployment, they’ve been talking about restoring price stability to the markets, and now the big albatross around the neck of the Fed has everything to do with bank stability and Americans confidence in the banking system. They absolutely did not need this distraction.

What I’m looking for next week is to see how much of their time in front of camera is spent addressing their longstanding goals versus what they feel they need to address to restore confidence to the American population that their money will be safe in the institutions that have come under duress over the last two weeks. This will be a very critical meeting for the Fed to do 100% accurately otherwise this will signal they are actually way more worried about the system than they are leading on, and therefore abandoning the other issues that they have been telling us are there primary concerns for nearly a year. They HAVE TO GET THIS RIGHT.

So what does all this mean for mortgage rates Andy? You know after being in this industry for close to 18 years now I have to say that we will probably experience the most wild, most volatile moves in mortgage pricing this week than we have seen since the initial COVID lockdowns that happened and the Fed dropped rates all the way to 0% overnight, and of course the actual Great Recession financial collapse of 2008 and 2009.

There is just no other way to look at everything happening right now in this exact snapshot moment in time and say that we will have smooth sailing ahead, everything will be easy-peasy, and that we should not expect volatility this week. This will likely be one of the most Volatile weeks we will see this entire year barring any other unexpected surprises of course which right now I can’t even confidently say we’ll avoid given all the things being uncovered.

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 Mortgage Heroes Podcast Episode 11 – Reverse Mortgages to the rescue!

Everyone’s starting to talk about reverse mortgages and it has a lot to do with 2 primary factors, elevated “forward mortgage” rates and historic home equity that’s accessible for those eligible for a reverse mortgage.


Remember last week when Andy said that there were two big, REALLY BIG things happening?….Jerome Powell AND Jobs!

First off, Jerome Powell testified in front of the Senate Banking committee Tuesday March 7th and Wednesday March 8th . He pretty much sounded like he was reading off the same set of notes from the last Fed Press Conference. He said things like – We will have to hold rates higher than initially expected, for longer than expected and sustain them until we see inflation returning to the 2% target…I mean how many months in a row is this going to continue?!?! I get it, they’re not making traction in the ways they need to, and he’s not gonna reveal any new secrets prior to the meeting coming up next week, but man, the repeated canned commentary is just not helping inspire confidence that we’re heading in the right direction.

Second was Labor and Jobs

  • JOLTS continues to be bipolar month after month. North of 11 million one month, then below 11 million the next…then north of 11 million again, and back below 11 million…In my opinion, It’s way too unpredictable to continue as a major variable in Fed policy moving forward. {shrug} But what do I know?….maybe they have a job opening coming up 😉
  • ADP Non-Farm Payroll came in super-hot, well above the forecast and even the previous moniths number. So even though we want there to be more job growth like this is indicating, the Fed wants more UNEMPLOYMENT in order to squash demand so that people will stop spending money at these elevated levels. It’s the ONLY WAY inflation has a chance at returning to their target.
  • Unemployment wes higher/lower than expected. Again, this reading has the Fed’s attention as it relates to the future because of the aforementioned “demand destruction” strategy.
  • average hourly earnings were better/worse than expected but what’s most important is the long term readings COMPARED to inflation. If hourly pay can keep up with the elevated costs, then the problems for the Fed persist as wage earners are able to cope with sustained high prices.

This week, the most important things happening are all coming at us like a firehose. THIS IS the week before the next Big Fed meeting and rate announcement, so this data will all be considered vital leading up to the March 22nd Fed Rate announcement.

Tuesday starts us off with: Month over month CPI, year over year CPI and the Fed favorite – Core CPI

Wednesday we get month over month PPI, month over month CORE PPI,  month over month CORE retail sales, and month over month retail sales…But wait! how could there be more?  The Empire state manufacturing index ALSO comes out, which we thought wasn’t a big deal last month but turned out to be a really bad sign for the markets. Wednesday is a big one.

Thursday we’re watching Building permits and housing starts closely hoping for positive readings in BOTH of those. Unemployment also comes out and has been pretty erratic lately and in contrast to what the Fed wants to see happening.

Finally, Friday we have preliminary consumer sentiment, and preliminary inflation expectations readings. It sure would be nice for both of these to reflect some sort of positivity coming into the week before the fed rate announcement. The markets and the economy at large could use some good news right about now.

So what does all this mean for mortgage rates Brian? You can expect mortgage rates to be flying around all over the place this week. With SO MUCH data coming out AND it being the week before the big fed announcement, you should not expect this week to be smooth sailing.

Weeks like this are where your preparation, communication, and execution all work in your favor. If you have a lock a loan this week, you should stick REAL close to your loan officer and be ready to strike IF and WHEN rates take a midday nosedive.

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 Mortgage Heroes Podcast Episode 10 – Equity declines $2.3 Trillion after reaching all time high

A recent report estimated the national residential home equity total was $47.7 trillion in June 2022, but but the end of 2022 that total declined to $45.3 trillion. There’s no reason to freak out though! In this episode we talk about what’s going on, why this is happening, and what people should do!

Monday Mortgage Minute – Jerome Powell & Jobs take the stage this week

As I mentioned, last week was going to be a bit light, yet there are still a few things we need to keep aware of:

Monday February 27th Pending Home Sales had a pretty low forecast of 0.9%, but came in REALLY hot at 8.1%. This is a great print on the surface, and we’re going to want to see more of this month after month in order to generate confidence that there is a trajectory change in this report through the rest of the year. And remember, this is just 1 great reading…we’ll need to string these together for a while to really make our confidence concrete.

Tuesday February 28th consumer confidence came out well below what was expected. It was 102.9, and anything over 100 is considered good. In this case the expectation was 108.5, so a 102 print isn’t that great, but not all hope is lost…quite yet.

Wednesday March 1st the ISM Manufacturing PMI came in just about as expected and made very little difference in the markets this week only because it was already struggling to begin with, and the continued struggle isn’t BREAKING NEWS. I would expect that this will gain more weight overall once this figure heads north of 50 once again, which is a sign of expansion and anything below 50 is a signal of contraction.

Thursday March 2nd unemployment was pretty much the same as the previous week, pretty low, and a non-issue EXCEPT FOR THE FACT THAT THE FED NEEDS TO SEE MORE UNEMPLOYMENT AND IT’S NOT HAPPENING!!! They’re totally going to raise rates again, especially because the labor market isn’t softening like they need it to.

Friday March 3rd the ISM Services PMI came out pretty quietly and it’s not SO VOLATILE that people are talking about it. Among all the other major headliners when it comes to the economy right now, this one is a lightweight until it becomes a REAL PROBLEM. That day could still come, but for now it may have found some footing.

This week is a BIG DEAL for a few key reasons.

#1 Jerome Powell will be testifying before the senate banking committee Tuesday March 7th and Wednesday March 8th. EVERYONE CONNECTED TO THE MARKETS AND FINANCE WILL BE LISTENING TO WHAT HE SAYS AS WE NEAR THE NEXT FED MEETING THIS MONTH. The markets will be volatile and most likely experience wild swings as tuned in ears are jockey-ing for position on what it could all mean moving forward.

If you’re listening to anything that could be a cue for what the next fed meeting will be like, listen for Jerome to say things about prices becoming “entrenched” and that their upwards trajectory for rates to sustain until they are confident their work is done. If you hear those 2 things or anything that remotely sounds like those 2 things…that confirms they’re worried inflation is here to stay.

#2 Labor and Jobs are in the spotlight Big Time! We have JOLTS, ADP Non-Farm Payroll, unemployment, and average hourly earnings all on deck to give us a very well-rounded look at how the labor markets are performing, where there are more pain points lifting up their heads, and possibly what the next shoe to drop will be.

This week is going to be a really good week for gauging the economic horizon.

So what does all this mean for mortgage rates?

Well everything I just mentioned coming up this week is going to impact mortgage rates as money moves INTO or OUT OF the mortgage backed security market. As we’ve been teaching you the more money that comes in, the lower the rates will go and the more money that leaves the market creates scarcity which causes rates to increase.

With the next fed meeting only a few weeks away, this is the week that could have the most volatile reaction between now and the next fed rate announcement. Expect rates to go up or down by as much as 0.25% or 0.3875% of a percent on any given day. Anything LESS volatile than that on a week like this will be very welcomed.

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 Mortgage Heroes Podcast Episode 9 – The Big Headlines Developing in 2023

It’s hard to believe we’re already 2 months into the new year. There’s already been a LOT of chatter about mortgage and real estate, but we have A LOT OF YEAR LEFT TO GO. This week we talk about the topics most likely to be atop the conversation!

Monday Mortgage Minute – Not ALL Fed Members Support More Rate Hikes

As I mentioned, last week was packed with economic data

Tuesday, we got Flash PMI which came out a bit better than expected, which was nice to see.

Wednesday Fed Meeting Minutes came out – which is what I was really waiting for – and most of the attention was put on an interesting statement in the notes. The statement wat that “almost all fed members supported the rate hike”….ALMOST ALL…NOT definitively all.

That might sound like I’m splitting hairs, but when it comes to public releases like this…the word selection matters and is purposeful. So when things like this come out we can look at that piece and establish that someone, or “someones,” are starting to feel that the end could be near. However, there’s a problem. The problem is that all the data the Fed references as justification for their decisions is contradicting the idea that their rate hikes are over.

The markets seemed to have looked past the notes and are wagering that there will be another hike in March cause we’re no where near the fed desired inflation target and in their own words the labor market “remained very tight, contributing to continuing upward pressures on wages and prices.” Also know as the wage price spiral, Prices go up and cause wages to go up while wages going up cause prices to go up.

Thursday, we got Preliminary GDP reading that came in lower than expected, which does make us wonder where the easing is coming from, because the prior reading had a heavy dose of government spending packed into it. So are we to assume the same for this most recent reading that’s lower?…if that IS the case…then slowing in both the PUBLIC sector and PRIVATE sectors is slowing as it should be.

We got unemployment on Thursday which was better than expected putting more pressure on the Fed. They will need to cause more pain in the labor market to force less spending in the economy to stand a chance at returning to 2% inflation.

Friday, we get Core PCE which was another Whammy to the Fed. It was expected to come in at 0.4% and came in at 0.6%. Now that seems like a small difference; but it’s not… 0.6 is 0.2 higher than 0.4….but 0.2 is HALF of 0.4 which means that a 0.6% print is a 50% higher reading than was projected – AND REMEMBER this is still a positive number with A + sign in front of it….meaning that we’re still overall experiencing higher prices compared to the previous reading.

This week is pretty slow actually.

Monday will bring us Pending Home Sales with a pretty low forecast, kind of par for the course right now when it comes to readings related to mortgage and real estate. On this show AND the podcast, we’ve been talking about inventory shortages which are helping keep home process relatively high still and with mortgage rates still elevated too pending home sales have really become a trouble spot.

Tuesday we’ll get consumer confidence which is going to be really interesting cause sometimes the data we talk about contradicts the elevated optimism among consumers which can distort or even cover up some innerworkings of the overall economy. We’ll see how “Confident” the consumer really is.

Wednesday, we get ISM Manufacturing PMI which has been in contraction for months and we’re expecting that to still be the case this week.

Thursday unemployment will roll out and Friday the ISM Services PMI comes out, which had a surprising optimistic reading last month so it’s up for grabs this week whether it will be more good news OR swing back into the bad news category.

So what does all this mean for mortgage rates?

Mortgage rates have come under heavy pressure recently with the data supporting the assumption that the Fed will have to continue raising rates until they achieve optimal pain in their plan. Until then there is no reason for the market to assume that we will see rates returning back to historic lows or even going in that direction for long periods of time. It is certainly clear that the mortgage market is going to continue struggling without the Feds involvement in buying mortgage-backed securities. As that is the case it puts additional pressure on mortgage-backed security investors to hold the line and build a tough stomach over the course of these upcoming months of fed rate hikes and policy changes. Rates will ebb and flow in response to money coming into the mortgage-backed security market or money coming out of the mortgage backed security market.

As we have been teaching you, the more money that comes in, the lower the rates will go and vice versa money that leaves the market creates more scarcity which causes rates to increase.

We are also at the point in the cycle where we’re getting closer and closer to the next Fed meeting and everyone’s antennae are up looking and listening for any cues that could signal change that impacts the rate market directly.

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 Mortgage Heroes Podcast Episode 8 – The Seamless Loan Experience

This week Ximena Munoz, our amazing Loan Processor, joins the show to discuss what it takes to have a seamless loan experience. Memo, Brian, and Ximena share practical steps and best practices you can put in place to give yourself the best chance at a smooth closing!

Monday Mortgage Minute – Everything is working against The Fed

As I mentioned, last week was packed with economic data

MoM CPI, YoY CPI, CORE CPI all came at or higher than expected which is a clear sign that we are still NOT where the Fed wants to be.

Retail sales and Core Retail Sales BOTH came in higher than expected, which seems great on the surface, but is also evidence that on paper the consumer seems able to keep up with these elevated prices…remember that when I come back to “entrenched” inflation.

The Empire State Manufacturing Index was still negative as expected – not a good sign!

PPI and Core PPI BOTH came in higher than expected, which is all but the proverbial nail in the coffin for any argument of a “Fed PIVOT”…I wish people on TV never started talking about that…it’s NOT A THING! And last week is all the explanation you need for why this was a silly concept to go out there trying to sell the audiences on

Unemployment came in lower than expect – again, opposite of what the Fed Needs to happen!!!

building permits and housing starts came in just a sliver short of their projected numbers, but this one is really telling about the future of home prices this year.

If we consider the weight of the economic information, I just shared we can start to clearly see that rates are going to remain elevated in housing through the rest of this year. I mean we’re already 11 months past the initial interest rate hikes in March 2022, and we’re STILL NOT SEEING the necessary impacts the Fed wants…so it’s reasonable to expect that fed rate hikes this month, next month, and likely in May will also take just as long to see their way through the markets.

So expect slight dips in prices as sellers make concessions so they can move onto the next thing they have in their life, And expect rates to stay between the high 5s and high 6s depending on the loan program you are in and the qualifications you bring to the table. At this point there’s just no other way to slice it.

Now this week is very mild comparatively.

Monday is a bank holiday (President’s Day) the markets are also closed.

Tuesday we get Flash PMI – which could be interesting certainly not as important as all the data we just reviewed.

Wednesday Fed Meeting Minutes – This is what I’m really looking out for because it will indicate and new change of tone and give us insight to their meeting minutes and sentiment about how they came to those conclusions and any forward guidance that might show us what is coming up ahead in March and into the summer.

Thursday we get Preliminary GDP reading, that we’re hoping will match up with the most recent announcement, but some of you might remember that topline came in at 2.9%, but if wee strip out government spending and inventory replenishment…it was actually 0.2%….so this reading we’ll be looking for any notable changes that indicate a more realistic reading of the overall health of the economy.

We also get unemployment on Thursday as well….

Friday we get Core PCE. We’re hoping for 0.3% target, but anything below that would be a VERY WELCOME reading so that we can get a sense that the Fed’s efforts might actually be driving this number down. BUT don’t get your hopes up cause you just heard what I said about CPI and PPI right?  Right?

Remember with Core PCE, ZERO would mean no increase in costs, and a negative number would mean costs are reversing and going back down. So 0.3% projection isn’t too hot, and ANYTHING, literally ANYTHING lower than that will be a very welcome sign!

So what’s all this mean for mortgage rates?

Mortgage rates going to head sideways this week. And every week that we get closer and closer to the next Fed meeting, the more and more that anticipation will impact market rates. In the meantime, we can expect that normal fluctuations and day by day changes in rates will continue.

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!