Renting

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Federal Reserve Gov. Lisa Cook said in a speech last month that measuring housing costs in an economy where the majority of homes are owner-occupied presents a challenge, but said that the practice of including implied market rents in inflation metrics was “defensible.”

Bloomberg News

Housing costs appear to be the final hurdle between the Federal Reserve and its goal of bringing inflation back down to its 2% target, and the issues there are likely to get worse before they get better.

Because of how shelter costs are tracked by the nation’s leading price indexes, housing expenses are likely to drive up measured inflation over the coming year, according to a report from the Federal Reserve Bank of Boston, despite data showing that rent prices have largely stabilized.

The Boston Fed projects the core readings — those without volatile food and energy categories — of the consumer price index, or CPI, and the personal consumption expenditures, or PCE, will rise by 0.74% and 0.29%, respectively, during the next 12 months because of greater housing costs. Meanwhile, market rents, as tracked by the analytics firm CoreLogic, were up just 3% year-over-year in April, well below the COVID-19 era-high of more than 13% and on par with their pre-pandemic average. 

Fed officials have acknowledged that the data lags related to housing costs have taken longer to play out than they had previously anticipated, noting it could be years before market trends and inflation readings sync up. But others say the issue could be a more fundamental one, related to how housing costs are measured in the U.S. — which differs in significant ways from other major world economies. 

Both CPI and PCE measure the cost of housing — also referred to as shelter — through changes in rental prices. But, because more than 65% of homes in America are owner-occupied, these indexes attempt to incorporate owned homes through what is known as owners’ equivalent rent or imputed rent, which are estimates of what a homeowner would pay for their homes if they were renting. 

For most homeowners, their housing costs — particularly their monthly mortgage payments — have not changed significantly in recent years. Most are locked in at or near historically low rates. Yet estimated rental growth from homeowners makes up a bigger share of housing price indexes than actual rents, and those owners’ equivalent rents have risen more quickly during the past two years.

Imputed rent accounted for roughly 76% of the overall housing category within the PCE index, which is tracked by the Bureau of Economic Analysis. Actual rents paid by tenants of non-farm housing makes up about 22%. From March 2022 through December 2023, owners’ equivalent rents rose roughly 15% while tenant rents rose 13.9%. Overall housing costs were up 14.7% during that period.

Other countries approach housing cost measurements differently. The European Central Bank does not include owner-occupied housing costs in its inflation tracker, the Harmonized Index of Consumer Prices. The CPI readings used by the Bank of England and the Bank of Canada both include ownership costs such as mortgage interest, insurance and renovations, rather than asking homeowners to estimate a rental value for their properties.

Louise Sheiner, an economic studies fellow at the Brookings Institution, said trying to measure housing costs in a uniform way is difficult, which is why different jurisdictions approach it differently. 

CPI and PCE include owners’ equivalent rent to account for the consumptive costs homeowners face, Sheiner explained, though she noted that in the current environment, in which home values are continuing to rise, the measure does not accurately reflect the impact of inflation on those homeowners.

“It is conceptually fine how they do it, but it also might put a little bit less weight on inflation by homeowners who are perfectly indexed,” she said. “They own the home so both their income goes up and, at the same time, their implicit rent goes up too, so they’re not worse off at all.”

Fed Gov. Lisa Cook also highlighted difficulties in tracking housing costs during a speaking engagement with the Economic Club of New York in June, noting that incorporating costs in areas where homes are predominantly owned rather than rented was one of the “big measurement problems” related to inflation. 

Yet, Cook noted that the National Academies of Science, Engineering and Medicine have endorsed factoring some version of owners’ equivalent rent into consumer pricing indexes.

“Including [owners’ equivalent rent] is a defensible thing to do,” she said. 

Cook added that regardless of how other central banks measure housing costs, the Fed’s go-to reading has long included imputed rent, so it cannot change its measure now.

“Not every European central bank, in its calculation of inflation, includes housing in that measure, so there’s a lot of heterogeneity and ours is the PCE index that we pay attention to,” she said.

Still, regardless of how inflation is measured, some economists say there has been enough progress on other parts of the economy to warrant an interest rate cut. The latest CPI report shows inflation rose 3.3%, driven largely by shelter, which was up 5.4% over the previous year. Similarly, PCE, which gives housing less weight, was up 2.6% on the year, with housing accounting for an outsized portion of the growth. 

While conventional wisdom suggests that an interest rate cut would spur demand for home purchases, thus driving up prices more, Nancy Vanden Houten, a senior economist at Oxford Economics, said lowering rates is essential to expanding the supply of both for sale and rental homes throughout the country. 

“The more we see progress on these other components of inflation, the Fed might have the freedom to look at housing a little bit differently,” Vanden Houten said. “High rates further constrain supply in the housing market, which is one of the key things propping up prices. If you want more supply and some softening in home price growth, lower interest rates would help in that regard.”

Source: nationalmortgagenews.com

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Data Over Politics, For Now

By:
Matthew Graham

Wed, Jul 3 2024, 2:18 PM

Data Over Politics, For Now

Several days ago, we were debating whether the presidential debate or the month-end/new-month trading environment was the bigger market mover.  The political angle was more popular in the analytical community, but evidence is increasingly suggesting that popularity wasn’t necessarily warranted.  Today offered some compelling evidence in the form of absolutely no reaction to a widely circulated newswire that seemed to suggest Biden having second thoughts about remaining in the running.  Contrast that to the immediate and obvious reaction to the ISM Services data, which made for the highest Treasury trading volume since PPI and jobless claims data on June 13th.  Data will remain in focus when markets return from the holiday break on Friday morning thanks to non-farm payrolls.

    • ADP Employment
      • 150k vs 160k f’cast, 157k prev

08:39 AM

Flat overnight and stronger in early trading.  MBS up 1 tick (0.03).  10yr down 2.6bps at 4.406

01:40 PM

Drifting sideways after strong reaction to weak ISM data.  MBS up about a quarter points and 10yr down 8bps at 4.352

 Download our mobile app to get alerts for MBS Commentary and streaming MBS and Treasury prices.

Source: mortgagenewsdaily.com

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Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate mortgages to write unbiased product reviews.

Mortgage rates increased overall this week, with 30-year mortgage rates ticking up closer to 7%, according to Freddie Mac. But the latest economic data continues to suggest that rates should ease throughout the remainder of 2024.

“Both new home and pending home sales are down, causing active listings to rise,” Sam Khater, Freddie Mac’s chief economist, said in a press release. “We are still expecting rates to moderately decrease in the second half of the year and given additional inventory, price growth should temper, boding well for interested homebuyers.”

As the economy cools, the Federal Reserve is expected to start lowering the federal funds rate, removing some of the upward pressure off of mortgage rates and allowing them to trend down.

On Wednesday, softer-than-expected private payroll data from ADP suggested that the labor market is continuing to cool off. Recent inflation data has shown signs of slowing as well.

Right now, investors think it’s likely that the Fed will start cutting rates in September, and that we could get two rate cuts by the end of the year, according to the CME FedWatch Tool. 

This means mortgage rates should go down in the coming months and years. If you’re thinking about postponing your home search until rates are lower, you might have better luck in 2025. 

Today’s mortgage rates

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Today’s refinance rates

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Mortgage Calculator

Use our free mortgage calculator to see how today’s interest rates will affect your monthly payments:

Mortgage Calculator

$1,161
Your estimated monthly payment

Total paid$418,177
Principal paid$275,520
Interest paid$42,657
  • Paying a 25% higher down payment would save you $8,916.08 on interest charges
  • Lowering the interest rate by 1% would save you $51,562.03
  • Paying an additional $500 each month would reduce the loan length by 146 months

By clicking on “More details,” you’ll also see how much you’ll pay over the entire length of your mortgage, including how much goes toward the principal vs. interest.

Mortgage Rate Projection for 2024

Mortgage rates started ticking up from historic lows in the second half of 2021 and increased dramatically in 2022 and throughout most of 2023.

Many forecasts expect rates to fall this year now that inflation has been coming down. In the last 12 months, the Consumer Price Index rose by 3.3%. This is a significant slowdown compared when it peaked at 9.1% in 2022, but we’ll likely need to see more slowing before rates can drop substantially.

For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.

Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans. 

When Will House Prices Come Down?

We aren’t likely to see home prices drop this year. In fact, they’ll probably rise.

Fannie Mae researchers expect prices to increase 4.8% in 2024 and 1.5% in 2025, while the Mortgage Bankers Association expects a 4.5% increase in 2024 and a 3.3% increase in 2024.

Sky high mortgage rates have pushed many hopeful buyers out of the market, slowing homebuying demand and putting downward pressure on home prices. But rates have since eased, removing some of that pressure. The current supply of homes is also historically low, which will likely push prices up.

What Happens to House Prices in a Recession?

House prices usually drop during a recession, but not always. When it does happen, it’s generally because fewer people can afford to purchase homes, and the low demand forces sellers to lower their prices.

How Much Mortgage Can I Afford?

A mortgage calculator like the one above can help you determine how much house you can afford. Play around with different home prices and down payment amounts to see how much your monthly payment could be, and think about how that fits in with your overall budget.

Typically, experts recommend spending no more than 28% of your gross monthly income on housing expenses. This means your entire monthly mortgage payment, including taxes and insurance, shouldn’t exceed 28% of your pre-tax monthly income.

The lower your rate, the more you’ll be able to borrow, so shop around and get preapproved with multiple mortgage lenders to see who can offer you the best rate. But remember not to borrow more than what your budget can comfortably handle.

Molly Grace

Mortgage Reporter

Source: businessinsider.com

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Today’s title insurance alternatives have updated protections making them more viable than they’ve traditionally been, according to a new commentary aimed at clarifying some other legal reports enumerating their shortcomings. 

“Many of the concerns that have been raised target traditional AOLs and do not contemplate the coverage provided by the modernized version,” Hallman Eady and Spencer Mobley, partners at law firm Bradley, said in a recent report on attorney opinion letters commissioned by Alita.

The commentary finds that an AOL wrapped with an errors and omission policy and a closing protection letter such as Alita’s “addresses significant title-related risks, including the most commonly encountered,” which makes it “a viable option” for mortgage and real estate industries.

Critics have contested the degree to which attorney opinion of title letters can safely compete with traditional insurance as key mortgage investors increasingly offer increased latitude for alternatives and test waivers as a means of potential means of lowering closing costs.

The new white paper references other legal commentaries commissioned separately by title insurance and mortgage banking trade groups. The attorneys also note that the Consumer Financial Protection Bureau’s recent closing cost inquiry makes it timely.

The American Land Title Association said the white paper “again demonstrates what ALTA has been saying for the last few years: unregulated title insurance alternatives—including attorney opinion letters — simply fall short.”

Title insurance alternatives are something that could expose lenders to “significant unforeseen costs,” according to the association.

“AOLs lack coverage for title defects not discoverable from a search of the public records, and typically don’t cover fraud,” ALTA added, citing Milliman’s nationwide findings that almost 30% of insurance losses and claims costs stem from issues outside public records.

The Bradley report acknowledges that historically title insurance came into being because of shortcomings in traditional AOLs, and that even when coupled with additional protections, it “is not identical to title insurance.”

It also confirmed some other reports that an attorney’s opinion based on a standard title search and related protections may not find or cover property ownership conflicts outside the public record. This could include fraud.

However, it also claims the E&O policy “insures the abstracting and closing services provided, which account for the largest share of losses reported by title insurers.”

ALTA questioned the limitations of data used to determine the largest share of losses, noting that it came from a single state, and pointed to nationwide Milliman numbers indicating the largest source of claims is a “basic risks” category that includes fraud.

The average claim cost in this category is over $143,000 for risks “not ultimately covered by attorney opinion letters,” according to the association, which further noted that fraud and forgery claims more than doubled in the last two years.

There are different additional protections that can be added to title insurance alternatives to address risks that may differ by loan, the Bradley attorneys noted.

Ultimately, when it comes to the question of what coverage is appropriate, “each lender or homeowner will need to engage in a cost-benefit analysis and choose the most appropriate form of coverage for the circumstance,” they said.

Source: nationalmortgagenews.com

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Fair Lending Compliance, HELOC Products; Training and Events; FICO News

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Fair Lending Compliance, HELOC Products; Training and Events; FICO News

By:
Rob Chrisman

Tue, Jul 2 2024, 11:36 AM

Cracker Jacks, Quaker Oats, Ferris Wheels, and 1893 Chicago have something in common. World’s Fairs, and World’s Expos, have pretty much gone away due to financial issues. A lot has happened since then, financially, and otherwise. Equifax was founded in 1899. The modern credit card, able to be used at various merchants, was developed in the 1950s, when many of today’s loan officers were entering the business. (Ok, just kidding.) FICO (legal name: Fair Isaac Corporation) began in 1956. FICO’s latest news came out yesterday with Encompass Lending Group and Equity Resources, Inc. being the latest to adopt FICO® Score 10 T. Meanwhile, the Mortgage Bankers Association and others have stated that credit-related price hikes have cost lenders & consumers hundreds of millions of dollars. FICO’s executives are well paid. FICO’s stock, at around $1,500 per share, has a price earnings ratio at around 77 (versus the S&P 500 average of around 25) although the only product with any great revenue growth is mortgage credit scores. (Other lines are flat or mediocre.) Observers suggest that Fair Isaac may only have two choices going forward: keep raising mortgage credit score prices even higher or watch its stock price plunge. Some give it near-monopoly status; American Economic Liberties Project’s Matt Stoller uses the word “cartel” when it comes to Experian, TransUnion, Equifax, and FICO. (Today’s podcast is found here and this week’s is sponsored by Bundle, the attorney-prepared legal documents company that is dedicated to the real estate, mortgage, and title industries. Fuel your operations and execution of documents from deeds to subordinations to assignments, and everything you need for any order, in one bundled price; receive 20 percent off using the code “Chrisman” at checkout. Hear an Interview with FirstClose’s Tedd Smith on a new national consumer survey that explored homeowners’ level of awareness of home equity and how it could be used to pay down higher interest credit card debt.)

Lender and Broker Services, Products, and Software

Spring EQ Wholesale is thrilled to unveil a new and unique product to the second mortgage industry: The FIXLINE product. FIXLINE is a fixed-rate HELOC, giving borrowers the flexibility of a line of credit with the stability of a fixed-rate loan. Register for its webinar taking place today, where their team will explore the ins-and-outs of the new FIXLINE product! Spring EQ is also excited to announce a recent addition to their TPO leadership team, Reno Heine. Reno joins Spring EQ as the SVP of TPO, bringing more than 25 years of mortgage industry experience. The need for home equity solutions is surging among borrowers, so make sure your business is prepared to meet this demand by partnering with the experts in home equity at Spring EQ. Interested in a wholesale partnership? Click here. Second mortgages are Spring EQ’s specialty, so think of them first for all your seconds.

Uncovering Fair Lending Risk to Build a Stronger Fair Lending Program! Preventing and detecting discrimination with an active fair lending compliance management system (Fair Lending CMS) is essential for every financial institution (FIs). FIs don’t just have a moral obligation to prevent and detect discrimination… They also have a legal obligation. Lending practices or programs that negatively impact a protected class can result in fines or enforcement actions, even if the discrimination was unintended. Ncontracts’ latest whitepaper introduces the key components of a fair lending compliance management system, discuss common fair lending mistakes, and highlight essential considerations when conducting a fair lending risk assessment to build or strengthen the institution’s overall fair lending program. Download the free whitepaper to learn more.

Events, Training, and Webinars

A good place for longer term conference planning is to start is here for in-person events in the future.

Today the 2nd at 11am PT, two veteran LOs discuss all things mortgage with Industry Leaders. Mortgage Pros 411 with Audrey Boissonou and Kevin Casey. And I get to join in!

Register now for FAMPChat Summer Series presented by the Central Florida FAMP Chapter beginning July 2nd, register now for all 10 sessions.

On Wednesday, July 10 at 11:00 am, NMMLA will present “The current and future state of Digital Mortgages” with Guest Speaker, Robert Pathman.

Thursday the 11th will be another episode of The Big Picture at 3PM ET… Rich Swerbinsky is interviewing the fabled Kevin Peranio of PRMG!

National MI: Leading a Team​​with Andrew Oxley – July 11th at 2pm ET.

Friday the 12th will see an episode of The Mortgage Collaborative’s Rundown with Melissa Langdale and me covering current events in the mortgage market for 30 minutes starting at noon PT, 3PM ET.

The Ultimate Mortgage Expo returns to New Orleans July 10 – 11. Join OCN in the Hotel Monteleone for a jam-packed event featuring 2 days of sessions and 2 days of exhibition hall opportunity. Also, come earlier on July 10 to enjoy complimentary access to the Mortgage Star Conference for women. Enjoy free access to this can’t-miss event using the code OCNFREE.*

Join Servbank’s cohosted webinar with the Mortgage Bankers Association on July 11 at 1-2p ET to learn how handling thousands of service transfers has gotten Servbank’s transfer plan down to a science. With a battle-tested plan and a laser-focus on customer experience, the painless service transfer is a reality. Register for the webinar today! The webinar is free for non-members by creating an account and entering the campaign code “SERVBANK100” at checkout.

On June 20, federal regulators published new quality control standards for automated valuation models (AVMs). The standards focus especially on safeguarding the credibility and integrity of AVMs to support fair lending practices and non-discrimination in real estate property valuations. Attend a complimentary webinar hosted by ICE for an insightful panel discussion with leading valuation experts. The webinar, “New quality standards for AVMs – are you ready?” will take place Tuesday, July 16, from 2 – 3 p.m. ET. Save your seat today.

Join ACES EVP, Nick Volpe and ACES President, Phill McCall on July 17, 11:00 AM – 11:45 AM PDT for a QC NOW webinar as they take a deeper dive into these analytics and how it aligns with the current state of the industry and how to best navigate through the volatile financial landscape.

Join NAMB and Freddie Mac on Wednesday, July 17, from 2pm – 3:30pm ET for Self Employed-The Basics, to get started learning about the self-employed borrower. This introductory session is designed to provide you with the information you need to complete your analysis and to enhance your processes for underwriting self-employed borrowers, with a focus on the sole proprietor.

Newrez Correspondent offers a comprehensive training curriculum on Newrez products and processes, to keep your staff informed of the latest developments in products, technology solutions, compliance issues and process improvements. Each of these programs is offered by its training and development staff on a monthly basis and is updated regularly to reflect recent changes in the industry.

National MI upcoming July 2024 webinar sessions. How to Plan and Attack the Week for Loan Officers with Dr. Bruce Lund – July 18th at 1pm ET. Become an Open House Success Partner ​​​​​with Rebecca Lorenz – July 23rd at 1pm ET. Mortgage Industry Updates Impacting the Balance of 2024 and Beyond ​​​​​with Scott Weghorst, July 25th at 2pm ET.

Thursday July 18th will another episode of The Big Picture at 3PM ET… Rich Swerbinsky is interviewing the Stan Middleman from Freedom Mortgage.

Monday, 5 August 9:00 AM – Tuesday, 6 August at 6:00 PM PDT join the California Association of Mortgage Professionals on August 5th -August 6th for its Annual Summer CAMP at Hyatt Regency Newport Beach, 1007 Jamboree Road, Newport Beach, California. Attorney Brian Levy will be the featured speaker!

“Join me and other leaders in the Michigan mortgage industry at the MMLA Annual Lending Conference, August 14 – 16 @ Boyne Mountain Resort. Go to www.mmla.net for all the registration and sponsorship information. I hope to see you there!”

August 19-21 will see the California MBA’s Western Secondary at the Terranea Resort in Southern California. Come say hi!

Whether you’re an appraiser, educator, or you work for an AMC, lender, tech company, or E&O insurance firm, the Valuation Expo 2024 is your premier opportunity to stay up to date with industry advancements and meet the people at the forefront. Don’t miss the chance to learn, network, and prosper. Register for Valuation Expo at Caesars Palace in Las Vegas, August 19th – 21st.

“NAMMBA CONNECT 2024, August 21-23, is calling for speakers who can inspire and empower our diverse community of mortgage professionals. Whether you specialize in innovative technology, leadership strategies, or industry trends, we invite you to join us in shaping the future of the mortgage industry. Submit your proposal through this speaker application form and be a catalyst for meaningful dialogue and growth.”

The MISMO Fall Summit is in Reston, Virginia, August 26-29 for a jam-packed program filled with presentations and strategy sessions focused on some of the most pressing issues in the industry. In-person and virtual attendance options are available. Early bird pricing extends through July 15, but space is limited, so register before it’s too late.

September 4-6 the NY MBA is taking over the Turning Stone Resort Casino in Verona, NY with a slate of top-notch speakers and information.

Register for the New England Mortgage Bankers two-day conference, September 11-13 in Portsmouth NH. Hear from a range of speakers, learn about new technologies and products, join golf and social events.

There’s the upcoming 2024 Pacific Northwest Mortgage Leaders Conference is Sunday, September 22 – Tuesday, September 24 at the Seattle Grand Sheraton. As the industry continues to evolve through technology, innovation, and adaptation, the conference will present an impressive lineup of local and national industry leaders who will share insights on critical topics impacting the mortgage industry.

“Loan Vision is excited to announce that registration is now OPEN for its 2024 Loan Vision Innovation Conference (previously the Loan Vision User Conference). With a focus on innovation, growth, and doing more with less, our new and improved annual conference is taking place in Chicago, Illinois from Monday, September 23rd – Wednesday the 25th. This conference will deliver highly recognized names in mortgage banking as our speakers, enhanced social networking events, and a fresh agenda for both executives and users and will be aimed at redefining industry standards and setting a new benchmark for excellence. If you’re interested in sponsoring this event, please contact Haleigh Heilman. To learn more about this conference, register, and book your hotel, please visit here.”

Registration has opened for the reverse mortgage industry’s biggest event of 2024, NRMLA’s Annual Meeting & Expo, September 24 from 1PM through September 26 at 12:00 pm, at the Hard Rock Hotel San Diego.

MBAC’s 68th Annual Convention is October 6-8 at the Embassy Suites in Myrtle Beach, SC. It is always worthwhile!

Capital Markets

Bond yields (read: mortgage rates) rose to the highest levels since late May yesterday to begin this holiday-shortened week that will likely be marked by low trading volumes. The jump in yields occurred a day after the first round of voting in France’s parliamentary elections suggested that the National Rally far-right party scored a smaller win than some polls had expected.

At home, President Biden’s widely derided performance in last week’s debate has put increased pressure (read: downward prices) on Treasuries, as a potential President Trump win is bringing anxiety into markets for a variety of reasons having to do with fiscal policy, tariff policy, and immigration policy. There is also mainstream media chatter that a Trump administration in 2025-2028 will be more inflammatory for rising budget deficits than a Biden administration.

In terms of cold hard data (read: not media speculation), the June ISM Manufacturing Index suggested there was a faster pace of contraction in the manufacturing sector last month than in May, signaling subdued activity for the manufacturing sector that fits with the narrative of a slowing economy. This was the third straight month, and 19th out of 20, that economic activity in the manufacturing sector contracted.

Total construction spending decreased 0.1 percent month-over-month in May, as expected, following an upwardly revised 0.3 percent increase (from -0.1 percent) in April. Total private construction was down 0.3 percent month-over-month while total public construction was up 0.5 percent month-over-month. On a year-over-year basis, total construction spending was up 6.4 percent. The restrictive effects of tight monetary policy are becoming increasingly apparent across the construction industry, despite the construction market having navigated the higher interest rate environment relatively well, thus far.

Keep in mind that the big data point this week is the June jobs report on Friday, which is expected to show the unemployment rate rising to the highest level since late 2021, despite a decent monthly gain in payroll employment. Payrolls are expected to come in +190k from the previous release’s +272k pace. More people are returning to the workforce, and there is slower job-finding among newly laid-off workers. Initial and continued claims have trended upward over the last few weeks, with initial claims trending at the highest level since last September and continued claims at the highest since December 2021.

Today’s economic calendar has little: Redbook same store sales for the week ending June 29, Fed Chair Powell’s participation in a panel discussion at the ECB Forum on Central Banking in Portugal, JOLTS job openings for June will be released, and Treasury will conduct several short-duration Treasury auctions. The May Job Openings and Labor Turnover Survey (JOLTS) is expected to show another step down in job openings and a cool rate of hiring across nonfarm industries. We begin the day with Agency MBS prices a few ticks better than Monday afternoon, the 10-year yielding 4.45 after closing yesterday at 4.48 percent, and the 2-year at 4.76.

Employment

“First Horizon Announces Mortgage Warehouse Lending Group leadership transition!

After joining First Tennessee in 1998, Bob Garrett, Executive Vice President of First Horizon’s Mortgage Warehouse Lending Group (MWL) is retiring. At a time when the company had a small footprint and little name recognition outside of Tennessee, Bob and his team were pioneers in the development of our national brand. Today MWL operates as one of the largest and best warehouse lenders in the nation and has funded over $1 trillion in mortgage loans under Bob’s leadership. Scott Walker, MWL Director of Business Development, will assume leadership of the business as Co-Director immediately and report to David Popwell. Bob will continue to assist Scott until his departure December 31, ensuring a smooth transition. Scott joined MWL in 2004 as a Relationship Manager and has since held several management roles. After joining the company, he quickly emerged as a significant contributor and well-regarded leader. “Bob’s legacy of excellence will not be forgotten as it serves as a building block for continued success,” said David Popwell, President of Specialty Banking. “We are fortunate to have Scott step into this role, a proven leader with the depth of experience and commitment to the company needed to continue to excel in this space. We wish Bob all the best in his retirement.”

Patrice Ficklin, who has led the Consumer Financial Protection Bureau’s fair lending office since 2011, is leaving the CFPB to rejoin Fannie Mae. She’s an expert in bureaucracy: Ficklin has been the CFPB’s only fair lending director through seven acting and permanent directors, setting up the agency’s Office of Fair Lending & Equal Opportunity, responsible for the oversight and enforcement of fair lending laws. She has helped coordinate efforts with the Department of Justice to rein in redlining and introduced new rules and guidelines aimed at curbing the impacts of racial bias on home valuations. Kate Berry with American Banker reminds us that, “Ficklin previously served as Fannie Mae’s associate general counsel for nearly a dozen years.” She is rejoining Fannie as its new fair lending officer.

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

Source: mortgagenewsdaily.com

Apache is functioning normally

The average 30-year fixed mortgage interest rate is 7.00% today, down -0.02% compared to one week ago. The average rate for a 15-year fixed mortgage is 6.46%, which is an increase of 0.03% since last week. For a look at mortgage rate movement, see the chart below.

The Federal Reserve has been holding off on interest rate cuts because inflation has been slow to improve. While experts still expect mortgage rates to gradually move lower in the coming months, housing market predictions can always change in response to economic data, geopolitical events and more.

Today’s average mortgage rates


Today’s average mortgage rates on Jul. 04, 2024, compared with one week ago. We use rate data collected by Bankrate as reported by lenders across the US.

Lower mortgage rates make buying a home more affordable. Experts recommend shopping around with different mortgage lenders to find the best deal. Enter your information below to get a custom quote from one of CNET’s partner lenders.

About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.

How can I choose a mortgage term?

Each mortgage has a loan term, or payment schedule. The most common mortgage terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. With a fixed-rate mortgage, the interest rate is set for the duration of the loan, offering stability. With an adjustable-rate mortgage, the interest rate is only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the market. Fixed-rate mortgages are a better option if you plan to live in a home in the long term, but adjustable-rate mortgages may offer lower interest rates upfront.

30-year fixed-rate mortgages

The average 30-year fixed mortgage interest rate is 7.00% today. A 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you’ll have a lower monthly payment.

15-year fixed-rate mortgages

Today, the average rate for a 15-year, fixed mortgage is 6.46%. Though you’ll have a bigger monthly payment than a 30-year fixed mortgage, a 15-year loan usually comes with a lower interest rate, allowing you to pay less interest in the long run and pay off your mortgage sooner.

5/1 adjustable-rate mortgages

A 5/1 adjustable-rate mortgage has an average rate of 6.66% today. You’ll typically get a lower introductory interest rate with a 5/1 ARM in the first five years of the mortgage. But you could pay more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your house within five years, an ARM could be a good option.

Why are mortgage rates so high right now?

At the start of the pandemic, mortgage rates were near record lows, around 3%. That all changed as inflation began to surge and the Federal Reserve kicked off a series of aggressive interest rate hikes starting in March 2022 to slow the economy, which indirectly drove up mortgage rates.

Now, more than two years later, mortgage rates are still around 7%. Over the last several months, mortgage rates have fluctuated in response to economic data and investors’ expectations as to when the Fed will start to lower rates.

Today’s homebuyers have less room in their budget to afford the cost of a home due to elevated mortgage rates and steep home prices. Limited housing inventory and low wage growth are also contributing to the affordability crisis and keeping mortgage demand down.

Will mortgage rates drop this year?

Most experts predict mortgage rates will fall below 7% in the coming months. However, a sustained downward trend will depend on several factors, including upcoming inflation and labor data.

The Fed hasn’t hiked interest rates in almost a year, but an actual rate cut doesn’t appear imminent. Some experts say the first cut could come as early as July, though it’s more likely we see the Fed lower rates in September or November.

“If the Fed makes any moves later this year, the signal would be sufficient for the mortgage market, and mortgage rates would start falling,” said Selma Hepp, chief economist at CoreLogic. “In that case, we could see the mortgage rates around 6.5% at the year-end.”

One thing is for sure: Homebuyers won’t see lower mortgage overnight, and a return to the 2-3% mortgage rates from just a few years ago is unlikely.

Here’s a look at where some major housing authorities expect average mortgage rates to land.

Calculate your monthly mortgage payment

Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.

Where can I find the best mortgage rates?

Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right.

  1. Save for a bigger down payment: Though a 20% down payment isn’t required, a larger upfront payment means taking out a smaller mortgage, which will help you save in interest.
  2. Boost your credit score: You can qualify for a conventional mortgage with a 620 credit score, but a higher score of at least 740 will get you better rates.
  3. Pay off debt: Experts recommend a debt-to-income ratio of 36% or less to help you qualify for the best rates. Not carrying other debt will put you in a better position to handle your monthly payments.
  4. Research loans and assistance: Government-sponsored loans have more flexible borrowing requirements than conventional loans. Some government-sponsored or private programs can also help with your down payment and closing costs.
  5. Shop around for lenders: Researching and comparing multiple loan offers from different lenders can help you secure the lowest mortgage rate for your situation.

Source: cnet.com

Apache is functioning normally

A Michigan federal judge gave a final nod to a $5 million settlement, putting to rest a shareholder suit against Home Point Financial, three years after it was first filed.

Of the sum, the lead counsel will receive 30% of the proceeds, or $1.5 million, Shalina Kumar, U.S. District Judge in Michigan ruled June 28.

The settlement was announced in September of last year but took close to a year to get the green light.

The class action lawsuit, lodged by shareholders, accused Home Point of making misleading statements regarding its business strategies and how the unfolding lending environment could impact it as it was set to go public.

Specifically, the class action accused the now defunct lender of omitting information in its filings with the Securities and Exchange Commission regarding how its expansion of broker partners could increase the company’s expenses and how an industry-wide decrease of gain-on-sale margins would impact it.

This was “negligent” on behalf of Home Point and due to it and “the precipitous decline in the market value of Home Point’s securities, plaintiffs and other class members have suffered significant losses and damages,” the original complaint filed June 21, 2021 said.

Judge Kumar, the federal judge on the case, wrote in her ruling that the settlement “delivered a favorable recovery for the class,” especially with the looming uncertainty around Home Point’s financial viability last year.

Home Point opted to sell off its wholesale business to The Loan Store, a national entity based in Tucson, Arizona, in April 2023. Four months later, the company’s servicing operation was acquired by Mr. Cooper. The defunct mortgage lender was a casualty of deteriorating economics of the mortgage industry, which resulted in its demise, analysts have said.  

In announcing the initial settlement last year — prior to the judge’s current approval — over 9,988 potential class members were contacted, all of whom could potentially receive a small chunk of the proceeds pie.

The case has been dismissed with prejudice, provided that the court retains jurisdiction over all matters relating to the administration of the settlement, the judge wrote in her ruling.

Other lenders that went public during this same time period, including Loandepot and Rocket Mortgage, have faced similar accusations lodged by shareholders. 

Loandepot settled one such suit in May, with a California judge granting final approval to a $3.5 million settlement accusing the lender of misleading investors prior to its initial public offering.

Meanwhile, Rocket Mortgage investors have pushed for a federal Michigan court to certify their class action lawsuit, which accuses the mortgage giant of misleading shareholders regarding the company’s financial health in 2021. The suit has been pending for over three years.

Source: nationalmortgagenews.com

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Higher interest rates knocked mortgage application volume back last week. But, while purchase volume appears to lose ground year-over-year, refinancing activity is steadily improving compared to the same week in 2023. The Mortgage Bankers Association said its Market Composite Index, a measure of that application volume, decreased 2.6 percent on a seasonally adjusted basis from one week earlier and rose 8.0 percent on an unadjusted basis.

The Refinance Index was down 2.0 percent compared to the week ended June 20 and was 29.0 percent higher than the same week one year ago. The refinance share of mortgage activity increased to 35.7 percent of total applications from 35.1 percent the previous week.  

The seasonally adjusted Purchase Index fell 3.0 percent from one week earlier. The unadjusted Purchase Index increased 7.0 percent compared with the previous week and was 12.0 percent lower than the same week one year ago.

“Mortgage rates moved higher last week, crossing the 7 percent mark, even as the latest inflation data has kept market expectations alive for a rate cut from the Fed later this year,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Purchase applications decreased the final full week of June, even as both new and existing inventories have increased over the past few months. Refinance activity also remains subdued – although there was a slight increase in applications for conventional refinance loans.”  

Highlights from MBA’s Weekly Mortgage Application Survey

  • Loan sizes rose last week. The average loan was $374,900 up from $372,300 while purchase loans jumped from $420,300 to $434,200. 
  • The FHA share of total applications was unchanged at 13.1 percent and the VA share fell to 12.9 percent from 13.8 percent. The USDA share of total applications hit a recent low of 0.3 percent.
  • The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances increased 10 basis points to 7.03 percent. Points increased to 0.62 from 0.61.
  • Jumbo 30-year FRM saw an average rate increase to 7.11 percent from 7.04 percent, with points decreasing to 0.5 from 0.60.
  • Thirty-year FHA-backed FRM had a rate of 6.90 percent, up from 6.82 percent. Points declined to 0.95 from 0.99.
  • The average rate for 15-year fixed-rate mortgages increased to 6.56 percent from 6.46 percent, with points decreasing to 0.54 from 0.75. 
  • Adjustable-rate mortgage (ARM) rates also increased with the 5/1 year adjustable at 6.38 percent with 0.54 point. The prior week that rate was 6.29 with 0.50 point. The ARM share of activity remained at the previous week’s level of 6.0 percent.

Source: mortgagenewsdaily.com

Apache is functioning normally

An aerial view shows a subdivision that has replaced the once rural landscape on July 19, 2023 in Hawthorn Woods, Illinois.

Scott Olson | Getty Images

After a weaker-than-expected spring housing market, summer looks no better. High home prices continue to rise, mortgage rates aren’t coming off recent highs and consumers are unimpressed by the small increase in home listings.

All of that is reflected in weekly mortgage demand, which has been stuck for the second week in a row. Total mortgage application volume was essentially flat last week, up just 0.8% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

Mortgage rates didn’t move much either. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.93% from 6.94%, with points unchanged at 0.61 (including the origination fee) for loans with a 20% down payment. That is, however, the lowest rate in more than three months.

Applications to refinance a home loan were unchanged week to week but were 26% higher than the same week one year ago.

“Lower rates, however, were still not enough to entice refinance borrowers back, as most continue to hold mortgages with considerably lower rates,” said Joel Kan, an MBA economist, in a release.

Applications for a mortgage to purchase a home increased 1% for the week but were 13% lower than the same week one year ago. Total housing supply is 18% higher than it was a year ago, according to Zillow, but it is still a very lean market.

“Purchase applications did see a small increase after adjusting for the Juneteenth holiday. Government purchase loans, primarily FHA and VA, saw gains of more than 2 percent over the previous week, as homebuyers in those segments sought to take advantage of the recent rate relief,” Kan added.

Mortgage rates moved sideways to start this week and will likely stay that way until Friday when two important reports on consumer spending and personal consumption expenditures prices are released. Any hint at the current state of inflation tends to have an impact on bond yields and, consequently, mortgage rates.

Don’t miss these insights from CNBC PRO

Source: cnbc.com

Apache is functioning normally

Want to hear some good news about mortgage rates that involves them being a lot higher than they previously were?

Yes, I know that sounds absurd, but hear me out. There are now millions more mortgages that feature rates above 6.5%, and many with rates above 7%.

There are also millions less that feature rates below 5% than there were just a couple years ago.

Why is this good you ask? Well, it means the effects of mortgage rate lock-in are beginning to wane.

It also means millions of borrowers might stand to benefit from a refinance is rates eventually drop.

Nearly a Quarter of Mortgage Holders Have an Interest Rate Above 5%

The latest Mortgage Monitor report from ICE released this week found that there’s been quite a shift in outstanding mortgage rates.

While it was quite common for a homeowner to hold a 30-year fixed priced at 2-3% a few years ago, it’s becoming less so today.

In fact, as of May some 24% of those with outstanding home loans had a mortgage rate at or above 5%, up from just 10% two years ago.

At the same time, there were there nearly six million (5.8M) fewer mortgages with rates below 5% than there were just two years ago.

And nearly five million (4.8M) fewer with rates below 4%, thanks to borrowers either selling their homes or in some cases pursuing a cash out refinance.

While the low-rate homeowners shed their mortgages via home sale or refinance, a new batch of high-rate homeowners is beginning to take their place.

Since 2022, four million new 30-year fixed mortgages have been originated with rates above 6.5%, and of those roughly half (1.9M) have rates north of 7%.

In other words, the collective outstanding mortgage rate of all homeowners is rising.

This means it’s becoming less normal to have an ultra-low interest rate and that could mean fewer roadblocks when it comes to selling and increasing for-sale inventory.

Why Is This Good Exactly?

In a nutshell, the shift from loose monetary policy to tight Fed policy in the matter of just a year and change wreaked havoc on mortgage rates and the housing market.

We went from 3% 30-year fixed mortgage rates in early 2022 to a rate above 8% by late 2023.

While the Fed doesn’t control mortgage rates, they made a big splash after announcing an end to their mortgage-backed securities (MBS) buying program known as Quantitative Easing (QE).

That meant the Fed was no longer a buyer of mortgages, which immediately lowered their value and raised the interest rate demanded by other investors to buy them.

At the same time, the Fed raised its own fed funds rate 11 times from near-zero to a target range of 5.25% to 5.50%.

While this was arguably necessary to cool off demand in the too-hot housing market, it created a group of haves and have nots.

The homeowners with 2-4% mortgages fixed for the next 30 years, and renters facing exorbitant asking prices and 7-8% mortgage rates.

This dichotomy isn’t good for the housing market. It doesn’t allow people to move up or move down, or for new entrants to get into the market.

Due to the quick divergence in rates for the haves and have nots, home sales have plummeted.

The same is true of refinances, especially rate and term refis, hurting lots of banks and mortgage lenders in the process.

But as the average outstanding mortgage rate climbs higher, there will be a lot more activity in the real estate and mortgage markets.

Here Comes the Refis (Well, Not Just Yet…)

If you look at the chart above, you’ll see that recent vintages of mortgages were dominated by high-rate mortgages.

The distribution of home loans with mortgage rates above 6% surged in 2023 and 2024 as the 30-year fixed ascended to its highest levels in decades.

While this has clearly dampened housing affordability, and led to numerous mortgage layoffs, it’s likely going to be a cyclical challenge that improves each year.

Over time, the low-rate mortgages will be replaced by higher-rate loans. And if mortgage rates moderate as inflation cools, many millions will be in the money a for a refinance.

So aside from mortgage rate lock-in easing and more homes coming to market, which pays off the underlying loans, we’ll also see more refinance activity as recent home buyers take advantage of lower rates.

In fact, we’ve already seen it as the 30-year fixed is roughly 1% below its October 2023 peak, thanks in part to normalizing mortgage spreads.

Those who timed their home purchase badly (in terms of that mortgage rate peak) have already been able to refinance into a lower monthly payment.

And if rates continue to come down this year and next, as is widely expected, we’re going to see a lot more borrowers refinance their mortgages.

This will benefit these homeowners and the mortgage industry, which traditionally relies upon refinances to keep up volume.

So while times have been bleak these last couple years, it’s all part of the process.

The shift out of cheap money and back into reality should get things moving again, whether it’s an uptick in home sales, mortgage lending, or both.

Source: thetruthaboutmortgage.com