Listen to this week's edition of Lykken on Lending for the latest mortgage rate and market updates.http://lykkenonlending.com/2017-11-27-podcast-market-update-with-joe-farr/
A stronger than expected Employment report on March 6 pushed mortgage rates up to the highest level of 2015. Since then, however, nearly all of the news, both globally and in the US, has been favorable for mortgage rates. In Europe, the European Central Bank (ECB) began its sovereign bond purchase program on March 9. The added demand from the ECB has helped push bond yields lower around the world. In addition, Greek and eurozone officials have made little progress in agreeing to terms for the Greek aid package. This caused investors to shift to safer assets, including US mortgage-backed securities. In the US, the major economic data released since the Employment report has been weaker than expected. Retail Sales, Industrial Production, and Housing Starts all have fallen well short of the consensus. Since slower growth reduces expectations for future inflation, this economic data has been good for mortgage rates. Finally, the largest improvement in mortgage rates took place on Wednesday after the release of the Fed statement. Fed officials downgraded their outlook for the economy and inflation, causing investors to push back their expectations for the timing of federal funds rate hikes.
The Ability-to-Repay (ATR) and the Qualified Mortgage (QM) rules are in effect as of January 10. It seems a little late, but yesterday a Subcommittee of the House Financial Services Committee held hearings to consider how the new rules will harm current and prospective homeowners. Representatives from the lending industry spoke about the limiting effect these rules will have on credit availability, especially on credit for low to moderate income borrowers. Committee members are considering proposed new laws to modify these rules.
Freddie Mac reported that average mortgage rates rose in the week through June 27, with 30-yrs hitting 4.46%, from 3.93% the prior week. This was the largest weekly increase in 26 years. While the survey results are released on Thursday, the timing of the data collection means that the data better reflects changes from Monday to Monday or Tuesday to Tuesday than Thursday to Thursday each week. The Primary Mortgage Market Survey (PMMS) is sent on Monday with a response due back by Wednesday. Most responses are completed and submitted on Monday or Tuesday. The responses are averaged and the results are released on Thursday. The survey results, therefore, reflect the average rate and points borrowers were being offered on Monday and/or early Tuesday. Changes in the market since Monday/Tuesday can make the published data misleading when compared to rates and points actually being offered on Thursday. This week, mortgage rates have improved substantially since the survey period earlier in the week. If the survey were conducted this morning, the results for 30-yr rates would be 20 to 25 basis points lower.
Is your company one of the many looking into selling their mortgage loan originations on a servicing retained basis? If so, the Lykken on Lending show today is one to which you should listen. Servicing experts Austin Tilghman and David Stephens, from United Capital Markets, were guest speakers. They explained that economics have forced many former release shops to consider retaining servicing. With so many correspondent lenders out of the market or having curtained their volume, there is very little competition for loans and as a result the correspondents are not having to pay full value for servicing. Even though the economics may compel originators to retain servicing, there are several complicating factors to be considered before doing so. One should consider the time it takes to become approved as a servicer with the agencies, the need to acquire sufficient net worth to qualify, employing servicing knowledge, and adapting to the changing cash flows of your business. Other non-economic risks need to be understood in making a decision to retain servicing, including the significant regulatory uncertainty surrounding servicing and that there is an unclear secondary market for servicing rights in the future. What is clear is that the servicing cash flows [...]
Our special guest on the Lykken-on-Lending blog talk radio show today was Doug Duncan, the Chief Economist for Fannie Mae. Doug provided his thoughts on the economy, housing, Europe, and inflation, but the most interesting comments had to do with his answer to a question asking how he would characterize what will happen in 2012. Doug answered by directing the listeners to a Fannie Mae research paper entitled 2012 – Year of the Political Economy. This paper can be found on the Fannie Mae web site at http://www.fanniemae.com/portal/about-us/media/financial-news/2012/5609.html. Doug explained that 2012 will be very heavily effected by the number of regulations just added to the books, as well as the many new regulations to be issued in the months to come. The consequence of the huge number of new regulations is UNCERTAINTY. He estimates that uncertainty will cost the economy 1% in Gross Domestic Product or $500 to $750 billion in 2012, effecting both the consumer and businesses. Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline's Joe Farr: Listen to internet radio with David Lykken on Blog Talk Radio MBSQuoteline supplies the essential market information necessary for effective decision making [...]
FHFA has answered a couple of the questions we raised on Tuesday regarding the Congressionally mandated increase in Fannie Mae and Freddie Mac guarantee fees (G-fees). Effective April 1st all G-fees charged by Fannie and Freddie will be increased by 10 basis points. In addition, FHFA said that during the first part of 2012 they will determine whether the new law will require additional increases in the G-fees. Since G-fees are paid from the interest on a loan, this increase will cause mortgage rates on loans going into Fannie and Freddie mortgage-backed securities after April 1st to rise by a similar amount.
HARP II guidelines were released last week and I was more confused than before. We are fortunate to have Alice Alvey to interpret what the guidelines say about who will be able to offer borrowers this new product and when. She too found it difficult, but this is what she thinks the guidelines say regarding who and when. First, the current servicer of a loan will be able to refinance their serviced loans beginning with applications taken after December 1, 2011. For these loans, certain provisions will not be available for settlements prior to January 3, 2012, so most loans will not fund until after then. Access to the HARP II does not open up to non-servicer originators (Open Access) until March 15, 2012. This is when the automated underwriting engines will be programmed to accept loans with the LTV waiver. Click PLAY to listen to the podcast of this week’s BlogTalkRadio/Lykken on Lending with Dave Lykken and MBSQuoteline's Joe Farr: Listen to internet radio with David Lykken on Blog Talk Radio MBSQuoteline supplies the essential market information necessary for effective decision making by Originators when assisting borrowers during the loan origination process, and for secondary marketing departments while managing pipelines. [...]