COVID-19

Apache is functioning normally

The real estate market carnage continues with all the major iBuyers pausing home purchases thanks to the coronavirus.

Zillow Offers Pauses Purchases

This morning, Zillow announced that it had stopped home buying via Zillow Offers amid the “market uncertainty” related to COVID-19.

While it’s unclear if it was mandated, they did note that the move was “in response to local public health orders related to COVID-19,”and also to ensure the protection and safety of its staff, customers, and partners.

Specifically, some states like California have implemented emergency orders requiring individuals to stay at home and cease all non-essential business, which includes some real estate activities.

The company said it would continue to market and sell homes through Zillow Offers, despite halting open houses for its homes last week.

Zillow said it ended 2019 with 2,707 homes in its inventory, and as of March 19th, had reduced it to approximately 1,860 homes.

All 24 markets where Zillow Offers currently operates are affected by the move.

Opendoor Cash Offers Suspended

Meanwhile, Opendoor is putting cash offers on hold as a result of COVID-19.

In a statement posted on their website, the iBuyer said, “If you’re currently in our offer process, be on the lookout for communication from us. If you’re not, here’s how we can still help with your home sale.”

In terms of that help, they are still allowing third parties to make a cash offer for your property, as opposed to Opendoor itself.

If you take them up on that option, you can still skip the showings, prep work, and choose you own close date.

They said they’ll get back to customers via email within 2-3 days if eligible.

You can also use one of their partner real estate agents to list your home in traditional fashion, though I think we all know selling right now probably doesn’t make a ton of sense unless absolutely necessary.

Offerpad Might Be on Hold Right Now

I visited Offerpad’s website to see how they were being impacted, but couldn’t get a totally clear answer.

However, they do have an “important notice” posted at the top of their website that reads:

“To ensure that our customers, employees, and third parties are safe to the best of our ability, our processes have been subject to temporary changes.”

“We need to ensure that all services, including third parties, associated with a customer’s purchase or sale will be available. We appreciate your flexibility during this time.:

So there’s a good chance they are following suit and putting new purchases on hold as well.

As reported last week, RedfinNow was the first to temporarily halt home purchases, as indicated in an 8-K filing.

Two Takeaways to Consider

One issue, as mentioned by Zillow, is that real estate isn’t necessarily an essential business activity.

At least when it involves investors trying to make money by buying and selling real estate.

For everyday Joes looking to buy or sell a home, I assume it’s still okay to do so. It certainly can be argued as essential in certain situations.

However, a bigger concern is if this is the canary in the coal mine.

If billion-dollar companies like Redfin and Zillow aren’t interested in buying our homes, what does that say about the health of the real estate market?

I think the worry is if this situation doesn’t improve in the next several months, we might see scores of foreclosures flood the market, which could lead to lower home prices.

Conversely, if the government and loan servicers get ahead of it and work hard to help unemployed homeowners, things might turn out okay.

And really, with all the spending going on, there’s bound to be inflation, which could benefit homeowners as the world recovers.

Source: thetruthaboutmortgage.com

Apache is functioning normally

While it’s hard to compare the current possible housing crisis to the very real one experienced about a decade ago, there are fears of negative market impact due to COVID-19.

We’ve already seen listing prices fall, along with a big jump in delistings, where home sellers pull their properties off the market.

And home purchase mortgage applications continue to plummet, especially in large metros like LA, NY, and Seattle, per the MBA.

purchase apps

Meanwhile, real estate brokerage Redfin revealed via an SEC filing that it was laying off 7% of its workforce, which could result in roughly 236 job losses.

Then we have Wells Fargo curtailing its mortgage menu, and ARMs pricing higher than fixed-rate mortgages.

The number of mortgages in forbearance has also surged 1000%, and is likely to get a lot worse the longer this goes on.

The real estate and mortgage industry certainly isn’t operating as usual, and it’s even reminiscent of times back in the early 2000s.

Temporary Inability to Pay the Mortgage?

  • The housing crisis a decade ago was driven by shoddy financing
  • Such as stated income, option ARMs, interest-only loans, and so on
  • This potential crisis is being driven mostly just by loss of income due to COVID-19
  • As long as it’s temporary it shouldn’t create too many problems for the housing market

This time around, the number one issue is inability to make mortgage payments due to loss of income or unemployment as a result of coronavirus.

Either companies have laid off staff due to a loss of business, or small business owners have taken a hit because they’ve had to close up shop.

Others might just be experiencing a temporary loss of income or a pay cut while companies navigate the uncertain waters ahead.

Whatever the situation, the problem seems to center around capacity to pay, as opposed to being overleveraged, or holding a home loan with some creative financing terms like interest only or an exploding ARM.

Homeowners could mostly afford their monthly mortgage payments before this unforeseen event took place, unlike the crisis that took place in the early 2000s.

Back then, borrowers took out mortgages they couldn’t afford, and serially refinanced them as their inflated home values grew.

Today, many homeowners have a sizable equity cushion, partially because cash out refinance volume has been very low, and also because home prices have risen a ton over the past decade.

This puts them in a much better position than those homeowners from 2006 who purchased a property with zero down financing and stated their income on the application.

That’s the good news. The bad news is many housing markets were already vulnerable before COVID-19 hit, and thus could see some an uptick in foreclosures if this plays out for a long period of time.

Almost Half of the 50 Most Vulnerable Counties Are in Florida and New Jersey

  • 14 of the highest risk counties can be found in New Jersey
  • Several are also located in the NYC suburban area
  • Another 10 are in Florida, mostly in the central and north part of the state
  • Others are scattered along the Mideast coast

So where are the potential foreclosure hotspots, once any coronavirus-related moratoria disappear?

Well, a new “Special Coronavirus Market Impact Report” released by ATTOM Data Solutions found that half of the most vulnerable counties reside in Florida and New Jersey.

They rank market risk by looking at three main factors:

– Percentage of housing units receiving a foreclosure notice in Q4 2019
– Percentage of homes underwater (LTV 100 or greater) in Q4 2019
– Percentage of local wages required to pay for major homeownership expenses

As we know from the prior mortgage crisis, payment default was driven by homeowner equity to some degree, with underwater borrowers often throwing in the towel because they had nothing to lose.

This was further exacerbated if they didn’t have the money to make mortgage payments, or if they were simply overextended.

Finally, if a foreclosure notice was already received before the coronavirus pandemic took place, it’s clearly a bad sign for a situation that likely just got worse.

As for which counties are on alert, there are 14 in New Jersey, such as Camden and Ocean, along with five in the New York City suburban area: Bergen, Essex, Passaic, Middlesex, and Union counties.

And there are 10 counties in Florida, mostly in the northern and central portions of the state, including Clay, Flagler, Hernando, Lake, and Osceola counties.

Additional New York counties include Orange, Rensselaer, Rockland, and Ulster.

There are also a handful of counties in the top 50 in Delaware, Louisiana, Maryland, North Carolina, South Carolina, and Virginia.

Only Seven Risky Housing Markets in the Midwest and West

  • The housing markets in the Midwest and West appear to be stronger overall
  • The only high-risk markets are in Illinois, mostly the Chicago metro
  • Along with Shasta County, CA, which is just south of Oregon
  • And Navajo County, AZ, in the northeast part of the state

Things appear to be a lot better in the Midwest and West, with just seven counties total landing in the top-50 most vulnerable list.

Every single Midwestern county can be found in Illinois, including Kane, Lake, McHenry, Tazewell, and Will.

Most are in the Chicago metropolitan area, a region that has never really seen massive amounts of home price appreciation since the crisis.

In terms of the West, only two counties made the top-50, including Shasta County, CA and Navajo County, AZ. Both aren’t major metros.

The report also revealed that counties where median home prices range from $160,000 to $300,000 account for 36 of the most vulnerable counties.

Meanwhile, counties with median home prices below $160,000 or above $300,000 made up just 14.

This is because those with median prices below $160,000 are among the most affordable, while those priced above $300,000 have some of the highest home equity amounts, and thus the lowest foreclosure rates.

The takeaway here is that most of the country looks pretty good overall with regard to housing market risk.

That could change depending on how long things play out, but there are plenty of mortgage relief programs available, including a 6-12 month forbearance via the CARES Act.

As long as this is somewhat temporary, and most homeowners get back to work, it should be a momentary blip.

Read more: How does mortgage forbearance work?

Source: thetruthaboutmortgage.com

Apache is functioning normally

It’s the first of the month, and with that comes fear and uncertainty that both homeowners and renters won’t be able to make payments due to loss of income related to the coronavirus.

While it’s not clear how bad things will get just yet, CNBC interviewed FHFA director Mark Calabria to get some preliminary numbers, which he himself called “very rough” and subject to change quickly.

Two Million Missed Mortgage Payments by May

  • 300,000 missed payments for Fannie/Freddie owned loans in April
  • 700,000 missed payments for overall market in April
  • Jumps up to 1M and 2M respectively by May
  • Expected to be worse for government loans backed by FHA/VA

He currently estimates that roughly 300,000 home loans backed by Fannie Mae and Freddie Mac could go delinquent in April, which is just over 1% of their book.

For the overall mortgage market, he said that translates to roughly 700,000 delinquent home loans.

By May, those numbers jump up to one million and a little more than two million missed payments, respectively.

He sees more stress in FHA/VA loans due to their lower credit score requirements, higher DTI ratios, and so on.

While it sounds pretty dire, Calabria was quick to point out that it only represents somewhere between 3-5% of the market, and that he’s “not seeing worst-case scenarios.”

This is counter to a comment made by MBA chief economist Mike Franantoni, who warned that if a quarter of U.S. homeowners (~12.5 million households) sought six months of mortgage forbearance, loan servicers could owe between $75 and $100 billion to investors.

Meanwhile, Mark Zandi, chief economist for Moody’s Analytics, said up to 15 million Americans could default if the lockdown goes through summer.

That would likely crush many loan servicers who lack the liquidity to face a barrage of missed payments, but the hope is it doesn’t come to that. Or the Fed steps in to help.

Calabria noted that if borrowers only miss 2-3 months of payments, most loan servicers should be OK, but if it goes beyond that time frame, a lot of firms will face liquidity problems.

Top retail mortgage lender Quicken Loans also services about 1.8 million home loans, and CEO Jay Farner said the company’s balance sheet is “strong enough” to pay holders of bonds backed by its mortgages in the event many default.

However, most forbearance requests have apparently come from homeowners who’ve never been late, which he says as a good sign they’ll get back on track once normal employment resumes.

Additionally, he pointed out that 70-80% of calls were from homeowners not yet facing hardship, who apparently just wanted to know their options.

He did reiterate that, “If you can pay your mortgage, please do so.”

The CARES Act Allows Borrowers to Miss 6-12 Mortgage Payments

  • Homeowners with a federally-backed mortgage can request forbearance for 180 days (and an additional 180 days)
  • Applies to FHA/VA/USDA and Fannie Mae/Freddie Mac loans
  • Simply requires borrowers to request assistance from their loan servicer and say they are facing a hardship related to COVID-19
  • Lenders may not charge fees, penalties, or interest beyond what would have been due had borrower remained current

The passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allows homeowners with a federally-backed residential mortgage to request forbearance for up to 180 days, or six months.

This includes FHA loans, USDA loans, VA loans, and home loans purchased or securitized by Fannie Mae or Freddie Mac.

That’s most of the mortgage market, aside from jumbo loans and portfolio loans kept on banks’ books.

It also grants them the ability to request an additional 180 days of forbearance if needed, or to cancel it at any time.

During the forbearance period, lenders may not charge fees, penalties, or interest beyond what would have been due had the borrower made all contractual payments on time and in full.

It’s still unclear what happens after the forbearance period ends. Does the loan servicer assess the borrower’s ability to get current or simply add the missed mortgage payments to the end of the loan term? Who knows.

Update: You can now get up to 15 months of mortgage forbearance.

Can Anyone Get Mortgage Forbearance Under CARES Act?

  • The CARES Act doesn’t define what a “financial hardship” is
  • Nor are loan servicers allowed to require additional documentation to grant mortgage forbearance
  • Both Calabria and Treasury Secretary Steven Mnuchin have urged homeowners to pay their mortgages if they can
  • But at the moment it appears anyone can qualify without proof of hardship

All a homeowner has to do to get mortgage forbearance is submit a request to their loan servicer that they are “experiencing a financial hardship due, directly or indirectly, to the COVID-19 national emergency,” regardless of delinquency status.

Other than that attestation from the homeowner, a loan servicer may not require additional documentation to grant mortgage payment forbearance.

This means you don’t have to prove loss of income or unemployment to qualify, something Calabria acknowledged while saying “we’re operating on the honor system.”

In other words, it should be very easy to get six to 12 months of mortgage payments put on hold with little more than a request, without the typical hoops to jump through.

While great for homeowners in need, it could be a disaster for loan servicers and the mortgage industry in general, assuming millions take part in the relief effort.

Read more: What’s the Last Day to Apply for Mortgage Forbearance Under the CARES Act?

Source: thetruthaboutmortgage.com

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Cities in Northern California saw more severe drops in population during the pandemic than those in Southern California, new census data show, with Bay Area communities hit particularly hard.

The same data show that many of the cities that grew the most between July 2020 and July 2022 were in Southern California.

Experts said that several factors might explain the north-south divide. But one likely reason is the Bay Area’s tech-rich economy. Many tech companies allowed employees to work from home and it is likely that “remote work has impacted the Bay Area more,” leading to an exodus of workers in Northern California, said Dowell Myers, a professor of policy, planning and demography at USC.

San Francisco has generated headlines recently due to its dramatic population loss over the last two years, but other Bay Area cities were also ranked as having some of the biggest population losses.

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San Jose lost almost 40,000 residents and dropped out of the top 10 list of the nation’s most populous cities.

Highest rate of population loss among big cities

  • San Francisco, -7.1%
  • Daly City, -4.4%
  • Berkeley, -4.2%
  • San Mateo, -4.1%
  • San Jose, -3.8%

Experts expect population loss in major cities to slow as the pandemic recedes into the past, but they say the state’s housing crisis — another driving factor — won’t be going away anytime soon.

The lion’s share of the cities that gained the most people between July 2020 and July 2022 was in suburban and exurban areas across the state. A Times analysis showed that these areas, largely in the Central Valley, also led the way in housing gains.

Northern California cities were also likely affected by “less construction and higher prices” for housing, Myers said.

The census data underscore some trends that have been seen during the COVID-19 crisis. Urban centers such as downtown San Francisco emptied out as tech workers stopped coming in to work, causing local economic distress. Some more far-flung areas such as Placer County and the Lake Tahoe region saw an influx of people from cities who were able to work remotely.

Susanville, Calif.

Susanville, Calif., lost more than 15% of its population between July 2020 and July 2022, but that was likely due to the 2021 Dixie fire.

(Gary Coronado / Los Angeles Times)

High housing costs were another key factor in the population shift, experts say. With housing costs rising, some Californians used the pandemic as an excuse to sell and move to cheaper areas. But the real estate price boom made it harder for others to move in.

“Hundreds of thousands more people would desire to live in the Bay Area — if not millions — and Southern California,” said Michael Lens, a professor of urban planning and public policy at UCLA, “if we made it easier to accommodate those people through more housing units and presumably more affordable housing.”

Of the 30 cities, counties and unincorporated areas in California that shrank the most, only two were in the southern part of the state, in Kern County: Taft, which lost 5.8% of its population, and Tehachapi, which lost 4.6%.

Cities and counties in metropolitan Southern California were absent from the top 30 list, with the cities of Commerce and Cerritos each losing about 4% and placing 36th and 41st, respectively, in that ranking.

Among cities with populations of more than 100,000, three of the five cities with the highest rate of increase were in Southern California, with the other two in the Sacramento and Fresno exurbs.

Highest rate of population increase among big cities

  • Menifee, 6.0%
  • Roseville, 4.3%
  • Clovis, 3.2%
  • Murrieta, 2.2%
  • Jurupa Valley, 2.2%

Menifee, which added over 4,500 homes between 2019 and 2022, has been intentional about its growth, city manager Armando Villa told The Times in March.

Meanwhile, a number of smaller cities with populations under 100,000 — many in Northern California — saw similar losses.

Susanville lost more than 15% of its population in the two-year span, but that was likely due to the 2021 Dixie fire, which burned more than a million acres and destroyed over 1,400 homes and other structures, according to the California Department of Forestry and Fire Protection. The town is also expected to lose one of its biggest employers, with the impending closure of the California Correctional Center.

Fire was also a likely factor in the city with the highest rate of population increase in that stretch — Paradise.

The city showed some signs of rebuilding after the 2018 Camp fire, gaining nearly 2,000 people after losing some 20,000 — almost 85% of its total residents — after the deadliest conflagration in state history.

But Lens said an increase in population — often connected to a boost in housing — is “not what we would hope” for in less dense areas.

Though growth in less dense areas isn’t necessarily a bad thing, he explained, the areas that need housing the most and can grow more efficiently are the major cities.

In a housing crisis, places such as Lathrop or Calimesa are “not where the demand is strongest,” so new housing may not be as direly needed, and the rural zones seeing growth are “not the most economically productive areas of the state,” he said.

Also, from a climate perspective, Lens noted that less densely populated areas lead to longer commutes and are “not the ideal places to put housing.”

Source: latimes.com

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According to the lawsuits filed in a U.S. district court in Michigan, the alleged events occurred amid the mortgage lender’s return-to-work policy during the Covid-19 pandemic. UWM forced employees to return to the office on July 9, 2021, per the lawsuits.  

Kassandra Memmer, hired as a conventional underwriter in September 2019, sued the company in April 2023. Memmer says she quit her job after the lender forced her to return to work despite a doctor’s note outlining her leave of absence to ensure her health and that of her unborn child. 

“In June of 2021, Defendant started removing barriers from desks, removing hand sanitizer machines, and not being strict on mask mandates,” the plaintiff’s attorney states in the lawsuit. “She had no choice: she either chose her family or her job.”

Her partner Jackson Memmer, a transgender man, started working at UWM as a conventional underwriter in August 2019. In a lawsuit filed in late May 2023, he alleges he was fired due to an investigation into clearing conditions with appraisals done when he was on paternity leave. The former underwriter was told he was being let go in December 2021, per the lawsuit. 

A spokesperson for UWM said the company “does not comment on legal matters that are currently pending.”  

Kassandra Memmer accuses the company of not paying her final bonus for June 2021 for files completed over daily commitment. Meanwhile, Jackson Memmer alleges he did not receive his final bonus from November 2021, which should be roughly $5,000. 

The plaintiffs complained to the U.S. Equal Employment Opportunity Commission (EEOC) about the discriminatory treatment and received a right-to-sue letter, the lawsuit states.  

Kassandra Memmer said she was offered a promotion to team lead but declined. However, she contacted human resources to switch to another department because “she was under a lot of stress with the brokers screaming at her and for denying the team lead position.”

She said a broker contacted her via e-mail and hit on her. The broker stated that “she was too pretty to be an underwriter and that he was going to tell her CEO Mat Ishbia to make her a model for the company,” per the lawsuit.

The leadership, according to the case, never reported the incident. 

Kassandra Memmer said in the lawsuit that she had to work many overtime hours to finish files and train senior underwriters. 

“Plaintiff and other underwriters were also required to do something Defendant called ‘Rise and Grind,’ which meant coming into work earlier or staying two hours more than the employee’s scheduled time, but with no compensation,” attorneys wrote in the lawsuit. 

Kassandra and Jackson Memmer said that in October 2020, they bought a home with a UWM mortgage, which is when they allege UWM became aware that Jackson was a transgender man. 

In early April, Bloomberg reported that with more than two-dozen current and former employees said UWM has a toxic work environment, with racial disparities, sexual harassment, drug use and bullying by managers. UWM said Bloomberg’s portrayal of a hostile workplace was “false and misleading.” 

Source: housingwire.com

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Typically, you pay a premium if you select a 30-year fixed mortgage versus an adjustable-rate mortgage.

The reason is simple – the interest rate is locked in and will not change during the entire loan term, which is a full 30 years, or 360 months.

Conversely, if you choose to go with an adjustable-rate mortgage, such as a 5/1 ARM or a 7/1 ARM, you only receive the benefit of a fixed rate for the first five or seven years, respectively.

It is then subject to change annually during the remaining 23 or 25 years of the loan term.

As such, you should be entitled to a discount on your mortgage rate during that initial fixed period to make up for the risk of the interest rate resetting higher once the fixed period ends.

This spread can change over time depending on what’s going on in the economy and secondary market, along with lender/investor appetite for certain products.

Today’s Menu: 30-Year Fixed or Bust

  • Mortgage rates are usually highest on the 30-year fixed
  • Because borrowers receive a fixed interest rate for a full three decades
  • Discounts are typically given on riskier products like ARMs or shorter-term loans like the 15-year fixed
  • But right now lenders aren’t passing along the usual discounts

At the moment, anything that isn’t a 30-year fixed mortgage is basically out of favor.

This is probably even more true with nonbank lenders and those who sell off their mortgages, as opposed to keeping them in their own bank portfolio.

This explains why you’re no longer seeing the usual discounts offered for loan products like ARMs, and in some cases, even shorter-term fixed-rate mortgages, including the 15-year fixed.

Once again, I traveled across the internet to see what mortgage lenders were advertising for their popular loan programs, and this trend is pretty clear.

Lender ARM or 15-Year Fixed Rate 30-Year Fixed Rate
Bank of America 3.375% (10/1 ARM) 3.375%
BB&T 3.375% (15-year fixed) 3.375%
Chase 3.49% (7/1 ARM) 3.125%
Citi 4.75% (7/1 ARM) 3.875%
Citizens Bank 3.375% (7/1 ARM) 3.375%
Navy Federal 2.375% (5/5 ARM) 2.875%
Quicken Loans 3.125% (10/1 ARM) 3.375%
USAA *3.50% (VA 5/1 ARM) 3.50%
Wells Fargo 3.625% (5/1 ARM) 3.375%

Bank of America is advertising a 30-year fixed for 3.375% with 0.786% discount points, and a 10/1 ARM for the same rate with 0.971% discount points. In this example, it’s actually more expensive to take the riskier loan product.

BB&T is charging the same 3.375% for a 30-year or 15-year fixed refinance rate, yet the APR is slightly higher on the 15-year.

Chase will give you a 30-year fixed for 3.125%, or a 5/1 ARM for the same price. If you want a 7/1 ARM, the rate jumps up to 3.49%. More risk for more money…that’s a sign of a messed-up mortgage market.

Citi is showing super wild mortgage rates, with the 30-year fixed 3.875% with 0.125% points, and the 7/1 ARM pricing at 4.75% with a full point charged. You’d be crazy to go with the ARM.

Over at Citizens Bank, they’re advertising a 30-year fixed for 3.375% with .50% discount points. Meanwhile, their 7/1 ARM features the same exact rate with .125% discount points.

So slightly cheaper in terms of closing costs, but the same exact rate. It wouldn’t make much sense for most folks to go with the ARM unless they absolutely knew they’d be selling before those seven years were up.

And right now, there’s not a whole lot of certainty in terms of what’s next for anyone.

Some mortgage lenders aren’t advertising or possibly even offering ARMs at the moment, including Better Mortgage and Guaranteed Rate.

Navy Federal seems relatively normal, with their 30-year fixed 2.875% with 1.25 points, and their 5/5 ARM pricing at 2.375% with 0.25% points.

That’s a discount of a half a percent, which is more of what you’d expect to see based on the risk profiles of both loan programs. This might be because they keep the loans they originate.

At Quicken Loans, you can get a slight discount on a 10-year ARM vs. a 30-year fixed, 3.125% instead of 3.375%.

Then there’s USAA, which is advertising a 30-year fixed VA loan for 3.50% with negative mortgage points of 0.375%, and a 5/1 ARM with “APR typically around 3.500%.” You have to call to get the scoop, but it doesn’t sound much cheaper.

Lastly, Wells Fargo is offering a 5/1 ARM for 3.625%, and a 30-year fixed for a cheaper 3.375%.

So again, you’d be better off taking the 30-year fixed, not only because the interest rate is lower, but it’s also fixed for the full mortgage term.

It’s All About the Plain Vanilla Home Loan Right Now

  • Mortgage lenders are very skittish at the moment like all other businesses
  • As such they’re sticking to their safest products like the 30-year fixed while also tightening underwriting standards
  • This is partially because it’s easier to sell these types of loans on the secondary market to investors
  • Expect it to be more difficult to find a home loan with exotic features for the foreseeable future

In summary, mortgage lenders are grappling with a lot of uncertainty, just like everyone else thanks to the coronavirus (COVID-19).

And when that happens, they flock to the safety and security of the 30-year fixed, similar to how investors flee the stock market and head toward government bonds, which are guaranteed to be paid back.

Speaking of being paid back, the Fed’s QE4 program targets agency mortgage-backed securities, such as those backed by Fannie Mae and Freddie Mac.

At the moment, banks and lenders are eschewing anything that isn’t super vanilla, aka basic and low-risk.

Those who are offering ARMs, jumbo loans and other traditionally riskier products are charging a premium in many cases since they don’t have the benefit of the Fed as a buyer.

Others are just removing them from their product menu, perhaps until the dust settles.

It’s reminiscent of the mortgage crisis that took place in the early 2000s, when lenders only originated boring old fixed-rate mortgages and ditched all the aggressive option ARMs, interest-only loans, and so on.

To make matters worse for some borrowers, they’re also upping minimum credit score requirements and getting tougher with their underwriting, whether it’s a lower max DTI ratio or a lower max loan-to-value ratio (LTV).

The name of the game is less risk, so if you’ve got a questionable loan scenario, it might be difficult to get funding right now.

Hopefully this is a short-term phenomenon, but no one knows for sure how long it will last.

Read more: What mortgage has the best interest rate?

Source: thetruthaboutmortgage.com

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Today, we stand at 156,105,000, so I think we are still in make-up mode until we reach a range acceptable to a fast economic recovery.

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That’s why the jobs data has beaten expectations 14 months in a row. What the U.S. has that other countries don’t is a massive young workforce. While population growth is slowing here, we have the demographic muscle that other countries don’t have — if we didn’t have that, our economic discussion would be different.

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Now let’s look at the labor market on all fronts from the data we got this week to get a comprehensive view of the labor market today. On Friday the BLS reported job growth came in at 339,000, with positive revisions, while the unemployment rate went higher, as there was a drop in self-employed workers.

From BLS: Total nonfarm payroll employment increased by 339,000 in May, and the unemployment rate rose by 0.3 percentage point to 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, government, health care, construction, transportation and warehousing, and social assistance.

Hours worked have fallen in the last few months, and wage growth is slowing. The fear of 1970s-style inflation was that wages could grow out of control in a tight labor market. In theory, 2022 and 2023 are tight labor markets and wage growth is slowing down. This trend should continue for the next 12 months as well.

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Here is a breakdown of that data for those aged 25 and older:

  • Less than a high school diploma: 5.7% (2 months ago, 4.8%)
  • High school graduate and no college: 3.9%
  • Some college or associate degree: 3.2%
  • Bachelor’s degree or higher: 2.1%.

The noticeable data line here is that the unemployment rate for those without a high school education is up almost 1% from two months ago.

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Here is the breakdown of the jobs created this month, another big month for the government, which typically doesn’t continue at this pace. Construction labor has held up very well, even though housing permits have been falling for some time. The backlog from COVID-19 has been a jobs program for the U.S. as we are still slowly growing the housing completion data.

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So the BLS jobs report is still pushing along, while wage growth is slowing down. Jobs Friday is one piece of the labor pie — we have two other data lines that we always need to keep an eye on to know the health of the labor market: job openings and jobless claims.

As the only person on Earth who talked about job openings data getting to 10 million in this recovery, I am surprised that job openings data is still around that mark. But that is off the recent highs of 12 million.

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At this point of the economic expansion, I am putting more weight on jobless claims data than job openings (JOLTS). For me, the Fed doesn’t pivot, or the 10-year yield doesn’t break under 3.21%, until jobless claims break over 323,000 on the four-week moving average, and that isn’t happening either.

As we can see below, the Gandalf line in the sand has held up the entire year, even though it was tested many times.

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As we can see below, the jobless claims four-week moving average is still far from breaking over 323,000. I chose that number using many different variables as I think when we crack about that level, it will be noticeable to everyone — even the Fed — that the labor market has broken.

From the St. Louis Fed: Initial claims for unemployment insurance benefits increased by 2,000 in the week ended May 27, to 232,000. The four-week moving average declined, to 229,500.

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It’s important to understand the labor dynamics of this economic expansion. We had such a shock in the economy with COVID-19 and a strong labor market recovery that the make-up labor demand, which doesn’t get talked about much, is a significant reason we still see healthy numbers.

Also, it’s essential to understand the demographic difference now and what we had to deal with after 2008. The Baby Boomers are leaving the labor market, and every month that happens, they need to be replaced if demand is growing. This is why having a healthy number of younger workers not only helps with that but also provides replacement consumers, as those who leave the labor market tend to consume a bit differently than younger workers.

At this stage of the economic cycle jobless claims is the data line that matters most. Once jobless claims break above 323,000, then and only then I believe we can talk about a Fed pivot — first in their language and then possibly with rate cuts.

The Federal Reserve is scared to death of the 1970s inflation, and they genuinely believe that breaking the labor market is the best way to prevent that type of inflation from happening. As a country, we are fighting against a group of people stuck in the wrong decade with their economic mindset on inflation.

Source: housingwire.com

Apache is functioning normally

Well, just like that it’s December again, which means it’s time for the 2022 mortgage rate predictions.

This past year was filled with ups and downs (literally) when it came to mortgage rates, with plenty of surprises and unexpected turns along the way.

I expect 2022 to be no different, seeing that COVID is still very much an unresolved issue.

At the same time, the Fed has pumped the brakes on its purchases of mortgage-backed securities, while also signaling an end to its easy money, low rate days.

So perhaps 2022 will be an ongoing tug-o-war between the Fed and COVID when it comes to the direction of rates. This could mean periods of low rates and not-as-low rates.

MBA 2022 Mortgage Rate Predictions

First quarter 2022: 3.3%
Second quarter 2022: 3.5%
Third quarter 2022: 3.7%
Fourth quarter 2022: 4.0%

First up is the Mortgage Bankers Association (MBA) and their monthly Mortgage Finance Forecast from late November.

They predict a 30-year fixed mortgage at 3.3% in the first quarter of 2022, which isn’t far off from today’s levels, depending on the mortgage lender in question.

It then rises 20 basis points to 3.5% in the second quarter of 2022, and another 20 bps to 3.7% in the third quarter.

The shocker is their call for a 4% 30-year fixed mortgage rate by the fourth quarter of 2022. That’s bold, though not out of the realm of possibilities.

They see rates going even higher from there in 2023, but perhaps plateauing a bit close to 4% for much of the year.

Fannie Mae 2022 Mortgage Rate Forecast

First quarter 2022: 3.2%
Second quarter 2022: 3.3%
Third quarter 2022: 3.3%
Fourth quarter 2022: 3.4%

Next up is Fannie Mae, which releases a monthly Housing Forecast that contains mortgage rate predictions through 2023.

They are playing things a lot safer than the MBA and simply going with a 30-year fixed that barely budges throughout the next 12 months.

We’re talking 3.2% to start off 2022, 3.3% for the second and third quarter, and just 3.4% at the end of the year.

And they don’t expect rates to go much higher in 2023 either, currently forecasting a rate of just 3.5% at that time.

Fannie Mae also polls consumers on their mortgage rate expectations over the next 12 months, and let’s just say they aren’t very optimistic.

In its latest release, (December 7th, 2021), just five percent of respondents said they believe mortgage rates will go down, while 58% think mortgage rates will go up.

Meanwhile, 32% expect mortgage rates to stay the same over this time period. So you’re in the minority if you see rates moving lower in 2022.

Freddie Mac 2022 Mortgage Rate Predictions

First quarter 2022: 3.4%
Second quarter 2022: 3.5%
Third quarter 2022: 3.6%
Fourth quarter 2022: 3.7%

Meanwhile, Freddie Mac isn’t too hopeful themselves when it comes to the direction of rates.

They expect the 30-year fixed to rise to 3.4% in the first quarter of 2022, before inching up 10 basis points each quarter to end the year around 3.7%.

While still quite low historically, it won’t be welcome news to prospective home buyers grappling with affordability issues, or existing owners looking to tap home equity.

The caveat is their forecast was last updated at the end of September, so until I get their next release, this is all we have to go on.

There’s a chance they may rein it in a bit and shift their estimates down, though I doubt they’d move more than say 10 basis points lower for each quarter. But we’ll see.

NAR 2022 Mortgage Rate Outlook

First quarter 2022: 3.3%
Second quarter 2022: 3.5%
Third quarter 2022: 3.6%
Fourth quarter 2022: 3.7%

Next up we’ve got our friends at the National Association of Realtors (NAR), which provide estimates in their monthly U.S. Economic Outlook.

The numbers above are from their November 2021 edition, and aren’t much different than what Freddie Mac is predicting.

In fact, other than the first quarter being a slightly lower 3.3%, their estimates are exactly the same.

They appear to be playing things more safely than in the past when they’d often call the end on the low mortgage rates.

I’m surprised they didn’t take the opportunity to call a year-end 4% 30-year fixed…

CoreLogic Mortgage Rate Forecast

While CoreLogic doesn’t break rates down by quarter, they do expect “mortgage rates to average about one-half of a percentage point higher in 2022 than they were in 2021, or about 3.4%.”

This is pretty close to the estimates from Fannie Mae, and the result of the Federal Reserve’s tapering to support its monetary policy.

Despite these expected higher interest rates, they believe home sales will rise to their highest levels since 2006, around the time the housing market began to top.

Ominous sign or not, it means mortgage lenders should stay relatively busy with home purchase loans, even if mortgage refinancing slows a lot.

The Truth’s 2022 Mortgage Rate Predictions

First quarter 2022: 3.0%
Second quarter 2022: 3.25%
Third quarter 2022: 3.375%
Fourth quarter 2022: 3.5%

Lastly, I’ll throw my hat in the ring and provide my predictions for the upcoming new year.

As I always say, there will be opportunities throughout the year – that’s just the nature of mortgage rates. They ebb and flow, rise and fall, just like anything else.

Of course, timing them is just as hard as everything else too.

Depending on the time of year (when are mortgage rates lowest), the environment could be favorable or not that desirable.

Still, I don’t see a ton of upside risk to rates given we’re still dealing with the COVID-19 pandemic.

A lot of unknowns remain, especially navigating this winter, which is always a trickier time of the year when it comes to any illnesses.

Once we get to 2022, it’ll hopefully be a bit clearer. But I expect new variants to surface in 2022, which could make it difficult for the Fed to move their own borrowing rates significantly higher.

At the same time, I don’t necessarily see mortgage rates falling much or hitting new all-time lows in 2022. It’s certainly possible though and I won’t rule it out.

But if I had to pick a direction, I’d say up, though only slightly. So if we start the year at 3%, only 3.5% by the end of the year, which isn’t bad at all.

A lot of homeowners already have super low 30-year fixed mortgage rates that they probably won’t mess with.

The only exception is those who wish to tap their equity via a cash out refinance. So rates will mostly only matter to new home buyers and these folks.

But if they stay low enough (or dare I say go even lower), plenty of existing homeowners with low-rate mortgages may rush to cash out some of that precious home equity.

This could save the mortgage industry, which is expected to see quite a bit of slowing in 2022 after some really big years.

Be sure to check all my 2022 real estate predictions for more on the housing market, rates, and trends.

The 2023 mortgage rate predictions are now out as well!

(photo: Marco Verch, CC 2.0)

Source: thetruthaboutmortgage.com

Apache is functioning normally

National mortgage rates were mostly lower compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed and jumbo loans moved lower, while rates for adjustable rate mortgages rose.

The Federal Reserve has raised rates 10 times in a row, most recently at its May 3 meeting. Rates now are at a 15-year high, but the consensus is that inflation is finally cooling and the central bank might halt raising rates.

”Mortgage rates have settled into a new normal of around 6.5 percent on a 30-year fixed-rate loan,” says Lisa Sturtevant, chief economist at Bright MLS, a large multiple listing service in the Middle Atlantic region. ”With growing recession risks, we could see mortgage rates dip lower, but we will not be returning to the 3 percent level seen during the height of the pandemic.”

Rates as of June 5, 2023.

These rates are marketplace averages based on the assumptions here. Actual rates listed across the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Monday, June 5th, 2023 at 7:30 a.m.

>>See historical mortgage interest rate movements

You can save thousands of dollars over the life of your mortgage by getting at least three rate quotes. Comparing mortgage offers from multiple lenders is always a smart move, but shopping around grew especially critical during the interest rate run-up of 2022, according to research by mortgage giant Freddie Mac. It found the payoff for bargain-huntng borrowers doubled last year.

“All too often, some homeowners take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”

Mortgage rates for home purchase

30-year mortgage falls, -0.20%

The average rate you’ll pay for a 30-year fixed mortgage is 6.99 percent, down 20 basis points since the same time last week. A month ago, the average rate on a 30-year fixed mortgage was lower, at 6.87 percent.

At the current average rate, you’ll pay $664.63 per month in principal and interest for every $100k you borrow. That’s lower by $13.48 than it would have been last week.

The 30-year mortgage is the most popular option for borrowers. It has a number of advantages. Among them:

  • Lower monthly payment. Compared to a shorter-term mortgage, such as 15 years, the 30-year mortgage offers more affordable monthly payments spread over time.
  • Stability. With a 30-year mortgage, you lock in a consistent principal and interest payment. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
  • Buying power. With lower payments, you can qualify for a larger loan amount and a more expensive home.
  • Flexibility. Lower monthly payments can free up some of your monthly budget for other goals, like building an emergency fund, contributing to retirement or college tuition, or saving for home repairs and maintenance.
  • Strategic use of debt. Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed mortgage with a smaller monthly payment can allow you to save more for retirement.

15-year mortgage moves lower,-0.24%

The average rate you’ll pay for a 15-year fixed mortgage is 6.37 percent, down 24 basis points since the same time last week.

Monthly payments on a 15-year fixed mortgage at that rate will cost around $864 per $100k borrowed. Yes, that payment is much bigger than it would be on a 30-year mortgage, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much more quickly.

5/1 ARM rate moves upward, +0.02%

The average rate on a 5/1 adjustable rate mortgage is 6.02 percent, climbing 2 basis points over the last week.

Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. In other words, the interest rate can change periodically throughout the life of the loan, unlike fixed-rate loans. These loan types are best for people who expect to refinance or sell before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.

While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.

Monthly payments on a 5/1 ARM at 6.02 percent would cost about $601 for each $100,000 borrowed over the initial five years, but could ratchet higher by hundreds of dollars afterward, depending on the loan’s terms.

Jumbo mortgage declines, -0.22%

The average rate you’ll pay for a jumbo mortgage is 6.98 percent, a decrease of 22 basis points over the last week. This time a month ago, the average rate for jumbo mortgages was lesser, at 6.94 percent.

At today’s average jumbo rate, you’ll pay $663.96 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $14.83 lower.

Rate review: How interest rates have shifted over the past week

  • 30-year fixed mortgage rate: 6.99%, down from 7.19% last week, -0.20
  • 15-year fixed mortgage rate: 6.37%, down from 6.61% last week, -0.24
  • 5/1 ARM mortgage rate: 6.02%, up from 6.00% last week, +0.02
  • Jumbo mortgage rate: 6.98%, down from 7.20% last week, -0.22

Refinance rates

Current 30 year mortgage refinance rate trends down, –0.15%

The average 30-year fixed-refinance rate is 7.10 percent, down 15 basis points from a week ago. A month ago, the average rate on a 30-year fixed refinance was lower, at 7.01 percent.

At the current average rate, you’ll pay $672.03 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $10.15 lower.

Where are mortgage rates headed?

The days of sub-3 percent mortgage interest on the 30-year fixed are behind us, and rates have so far risen beyond 7 percent in 2022.

“Low interest rates were the medicine for economic recovery following the financial crisis, but it was a slow recovery so rates never went up very far,” says McBride. “The rebound in the economy, and especially inflation, in the late pandemic stages has been very pronounced, and we now have a backdrop of mortgage rates rising at the fastest pace in decades.”

Comparing mortgage options

The 30-year fixed-rate mortgage is the most popular option for homeowners, and this type of loan has a number of advantages, including:

  • Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower payments spread over time.
  • Stability: With a 30-year mortgage, you lock in a consistent principal and interest payment. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
  • Buying power: With lower payments, you can qualify for a larger loan amount and a more expensive home.
  • Flexibility: Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
  • Strategic use of debt: Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed mortgage with a smaller monthly payment can allow you to save more for retirement.

That said, shorter-term loans have gained popularity as rates have been historically low. Although they have higher monthly payments compared to 30-year mortgages, there are some big benefits if you can afford the upfront costs. Shorter-term loans can help you achieve:

  • Greatly reduced interest costs: Because you pay off the loan faster, you’ll be able to pay less interest overall.
  • Lower interest rate: On top of less time for that interest to compound, most lenders price shorter-term mortgages with lower rates.
  • Build equity faster: The faster you pay off your mortgage, the faster you’ll own value in your home outright. That’s especially handy if you want to borrow against your property to fund other spending.
  • Debt-free sooner: A shorter-term mortgage means you’ll own your house free and clear sooner than you would with a longer-term loan.

What are current mortgage rates?

Mortgage rates have been volatile because of the COVID-19 pandemic. Generally, though, rates have been low. Mortgage rates are rising and falling from week to week, as lenders are inundated with forbearance and refinance requests. In general, however, rates are consistently below 4 percent and even dipping below 3%. This is an especially good time for people with good to excellent credit to lock in a low rate for a purchase loan. However, lenders are also raising credit standards for borrowers and demanding higher down payments as they try to dampen their risks.

What comes next:

Featured lenders for today, June 5, 2023

Source: bankrate.com