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The Biden Administration is awarding $85 million in grants to 21 local governments to build affordable housing in what officials call a “first-of-its-kind” program.

The Pathways to Remove Obstacles to Housing, or PRO Housing program, will deliver an additional $100 million out of the government’s fiscal year 2024 budget in an application process, officials said. The Department of Housing and Urban Development made the announcement Wednesday with Vice President Kamala Harris. 

Cities, counties, states and other jurisdictional entities must describe how they’ll use the funds to address affordable housing barriers in zoning and permitting; financing gaps; infrastructure upgrades; and preservation of aging housing. HUD said combined requests from 175 communities exceeded $13 for every $1 available. 

“We have lots of other money to actually build housing,” a senior housing official told the media, mentioning other HUD programs. “So this is not at all the only money that we have to address housing. We have billions of dollars here to help build more affordable housing.”

The Biden Administration asked for another $100 million in PRO Housing grants in its fiscal year 2025 budget, among $258 billion it’s proposed for housing efforts. 

The awards come a day after HUD announced an unrelated $142 million in grants and loans, under its Green and Resilient Retrofit Program, to improve over 2,200 properties for low-income residents. The GRRP, created by the Inflation Reduction Act, has $754 million in funding and has aided over 16,400 rental properties. 

In another unrelated move, the U.S. Department of the Treasury Monday said its Community Development FInancial Institutions Fund will provide $100 million over three years to support affordable housing production. Officials emphasized the Treasury announcement related to financing tools, while PRO Housing resources will be realized this summer. 

Some of the PRO Housing funds will go to projects already underway, officials said. Some of Milwaukee’s $2.1 million award will address aging housing, while some of Denver’s $4.5 million will be used to upgrade utilities. While major cities won awards, Ketchum, Idaho, with a population under 4,000 residents, won $2.5 million.

“When people are doing affordable housing projects, and they find there’s an unexpected need for a new electrical line or sewer line, they can come and have infrastructure funding through PRO for their infrastructure remediation needs,” a senior housing official said. 

The effort is part of President Biden’s moves to address the nation’s housing crisis, including a pending bill to provide $25,000 in down payment assistance to first-generation homebuyers. 

Treasury Secretary Janet Yellen Monday separately suggested the Federal Home Loan Banks improve upon their affordable housing program, to expand their required net income contributions from a required 10% to 20%. Some banks have already upped their AHP funding to 20% voluntarily. 

The Federal Housing Finance Agency last week requested public input on the Banks’ AHP, which critics have called overly complicated. The FHLBs’ contribution to affordable housing amounted to around $350 million last year.

Source: nationalmortgagenews.com

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HELOC, Live Pricing Data, VOIE Tools; LO Survey, Webinars and Training

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HELOC, Live Pricing Data, VOIE Tools; LO Survey, Webinars and Training

By:
Rob Chrisman

Tue, Jun 25 2024, 11:54 AM

Everyone’s above average, right? If you are a lender and making money, you’re in the majority. It’s not that you’re not special, it’s just that with cuts and servicing income, and unprofitable companies going away, most companies are in the black: In the first quarter, 59 percent off all mortgage banking companies were profitable per the MBA Performance Report, buy it for details. Is our government profitable? Of course not, almost regardless of Administration. The federal budget deficit is expected to swell to around $1.9 trillion this year, according to the Congressional Budget Office, which was higher than its previous estimate of $1.5 trillion. This takes into account increased spending for student loans and Medicaid as well as the recently passed $95 billion foreign aid package. National debt is even poised to top $56 trillion over the next 10 years, or 122 percent of GDP, surpassing the 106 percent seen in 1946 after World War II. Meanwhile, the eurozone is facing debt issues of its own, with the ECB warning eight of its members (including Belgium, France, and Italy) over their excessive budget deficits. Today’s podcast is found here and this week’s is sponsored by Candor. Candor’s authentic Expert System AI has powered more than 2 million flawless, hands off underwrites. Every credit risk decision Candor makes is backed by a warranty, eliminating repurchase worries. Hear an interview with FinLocker’s Brian Vieaux on bringing consumer permission data to property searches and originations.

Software, Products, and Services for Lenders and Brokers

“Truv is the only consumer-permissioned VOIE platform approved with both GSEs, solidifying our commitment to delivering top-notch verification services tailored for mortgage lenders, banks, and credit unions. What does this mean for your business? Faster turn times, lower buyback risks, compliance assurance, and reduced operational costs. Read about why this matters for your business here.”

“Did you know that Polly is the rate engine for HousingWire’s Mortgage Rates Center? We offer the same capability to display live rates on lender websites, helping borrowers better assess your competitive edge against other lenders. This live data ensures that as the market fluctuates, prospects get real-time insights into your rates. Because in the current rate environment, having accurate, up-to-date rate intel on your homepage is crucial. It signals transparency, allowing potential borrowers to make informed decisions faster, without needing to supply personal information. This convenience can significantly increase your site’s engagement and drive more volume your way. On the flip side, NOT displaying live rates may deter potential borrowers, as they could perceive higher costs or simply prefer quick access to this information. Now, let’s take it several steps further; Polly’s Lender Intelligence will help you keep your rates competitive, ensuring you stay at the forefront of your peers. Let’s talk about it.”

“Calling all loan originators: We need your insights! Take the annual Loan Originators Survey from MGIC and Loan Officer Hub to weigh in on how you handled the challenges and opportunities of the past year. Get a head start on comparing your strategies to your peers’: Complete the survey by June 30 and you’ll receive exclusive early access to the full survey report this fall!”

Optimal Blue announced its new Competitive Data License today. In a news release, the company described its new data solution as a collection of key national mortgage pricing data that empowers lenders to price products competitively, operate more profitably, and react swiftly to changing market conditions. This product from Optimal Blue includes loan-level data from the industry’s most widely used product, pricing, and eligibility engine, providing a full price trace from borrower/buy-side to investor/sell-side pricing. Optimal Blue’s new data solution equips lenders with the ability to benchmark every aspect of their pricing strategy, providing extensive insights into markups, loan-level price adjustments (LLPAs), servicing-released premiums (SRP), concessions, loan officer compensation, base price, and PAR rate. Optimal Blue will be hosting a webinar on July 10 for those interested in learning more about Competitive Data License and its other data solutions.

HELOC borrowers can pay off debt to qualify and still close in as little as 1 day! With trillions of dollars in accessible home equity nationwide, there’s never been a better time to become a REMN Partner. REMN Wholesale, leading the way in Wholesale Digital HELOCs nationally, now provides the DEBT ELIMINATOR feature to its EQUITY ACCESS Digital HELOC. DEBT ELIMINATOR gives borrowers the ability to pay off debt to qualify. With loan amounts from $25k to $400k and recent rate reductions, REMN’s Digital HELOC is designed for fast closings. Additional features: Instant Income Verification for the vast majority of W-2 borrowers; automated analysis of bank statements to determine Income for both W-2 and Self-employed borrowers; single AVM up to $400k (appraisal options available); Broker Portal with robust functionality and real-time detailed status on all pipeline loans. Minimum FICO 640 and max 80% CLTV (see rates/guides). Flexible: Hybrid platform is digitally fast with humans to solve real-life complexities! And they provide fast payout (utilizing ACH). White Label: Brand your company/MLO. REMN is only wholesale! Contact Carl Markman.

Webinars and Shows

“Unlock the key to closing more loans in a competitive market. Join us on Thursday, June 27 at 2 pm ET / 11 am PT for the NMP Webinar “Build Your Personal Brand (and Close More Loans) by Optimizing Borrower Credit Scores.” Hosted by Mike Darne, a seasoned marketing executive who has led branding efforts at Capital One and Marriott, this webinar will share proprietary research from CreditXpert on what borrowers seek in a lender and how credit optimization meets those needs. Discover how you can help borrowers qualify, access better loan programs, lower their cost of homeownership, and reduce LLPA premiums. Learn to leverage credit optimization to build your personal brand, stand out in the marketplace, and ultimately close more loans. Don’t miss this chance to enhance your skills and grow your business: Register for the webinar here.”

Podcast: How the NAR Ruling Will Impact Lenders (& the Entire Home-Buying Process). The groundbreaking NAR settlement has real estate agents, lending professionals, and home buyers scrambling to understand its ramifications. Here to weigh in is Maxwell’s Clear to Close crew: In this conversation, Alan, Bryan, and Anthony channel their experience in the industry to walk through possible outcomes of the ruling. Specifically, this episode explores how new policy changes are likely to impact lead generation, methods to earn borrower business, and more—and how lenders can get ahead of the major ways the home-buying process is about to change. Click here to listen to How the NAR Ruling Will Impact Lenders (& the Entire Home-Buying Process).

A good place for longer term conference planning is to start is here, and click on “Conference List” for in-person events in the future.

Join Kristin Messerli and Robbie Chrisman today at 10am PT/1pm ET for the latest episode of Mortgages with Millennials as they share some new research on NextGen money trends, this time based on a personality quiz she developed to better understand the mindset, planning style, and behaviors of millennials when it comes to money and homebuying. sharing some new research on NextGen money trends, this time based on a personality quiz she developed to better understand the mindset, planning style, and behaviors of millennials when it comes to money and homebuying.

Every Tuesday at 11am PT, two veteran LOs discuss all things mortgage with Industry Leaders. Mortgage Pros 411 with Audrey Boissonou and Kevin Casey.

Register for Silicon Valley CAMP’s Free Marketing Presentation: “AI for Dummies via Zoom,” today at 9:30 AM (PDT).

In support of the Credit Score Models and Credit Reports Initiative, FHFA has announced a new stakeholder forum, an “Overview of Historical Credit Scores,” that will take place today from 3-4 p.m. (ET). FHFA, Freddie Mac and Fannie Mae will provide details regarding the Enterprises’ forthcoming publication of historical credit scores to support the implementation of the VantageScore® 4.0 credit score model.

MBA’s Single Family Research Showcase 2024 Virtual Meeting, June 25 & 26, 1:00 – 5:00 pm. MBA’s Research & Economics team will take you on a deep dive behind the data during our one-of-a-kind Single-Family Research & Economics Showcase. Led by MBA’s Chief Economist, Mike Fratantoni, Ph.D., this two-day online event highlights the most current results and insights from our popular residential surveys, forecasts, and reports. For those unable to attend, meetings will be recorded on both days. Register to receive the recordings.

Capital Markets

As optimism about a US Treasury rally grows among investors, a key bond market indicator suggests high interest rates could persist, potentially hampering the Federal Reserve’s ability to cut rates. Market forecasts indicate that the economy’s neutral rate, crucial for balancing growth, is significantly higher than the Fed’s current projection, hinting at long-term elevated borrowing costs.

While we do have some significant data later this week (GDP, inflation, consumer sentiment, home prices, etc.), this final week of June began yesterday on a quiet note without much market movement. This week also brings the quarterly refunding, which sees an increased flood of Treasury issuance that investors will be asked to absorb: $211 billion in new debt this week alone, with all of it coming on the front end of the curve. Today, markets will receive $69 billion 2-year Treasury notes.

Today’s economic calendar kicked off with the non-market moving Chicago Fed National Activity Index for May (better than expected) and Philadelphia Fed non-manufacturing for June. Later today brings Redbook same store sales for the week ending June 22, April house price indices from FHFA and Case-Shiller, the Consumer Confidence report for June, Richmond Fed manufacturing and services/revenues in June, and Dallas Fed Texas services for June, followed by the aforementioned Treasury note auction. Two Fed Governors are scheduled to make appearances: Governor Bowman and Governor Cook. We begin the day with Agency MBS prices little changed from Monday’s close, the 10-year yielding 4.22 after closing yesterday at 4.25 percent, and the 2-year at 4.72.

Employment

Mortgage Equity Partners (“MEP”), a mid-cap IMB headquartered in Massachusetts, is proud to be recognized as the fastest-growing IMB in the state measured in both units closed and volume funded in 2023 and YTD 2024. MEP has added production in many of its 22 states over the last 12-14 months. “As a mid-cap, we inherently have a flatter management structure, are more nimble, and can adapt to change quicker. Consistently, we see LOs migrate from large-cap IMBs because, as architects of their own businesses, LOs want quicker access to decision-makers. Those LOs want to operate at their own cadence and not be bogged down with layers of management. Our environment has a positive impact on LOs as strong business partners to support their referral sources,” said Sean Riley, CEO and General Counsel. To learn more about MEP, visit meploans.com or contact John Cabral, National Sales Director.

A seasoned Mortgage Executive is seeking a new opportunity to help lead a mortgage lender or vendor toward achieving their growth goals. Are you a mortgage lender or vendor (established or new) in need of leadership to navigate the current market and drive future growth? This executive has extensive sales leadership experience in all production channels (TPO, Retail, and DTC) and is an expert in all product types (Agency, Non-QM, and Private Money Lending). They also have deep knowledge of the vendor and technology space. Please send inquiries to Anjelica Nixt to pass along to the candidate and specify the listing.

(Remember: job seekers can post their resumes for free on www.lendernews.com where employers can view them for several months for a nominal charge.)

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

Source: mortgagenewsdaily.com

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MINNEAPOLIS — Last year, after Deb Jerikovsky’s husband died, she decided to swap the lake home where they planned to spend retirement for a house in the metro that’s closer to family.

She put that plan on hold, however, once she realized 7% mortgage rates would force her to dip too deeply into her savings. Instead, she moved in with her daughter, hoping she’d eventually score a lower rate.

She didn’t have to wait long.

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Mortgage rates were still hovering near 7% last October when she ran across a listing for a townhouse in Coon Rapids, Minnesota, that touted a KitchenAid fridge, electronic blinds and an unexpected extravagance: a low-interest assumable mortgage.

“It was like winning the lottery,” said Jerikovsky, who assumed the seller’s 2.25% mortgage rate.

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The deal saved her about $700 a month compared with today’s rates and gave her enough room in her budget to buy a new car and spend part of the winter with her aunt in Florida. Her $349,900 townhouse is one of hundreds of listings in the Twin Cities with an assumable mortgage eligible sellers can transfer to qualifying buyers, teleporting them back to a time of record-low rates.

Though they now account for only a fraction of all house listings, these government-backed mortgages — courtesy of the Federal Housing Administration (FHA), Veteran Affairs (VA) and U.S. Department of Agriculture (USDA) — are an overlooked home-buying hack saving a growing number of buyers hundreds of dollars a month and tens of thousands of dollars through the life of their mortgages.

“Most agents aren’t even aware of what it entails and what to look for,” said Tyler Miller, a Minnesota broker who has been involved with several sales involving assumable mortgages with astoundingly low rates.

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Miller recently listed a four-bedroom house in Blaine with an assumable 2.25% FHA mortgage with a monthly payment that’s about $1,700 less than it would be at the going rate. To tout the listing, he posted a TikTok video promoting the benefits.

“I had some people tell me I was lying,” Miller said. “I said, ‘No, this is real.’”

Assumable mortgages have been lurking in the shadows of unusually low rates in recent history. Such mortgages were last popular in the 1980s when rates hit a record 18.1%.

At the end of 2020 and into early January 2021, rates fell to record lows, hovering around 3% for much of 2021 and causing home sales and prices to soar. That buying binge locked in thousands of mortgages at rates that likely won’t be that low again for decades. An estimated 80% of all VA mortgages, like the one Jerikovsky assumed, now have a rate that’s less than 4%, and many of those rate-holders are now ready to sell.

Today, the average 30-year fixed-rate mortgage is about 7%. Though that’s still below historical averages, there’s a generation of buyers yearning for a time of low rates that’s unlikely to re-emerge anytime soon.

An estimated one-third of all mortgages in the U.S. are assumable now. Because many owners will hold onto those rates as long as possible, assumable mortgage listings represent only a fraction of homes currently for sale, making them one of the best-kept secrets for homebuyers these days.

While some agents will include an assumable mortgage in the listing details, many homeowners don’t even know they have one — the details are buried in the fine print of their contract, which many buyers don’t carefully read. In Minnesota, just shy of 5% of the more than 30,000 houses listed on Realtor.com had assumable mortgages. The website only started including a search feature for assumable mortgages in February.

Ryan Carrillo and Louis Ortiz started their Assumable.io website, which is dedicated to assumable mortgages, after Carrillo discovered the 2.75% FHA mortgage on his own house was assumable.

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The site lets you search for listings city by city, including detailed mortgage data such as the assumable rate and payment compared with the payment at current rates. All of the more than 30,000 nationwide listings on the site have an assumable mortgage, including other key details such as the required down payment and the interest savings through the remaining mortgage.

“It’s a huge opportunity,” Carrillo said, nothing that traffic to the site has doubled every month since its launch.

A recent listing for a nearly new townhouse in Maple Grove initially priced at $485,000 came with an assumable mortgage that’s half the current rate, saving a would-be buyer about $1,000 a month. Through the life of the loan, that lower rate would save nearly $400,000 in interest payments.

Roam, which doesn’t yet post listings in the Twin Cities, is another new website focused solely on assumable mortgages. It charges buyers 1% of the purchase price to help navigate the process. On average, the company claims, buyers who use the site save $15,000 in mortgage payments annually.

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“It’s not a panacea and won’t work for every transaction and every buyer,” Ortiz said. “But it provides buyers the opportunity to afford more house if they can make the equity gap work.”

That equity gap is often the biggest hurdle. Because the buyer is essentially taking on the existing mortgage rather than receiving a new one, the buyer has to pay the seller the difference between the original mortgage balance and the current asking price.

Though it’s only been a couple years since rates spiked, that equity gap can be significant given how house prices have steadily risen. To eliminate that barrier, Ortiz and Carrillo said they’re now offering lenders willing to do a second mortgage access to their site.

Chris Birk — vice president of Veterans United Home Loans, which has a national network of agents who specialize in working with military buyers — said there’s been a 600% increase in the number of VA mortgage assumptions from 2022 to 2023.

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“We’re seeing marked increase interest in these,” he said. “But it’s a foreign concept for so many buyers but also sellers.”

He said while any lender or servicer should be able to complete the transaction, it helps to work with professionals who are familiar with the process.

Brady Holland, the agent who helped Jerikovsky buy her townhouse, said assuming a mortgage can be a bit more complex because both the buyer and seller have to provide documentation. That’s especially true for the seller, who is essentially “selling” the mortgage to the buyer.

“It was a little tricky,” he said. “I had to call [the processor] every other day to check on things. … It takes a team to make it happen.”

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Many VA mortgage holders are reluctant to let another buyer assume their mortgage because once they do, they forfeit the right to use the benefit to buy another one. Unlike FHA mortgages, VA mortgages are considered a government benefit with perks that include the ability to forgo private mortgage insurance and no, or a low down payment and competitive low rates.

A VA mortgage holder is entitled to transfer those benefits to a qualifying nonveteran, as long as the seller doesn’t plan to buy a home with another VA loan.

In the case of the house that Jerikovsky bought, the seller was a widow who moved to an apartment, enabling her to waive her right to additional VA mortgage benefits because she doesn’t plan to buy again.

Though a mortgage assumption can take longer than a new, traditional mortgage, that wasn’t the case for Jerikovsky’s purchase, which closed less than two months after she first saw the house. For her, the most challenging part of the process, she said, was filling out online forms and applications. But her tech-savvy daughter helped with that.

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“I didn’t know if I would be living with my daughter for six months or a couple years until rates went down,” she said. “That (assumable) rate made all the difference in the world.”

– Jim Buchta for the Star Tribune

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Apache is functioning normally

Federal Reserve Governor Lisa Cook said it will be appropriate to reduce interest rates “at some point,” adding that she expects inflation to improve gradually this year before more rapid progress in 2025. 

READ ALSO: Mortgage rates fall to lowest point in over a month

“With significant progress on inflation and the labor market cooling gradually, at some point it will be appropriate to reduce the level of policy restriction to maintain a healthy balance in the economy,” Cook said Tuesday in prepared remarks to the Economic Club of New York. 

“The timing of any such adjustment will depend on how economic data evolve and what they imply for the economic outlook and balance of risks,” she said. 

U.S. central bankers left their benchmark rate unchanged at a more than two-decade high earlier this month, a level they’ve maintained for nearly a year. Policymakers say they need to see more data to be convinced that inflation is on a sustainable path toward their 2% target.

The Fed’s preferred underlying price gauge is expected to rise just 0.1% in May from a month earlier — marking the slowest advance of the year — in data out Friday. 

Cook expects three- and six-month inflation rates to continue to move lower on a “bumpy path,” with monthly data similar to the “favorable” readings seen in the second half of 2023 for the rest of the year. Annual inflation, however, will move roughly sideways, she said. 

“Beyond that, I see inflation slowing more sharply next year, with housing-services inflation declining to reflect the past slowing in rents on new leases, core goods inflation remaining slightly negative, and inflation in core services excluding housing easing over time,” Cook said.

The Fed governor said monetary policy is restrictive, as high interest rates put downward pressure on aggregate demand. 

While the economy remains resilient and the labor market strong, high mortgage rates have slowed home sales and construction, and delinquencies are rising as elevated prices and borrowing costs strain some Americans. 

Cook said the rising delinquency rates “are not yet concerning for the overall economy but bear watching.” 

The labor market is about where it was before the pandemic, she added, calling it “tight but not overheated.” She said data suggests payroll job gains were overstated last year and may continue to be this year. 

Speaking during a question-and-answer session following the speech, Cook said she and other policymakers are “attentive” to the risk that the labor market could “change very quickly,” and officials stand ready to respond. She demurred when asked about the potential for rate cuts this year, saying policymakers are data dependent.

Speaking earlier Tuesday, Governor Michelle Bowman said she sees a number of upside risks to the inflation outlook, and reiterated the need to keep borrowing costs elevated for some time. 

“We are still not yet at the point where it is appropriate to lower the policy rate,” Bowman said Tuesday in London. “Given the risks and uncertainties regarding my economic outlook, I will remain cautious in my approach to considering future changes in the stance of policy.”

Source: nationalmortgagenews.com

Apache is functioning normally

Mortgage rates have been flatter than the earth according to the flat earth society.  Much like the actual earth in many areas in the middle of the country–and especially Florida–things can be flat for as far as the eye can see, but the farther one moves along, the more they’ll see the contour.

For now, though, mortgage rates are in Florida (or IL, ND, MN, etc…).  Conventional 30yr fixed rates inched up 0.01% from yesterday–effectively unchanged and in the same tight range of 7.01 to 7.04 seen since last Monday.

Much like the actual geology of the planet, this isn’t a conspiracy.  It’s just the way things are relative to what we can see around us.  It will change, but not until markets are forced to confront mountains of more important economic data and events.  

Tomorrow’s events have only a slightly better chance of forcing the bond market (and thus, mortgage rates) to make bigger moves.  Friday continues to be the biggest risk/opportunity, but it’s really the following 2 weeks of data that are almost certainly destined to deliver peaks and valleys.

Source: mortgagenewsdaily.com

Apache is functioning normally

After a rocky start to the year, things began to improve for rates and the inflation outlook in May. June took the improvement to the next level, but this week didn’t affect the bigger picture.

Ahead of Wednesday’s market closure for Juneteenth, the most relevant economic report was Retail Sales on Tuesday morning.  It came in slightly below forecast and the previous month was revised lower.   Rates responded by moving back toward recent lows, but not below them.

Some sources suggest mortgage rates are in fact at multi-month lows, but this relies on Freddie Mac’s weekly survey which is notorious for modest inconsistencies with reality due to the timing and methodology of the survey.  In both 10yr Treasury yields and mortgage rates, the reality has been more of a sideways fizzle as opposed to additional improvement.

Apart from Retail Sales, Friday’s PMI data from S&P Global caused the most notable market reaction after coming in at the strongest levels in more than 2 years–albeit, just barely.

Stronger economic data tends to coincide with rates moving up.  Using 10yr Treasury yields as a convenient intraday benchmark for mortgage rate momentum, we can see the impact relative to Retail Sales earlier in the week.  Neither were remotely on the scale of last week’s CPI data.  Additionally, they each argued opposite cases, thus helping the rate range remain subdued for now.

In other words, most of June’s progress was already in place before this week began.  It gets rates within striking distance of a longer term uptrend–one that will be hard to definitively break unless June’s forthcoming economic data paints a picture of economic weakness and lower inflation.  It will be several weeks before most of June’s data starts coming in.

While the rest of this week’s data didn’t necessarily move markets, much of it was housing-focused.  New Residential Construction is measured at several stages with building permits and housing starts (the start of the physical construction process) being the two main headlines.  Both have been trending gently lower (but remain elevated compared to the pre-pandemic levels) and this week’s update was no exception.

The National Association of Homebuilders (NAHB) also released its Housing Market Index which is essentially builder confidence.  In general, the high rate/low affordability environment continues weighing on builders, forcing them to cut prices and/or offer additional incentives.

Existing Home Sales are much more sensitive to the post-pandemic rate volatility and have been doing much worse than new construction as a result.  This week’s update did little to change that, but didn’t offer any fireworks relative to expectations.

The more interesting consideration for home sales is a potential future with another move toward lower rates.  The last notable rate rally resulted in a clear response from the housing market.  The upcoming data in early July will determine whether rates are able to challenge the bigger picture uptrend.  While that challenge could go either way, if it’s successful, it suggests a meaningful uptick in housing activity.

Source: mortgagenewsdaily.com

Apache is functioning normally

Mortgage rates that continue to hover in the 7% range along with elevated construction financing costs continue to put a damper on builder sentiment. 

Builder confidence in the market for newly built single-family homes was 43 in June, down two points from May, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This is the lowest reading since December 2023.

“Persistently high mortgage rates are keeping many prospective buyers on the sidelines,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “Home builders are also dealing with higher rates for construction and development loans, chronic labor shortages and a dearth of buildable lots.”

“We are in an unusual situation because a lack of progress on reducing shelter inflation, which is currently running at a 5.4% year-over-year rate, is making it difficult for the Federal Reserve to achieve its target inflation rate of 2%,” said NAHB Chief Economist Robert Dietz. “The best way to bring down shelter inflation and push the overall inflation rate down to the 2% range is to increase the nation’s housing supply. A more favorable interest rate environment for construction and development loans would help to achieve this aim.”

The June HMI survey also revealed that 29% of builders cut home prices to bolster sales in June, the highest share since January 2024 (31%) and well above the May rate of 25%. However, the average price reduction in June held steady at 6% for the 12th straight month. Meanwhile, the use of sales incentives ticked up to 61% in June from a reading of 59% in May. This metric is at its highest share since January 2024 (62%).

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI component indices posted declines in June and all are below the key threshold of 50 for the first time since December 2023. The HMI index charting current sales conditions in June fell three points to 48, the component measuring sales expectations in the next six months fell four points to 47 and the gauge charting traffic of prospective buyers declined two points to 28.

Looking at the three-month moving averages for regional HMI scores, the Northeast held steady at 62, the Midwest dropped three points to 47, the South decreased three points to 46 and the West posted a two-point decline to 41.

HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at Housing Economics PLUS.

Source: nahb.org

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Interest rates play a crucial role in the real estate market, influencing home buying decisions and the overall affordability of homes. As we move through 2024, understanding how interest rates impact these decisions is more important than ever. This article explores the relationship between interest rates and home buying, providing insights into what prospective buyers need to consider in this evolving economic landscape.

How interest rates affect home affordability

Interest rates directly affect the monthly mortgage payments that homebuyers must make. When interest rates are low, monthly payments are more affordable, enabling buyers to purchase more expensive homes or save money on less costly ones. Conversely, high interest rates increase monthly payments, making homes less affordable and potentially reducing the number of qualified buyers in the market.

For example, a 1 percent increase in interest rates can significantly raise the monthly cost of a mortgage, impacting a buyer’s budget and home choices. In 2024, buyers need to be acutely aware of interest rate trends to make informed decisions about their home purchases.

The role of the Federal Reserve

The Federal Reserve, or the Fed, plays a key role in setting interest rates, influencing economic conditions and housing market dynamics. In response to economic shifts, the Fed adjusts interest rates to either stimulate the economy or curb inflation. These adjustments have a direct impact on mortgage rates.

In 2024, the Fed’s actions are particularly relevant as it navigates post-pandemic economic recovery and inflation concerns. Prospective homebuyers must stay informed about Fed policies and their potential impacts on interest rates to better time their purchases and secure favorable mortgage terms.

Strategies for homebuyers in a fluctuating interest rate environment

Navigating a fluctuating interest rate environment can be challenging for homebuyers. Here are some strategies to consider in 2024:

  1. Lock in rates early: Securing a mortgage rate lock can protect buyers from future rate increases. This is especially useful in a rising interest rate environment.
  2. Explore different mortgage options: Adjustable-rate mortgages (ARMs) might offer lower initial rates compared to fixed-rate mortgages. However, they come with the risk of rate increases in the future. Buyers need to evaluate their long-term plans and risk tolerance when choosing a mortgage type.
  3. Improve credit scores: A higher credit score can lead to better mortgage rates. Homebuyers should focus on improving their credit scores by paying down debt and correcting any errors on their credit reports.
  4. Increase down payments: A larger down payment can reduce the loan amount, resulting in lower monthly payments and potentially better interest rates. Buyers should consider saving more for their down payments to offset higher rates.
  5. Consider refinancing options: If interest rates drop after purchasing a home, refinancing can be a smart move to secure lower monthly payments. Buyers should remain vigilant about rate trends and refinancing opportunities.

Market trends and predictions for 2024

Predicting interest rate movements is challenging, but several factors can provide clues about future trends. In 2024, key considerations include:

  1. Economic growth: Strong economic growth typically leads to higher interest rates as the Fed seeks to manage inflation. Buyers should monitor economic indicators such as GDP growth and employment rates.
  2. Inflation rates: High inflation often prompts the Fed to raise interest rates to cool down the economy. Keeping an eye on inflation trends can help buyers anticipate rate changes.
  3. Global events: International events — such as geopolitical tensions or economic crises — can impact U.S. interest rates. Buyers should stay informed about global news that might influence economic stability and interest rates.
  4. Housing market conditions: Supply and demand dynamics in the housing market also affect interest rates. In a hot housing market with high demand and low supply, interest rates might rise. Conversely, a cooling market could lead to lower rates.

The psychological impact of interest rate changes

Interest rates not only affect the financial aspects of home buying but also have psychological effects on buyers. Higher rates can create a sense of urgency, pushing buyers to act quickly before rates rise further. On the other hand, lower rates might lead to a more relaxed approach, giving buyers time to shop around and make more deliberate decisions.

Understanding these psychological impacts can help buyers remain calm and make rational decisions. Staying informed about market trends and consulting with financial advisors can provide the confidence needed to navigate the home-buying process, regardless of interest rate fluctuations.

Making informed decisions in 2024

As we progress through 2024, the impact of interest rates on home-buying decisions remains significant. Prospective buyers need to stay informed about economic trends, Fed policies and market conditions to make well-timed and financially sound decisions.

By understanding how interest rates affect affordability, employing strategic approaches to mortgage selection and staying vigilant about market trends, homebuyers can navigate the complexities of the 2024 housing market with confidence. Making informed decisions will ensure that buyers can secure the best possible terms for their home purchases, ultimately leading to successful and satisfying homeownership experiences.

This story was created using AI technology.

Source: rollingout.com

Apache is functioning normally

In case you missed it, the Federal Housing Finance Agency (FHFA) granted conditional approval to Freddie Mac to purchase single-family closed-end second mortgages.

What this means is lenders will now be able to originate second mortgages and sell them off to one of the two government-sponsored enterprises (GSEs).

Arguably, this should improve access to such lending products, and potentially result in cost savings if increased competition drives down interest rates and fees.

At the same time, some have argued that this is inflationary (since it makes it easier for homeowners to take on more debt), while others have said it’s not part of the GSEs core mission to boost homeownership.

I’m here to argue that this new pilot program is very limited and likely won’t change much, at least anytime soon.

What Is Freddie Mac’s New Second Mortgage Pilot Program?

In a nutshell, Freddie Mac is now permitted to purchase second mortgages that meet certain criteria.

As a result, there will be added liquidity in the lending markets for home equity loans, which are closed-end loans.

At the moment, most second liens, whether open-end HELOCs or closed-end home equity loans, are originated by large depository banks that typically keep them on their books.

The nonbanks often don’t have this luxury because it’s capital intensive, so the end result is that fewer mortgage companies offer such loans.

Notice the lack of home equity lending in the chart above provided by ICE, which has since been exacerbated by mortgage rate lock-in.

This can lead to negative outcomes for homeowners who might need access to their home equity to pay off other debt or fund purchases.

In fact, the pilot was approved by the FHFA to determine if the offering will advance Freddie Mac’s “statutory purposes” and benefits homeowners, especially those who reside in rural and underserved communities.

One of the arguments for the program is that HELOC providers often overlook lower-income homeowners in search of more affluent borrowers who open bigger lines of credit.

These happen to be more lucrative for those lenders since the larger the loan, the higher the commission generally.

Anyway, without getting too convoluted, the new program simply makes home equity loans easier to come by.

It’s not much different than the liquidity Freddie Mac (and sister Fannie Mae) provide for first mortgages, which makes them easier to obtain and cheaper too.

Who Qualifies for a Freddie Mac Second Mortgage?

While I myself was critical of this new program, mostly because you can already get a home equity loan from many different providers, there are several guardrails in place to keep this from becoming an unintended monster.

For one, it is limited to $2.5 billion in total loan volume over an 18-month pilot period.

This means once that money is exhausted, the program is closed and will be evaluated to determine if it should continue and/or be expanded.

In addition, the first mortgage must already be owned by Freddie Mac and the loan requires a minimum seasoning period of 24 months.

As such, a homeowner can’t get a Freddie Mac home equity loan unless they’ve had their existing first mortgage for at least two years.

And last but not least, it’s only available on primary residences and loan amounts are capped at $78,277.

This corresponds to subordinate-lien loan thresholds for Qualified Mortgages (QMs).

If you meet ALL these criteria, it may be possible to get a home equity loan behind your existing first mortgage that is backed by Freddie Mac.

Ideally, it will be easier to obtain and cheaper than other alternatives from private banks. But we don’t really know for sure.

This Program Is Going to Be Super Limited

As you can see from the program guidelines above, this isn’t going to be a massive program, at least not initially.

We know they won’t lend more than $2.5 billion, which broken down nationally isn’t a very large number.

For perspective, the nation’s largest second mortgage lender, PNC Bank, originated nearly 80,000 loans in 2022.

Assuming the typical loan is at the max loan amount of $78,277, it would result in less than 32,000 second mortgages being purchased by Freddie Mac.

Arguably it’ll be a lower average loan amount, but that still puts the loan count below that of just one provider.

In other words, it’s likely not going to make a big impact if the pilot doesn’t even generate as much activity as one other lender.

Especially when there are hundreds of other second mortgage providers out there.

But I’m sure everyone will be watching to see how it shakes out, and especially how the underwriting guidelines and mortgage rates compare.

Some also argue that this is just the beginning, and could usher in a full-blown second mortgage program backed by the likes of Freddie Mac AND Fannie Mae.

At which point everyone will be tapping equity left and right, potentially setting off another debt crisis (and eventual housing crisis).

But such worries are a long way away and not even founded at this juncture.

Home Equity Is at All-Time Highs While Withdrawals Are at Their Lows

As for why a program like this is necessary, the argument is to provide options for the underserved and an alternative to a cash out refinance.

The FHFA recognizes that with mortgage rates significantly higher today, refinancing the first mortgage in order to tap equity doesn’t make much sense.

And they know homeowners will do what they have to do if and when they need access to cash.

This could provide a lower-cost option versus a traditional refinance and also broaden participation of such lending to smaller, local shops instead of just big banks.

If you look at the latest stats, you’ll see that home equity withdrawals are rock bottom at a time when home equity has never been higher.

Per ICE, mortgage holders had a collective $16.9 trillion in equity entering the second quarter of 2024, of which $11 trillion could be tapped while maintaining an LTV of 80% or less. Those are both record highs.

Meanwhile, home equity withdrawals in the first quarter were equivalent to just 0.36% of tappable equity available, with both the fourth quarter of 2023 and Q1 2024 withdrawal rates the lowest on record (since 2005).

And about half of home equity withdrawal is happening via cash out refinancing, which likely isn’t ideal for borrowers with low fixed-rate first mortgages they lose in the process.

So we have an environment where home equity lending is already super low and a pilot that greatly limits how much can be generated via the program.

Of course, it is possible that the pilot pushes private lenders to up the ante and that leads to more home equity withdrawals, whether in the best interest of homeowners or not.

Source: thetruthaboutmortgage.com