Monetary policy

Apache is functioning normally

Apache is functioning normally

Today was a rough day for mortgage rates as the market digested the Fed’s latest outlook, which confirmed its inflation fight is far from over.

While they didn’t raise their own fed funds rate yesterday, they did leave the door open for another hike in the future, assuming economic data warrants it.

Their overall stance actually didn’t change, but their so-called “dot plot” revealed that more of the Federal Reserve’s policymakers expect another rate hike this year.

Granted, it appears only one more quarter percent (0.25%) hike is in the cards at this juncture.

So while we might be going higher, it might only be a tiny bit higher. And after that, there may be more certainty for mortgage rates.

Higher Mortgage Rates for Longer, However…

After the Fed’s announcement, everyone seemed to adopt a simple takeaway: “higher for longer.”

In other words, most don’t expect the Fed to pivot and begin loosening monetary policy anytime soon.

There had been some hope that we were at the terminal rate, where the Fed stops hiking. But maybe not just yet.

As it stands, the Fed has raised their own fed funds rate 11 times since early 2022, and mortgage rates have risen along with those hikes.

While the Fed doesn’t control mortgage rates, its policy decisions can affect the direction of long-term interest rates, such as those tied to 30-year fixed mortgages.

Simply put, they don’t set the rate on your 30-year fixed, but what they say or do can push rates higher or lower.

Of course, their decisions are rooted in economic data, so it’s really the economy that’s dictating the direction of mortgage rates.

Anyway, some market watchers were hopeful the Fed was done hiking rates prior to the announcement yesterday.

And again, while they did hold rates steady, the dot plot indicated one more hike could be in the cards before the end of the year.

The Dot Plot Got Worse

These individual estimates from the dot plot also moved higher for 2024 and 2025, meaning rates may have to stay where they’re at for a bit longer than expected.

However, what does higher actually mean? Does it mean one more 0.25% rate hike from the Fed, but nothing beyond that.

And how does that translate to mortgage rates? On the one hand, it’s another rate hike, but mortgage rates only take cues from the Fed’s monetary policy.

If the Fed follows through with one more hike, but also signals that it’s done hiking, mortgage rates could breathe a sigh of relief.

Continue to Watch the Economic Data, Not the Fed Announcements

While the initial reaction to the Fed’s latest forecast was not good news for mortgage rates, or the stock market for that matter, it’ll be interesting to see what transpires once the dust settles.

Economic data had been mostly improving recently, in the sense that inflation was trending lower, which is the Fed’s primary objective.

But there were some hiccups recently, including lower-than-expected jobless claims, pointing to more economic resiliency.

However, if weaker economic data continues to come down the pipe, the Fed will be less inclined to raise its own rate and perhaps provide more clarity on future policy.

In that sense, not much has really changed here. The Fed is still data-dependent as it has always been.

Instead of watching Jerome Powell’s pressers, you may want to continue looking at the data that comes in, whether it’s the CPI report or jobs report. This is more important than looking at the dot plot.

Assuming the data continues to show a cooler economy, interest rates may not rise much more, and could simply linger at these higher levels.

But until we see consecutive reports showing a real drop in inflation, it’s going to be more of the same.

More Certainty from the Fed Could Keep Mortgage Rates in Check

Lastly, we’ve got very wide mortgage spreads, which is the difference between the 10-year Treasury yield and the 30-year fixed.

It’s been close to 300 basis points for a while now, nearly double the long-run average of 170 bps.

If the Fed is able to provide more clarity on their policy by year-end, it might allow this spread to narrow. And that could offset any additional upward pressure on mortgage rates.

It’s somewhat bittersweet, but it could prevent the 30-year fixed from going even higher, say to 8%.

With the 10-year yield around 4.50 and the spread currently about 300 bps, 30-year fixed rates are hovering around 7.5%.

If that spread can come down to say 250 bps, you might get a mortgage rate back in the 6s, or at least offset any additional increases.

Tip: The prime rate, which is tied to HELOCs, moves in lockstep with the fed funds rate. So those with open-ended second mortgages have seen their rates go up each time the Fed raised its own rate.

Source: thetruthaboutmortgage.com

Apache is functioning normally

Apache is functioning normally

Mortgage rates remained well above 7% on Thursday as markets digested Wednesday’s Fed meeting. 

Freddie Mac‘s Primary Mortgage Market Survey, which focuses on conventional and conforming loans with a 20% down payment, shows the 30-year fixed rate averaged 7.19% as of Sept. 21, up one basis point from last week’s 7.18%. By contrast, the 30-year fixed-rate mortgage was at 6.29% a year ago at this time.

“Mortgage rates continue to linger above 7% as the Federal Reserve paused their interest rate hikes,” Sam Khater, Freddie Mac’s chief economist said.

Elevated mortgage rates weigh negatively on the housing demand, and by extension on homebuilders, Kharter added.  

“Builder sentiment declined for the first time in several months and construction levels have dipped to a three-year low, which could have an impact on the already low housing supply,” he noted.

Other indices showed different mortgage rates this week.

HousingWire’s Mortgage Rates Center showed Optimal Blue’s 30-year fixed rate for conventional loans at 7.22% on Wednesday, compared to 7.16% the previous week. At Mortgage News Daily on Wednesday, the 30-year fixed rate for conventional loans was 7.33%, up from 7.22% the previous week.

Members of the Federal Open Market Committee expect interest rates to remain elevated for longer than had been expected

The Fed paused its rate hikes yesterday as several economic indicators — including the improved core CPI figures, lower job openings, and higher unemployment rate — point towards a cooling economy. However, members remained cautious and the committee’s updated outlook implies a forthcoming monetary policy that is “tighter for longer,” Jiayi Xu, economist at Realtor.com said.

“With the year-end projection for 2023 remaining at 5.6%, we are drawing closer to another potential rate hike as the year approaches its end,” she said.

Furthermore, the expected policy rate for the conclusion of 2024 and 2025 is now half a percentage point higher than what was anticipated back in June, reinforcing the trend toward a more restrictive monetary policy in the path forward.

While higher interest rates indicate additional hurdles to come for the housing market, the fall typically ushers in more favorable buying conditions compared to the rest of the year, according to Xu.

“For those looking to purchase a home in this tough year, the first week of October will emerge as the best time to make a move,” Xu said.

Historical data suggests that during this particular week, home prices tend to dip below their peak levels, competition subsides, and the housing inventory expands compared to the busy summer months, she explained.

Meanwhile, homebuyers who can’t afford to buy a house in today’s market can rely on renting as rental prices are going down. 

Source: housingwire.com

Apache is functioning normally

Apache is functioning normally

No one can predict the future of real estate, but you can prepare. Find out what to prepare for and pick up the tools you’ll need at the immersive Virtual Inman Connect on Nov. 1-2, 2023. And don’t miss Inman Connect New York on Jan. 23-25, 2024, where AI, capital and more will be center stage. Bet big on the roaring future, and join us at Connect.

The U.S. looks to be headed for a “mild recession” in the first half of next year, but continued strength in the economy could keep mortgage rates from coming down as much as previously expected, economists at mortgage giant Fannie Mae said in a forecast released Monday.

While the Federal Reserve isn’t expected to raise rates when policymakers wrap up a two-day meeting Wednesday, persistent inflation could still prompt the Fed to hike rates later this year, or implement a “higher for longer” rate strategy.

The good news is that even though mortgage rates have settled in above 7 percent, the risk that rates will do even more damage to home sales is limited, as the share of cash purchases remains high and sales are now driven more by life events than discretionary move-up buys, Fannie Mae forecasters said.

Nevertheless, Fannie Mae economists forecast that home sales will drop by 14.7 percent this year, and stay at about the same level next year.

“We expect that total housing market activity will remain at a low level into 2024 as the Federal Reserve continues to hold the line on interest rates against inflation,” Fannie Mae Chief Economist Doug Duncan said, in a statement.

Last month, economists at Fannie Mae were expecting rates for 30-year fixed-rate conforming mortgages would peak at 6.8 percent during the third quarter of this year before retreating to an average of 6 percent during the final three months of 2024. Forecasters at the Mortgage Bankers Association (MBA) were even more optimistic, predicting mortgage rates would drop to an average of 5 percent by Q4 2024.

Mortgage rates projected to ease next year

Source: Fannie Mae, Mortgage Bankers Association forecasts.

That was before strong economic data sent rates on the popular 30-year fixed-rate conforming loans soaring to a 2023 high of 7.30 percent, according to rate lock data tracked by the Optimal Blue Mortgage Market Indices, which show rates have only pulled back slightly since then.

With the economy cooling more slowly than expected, Fannie Mae analysts now see mortgage rates peaking at 7.1 percent during the final three months of 2023, before easing to 6.3 percent by Q4 2024. In releasing their latest forecast Monday, MBA economists predicted mortgage rates will start coming down this year, but remain well above 5 percent next year.

Home sales projected to drop 17.4% this year

Source: Fannie Mae Housing Forecast, September 2023.

Fannie Mae is forecasting 4.8 million total home sales in 2023, which would be a 17.4 percent drop from last year and the slowest annual pace since 2011. Next year isn’t expected to be much different, with sales expected to bounce back by less than 1 percent.

“While the additional downside risk from rate movements to date is minimal, the prospects of a recovery in existing sales in the near future is unlikely given strong mortgage rate ‘lock-in’ effects and stressed affordability,” Fannie Mae economists said in commentary accompanying their September forecast.

New home sales are expected to grow by more than 6 percent this year, as builders race to complete homes in markets where the lock-in effect — reluctance on the part of homeowners to give up the low rate on their existing mortgage — has made listings scarce.

“New home sales were surprisingly strong in the first half of the year, due partly to homebuilder rate buydowns, which become more expensive when mortgage rates rise,” Duncan noted. But he said Fannie Mae forecasters expect new home sales to pull back slightly next year, “due to the higher mortgage rate environment and recent decline in homebuilder confidence.”

The National Association of Home Builders/Wells Fargo Housing Market Index, a gauge of builder confidence, dipped six points in August and another five points in September, to 45. It was the first time the index has been below 50 in five months, which indicates more builders view conditions as poor than good.

The recent rebound in mortgage rates “is making homebuilders nervous,” Pantheon Macroeconomics Chief Economist Ian Shepherdson said in a note to clients Monday.

“To be clear, the impact of mortgage rates returning to 7-1/4 percent from their recent 6-1/2 percent lows will be nothing like as bad as the initial surge from 3 percent to 7-1/4 percent in the year to September 2022,” Shepherdson said. “But it ought to be enough to quash the nonsensical media/Fed narrative that the housing market is starting to recover. It isn’t.”

Large pipeline of multifamily housing coming online

Source: Fannie Mae Housing Forecast, September 2023.

Fannie Mae economists expect single-family housing starts to plateau at 910,000 next year, and for multifamily construction to slow by 22 percent, to 389,000 units.

“With sluggish rent growth on a national level, more normalized vacancy rates, and tighter construction and development loan lending standards, we expect multifamily construction starts to continue to slow,” Fannie Mae forecasters said. “These dynamics may also play into softening demand for single-family housing: There is a large pipeline of multifamily housing coming online, and the rent-to-buy calculus for prospective homebuyers may tilt a little more in favor of renting for longer.”

Mortgage lending expected to grow by 20% next year

Source: Fannie Mae Housing Forecast, September 2023.

With home prices holding firm and mortgage rates expected to ease next year, Fannie Mae forecasters expect mortgage originations will grow by 20 percent next year. The slight uptick in home sales projected for next year would boost purchase loan originations by 9.4 percent, to $1.433 trillion, while lower mortgage rates are expected to boost refinancing by 76 percent, to $442 billion.

Mild recession seen as ‘likeliest outcome’ of Fed tightening

Fannie Mae economists have been predicting that the U.S. was headed for a recession since April 2022, after the Fed began raising interest rates and the impact of stimulus measures introduced during the pandemic faded.

While mixed economic data continues to “muddle the near-term outlook,” Fannie Mae economists say they continue to expect a “mild recession” in the first half of 2024, based on the belief that consumers will need to rein in spending in order to live within their means.

“Fundamentally, personal consumption remains at what we believe to be an unsustainable level relative to incomes, and the full effects of monetary policy tightening are still working through the economy,” Fannie Mae forecasters said.

In their weekly brief on the U.S. economy, Shepherdson and his Pantheon Macroeconomics colleague Kieran Clancy noted three potential wildcards on the economic horizon: A strike launched last week by the United Auto Workers targeting the big three automakers, next month’s resumption of federal student loan payments, and a “likely” government shutdown.

“An all-out strike lasting a month could be expected to depress quarterly GDP [gross domestic product] growth by about 1.7 percentage points, before taking account of the hit to the supply chain,” the Pantheon Macroeconomics team said. “The problem for the Fed is that it would be impossible to know in real time how much of any slowing in economic growth could confidently be pinned the strike, and how much could be due to other factors, notably the hit to consumption from the restart of student loan payments. The latter already is making itself felt in falling restaurant diner and airline passenger numbers.”

Fannie Mae economists agree that a sustained strike could “drive a negative payroll report in October, as well as dampen the GDP measure,” but that a short-lived strike “would likely be followed by a rebound in auto manufacturing output thereafter.”

Get Inman’s Mortgage Brief Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.

Email Matt Carter

Source: inman.com

Apache is functioning normally

Apache is functioning normally

Hyperinflation occurs when prices for goods and services rise uncontrollably. It is an economic condition that fuels nightmares for consumers and for economists alike.

According to data from Johns Hopkins University professor Steve Hanke, there have been more than 60 documented instances of hyperinflation since the 1700s, and in every instance, economic conditions deteriorated so fast that in all cases, national currencies failed, meaning that they lost nearly all of their purchasing power both domestically and internationally.

That begs a key question: Could hyperinflation come in the United States? And, if so, could hyperinflation take down the U.S. dollar and trigger a recession?

Theoretically, the answer is “possibly.” Realistically, the answer is “not likely.” Let’s take a look at hyperinflation and evaluate the possibility of inflation on steroids taking root in the U.S. economy.

What Is Hyperinflation?

If you’re still not quite clear on what is hyperinflation, economists define the term as when the price of goods and services rises uncontrollably over a specific timeframe, with no short-term economic remedy able to bring those prices back down again.

While figures linked to hyperinflation vary, some economists say hyperinflation occurs when the price of goods and services in a country’s economy rise by 50% over the period of one month.

The causes of hyperinflation typically stem from a skyrocketing boost in a country’s money supply without any accompanying economic growth. That scenario usually occurs when a country’s government essentially prints and spends money in short-term bursts, thus triggering a rise in that country’s money supply.

When a government pursues a high level of short-term economic spending at a rate significantly higher than the country’s gross domestic product (GDP) rate, more money flows through the economy. When that happens, the real value of a nation’s currency declines, the price of goods and services rises, and inflation spikes.

💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

Is Hyperinflation Coming to the United States?

While U.S. inflation rates and the prices of many goods and services are on the upswing, economists dismiss the notion that U.S. hyperinflation is looming for the country for several reasons. First, it’s important to remember that hyperinflation and inflation aren’t the same thing, and the Federal Reserve would likely raise interest rates if inflation concerns grew.

According to data published in September 2023, the annual U.S. inflation rate was 3.7% for the 12 months that ended in August 2023. That’s a significant drop from June of 2022, when the inflation rate was 9.1%, which was led by certain items such as airline tickets, lumber, and hotel rates. Many economists attributed this to ongoing inventory shortages and supply chain issues and the release of post-pandemic pent-up demand.

Even the largest inflation rate in U.S. history — 23% in June, 1920 — wouldn’t come close to approaching hyperinflation levels of 50% in a month. Still, ongoing inflation is something that the U.S. economy hasn’t seen in more than four decades, and it’s a risk that investors may want to consider when devising their portfolio strategy.

How Can Hyperinflation Affect the United States?

Economists have largely downplayed the chances of a hyperinflation in the USA, but with inflation on the rise, it’s helpful for consumers to get a better grip on hyperinflation, in particular, and on inflation in general.

Hyperinflation Causes:

These are some of the typical causes of hyperinflation:

Falling Dollar Value

Like most major global currencies, the dollar trades on foreign currency exchanges. When a country faces inflationary risks, investors grow skittish, and may bypass that country’s currency in favor of more stable currencies. Even without hyperinflation, a weaker dollar can significantly hurt the U.S. economy.

(Hyperinflation is the extreme opposite of what happens during deflation, in which prices for goods and services decline and the value of a currency rises.)

Fewer Major Purchases

As inflation seeps into an economy, high prices may prompt individuals and businesses to defer or cancel large purchases. Consumers, for example, could hold off buying new homes, new vehicles, or major household appliances. Businesses might postpone big-ticket purchases like heavy machinery, office buildings, and commercial vehicles.

Some investors may hesitate to put money into stocks in a down market. All of those decisions could stall economic growth, as fewer dollars are circulating through the economy.

Monetary Policy

When inflation occurs, banks and financial institutions may not lend money or extend credit to consumers and businesses, as confidence in the overall economy wanes.

The economic fix for skyrocketing inflation typically comes from a country’s central bank. In the United States, that would be the Federal Reserve. When necessary, the Federal Reserve uses monetary policy to slow rising inflation by curbing the U.S. money supply, often by raising interest rates. Higher interest rates give consumers and businesses more incentive to save and less incentive to spend. That, in turn, slows rising inflation.

Recommended: What Is Monetary Policy?

Lower Investment Returns

Inflation eats into real investment returns. As the value of a dollar declines, investors need to earn more than their average return on investment in order to generate the same purchasing power.

Get up to $1,000 in stock when you fund a new Active Invest account.**

Access stock trading, options, auto investing, IRAs, and more. Get started in just a few minutes.

**Customer must fund their Active Invest account with at least $10 within 30 days of opening the account.
Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

How to Combat Hyperinflation

Individuals can’t do much to combat hyperinflation on their own. In fact, during hyperinflation, economies and societies can break down or collapse. Fortunately, periods of hyperinflation are rare. And remember, the 3.7% inflation rate as of August 2023 in the U.S. is nowhere near the levels of 50% in a month, which is when many economists believe hyperinflation occurs.

That said, there are things that might help individuals lessen the impact regular or high inflation might have on their investments. These actions include having a balanced and diversified portfolio, and investing in Treasury Inflation-Protected Securities (TIPS), in which the principal amount invested adjusts with inflation.

💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).

Real-World Examples of Hyperinflation

Zimbabwe offers a relatively recent example of hyperinflation. Just over a decade ago, Zimbabwe’s inflation rate stood at a staggering 98% daily inflation rate as the country’s economy went into free fall. That means consumer prices doubled on a daily basis.

Today, the Zimbabwe dollar is very weak, as the country continues to struggle with the issues that often lead to hyperinflation, such as an increased money supply, political corruption, and a major decline in economic activity.

Even historically stable country economies have experienced hyperinflation.

In the immediate aftermath of World War I, the Weimer Republic of Germany fell into economic decline due to war reparation debts and significantly reduced economic activity. The German government printed too much money in an effort to handle its economic obligations and to ignite a stagnant economy. The country faced an inflation rate of 323% per month by November, 1923 — that’s an annual inflation rate of three billion percent.

In today’s dollars, the consumer impact of hyperinflation is particularly onerous. For example, a small cup of coffee that normally would cost $3 would cost $22 at a 1,000% inflation rate. Similarly, a rental payment for an apartment in a major U.S. city might normally cost $2,000. With a 1,000% inflation rate, that rent would cost $22,000.

Hyperinflation also exists on the world’s economic stage in 2023. Venezuela, for example, has an estimated inflation rate of about 400%.

The Takeaway

While hyperinflation is certainly an economic condition any country would strive to avoid, there’s no compelling evidence suggesting it’s on the U.S. economic horizon — now or anytime in the near future. Still, the country has been in an inflationary period since 2022, so investors may consider using some inflation-hedging strategies to reduce its impact.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

How does hyperinflation differ from regular inflation?

Inflation is the rate at which prices for goods and services are rising in a given economy. Hyperinflation is considered out-of-control inflation, at levels of about 50% in one month, and it can be a sign that a severe economic crisis is on the horizon.

Has the United States ever experienced hyperinflation in its history?

No. The closest the U.S. has come to hyperinflation is when annual inflation peaked at almost 30% during the Revolutionary War in 1778.

Are there any warning signs or indicators that could suggest the onset of hyperinflation?

Signs that might suggest that hyperinflation could happen include significant price increases of goods and services (such as increases of 50% in one month), the value of a country’s currency plummets, and economic activity slows or stops.

How can individuals protect their assets and finances during periods of hyperinflation?

Hyperinflation is quite rare, especially in countries with a central bank, like the Federal Reserve, that works to control inflation. However, there are things an investor might do to help limit the impact regular inflation might have. This includes having a balanced and diversified portfolio, and investing in Treasury Inflation-Protected Securities (TIPS), in which the principal invested adjusts with inflation.

Photo credit: iStock/milindri

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.

SOIN0723108

Source: sofi.com

Apache is functioning normally

Apache is functioning normally

We maintain our forecast for a modest economic contraction in the first half of 2024. Fundamentally, personal consumption remains at what we believe to be an unsustainable level relative to incomes, and the full effects of monetary policy tightening are still working through the economy. We have upgraded our 2023 real GDP growth outlook to 2.2 percent from 1.9 percent on a Q4/Q4 basis largely due to incoming July data, while our forecast for growth in 2024 is unchanged. Meanwhile, we forecast the topline and core measures of the Consumer Price Index (CPI) to end the year around 3.1 percent and 4.0 percent in 2023, respectively, slowing further in 2024 to 2.4 percent and 2.5 percent.

With the jump in mortgage rates to above 7 percent, the housing market faces renewed headwinds. Mortgage origination activity has slowed further in recent weeks and total home sales remain at levels not seen since 2011. The new home market, which showed surprising strength over the first half of 2023, due in part to a limited inventory of existing homes for sale, may now be taking a breather. We forecast total home sales to be around 4.8 million in 2023, which would be the slowest annual pace since 2011 and 4.9 million in 2024. Similarly, our expectation for 2023 mortgage originations was downgraded from $1.60 trillion to $1.56 trillion in 2023 and from $1.92 trillion to $1.88 trillion in 2024.

Q3 GDP Growth Poised to Accelerate, but Strength is Likely Temporary
The third quarter started off on a strong note, with real personal consumption jumping 0.6 percent month over month in July, pointing to a stronger Q3 2023 GDP growth figure than previously anticipated. Even if personal consumption expenditures were to remain flat over the next two months, July’s growth alone would translate into a pace of personal consumption over the quarter of around 3.8 percent annualized. However, this surge in spending is likely unsustainable and our outlook is for decelerating activity. We believe much of the July consumption was the result of pulling forward future spending in part due to a combination of the release of popular movies and concerts as well as an increase in spending on energy during the July heat waves, and perhaps due to seasonal timing related to online retailer sales. Both recent credit card transaction data and auto sales data point to a likely pullback in consumption in August, with auto sales falling 4.6 percent month over month. August nominal retail sales jumped by 0.6 percent, but this was almost entirely due to price increases in gasoline. Control group retail sales, which feed into the GDP report, rose by only 0.1 percent in nominal terms, suggesting flat or slightly declining real sales. Furthermore, the 0.6 percent pop in real consumption in July came despite a decline of 0.2 percent in real disposable income, increasing the divergence between the two series. Recent spending growth has come via a further reduction in the already below-trend personal saving rate to 3.5 percent in July. This was down from 4.3 percent in June and around an average of 8.0 percent from 2017 to 2019. Especially when accounting for an expected deceleration in wage growth, we expect more modest consumer spending growth in coming quarters.

Refinance Application-Level Index (RALI), remains depressed given that mortgage rates remain above the 7 percent level.

Economic & Strategic Research (ESR) Group
September 14, 2023
For a snapshot of macroeconomic and housing data between the monthly forecasts, please read ESR’s Economic and Housing Weekly Notes.

Data sources for charts: Bureau of Economic Analysis, Bureau of Labor Statistics, Mortgage Bankers Association, National Association of REALTORS®, Fannie Mae

Opinions, analyses, estimates, forecasts and other views of Fannie Mae’s Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae’s business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

ESR Macroeconomic Forecast Team

  • Doug Duncan, SVP and Chief Economist
  • Mark Palim, VP and Deputy Chief Economist
  • Eric Brescia, Economics Manager
  • Nick Embrey, Economist
  • Nathaniel Drake, Economic Analyst
  • Richard Goyette, Economic Analyst

Source: fanniemae.com

Apache is functioning normally

A proposed set of higher risk weights for mortgage-related assets at banks could broadly compound current strains on home affordability and conflict with other policies and rulemaking promoting it, critics testified at a congressional hearing Thursday.

The new rules not only increase portfolio lending expenditures for low down payment loans, but aspects like a possible change affecting servicing rights also add costs for lenders and the market at large, said Bob Broeksmit, president and CEO, Mortgage Bankers Association.

The rights and associated work of handling loan payments are a key cost for the mortgage industry at large and if depositories further withdraw from investments in them, costs for nonbank lenders already struggling to profit due to higher rates could rise, he said.

“The mortgage servicing value is an integral part of how every mortgage is priced, not just mortgages made by these banks,” Broeksmit said at a House Financial Services subcommittee hearing. The subcommittee involved is focused on financial institutions and monetary policy.

Mortgage servicing rights already have a relatively high risk weighting under current bank capital rules that discourage holding them in amounts above 25% of Tier One common equity. The proposal would lower the cap to 10% of common stock or other assets in that category.

Broeksmit also reiterated his past criticisms of moving from a risk-weighting of 50% for most home mortgages outside the income-producing sector, to a proposed step-up of percentages in that category by loan-to-value ratio that’s in excess of global Basel III rules.

“If these increased capital requirements go into effect, banks will make fewer mortgage loans or they will raise the price,” said Broeksmit.

He also doubled-down on his previously stated concerns about the fact that the new requirements don’t account for the additional protection private mortgage insurance can provide to loans with lower down payments.

Others testifying said the capital rules could put a strain on mortgages that have balloon payments due in a higher rate market.

“In a time of historic inflation, the fastest increase in interest rates in modern history, and a growing likelihood of the credit crunch, now is not the time to raise capital levels,” said Committee Chair Rep. Andy Barr, R.-Ky. “Such action threatens to further constrain credit availability and put already-sensitive sectors such as commercial real estate in further peril.”

The new capital rules also could be a constraint on lines of credit used both by businesses and consumers, Broeksmit said.

“If I understand this voluminous proposal correctly, banks would be required to hold capital on the maximum amount that could be drawn rather than the amount that is outstanding. That could have a really chilling effect on … small business credit and also home equity lines of credit where consumers take that out and use it as they need it,” he said.

Other speakers and some Democratic members of Congress debated the assertion that the rule would hurt access to financing.

“We strongly disagree that new capital requirements will undermine credit availability,” said Alexa Philo, senior policy analyst, Americans for Financial Reform, after Rep. Ayanna Pressley, D.-Mass, asked whether the new rules could protect the availability of lending in a downturn.

There’s a significant body of research that has found that domestic financial institutions with higher reserves provided more financing than those with lower capital levels, Philo said.

“Well capitalized, large U.S. banks had higher loan originations and liquidity,” she said.

Source: nationalmortgagenews.com

Apache is functioning normally

Hedging, PPE, Fee Collection, QC Products; Gov’t and Conforming News; Producer Inflation Alive and Well

<meta name="smartbanner:author" content="We now have a native iPhone
and Android app.
Download the NEW APP”>


This website requires Javascrip to run properly.

Hedging, PPE, Fee Collection, QC Products; Gov’t and Conforming News; Producer Inflation Alive and Well

By:
Rob Chrisman

Thu, Sep 14 2023, 11:15 AM

This morning I head from Chicago to Orlando along with 74 million others (yearly). More fun with numbers: Although the MBA thinks we’ll fund about $1.7 trillion in 2023, weekly applications continue to reflect a declining market so let’s use $1.5 trillion to make the numbers easier. That averages out to $6 billion per business day of production. The Fed is looking to offload $13 billion in MBS from bank seizures. To keep things in perspective, that is only two days’ worth of production, certainly not enough to “swamp the boat.” Perspective is good, and here’s another example. Higher and volatile interest rates, uncertainty about property values, and stresses in some property markets have increased pressure on some loans and properties. Accordingly, MBA reported that commercial and multifamily mortgage delinquencies increased in the second quarter of 2023. Even with the uptick in delinquency rates, they remain at the lower end of historical ranges. Loans backed by properties (and property types) with stable cash flows, are faring better than those that may have seen declines in incomes. (Today’s podcast can be found here and this week’s is sponsored by SimpleNexus, an nCino Company, and award-winning developer of mortgage technology for modern lenders. Hear an interview with C2 Financial and Revest Homes’ Jim Black on how originators can win business in a tough rate environment.)

Lender and Broker Software, Products, and Services

Amidst changing QC requirements and increasing repurchase risk, lenders must invest in automation to drive efficiency and protect profits. The industry needs to shift its focus from crisis management to prevention with proactive QC. Not only does this approach set lenders up for success regardless of the origination environment, but it’s also a regulatory imperative now that Fannie Mae requires lenders to conduct pre-funding QC on a minimum of 10% of their production. ACES Quality Management empowers mortgage lenders and servicers to take control of their operations and embrace proactive QC. ACES seamlessly combines cutting-edge technology with comprehensive data analysis, giving mortgage professionals the tools they need to identify, anticipate and rectify potential issues in near real time. Learn why financial institutions and third-party providers rely on ACES.

“Looking for a full-service depository bank that will help you achieve your long-term growth plans? NexBank has been a dependable lender to our clients through all business cycles. We’ve been in the wholesale, correspondent, and warehouse lending business since 2008 and don’t compete with our clients for retail originations or refinancing business. Our long-tenured account executives, with an average of 24 years of industry experience, know our business well and are dedicated to helping you grow yours. This month, we celebrate the 15th anniversary of three professionals who have contributed to the success of our clients and NexBank. Lance Hackney with $4 billion closed volume; Brandi Horton with $4.5 billion closed volume; and Steve Smith with $5 billion closed volume. We support all channels: Wholesale, Non-Delegated & Delegated Correspondent with Portfolio, Conventional, FHA, and VA products, and offer Delegated & Emerging Banker Warehouse Lending and Escrow Deposit Management. Email Jon Hodge to reach an AE. Member FDIC. Equal Housing Lender. NMLS 672886.”

If you’re using Encompass® by ICE Mortgage Technology™ and you’re not using Fee Chaser to collect your upfront fees you it’s time to get your act together. Fee Chaser enables your borrowers to pay their upfront fees right from a text message. No more missed appraisal fees, no more paper checks, no more credit card numbers floating around on printed forms. Check out Fee Chaser here and they’ll text a demo right to your phone.

“Optimal Blue’s market-leading product, pricing and eligibility (PPE) engine has been the industry’s preferred choice for years because of our ability to serve our clients’ needs. With Optimal Blue’s open-API platform, our clients can access and use all of the functionality that exists in the Optimal Blue PPE via APIs, including creating customized rate quoting tools, fully automating lock events, and ensuring LOs have on-demand access to product and pricing where and when they need it. Reach out to Optimal Blue today to learn more about our open-API platform and how you can use it to unlock hidden efficiencies and improve your business!”

Government and Other Conforming Program News

Plaza Home Mortgage® reminded brokers of the ins and outs of getting government deals done. Here are five really great reasons to look to Plaza first for your government loans:

Manual underwriting may be an option for loans that do not get an approval through AUS-Total Scorecard (manual underwriting requirements apply). FHA and VA FICOs down to 550. USDA FICOs down to 600. Cash-out allowed on FHA and VA. Experienced Underwriting team that is willing to go the extra mile for your borrower.

Effective August 25th, the Attorney Authorization Approval (AAA) Matrix is available within Property 360™ on both the Claims and Excess Fees landing pages. The matrix remains accessible on the Excess Attorney Fee – Cost Guidelines webpage in the Single-Family portal.

Federal Housing Agencies issued a reminder for mortgage assistance for those impacted by the Maui Wildfires. In a joint statement, the Federal Housing pledged their offices’ ongoing support for Hawaiian residents affected by the devastating wildfires on the Hawaiian island of Maui.

Hurricane season has begun, MBAF provided a reminder of MBA’s Disaster Recovery Resource Guide. This guide outlines what to do before and after a natural disaster, along with how to start, and then, work through the recovery process. Additionally, another resource available is Hurricane Help FAQs.

Fifth Third Correspondent Lending Communiqué 2023-6-9.1.23 has the following topics:

Final Document Reminder, as a reminder, Fifth Third expects Final Title Policies and Recorded Mortgages to be delivered within 90 days of the loan purchase date. Excessively aged documents will be assessed a fee per section 1.07 of the Correspondent Seller Guide.

Maximize Cash Out with Loan Stream Mortgage Non-QM Closed End Seconds. Program highlights include clients can Access Equity with our Non-QM CES Cash Out Refi: 90% CLTV Full Doc, 85% CLTV Bank Statements, 80% CLTV Investment Properties and 75% CLTV DSCR. Also available on Purchase, Rate/Term Refinance & Cash Out.

Chaos has a way of bringing on unexpected opportunities. Plaza Home Mortgage®. Co-President and COO, Michael Fontaine, shares with National Mortgage News how Plaza navigates in the evolving wholesale landscape. From diverse strategies to tapping into improved technology plus Plaza’s training offerings to help amplify broker clients’ strengths, take a look.

Plaza Home Mortgage® Jumbo opportunities keep getting better, now offering 2-1 and 1-0 Temporary Buydowns on its new Jumbo Elite loan program. Get in touch with your Account Executive for the qualifying details. Explore the complete range of Jumbo solutions Plaza offers for your borrowers.

Capital Markets

Why do those in the mortgage space watch the 10-year U.S. Treasury note? Historically, the 10-year U.S. Treasury yield has been considered a key benchmark for mortgage rates. Mortgage rates, however, are not actually based on the 10-year U.S. Treasury note (as is commonly believed). MCT released a blog, “How the 10-Year U.S. Treasury Note Impacts Mortgage Rates” that serves as an excellent primer for how mortgage interest rates respond to moves of the benchmark U.S. Treasury note. The piece discusses why mortgage rates and Treasury yields move together and how bonds are influenced by Treasury yields. With a trusted capital markets partner like MCT, you can rest assured that you will be notified of how economic trends could have the potential to impact your business. Sign up for MCT’s newsletter to receive educational articles like this one and learn more about variables that impact mortgage rates.

In rate news, even though inflation in August showed a larger than expected increase in core CPI (actual 0.3 percent when it was expected at 0.2 percent), it showed ongoing improvement on a year-over-year basis, enough to prevent any significant change in Fed rate hike expectations. The implied likelihood of a rate hike in December sits around 46 percent.

Digging into the numbers, gasoline prices contributed to nearly half of the increase to the headline number, rising nearly 11 percent over the month, and that inevitably had some trickle-through impact on the core reading, as transportation services were driven higher by energy prices. The 3.7 percent year-over-year rate of CPI is still well above the Fed’s 2 percent target, reflecting stickiness that, while probably not compelling enough to the Fed to raise rates further at this point as the trend in inflation has downshifted since the spring, will certainly keep the Fed in a “higher for longer” mindset. Looking forward to the FOMC meeting next week, another pause in rate hikes is already baked in, so the importance is actually much more about rate decisions in November, December, and January.

Today’s economic calendar is under way with several releases. Events kicked off with the ECB releasing its latest monetary policy decision (+.25 percent, as expected, in an effort to continue to tame inflation) followed by ECB head Lagarde’s press conference. The U.S. calendar is also under way with retail sales (+.6 percent for August, much higher than expected), the Producer Price Index (+.7 percent, much stronger than expected, core +.3 percent), and weekly jobless claims (220k, 1.688 continuing). Later today brings July business inventories, Treasury announcing the sizes for next week’s reopened 20-year bonds and 10-year TIPS auctions, and Freddie Mac’s latest Primary Mortgage Markets Survey. We begin Thursday with Agency MBS prices worse a few 32nds from Wednesday evening, the 10-year yielding 4.27 after closing yesterday at 4.25 percent, and the 2-year at 5.02 after this slew of economic news.

Employment

“Foundation Mortgage is rapidly expanding after several record months and is looking for top tier experienced Non-QM account executives to join our team. We have a vast array of non-QM products to choose from and common-sense underwriting. We make exceptions that other lenders won’t. If you are looking to join an experienced team that knows how to get loans done contact Dean Ayres.”

On the heels of the successful acquisition of Platinum Home Mortgage Corp, Planet continues its appetite for retail acquisition by looking to consolidate several independent bankers into its organization. If your firm is seeking better economies of scale or a strategic exit, let’s talk. With our strong multichannel support, speedy turnarounds, dedicated recruitment, and customer retention, Planet will give you a remarkable edge. Please contact Lee Gross to find out what Planet could do for you. All inquiries will be held in strict confidence. Confidentiality will also be honored for single MLOs or smaller sales teams who contact VP of Talent Peter Briggs or 435-709-6287.

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

While it’s impossible to predict the future when it comes to financial markets, it’s usually possible to identify the events that have higher potential to cause bigger swings. Other times, volatility strikes on days when it wasn’t entirely expected.

That’s how this past week began.  After Monday’s holiday closure, rates jumped higher on Tuesday morning without warning.  What would a “warning” have looked like?  It could be as simple as the presence of a scheduled economic report with a history of causing a volatile market response.  Tuesday had none of those, but it did have a legitimate market mover pulling the strings behind the scenes.

The puppet master in question is a bit esoteric without a quick refresher:

  • Interest rates are based on bonds.
  • The Fed sets a target for the shortest-term bonds, but the market trades it out from there.
  • There are all kinds of bonds. US Treasuries are government bonds.  Mortgage backed securities (MBS) are bonds tied to mortgage cash flows.  Municipal bonds finance local government operations.  Corporate bonds finance various spending/investment needs for large companies.
  • All these bonds are slightly different in their risk and reward, but they are all part of the same asset class in the eyes of investors.  Specifically, bonds are a “fixed income” investment that allow investors to receive a fixed schedule of repayment with interest.  

With all that out of the way, the following will hopefully make more sense.  Tuesday was the 5th biggest day ever for new corporate bonds being offered for sale.  The top 4 days all benefited from extremely large individual bonds from one company.  All 4 had at least one offering of $25 billion or more.  That made Tuesday all the more notable in that the largest bond was “only” $4.75 billion.

In other words, there was a deluge of new bonds competing for investors’ attention.  That means relatively lower demand for other bonds such as MBS.  When demand for a bond falls, it results in lower prices, and lower prices mean higher rates.  

The market knew that this week would be a healthy one for new corporate bonds, but reality exceeded expectations.  The bottom line is that the excess supply caused a bit of weakness across the entire bond market, including the part that dictates mortgage rates.

We also had some good, old-fashioned economic data hit the market on Wednesday, but it didn’t do us any favors either.  The ISM Non-Manufacturing Index showed the services sector growing more than expected in August.  This includes a separate index that showed higher prices as well.  In addition to rising more than expected, both indices give the impression they’re in the process of bouncing after correcting from the “too hot” levels in early 2022.

Stronger economic data and higher prices are two of the biggest enemies of rates.  It made Wednesday the worst day of the week for the average mortgage lender.  10yr Treasury yields provide a benchmark for interest rate movement this week and allow us to see more granular detail.

Things calmed down heading into the weekend with rates staying safely below the highs seen at the end of August, but that wasn’t much of a consolation in the bigger picture. 

The week ahead brings some high stakes economic data in the form of August’s Consumer Price Index (CPI).  This broad inflation metric has been one of the most important sources of influence for the market on any given month over the past few years and this one could be one of the more notable examples.

CPI has been falling in general, but the decline runs the risk of being misleading due to the broad decline in fuel prices that ended 2 months ago.  Last month’s data began to show the effects of that fuel price reversal and some analysts think it will be more apparent in next week’s report.  This has resulted in a wider range of forecasts than normal and that tends to result in a more volatile market response. 

Note the small bounce in “headline” inflation, which includes fuel prices versus “core” inflation which excludes fuel.  Like with the ISM data above, some market watchers think the economy has merely corrected from overly hot conditions and that growth/inflation could continue to be more resilient than expected.

To make matters more consequential, it is the “blackout week” for the Fed where members refrain from commenting on monetary policy in the 12 days leading up to a rate announcement.  That means the market’s imagination can run a bit wilder than normal when it comes to interpreting the CPI results.  

At the end of the day, everyone is trying to get to the same answer: is inflation truly defeated or does policy need to stay tighter to keep inflation from bouncing.  The following chart of monthly core inflation shows that we’ve only recently returned to target levels.  The market keeps waiting for the Fed to say that the return is sustainable and the Fed keeps saying “we’re not sure yet.” 

Source: mortgagenewsdaily.com

Apache is functioning normally

Warehouse, HELOC, AMC, Rate Lock; Automation, POS Products; Insurance and Disaster News

<meta name="smartbanner:author" content="We now have a native iPhone
and Android app.
Download the NEW APP”>


This website requires Javascrip to run properly.

Warehouse, HELOC, AMC, Rate Lock; Automation, POS Products; Insurance and Disaster News

By:
Rob Chrisman

4 Hours, 46 Min ago

One of the topics here in Tennessee is how lenders can help real estate agents or clients. Wanna maybe help your client or favorite real estate agent grappling with inventory? HUD has a “Home store” of houses. Worth a shot at 3.5 percent down properties! For something to really start your synapses firing on a Monday morning ahead of a five day work week, the CEO of the California MBA, Susan Milazzo, sent, “The latest effort to pass legislation to address California’s insurance crisis has died. Assembly Democrats felt that the bill favored insurance companies over consumers, and they wanted to add a provision that would prohibit insurance companies from not renewing any business through the end of next year. With no real guarantee of when the commissioner would do the emergency regulations or the contents of those regulations, it amounted to a poison pill.” (More insurance news below in the “disaster” section.) (Today’s podcast can be found here and this week’s is sponsored by SimpleNexus, an nCino Company, and award-winning developer of mortgage technology for modern lenders. Hear an interview with J.D. Power’s Craig Martin on the U.S. Mortgage Servicer Satisfaction Study.

Lender and Broker Software and Services

Credit unions, it’s time to make your mark at the 2023 ACUMA Annual Conference from Oct. 1 – 4. Secondary marketing experts from Optimal Blue will be on-site and ready to discuss ways you can up your game and do even more to maximize success. Whether you’re working to get your members the best possible rates, trying to more effectively mitigate pipeline risk, or aiming to better understand the value of your MSR assets – we’re ready to help you reach your goals. Stop by our booth to learn more.

Your online loan application should win you business, not scare prospective borrowers away. Win borrowers here.

Attention TMC Members! Join Capacity CEO David Karandish and Mike Metz of VIP Mortgage for an exciting 3:15 p.m. session on Monday, September 11th. Learn how VIP Mortgage is springboarding their AI pursuits. Book one-on-one time with our team at TMC Fall, or join the session to learn about our personalized, in-depth AI Assessments. Whether you already use automation tools or you’re just starting to explore, Capacity’s AI Assessments offers a unique way to scale your tech initiatives. Over three meetings, our team will learn about your business needs, identify automation and AI tools opportunities, and provide in-depth resources to guide you through your AI roadmap. Want to jumpstart your AI journey? Meet Capacity at TMC Fall.

“OptiFunder Bringing the Primary and Secondary Markets Together. Nearly 15% of all warehoused loans now go through OptiFunder for warehouse selection and automated funding, shipping, and purchase advice. Since 2019, our mission has been to bring mortgage bankers and warehouse lenders together to optimize selection and streamline the historically manual process of funding mortgage loans. Nearing the top of Inc. 5000’s list of fastest-growing private companies, it’s safe to say we’ve been successful in that mission. As we continue to grow, we’re working on additional opportunities to bring the primary origination and secondary markets together. We’ve spent the last few years making the lives of originators easier; it’s time to put some focus on warehouses. Join the OptiFunder community on Linkedin to keep up with what we’re doing or visit our new website to learn more about OptiFunder.”

Does it feel like your current point-of-sale vendor has lost focus on mortgage? As a mortgage-specialized partner, Maxwell is committed to giving lenders a competitive advantage in a tough mortgage market. Compared to a top competitor, Maxwell Point of Sale averages a 5.9% higher pull-through rate from rate-lock to close. For the average lender using Maxwell POS, this equates to $42MM in additional loan volume. Maxwell also focuses on providing an excellent borrower experience, with a 17% faster turn-time from application submission to conditional approval. Schedule a call with the team to learn how Maxwell Point of Sale can start working for you and your borrowers quickly.

Are you tired of having to adjust head count every time the market changes? The Mortgage Automation Suite, brought to you by Richey May and Zoral, can help. With scalable automated solutions that improve accuracy while reducing repurchases and costs, your business will be well-equipped for any market cycle. Leveraging this powerful automation will allow your team to close loans more easily, helping to retain your best staff. Plus, it adds the extra layer of stability needed during difficult times; something we could all use a bit more of these days! Find out how the Mortgage Automation Suite from Richey May & Zoral can help you today. Email [email protected].

In this market, hustle is everything. You can’t afford to waste a single deal – or a single minute. That’s why ReadyPrice has launched Shop. Lock. Deliver.® It’s an innovative new platform designed to help independent mortgage brokers like you save time and money. Now you can shop competitive loan offerings from multiple lenders, get rate lock guarantees in real time, receive underwriting findings, and deliver the borrower’s complete loan file to lenders – and all on a single platform, at no cost to brokers. It’s already helping brokers around the country thrive and compete in even the toughest market environments. Multiple lenders. One platform. Zero b.s. Check out ReadyPrice today.

Attention Lenders and Real Estate Appraisers: In a September 6th article found in Housing Wire, it was pointed out the 1/2 of all appraisers claimed “fee pressure” by AMCs was their biggest challenge this year. Also included were “technology fees” appraisers are forced to pay has become a major issue. AMCs are taking an increasing cut of the appraisal fees and at the same time selecting appraisers who are willing to work for relatively lower fees. The Private Asset & Management Group, LLC has launched its new platform allowing retail and wholesale lenders the ability to use they’re ‘own’ roster of approved appraisers, with realistic fees for their market areas, self-manage the process with 1 dashboard from a state-of-the-art software system with absolutely “NO” cost! And it reduces the appraisal fee to the borrower by 25%-35%. For further information contact David Cedar (631-319-6161).

TPO Programs for Correspondents and Brokers

In this most challenging of rate environments for the industry, Luxury Mortgage (“LMC”) continues to show steadfast commitment to all its business partners. LMC strives to offer competitive rates and products to assist brokers in closing more loans. Due to overwhelming popular demand, LMC is stepping up again and extending last month’s unprecedented purchase specials. Full and Alt Doc loans (including Bank Statement, 1099 Only, and Asset Qualifier) will receive up to a 100-bps price improvement (yes, you read that correctly!), and DSCR loans will receive a 50-bps price improvement! Click here for complete details of these special offers. If you are not yet an approved broker, now is the perfect time to become one. Click here to begin the process of becoming an approved wholesale broker.

Sometimes, your clients’ needs are as simple as a safety net. A HELOC is a perfect product to provide them with financial liquidity, stability, and support – especially in today’s market! Symmetry’s HELOC offers your borrowers the ability to purchase a home with less cash down, afford home renovations or repairs, purchase a 2nd home or investment property, consolidate and pay off debt, and many more benefits… Not sure how to best present Symmetry’s HELOC to your borrowers? Contact your area manager to build a plan that works for you!

Disaster Updates

Several top insurance companies (like Farmers, State Farm and Allstate) have reduced their footprint in California over the last several months. State Farm and Allstate say they’re not writing any new homeowner insurance policies in California moving forward due to it being too expense. And just ask a homeowner in a low-lying area of Florida, Louisiana, or the Carolinas how it’s going.

Last month the Biden administration urged a federal judge to reject a challenge by Florida and other states to an overhaul of the National Flood Insurance Program that has led to higher premiums for many property owners.

Meanwhile, the FDIC sent out, “The Federal Deposit Insurance Corporation, the Federal Reserve Board, the National Credit Union Administration, the Office of the Comptroller of the Currency, and state financial regulators, collectively the agencies, recognize the serious impact of Hurricane Idalia on the customers and operations of many financial institutions and will provide appropriate regulatory assistance to affected institutions subject to their supervision. The agencies encourage institutions operating in the affected areas to meet the financial services needs of their communities.

“The agencies encourage financial institutions to work constructively with borrowers in communities affected by Hurricane Idalia. Prudent efforts to adjust or alter terms on existing loans in affected areas are supported by the agencies and should not be subject to examiner criticism. In accordance with U.S. generally accepted accounting principles, institutions should individually evaluate modifications of existing loans to determine whether they represent troubled debt restructurings or modifications to borrowers experiencing financial difficulty, as applicable. In making this evaluation, institutions should consider the facts and circumstances of each borrower and modification. In supervising institutions affected by Hurricane Idalia, the agencies will consider the unusual circumstances these institutions face. The agencies recognize that efforts to work with borrowers in communities under stress can be consistent with safe-and-sound practices as well as in the public interest.”

FEMA Disaster Declarations are in the news. Georgia Hurricane Idalia – DR-4738-GA. Florida Hurricane Idalia – 4734-DR-FL, Amendment 001, Amendment 002, Amendment 003.

AmeriHome spread the word that on August 31, 2023, with DR-4734, the Federal Emergency Management Agency (FEMA) declared that federal disaster aid with individual assistance has been made available to counties in Florida to supplement recovery efforts in the areas affected by Hurricane Idalia from August 27, 2023, to September 4, 2023. On September 1, 2023, with Amendment No. 1, FEMA granted Individual Assistance to 6 additional counties. On September 3, 2023, with Amendment No. 2, FEMA granted Individual Assistance to 1 additional county.

On September 4, 2023, with Amendment No. 3, FEMA announced an Incident Period End Date of September 4, 2023. On September 9, 2023, with Amendment No. 5, FEMA granted Individual Assitance to 2 additional counties.

On 9/3/2023, with Amendment No. 2 to DR-4734, FEMA declared federal disaster aid with individual assistance has been made available to an additional Florida county, Pinellas, affected by Hurricane Idalia from 8/27/2023 and continuing. See AmeriHome Mortgage Disaster Announcement 20230902-CL for inspection requirements.

On 9/4/2023, with Amendment No. 3 to DR-4734, FEMA provided an Incident Period End Date of 9/4/2023, for Florida counties affected by Hurricane Idalia from 8/27/2023 to 9/4/2023.

See AmeriHome Mortgage Disaster Announcement 20230903-CL for inspection requirements.

On 9/7/2023, with DR-4738, FEMA declared federal disaster aid with individual assistance has been made available to 3 Georgia counties Cook, Glynn, and Lowndes affected by Hurricane Idalia on 8/30/2023. See AmeriHome Mortgage Disaster Announcement 20230905-CL for inspection requirements.

Capital Markets

There’s anxiety (isn’t there always?) over the Federal Reserve turning more “hawkish” and impacting investor sentiment, and therefore bonds and stocks. While the Fed is largely considered to be nearing the end of its hiking cycle, the “terminal rate” is still unknown, of course. Federal Reserve speakers, typically the presidents of each district, are in a blackout period ahead of the FOMC meeting scheduled for September 19-20, which will give this week’s economic reports extra weight.

So, what is the financial press yammering about? Student loans having to be repaid, the latest jump in oil prices in the past few days driven by longer-than-expected production cuts by key oil nations Saudi Arabia and Russia, and data showing a tight labor market in the form of initial jobless claims falling for a fourth straight week.

Think about it. Despite the rapid rise in interest rates and restrictive monetary policy, the U.S. economy remains resilient. August’s employment report and last week’s ISM Services Index provided evidence that the post-pandemic economic expansion continues. The ISM Non-Manufacturing PMI Increased From 52.7 in August to 54.5 in September, its highest level since February, highlighting continued growth in sectors accounting for the majority of U.S. economic activity such as: services, mining, construction, and public administration. This series has been in expansion territory for all of 2023. There was a small increase in the prices paid index due to higher fuel costs, indicating that services inflation is far from returning to pre-pandemic levels.

The Fed’s Beige Book also reported an uptick in economic activity from July to August. However, unlike the ISM indices, the Beige Book showed inflation moderating in some parts of the country. A revision to unit labor costs – which gauges wage inflation – showed a 2.2 percent annualized increase compared to the initial estimate of 1.6 percent while productivity growth was revised down to 3.5 percent from the initial estimate of 3.7 percent. It is likely not the last revision for these data series from the Department of Labor as they are difficult to measure in real time. Elsewhere, the trade deficit has narrowed over the last few months but remains wider than pre-pandemic levels.

Even with a slight decrease last week, mortgage rates have ticked back up over the last couple weeks. The market has priced in “higher for longer” rate expectations from the Fed and are about one percent higher than the lows seen in February. Mortgage applications have declined six of the last seven weeks as higher rates erode affordability. Mortgage purchase applications reach a low not seen since April 1995. This week includes the $99 billion mini-Refunding as well as key inflation reports with CPI on Wednesday, PPI and retail sales on Thursday, and import / export prices as well as Michigan sentiment on Friday. No Fed speakers are currently scheduled with the FOMC in blackout period ahead of the September 19/20 FOMC meeting. Today’s economic calendar is limited to a Treasury auction of $44 billion 3-year notes. We begin the week with Agency MBS prices slightly worse, the 10-year yielding 4.29 after closing last week at 4.26 percent, and the 2-year at 4.98.

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

If you’re at all tuned in to economic and financial news, you’ve probably heard the the phrase “data dependent” more than a few times recently.  It refers to the outlook for the Fed’s monetary policy and interest rates in general.  If the data shows less growth and inflation, the Fed will set friendlier policies and rates will move lower.  If the data is stronger and inflation is higher, rates will remain high or move higher.

Today brought the week’s only true top tier economic report.  You may have never heard of the ISM Non-Manufacturing Index, but it’s the most closely watched version of a class of economic indices (PMIs or “purchasing managers indices) that are highly regarded by financial markets.  All that to say, if the ISM Non-Manufacturing PMI comes in much higher or lower than expected, the market tends to react.

Today’s version was higher than expected across the board (there are multiple sub-indices that factor into the overall headline).  Of particular note, the “prices paid” index rose for the 2nd straight month and is now back in line with the highest levels since March/April.  

The market isn’t too worried about the outright levels of that price index, but the trajectory matters.  Today’s increase gives the impression of the first legitimate bounce in service sector inflation since the price index began a serious downtrend in mid-2022.

Who cares?  Mortgage rates!  Rates are high due to inflation.  If it looks like inflation is bouncing, rates will have a hard time moving lower.  Today’s reaction was fairly small in the bigger picture, but it nonetheless took the average lender back up to the highest rates in more than a week.  

From here, the next critical update from economic data is a full week away in the form of the Consumer Price Index (CPI)–an even bigger report than today’s ISM data.  

Source: mortgagenewsdaily.com