Aided by its acquisition of Platinum Home Mortgage’s assets, second-quarter origination volume at Planet Home Lending grew 13% from the previous quarter and 15% from the prior year period.
And the company is on the lookout for more additions to build out its retail network.
Across all channels, Planet originated $7.39 billion for the three months ending June 30, compared with $6.54 billion in the first quarter and $6.43 billion during the second quarter of 2022.
Retail volume, while just a tiny portion of the total at $376 million, was up 39% versus $270 million in the first quarter. For the second quarter of 2022, Planet originated $670 million in the retail channel.
However, customer retention production made up $290 million of last year’s second quarter retail volume. In the current higher interest rate environment, retention volume was $156 million in the most recent period, up 78% from the first quarter’s $88 million.
On June 1, Planet closed on the asset purchase of 20 branches and production personnel from Hoffman Estates, Illinois-based Platinum.
“We anticipate the additional branches and retail professionals joining Planet…will further increase our retail market share in Q3,” Michael Dubeck, chairman and CEO of parent company Planet Financial Group, said in a press release. “We continue to explore additional acquisitions of right-sized, financially stable retail organizations.”
Planet Financial, headquartered in Meriden, Connecticut, is privately held. It did not release profitability metrics.
The correspondent channel, which grew following the second-quarter 2022 acquisition of Home Point Capital’s unit, did $7.02 billion in the most recent three months. This was 12% more than $6.27 billion in the first quarter and 22% versus $5.76 billion of mortgages purchased in the second quarter of 2022.
Planet Home was also a purchaser of mortgage servicing rights during the quarter, adding a $10 billion Ginnie Mae portfolio from Village Capital & Investment in June.
In the second half of the year, Planet Home Lending plans to actively purchase MSRs both through bulk and co-issue transactions, and is consistently reviewing brokered and private portfolio offerings, a company spokesperson added at that time.
“We are constantly scaling up and creating operational efficiencies, which increases the competitiveness of our pricing,” the spokesperson said. “Planet purchases when the opportunities align and it’s a win for us and the seller.”
The Village deal was the primary reason Planet had a $96.94 billion MSR portfolio (including residential and commercial subservicing) as of June 30, versus $77.03 billion on March 31 and $58.69 billion on June 30, 2022.
In June, Fitch Ratings upgraded the RMBS primary subprime servicer and RMBS special servicer ratings one notch each.
“The company’s management team promotes a continuous improvement culture as evident in its primary and special servicing performance metrics while also managing significant portfolio growth in the past 24 months,” Fitch said. “The ratings also consider the financial condition of PHL’s parent, Planet Financial.”
Mortgage tech firm Blend Labs narrowed its financial losses in the second quarter on the strength of its platform business as well as cost-cutting measures.
Blend, whose white-label software processes billions in mortgage transactions for lenders, reaffirmed its goal of reaching profitability by 2024.
The San Francisco, California-based company reported a non-GAAP net loss of $22.7 million in the second quarter, compared to $35.6 million in Q1 and $45.1 million in Q2 2022. The company’s GAAP net loss in Q2 was $41.5 million, down from a GAAP net loss of $66.2 million in the previous quarter, according to the documents filed with the Securities and Exchange Commission (SEC) on Wednesday.
Nima Ghamsari, head of Blend, said Q2 results exceeded expectations for the second quarter in a row largely driven by its resilient customer base.
“We’re driving adoption and utilization growth of our value-add features, maintaining strong retention, and growing mortgage market share – all while continuing to set the foundation for our next-generation mortgage products on our Blend Builder platform,” Ghamsari told analysts.
The company posted $42.8 million in revenues in Q2, above the guidance provided by executives of between $39.5 million and $41 million.
Blend Builder — a cloud banking platform designed to help businesses in the financial services industry streamline processes for mortgages, loans, deposits and accounts – is a “key driver of the company’s growth strategy,” Ghamsari noted.
Blend’s platform segment — which includes the mortgage suite, consumer banking suite and professional services under the changed reporting structure — came in at $30.3 million in revenues. The Title 365 segment revenue posted $12.5 million.
The mortgage banking suite revenue declined by 17% year-over-year to $22.3 million, performing better than a 37% mortgage market volume decline over the same period as reported by the Mortgage Bankers Association (MBA), the company said.
Blend’s white-label technology powers mortgage applications on the websites of major lenders such as Wells Fargo and U.S. Bank. With client’s increases in adoption of add-on products and renewals, mortgage suite revenue per transaction increased from $77 to $93 from the same period in 2022.
Add-on products released in Q2 include a soft credit inquiry function for lenders that would save them about $50 per file. The company previously noted that lenders that adopted soft credit into their workflows saved up to 71% compared to lenders utilizing all hard inquiries.
Blend deployed 18 consumer banking products this year, bringing in $5.8 million revenue in its consumer banking suite – a 27% increase from Q2 2022.
Professional services revenue increased 10% year-over-year to $2.2 million.
Ghamsari’s priorities for the rest of the year is to roll out value-add features like soft credit pulls and add-on products such as Blend Close and Blend Income.
Blend’s cutting costs, accelerating path to profitability
On the expenses side, non-GAAP operating costs in Q2 totaled $41.7 million compared to $65.3 million in the same period of 2022.
As part of the internal efficiencies gained with Blend Builder, the company announced Wednesday that it streamlined its workforce, positioning its customers and Blend for more efficient growth and value creation.
Blend’s fifth round of layoff affected 150 positions, about 19% of the company’s current onshore workforce and about 20 vacancies across the firm, according to its 10 Q filing with the SEC.
The company conducted three workforce reduction initiatives in 2022 and two in 2023.
“The restructuring initiatives are expected to reduce Blend’s operating expenses an additional $33 million on an annualized basis,” Amir Jafari, Blend’s new CFO, told analysts.
As of June 30, 2023, Blend has cash, cash equivalents, and marketable securities, including restricted cash, totaling $277.9 million with total debt outstanding of $225.0 million in the form of the company’s five-year term loan.
Going forward, Blend will be charging customers a recurring Software as a Service (SaaS) fee to increase the stability of its future cash flow.
Blend’s $25 million revolving line of credit remains undrawn.
“We are increasing the stability of our future cash flows by adding a recurring SaaS-like fee while retaining the upside associated with our consumption based model,” Jafari said. “We believe this shift in payment terms should improve our overall free cash flow with more fees being paid in advance.”
Despite the challenging mortgage environment, Blend reiterated its goal in reaching its non-GAAP profitability goal by 2024 from the originally planned timeline of 2025.
Since going public in July 2021, Blend is yet to turn a profit.
In Q3, the mortgage tech firm expects its Q3 revenue to be between $38 million and $42 million. Platform revenue is projected to post between $27 million and $30 million. Its title business revenue is forecast to come in between $11 million and $12 million.
The company estimates a non-GAAP net operating loss between $17.5 million and $15.5 million in Q3.
Ahead of its initial public offering slated for mid-December, United Wholesale Mortgage is offering mortgage rates below 2% on FHA loans through its Conquest Program.
UWM, the second-largest lender in the country, is offering rates between 1.99% and 2.5% on FHA loans, the company announced in a statement on Wednesday. The rates will be available on FHA purchase mortgages, FHA rate and term refinances, and FHA streamline refinances.
On Wednesday, the FHA announced new loan limits for 2021, increasing those amounts to $356,362 for much of the U.S. and to $822,375 in high-cost areas.
The Conquest FHA announcement is the latest in a series of UWM product launches in 2020. The lender, led by CEO Mat Ishbia, has offered ultra-low mortgage rates on VA purchase and IRRRL loans, as well as purchase and refinances on both 30-year and 15-year fixed-rate products.
Not all borrowers have qualified for the products, and to obtain the lowest rates borrowers have had to buy points upfront.
5 reasons to refinance your mortgage right now
If you’re thinking about refinancing your mortgage, here are five reasons why you might want to act now and reach out to a loan officer.
Presented by: Citi Mortgage
Like many other mortgage companies, UWM has ridden a wave of record-low mortgage rates and rising home prices en route to its best-ever year in 2020.
As of the end of the third quarter, Pontiac, Michigan-based UWM closed nearly $128 billion in production, eclipsing the $108 billion it originated throughout all of 2019, the firm said. UWM originated $54.2 billion in closed loans during the third quarter, an 81% increase from the $29.9 billion it originated in Q3 2019 (loan volume was up 31.8% from Q2 2020).
According to company statements, net income totaled $1.45 billion in the third quarter, up from $198 million during the same period in 2019. The gain-on-sale margin also inched up to a record 3.18%; a year ago it was 1.29%.
In the summer, UWM announced it was merging with a blank-check company led by businessman Alec Gores. Ishbia, who will control 94% of the company, is seeking a valuation of about $16.1 billion. He’s described the impetus to go public as achieving greater scale, promoting the broker channel, and avoiding having to sell mortgage servicing rights.
The mortgage brokers that UWM bet its future on and championed have also reaped the rewards from low mortgage rates and a boom in mortgage originations over the last few quarters.
According to Inside Mortgage Finance, the wholesale and correspondent channels in the third quarter rose 34.1% from the second to the third quarter. By contrast, there was only a 9.2% increase in retail production and 16.9% growth in total first-lien originations, the publication reported. The third-party-origination share of third-quarter production rose 4.5 percentage points to 35.5% in the third quarter.
Opendoor continued to feel the market’s headwinds in the second quarter of 2023, which led to fewer homes sold and lower revenues in the period. But the iBuyer greatly reduced its operating costs, delivered a profit, and increased its home purchases in the quarter.
The iBuyer recorded a net income of $23 million from April to June, compared to a net loss of $101 million in the previous quarter and a net loss of $54 million in the same quarter last year, per Securities and Exchange Commission (SEC) filings.
The firm’s revenues came in at $2 billion in the second quarter of 2023, down 37% compared to the previous quarter and 53% related to 2Q 2022. Total operating expenses declined to $217 million, compared to $294 million in Q1 2023 and $454 million in Q2 2022.
Carrie Wheeler, CEO of Opendoor, said the company exceeded the high end of its guidance for adjusted Ebitda and revenues in the second quarter as it continues to “focus on what we can control and operate with discipline in this environment.”
In April, the iBuyer announced that it had made the “very difficult decision” to lay off roughly 22% of its workforce, or 560 positions. More layoffs followed in November 2022, when Opendoor cut 550 jobs, or approximately 18% of its workforce at the time.
“Our results reflect the progress we’ve made in strengthening our offering, driving cost efficiencies and managing risk. We expect the third quarter to mark our return to positive contribution margin levels,” Wheeler said in a statement.
Opendoor has committed to deliver at least 100 basis points of contribution margin improvement by 2024, increasing the annual target range to 5% to 7%, with a goal of eventually returning to positive adjusted net income. The contribution margin was negative 4.6% in Q2 2023.
“We expect to perform within our 5% to 7% contribution margin target beginning Q4 2023,” Opendoor’s interim CFO Christy Schwartz told analysts Thursday. “We are managing our business to return to positive adjusted net income, which is our best proxy for operating cash flow. And we believe we have the cost structure and balance sheet in place to do so.”
Schwartz said the company expects to reach breakeven at steady annual revenues of $10 billion, or approximately 2,200 home acquisitions and resales per month at its target contribution margin range of 5% to 7%.
But what about selling and buying homes?
In the second quarter of 2023, Opendoor sold 5,383 homes, a decline of 35% compared to 1Q 2023 and 49% compared to 2Q 2022.
“As of quarter end, 99% of the homes we made offers on between March and June of last year were sold or under resale contract and our new book of inventory is generating positive unit economics in what continues to be an uncertain time in the U.S. housing market,” Wheeler said.
Meanwhile, Opendoor’s inventory balance reached $1.1 billion in the quarter, representing 3,558 homes. The total is down 46% from the previous quarter and 83% from the same period last year.
The company purchased 2,680 homes from April to June, up 53% from Q1 2023 and down 81% from Q2 2022. The decline versus the prior year comes primarily from elevated spreads embedded in its offers since June last year, coupled with sellers remaining on the sidelines, Opendoor’s executives told analysts.
Opendoor ended the quarter with 1,390 homes under contract for purchase, up 22% versus Q1 2023.
Looking forward, the company expects to deliver revenues between $950 million and $1 billion in Q3 2023 when adjusted Ebitda is expected to be between negative $60 million and $70 million.
The firm is optimistic about the opportunities it has cultivated, including its partnership with Zillow and its Opendoor Exclusives platform.
Black Knight reported slimmer profits and slowing organic growth in the second quarter, largely due to weaker mortgage volume from clients as well as near-term effects from the proposed merger deal with Intercontinental Exchange (ICE).
The company’s profit dropped 61% quarter over quarter to $55.3 million in Q2 2023. Profit rose 32% from $40.3 million in Q1 2023.
“Our second quarter results reflect a weaker than expected mortgage market coupled with the near-term effects of the proposed merger with ICE. Revenue declined 4% on an organic basis driven by lower origination volumes as well as indirect effects of the mortgage market on our originations software business,” Black Knight CEO Joe Nackashi said in a statement.
Black Knight’s revenue in the second quarter reached $368.2 million, declining 7% from the same period in 2022.
“High interest rates following the rapid rise since early 2022 continue to cause operational challenges for Black Knight’s clients and prospects,” the company noted in its 8K filing.
Heightened focus on expenses by clients and prospects, as well as the proposed ICE transaction, has elongated the sales cycles in the short term; market conditions continue to result in elevated originator consolidation, bankruptcies and associated attrition, according to its filing with the Securities and Exchange Commission (SEC).
Software solutions represented 87.9% of the revenues in the first quarter, with an operating margin of 41.4%, down from 45.6% in the same period of 2022.
“Our origination software solutions revenues decreased $15.6 million, or 13%, as revenues from new clients were more than offset by a decrease of $8.3 million in license fees and the effect of lower origination volumes and attrition,” according to the company’s 10 Q filing with the SEC.
The remaining revenue came from data and analytics, a segment with an operating margin of 15.2% from April to June, compared to 24.9% in the previous year.
Development on ICE-Black Knight merger
With ICE’s proposed acquisition of Black Knight under review by the Federal Trade Commission (FTC), the two companies and the FTC are expecting a preliminary injunction hearing scheduled for August 14 – August 18.
Black Knight, ICE and the FTC asked for a delay as the planned sale of Optimal Blue in July requires time for the FTC staff to analyze the implications of the divestiture and discuss a potential resolution of the pending matter.
ICE and Black Knight also announced an agreement to sell loan origination system Empower to a subsidiary of Canada’s Constellation Software in March to quell FTC’s antitrust concerns.
Following ICE and Black Knight’s announcement of an agreement to sell Optimal Blue, Keefe, Bruyette & Woods (KBW) noted that the divestiture of Black Knight’s Optimal Blue leaves the FTC with a weak case as it remedies the remaining horizontal overlap cited in the FTC’s complaint.
KBW had floated the possibility of the FTC settling on the ICE-BK merger deal before the August 14 trial, allowing the deal to close Q3 2023.
“As this case continues to evolve, it is not possible to reasonably estimate the probability that the parties will ultimately reach settlement or that the FTC will ultimately prevail on its claims. Should the parties not reach a settlement, we intend to vigorously defend against the claims of the FTC,” Black Knight’s 10 Q filing said.
Due to the transaction with ICE, Black Knight has suspended the practice of providing forward-looking guidance.
“This period of time, from an investment perspective, is some of the best environments we have seen in years. The time is now. While we are a mortgage REIT, I like to think of us as an asset manager operating as a REIT.”
Nierenberg spoke to analysts after Rithm announced Wednesday that it delivered a $357.4 million GAAP net income in the second quarter of 2023 — higher than the $68.9 million the prior quarter. Earnings available for distribution reached $297.9 million in the second quarter, compared to $171 million in the previous quarter.
In June, Rithm invested $145 million to purchase $1.4 billion of consumer loans from Goldman Sachs and purchased 371 newly built single-family rental properties from Lennar. In July, the company acquired 200 newly-built townhomes from Dream Finders Homes and announced the acquisition of Sculptor Capital Management for $639 million.
Rithm had 1.8 billion of total cash and liquidity to support its acquisitions at the end of the second quarter.
“Subsequent to quarter end, we announced the acquisition of Sculptor Capital Management. This acquisition helps accelerate our growth in the alternative asset management space, as Sculptor’s $34 billion of AUM complements Rithm’s $7bn of permanent equity capital and $30+ billion balance sheet,” Nierenberg said. “With the introduction of new capital rules being instituted on banks and the highest level of rates seen in 20+ years, the investing environment has not been this good in years.”
Bank regulators last week released a proposal to increase capital requirements for banks under the Basel III regulation.
Rithm executives, who said the market is at a transition point in tightening from monetary to regulatory, estimate that regulations open up over $1.5 trillion to $2 trillion in funding needs with $170 billion in additional capital requirements. Assets impacted include mortgages, funding to corporates, market-making and trading intermediations and fee-based businesses.
Mortgage business
Rithm’s mortgage business delivered a combined pre-tax income of $326.9 million in the second quarter of 2023, compared to $164 million in the previous quarter.
Originations returned to profitability, with $8.7 million in pre-tax income from April to June. Volumes increased to $9.9 billion in the second quarter, higher than the $7 billion in the previous quarter. However, gain-on-sale margins decreased to 1.25% in Q2 2023, from 1.61% in Q1 2023, due to “channel mix and overall market conditions,” the company said.
“We don’t need to originate a unit to do volume. We want to originate units that are core to our business, where we are doing something that is going to make money for LPs and shareholders. So, whether we do an extra billion dollars in origination in a channel, or a billion dollars less in a channel, we care about one thing, obviously servicing our customers and then driving profitability for our shareholders and LPs,” Nierenberg said.
Rithm’s mortgage production is expected to be between $8 billion and $10 billion in Q3 2023.
The company recently filed a confidential S-1 to spin off its mortgage business. Nierenberg said the separated business may include all the origination operations and most servicing assets, but some MSRs may stay back. He said Rithm does not plan “to turn around and just sell down the entire thing” but wants flexibility with a listed company.
“With where mortgage companies are trading, I don’t know that anybody trades at a significant premium at this point. And quite frankly, we just think the timing is right now with the scale and what the team has done around with the New Rez brand and obviously the Caliber acquisition.”
Servicing contributed $357.3 million in profits during the second quarter. The company’s mortgage servicing rights portfolio (MSRs) totaled $598 billion in unpaid principal balance (UPB) as of June 30, 2023, down from $603 billion as of March 31, 2023.
According to Nierenberg, Rithm continues to move mortgage servicing rights from some of its subservicers back in-house. However, the executive anticipates “there’s limited upside for us” regarding MSR values, so while Rithm monitors where rates are, the company will start putting “more hedges on against that asset as we go forward.”
After the earnings release, analysts at BTIG said they “Continue to see value in the equity, which could offer the optionality to participate in a spin off of the originator/servicer while owning a growing and re-purposed asset manager at a potentially attractive valuation.”
The company’s stock was trading at $10.20 on Wednesday afternoon, up by 1.54% after the earnings report.
In our latest real estate tech entrepreneur interview, we’re speaking with Andrew Flint from Occupier. He is a recent addition to the GEM.
Who are you and what do you do?
My name is Andrew Flint and I am a Co-founder of Occupier along with Erik Pearson and Matt Giffune. Occupier is a Real Estate Success platform that enables businesses and tenant-rep brokers to make better real estate decisions. Our software engages internal and external stakeholders around lease administration, transaction management, and lease accounting to execute the workflows most important to aligning real estate with the operational needs of the business. We launched Occupier after working together at VTS, now the leading leasing asset and management platform for landlords. Prior to that, Matt and I spent approximately 10 years as commercial real estate brokers at JLL in NYC and Boston. It was through these previous experiences that we recognized how far behind tenants, landlords and brokers were in terms of using technology to manage their business. Proptech has exploded over the past 5-7 years, however the primary focus has been on landlords, leaving an enormous opportunity to create technology focused on the tenant and their teams.
What problem does your product/service solve?
First and foremost, we provide a modern lease administration platform focused on making key lease details like critical dates, financials, and documents readily accessible and actionable to all relevant stakeholders, both internal and external. Second, as new FASB ASC-842 accounting guidelines go into effect with private companies, businesses need to comply with how they disclose their real estate holdings on their balance sheet. Without centralized lease data and the ability to measure it, companies put themselves at risk of non-compliance, hence our Q3 launch of a seamlessly integrated lease accounting module. Finally, Occupier drives a more efficient transaction process by engaging the tenant-rep broker into a dynamic workflow that centralizes all deal communication, site selection, and negotiation in one place, increasing the pace and accuracy of lease transactions.
What are you most excited about right now?
During the coronavirus lockdown, it’s been unbelievable to see the team come together and thrive. We have been heads-down on product development and onboarding new customers, moving closer launch of Occupier Lease Accounting in Q3. There is a ton of pent up demand to leverage that module alongside lease administration and transaction management. In May, we kicked off our participation in Reach 2020, a proptech focused accelerator we are extremely excited about given its association with NAR, CCIM, and SIOR.
What’s next for you?
While we are fully focused on the business right now, we are also poised to raise a proper venture round within the next 9-12, enabling us to bring on additional product, sales and marketing, and customer success resources. With additional firepower and a solid foundation, what we will be able to provide tenants and brokers will drive significant efficiencies in how companies make real estate decisions and how brokers grow their business.
What’s a cause you’re passionate about and why?
It is no secret that our country has a serious problem with racial injustice, with the killing of George Floyd shining a light on these problems. As a team we support causes, like the Black Lives Matter movement, that will force long overdue changes in America. We believe we can make a direct impact by committing to building a diverse team as we grow. Personally, I am passionate about supporting community organizations like Grand Street Settlement in the Lower East Side of NYC, that provide programs and services to families, youths and seniors across the city. Before having kids, I volunteered for 7 years, and most recently made a donation after hearing funding for summer youth programs had been cut. These are times where we need to figure out ways to double down on programs like theirs which build up our communities.
Thanks to Andrew for sharing his story. If you’d like to connect, find him on LinkedIn here.
We’re constantly looking for great real estate tech entrepreneurs to feature. If that’s you, please read this post — then drop me a line (drew @ geekestatelabs dot com).
There’s still overcapacity in the market and as part of lenders cutting costs, Fannie Mae expects more layoffs in the industry.
“It’s expensive to let people go and then rehire. So there is usually that six month or so lag before you see the layoffs as they’re calibrating, will the market come back or not,” Doug Duncan, chief economist and senior vice president at Fannie Mae said in an interview with HousingWire.
“Our view is there’s not going to be a sufficiently large turn in the market to justify the current amount of labor that’s been held,” Duncan noted.
‘Business process streamlining’ ranked second (32%) as lenders seek to reduce costs through streamlining, minimizing manual tasks, and improving accuracy. Both ‘consumer-facing technology’ and ‘talent management & leadership’ ranked in the top three (24%) to help improve customer experience and drive sales.
“[We are] looking at technology that will help streamline and reduce appraisal costs for the borrower. Additionally, [we’re] reviewing technology to improve accuracy in determining income of self-employed borrowers,” an executive at a large lender, said.
Fannie Mae conducted an online survey consisting of 10 questions among senior executives — such as CEOs and CFOs of Fannie Mae’s lending institution partners.
Among a random selection of 3,000 senior executives, 253 senior executives completed the survey between May 2 and May 15 representing 232 lending institutions — including mortgage banks, depository institutions and credit unions.
Surveyed lending executives had a pessimistic outlook toward the economy.
About 73% of the respondents believe the U.S. economy is on the wrong track.
About 93% of lenders believe the U.S. economy is “very likely” (57%) or “somewhat likely” (37%) to enter a recession in the next two years. Among them, 68% of lenders expect the recession to start in Q3 (24%) or Q4 of this year (44%).
Fannie Mae’sEconomic & Strategic Research (ESR) group in its July commentary projected that if a recession were to occur it would be a modest one, which is likely to begin in Q4 2023 or Q1 2024.
The economy — coupled with resilience in the labor market and active new home construction — experienced a stronger pace of economic growth than Fannie Mae previously expected.
“The reason, if a recession occurred was going to be mild, was because of housing. We also said that while our base case was a mild recession, the alternative case was a soft lancing and it would be housing that would be the cause,” Duncan said.
Wells Fargo, which downsized its home lending unit early this year, originated $7.8 billion of mortgage loans in the second quarter, up 18.2% from the previous quarter. However, the bank’s home lending earnings were down 13% to $847 million during the quarter compared to $972 million in the second quarter of 2022. The decline was due to loan spread compression and lower mortgage banking income driven by lower originations.
Read next: Wells Fargo lays off 500 mortgage staff as downsizing continues
Wells has also set aside an additional $994 million for expected losses from commercial real estate office loans. The company’s provision for credit losses in the second quarter was $1.7 billion, compared to just $580 million a year ago.
“As expected, net loan charge-offs increased from the first quarter,” Scharf said. “Commercial charge-offs increased driven by a small number of borrowers in commercial banking, with little signs of systemic weakness across the portfolio, and higher losses in commercial real estate, primarily in the office portfolio.
“We had a $949 million increase in the allowance for credit losses, primarily for commercial real estate office loans, as well as for higher credit card loan balances. While we haven’t seen significant losses in our office portfolio to date, we are reserving for the weakness that we expect to play out in that market over time.”
Average mortgage rates tumbled yesterday following a first-class inflation report. In some cases, they are now back below 7% for an excellent borrower wanting a conventional, 30-year, fixed-rate mortgage. Phew!
First thing, markets were signaling that mortgage rates today might fall but perhaps only a little. However, these early mini-trends often switch speed or direction later in the day.
Current mortgage and refinance rates
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.122%
7.147%
+0.15
Conventional 15-year fixed
6.297%
6.321%
+0.1
Conventional 20-year fixed
7.34%
7.403%
+0.03
Conventional 10-year fixed
6.872%
6.985%
+0.05
30-year fixed FHA
7.065%
7.685%
+0.02
15-year fixed FHA
6.503%
6.972%
+0.16
30-year fixed VA
6.75%
6.959%
+0.25
15-year fixed VA
6.625%
6.965%
Unchanged
5/1 ARM Conventional
6.75%
7.266%
Unchanged
5/1 ARM FHA
6.75%
7.532%
+0.11
5/1 ARM VA
6.75%
7.532%
+0.11
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock a mortgage rate today?
The chances of mortgage rates falling far and for long later this year improved yesterday. That day’s inflation report helped a lot.
But I reckon we’ll probably need a heap more similarly rate-friendly data in order to bring about that significant and sustained fall. And, while it’s possible such a heap will be delivered quickly, it’s probably more likely we’ll see any improvements late this year or sometime in 2024.
So, my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCK if closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data, compared with roughly the same time yesterday, were:
The yield on 10-year Treasury notes tumbled to 3.81% from 3.91%. (Very good for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were higher. (Bad for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices decreased to $75.65 from $75.94 a barrel. (Neutral for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices rose to $1,964 from $1,959 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — held steady at 81 out of 100. (Neutral for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic and the Federal Reserve’s interventions in the mortgage market, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today might fall. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
What’s driving mortgage rates today?
Yesterday
Yesterday’s consumer price index (CPI) was a real tonic for mortgage rates. Comerica Bank’s chief economist said that “the fever is breaking“ for inflation.
And The Wall Street Journal (paywall) suggested: “Inflation cooled last month to its slowest pace in more than two years, giving Americans relief from a painful period of rising prices and boosting the chances that the Federal Reserve will stop raising interest rates after an expected increase this month.“
Note that the Journal’s writers (and many others) still expect a rise in general interest rates on Jul. 26. And that might limit how far mortgage rates can fall in the short term.
But other things could also limit the extent and duration of further decreases in mortgage rates. More and more people are talking up the possibility of a “soft landing.“ That refers to the Fed successfully driving down inflation without throwing the country into a recession.
But those of us wanting lower mortgage rates were kind of hoping for a recession. Of course, we didn’t want the bad stuff for the wider population. But mortgage rates tend to fall when the economy is in trouble and rise when it’s doing well.
So, while some falls in mortgage rates might be on the cards later in the year or in 2024, they might not be as big as we’d once been able to hope.
The rest of this week
This morning’s producer price index (PPI) for June was nothing like as important to mortgage rates as yesterday’s CPI. It and tomorrow’s import price index (IPI) are generally seen as secondary inflation measures. But, with markets hyper-sensitive to inflation news right now, they’re worth observing.
Today’s PPI was probably good for mortgage rates. The headline figure (PPI for final demand) came in at 0.1% in June, compared with the expected 0.2%. Just don’t expect it to have as positive an effect as yesterday’s news.
Please read the weekend edition of this daily report for more background on what’s happening to mortgage rates.
Recent trends
According to Freddie Mac’s archives, the weekly all-time low for mortgage rates was set on Jan. 7, 2021, when it stood at 2.65% for conventional, 30-year, fixed-rate mortgages.
Freddie’s Jul. 6 report put that same weekly average at 6.81%, up from the previous week’s 6.71%. But Freddie is almost always out of date by the time it announces its weekly figures.
In November, Freddie stopped including discount points in its forecasts. It has also delayed until later in the day the time at which it publishes its Thursday reports. Andwe now update this section on Fridays.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the current quarter (Q2/23) and the following three quarters (Q3/23, Q4/23 and Q1/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. They were both updated in June.
In the past, we included Freddie Mac’s forecasts. But it seems to have given up on publishing those.
Forecaster
Q2/23
Q3/23
Q4/23
Q1/24
Fannie Mae
6.5%
6.6%
6.3%
6.1%
MBA
6.5%
6.2%
5.8%
5.6%
Of course, given so many unknowables, the whole current crop of forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change, unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
For the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
In fact, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. This gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements, or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders — and it could save you thousands in the long run.
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.