Some softer than expected inflation data is keeping mortgage rates from moving out of the tight range that they’ve been in all week. Tomorrow we will get more inflation data, bringing with it the possibility of a rate adjustment before we head into the weekend. Read on for more details.
Where are mortgage rates going?
Rates flatten out again
Believe it or not there are some exciting weeks for mortgage rates. This has not been one of those weeks.
It’s not unexpected for the week following the monthly jobs report to be a dull one, so I can’t say I didn’t see it coming.
There just hasn’t been many significant economic reports out this week and the few reports that did get released weren’t much to talk about.
Today, we got the latest Consumer Prices Index reading, which came in slightly below expectations.
That means the inflation hawks will have to wait another day before they can rile up the troops with their talk of a quicker than expected tightening schedule from the Federal Reserve.
Here are the latest numbers in the Freddie Mac Primary Mortgage Market Survey:
The average rate on a 30-year fixed rate mortgage remained unchanged at 4.55% (0.5 points)
The average rate on a 15-year fixed rate mortgage fell two basis points to 4.01% (0.4 points)
The average rate on a 5/1-year adjustable rate mortgage rose eight basis points to 3.77% (0.3 points)
Here’s what their Economic & Housing Research group had to say about rates this week:
“The 30-year fixed mortgage rate remained at 4.55 percent over the past week.
The minimal movement of mortgage rates in these last three weeks reflects the current economic nirvana of a tight labor market, solid economic growth and restrained inflation. As we head into late spring, the demand for purchase credit remains rock solid, which should set us up for another robust summer home sales season.
While this year’s higher rates – up 50 basis points from a year ago – have put pressure on the budgets of some home shoppers, weak inventory levels are what’s keeping the housing market from a stronger sales pace.”
Rate/Float Recommendation
Locking now is likely the smart move
Mortgage rates are staying in a tight range for now but could very well be on track to increase substantially by the time 2019 rolls around.
At the very least, it’s far more likely that mortgage rates will rise than fall in the coming weeks and months.
So if you’re looking to buy a new home or refinance your current mortgage, the better option is likely to lock in a rate sooner rather than later.
Learn what you can do to get the best interest rate possible.
Today’s economic data:
Consumer Price Index
The consumer price index rose 0.2% month over month in April, putting it at 2.5% year over year. CPI less food and energy ticked up 0.1%, month over month putting it at 2.1% year over year.
Jobless Claims
Applications filed for U.S. unemployment benefits came in at 211,000 for the week of 5/5/18. That brings the four-week moving average to 216,000.
Bloomberg Consumer Comfort Index
The Bloomberg consumer comfort index hit a 55.8 for the week of 5/6/18.
Notable events this week:
Monday:
Tuesday:
NFIB Small Business Optimism Index
JOLTS
Wednesday:
PPI-FD
10-Yr Note Auction
Fedspeak
Thursday:
Consumer Price Index
Jobless Claims
Bloomberg Consumer Comfort Index
Friday:
Fedspeak
Consumer Sentiment
*Terms and conditions apply.
Carter Wessman
Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.
During this epic recovery, which started on April 7, 2020, I was very adamant on Twitter that job openings would hit 10 million soon. Today, job openings are now trending near 11 million. As you see from the chart below, the labor market dynamics from the end of the great financial crisis, where job openings were just a tad over 2 million, is much different today. People forget that we had near 7 million job openings before COVID-19 hit us. The trend was always your friend with this data line that many people often ignore.
Jobless claims data looks solid. As the baby boomers retire, we need labor to replace them and grow jobs.
Luckily for the United States of America, our demographics are solid going out into this century compared to other countries. I have always stressed our American muscle is not just having king dollar but our demographics. This is why I use the term replacement buyers for housing, and it applies to workers too.
After I retired the America is back recovery model on Dec. 9, 2020, I knew the jobs recovery would lag all the other economic data for multiple reasons. However, we are getting closer to that September 2022 milestone. So, let’s look at the numbers today with seven months left until the September report:
—Feb 2020: 152,553,000 jobs —Today: 150,390,000 jobs
That leaves us with 2,163,000 jobs left to make up with seven months to go, which means we need to average adding 309,000 jobs per month. The unemployment rate currently stands at 3.8%.
Take a look at the jobs data and which sector added jobs in February: Construction jobs came in big again, and we didn’t have any negative sectors the last month.
Job openings for construction workers are still historically high today as the need for labor in America is very high. So much for the premise that robots and immigrants would take all the jobs in America.
Looking at jobs data is always about prime-age employment data for ages 25-54. The employment-to-population percentage for the prime-age labor force is 1% away from being back to February 2020 levels. The jobs recovery in this new expansion has been much better than we saw during the recovery phase after the great financial crisis.
Education and employment
Most Americans have always been working, even if they’re not college-educated. The labor force with the least educational attainment tends to have a higher unemployment rate. I started the hashtag A Tighter Labor Market Is A Good Thing to remind everyone that the economy runs hot when we have a tighter labor market. We want to see the kind of unemployment rates that college-educated people have spread to everyone because we have tons of jobs that don’t need a college education.
Here is a breakdown of the unemployment rate and educational attainment for those 25 years and older:
—Less than a high school diploma: 4.3%. —High school graduate and no college: 4.5%. —Some college or associate degree: 3.8% —Bachelor’s degree and higher: 2.2%.
The 10-year yield and mortgage rates
My 2022 forecast said: For 2022, my range for the 10-year yield is 0.62%-1.94%, similar to 2021. Accordingly, my upper end range in mortgage rates is 3.375%-3.625% and the lower end range is 2.375%-2.50%. This is very similar to what I have done in the past, paying my respects to the downtrend in bond yields since 1981.
We had a few times in the previous cycle where the 10-year yield was below 1.60% and above 3%. Regarding 4% plus mortgage rates, I can make a case for higher yields, but this would require the world economies functioning all together in a world with no pandemic. For this scenario, Japan and Germany yields need to rise, which would push our 10-year yield toward 2.42% and get mortgage rates over 4%. Current conditions don’t support this.
The 10-year yield has made a great attempt to break over 1.94% this year, as Germany and Japan’s bond yields rose noticeably in mid January. While our 10-year yield didn’t rise as much, once Japan and Germany broke out, our yields did get above 1.94% for the first time since 2019 for a few days. However, they haven’t been able to hold their increases.
As I am writing this, our 10-year yield is at 1.71%. I have stressed that it’s going to be very hard for the 10-year yield to break over 1.94% and have a higher duration, even with the hot economic growth with extremely hot inflation data. The trend in the 10-year yield, which has been going lower for decades, is simply too powerful. The 10-year yield didn’t collapse lower when we had deflationary pressures in 2009. Currently, the 10-year yield is not heading much higher as we see much higher year-over-year growth in inflation.
We have seen mortgage rates fall recently with the moves lower in the 10-year yield. If economic growth gets weaker toward the second half of 2022, it will be tough to have the 10-year yield getting above 1.94% and staying above that level. As you can see now, global yields need to rise for this to happen.
Economic cycle update
Now for an economic update. Some of the economic data has been cooling off as expected, but staying firm. We can’t replicate the same economic growth coming out of COVID-19. Eventually, we get back to our normal slow but steady economic growth patterns. Economics is demographics and productivity, and population growth is slowing here in the U.S., and productivity growth hasn’t been strong for a while now. We have limits to what we can do here in the U.S.
The St. Louis Financial Stress Index, a crucial variable in the AB recovery model, shows life lately at -0.5427%. The stock market has been more active lately, and the Russian Invasion has now put in a shock factor that has simply too many variables to account for. If things get better on that front, the markets will act better. However, we can see more stress in this index if things get worse. The oil and wheat shock in prices will impact global economies.
The leading economic index has had an epic recovery from the lows of April. However, last month it didn’t show any growth. When this data line falls four to six months, a recession red flag is raised. We aren’t there yet, but I am keeping an eye on this.
Retail sales have held up much better than I could have imagined; Americans are spending and even adjusting to inflation and retail sales are booming. However, the growth rate is getting back to normal after the crazy growth in 2021. The moderation in the data that I had expected is finally here but it has still been an impressive run for retail sales.
Americans’ personal savings rate and disposable income are healthy enough to keep the expansion going! Even though the disaster relief has faded from the economic discussion, both these levels are good to go as employment has picked up a lot from the COVID-19 lows with wage growth. We have to remember, households have more cash, more net wealth, and have refinanced their mortgages to have lower payments.
This is a big reason why households’ cash flow is much better now, and employment has been up a lot since the lows of COVID-19.
However, just like I had an America is Back recovery model on April 7, 2020, I have recession models and raise recession red flags as the expansion matures. I raised my first red flag recently when the unemployment rate got to 4%, and the 2-year yield got above 0.56%.
Once the Fed raises rates, the second recession red flag will be presented. This will most likely happen this month.
The third recession red flag is getting very close; the 2/10s are getting very close to inverting. I have been on an inverted yield curve watch since Thanksgiving 2021, and now it’s almost here. Typically we see an inverted curve before every recession. This red flag is very complicated, and once it is raised, I will go into more detail on how I look at this.
My job is to show you the progress of the economic expansion into the next recession and out — over and over again. Each economic expansion is unique, and with the Russian Invasion and massive price increases on oil and wheat, I have incorporated those factors into the equation. We have to take this one day at a time because the news can get better or worse with each passing day.
Josh D’Amaro notices chipped paint as he passes by the entrance to the Pirates of the Caribbean ride.
“It bugs me, absolutely bugs me,” he says.
We are walking through Disneyland, and D’Amaro is on the hunt for burned-out lightbulbs, trash on walkways and anything else that can take away from the magic.
But this 52-year-old isn’t just any Disney employee (or “cast member,” as he would note).
D’Amaro is in charge of Disneyland and the 11 other Disney theme parks around the world, plus Disney Cruise Line, a timeshare business, 50 hotels, an adventure tour company and all the merchandise (think: toys, books, games and clothing) The Walt Disney Company produces and licenses globally.
Yet on this June afternoon, the chairman of Disney parks, experiences and products is obsessing over a paint chip on a little-used railing. Doesn’t one of the company’s top executives have better things to do with his time?
“Absolutely not,” he quickly shoots back. “That’s all part of the show.”
D’Amaro is one of the most powerful theme park executives in the world. He has to balance, among other things, keeping the magic and nostalgia of Walt Disney’s vision alive with innovating rides and attractions for a younger tech-savvy generation.
Not to mention, D’Amaro has the difficult task of juggling the conflicting goals of creating profits for shareholders and making a Disney vacation affordable — or, at least, within reach — for families that dream of such a trip.
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TARAH CHIEFFI/THE POINTS GUY
Disney parks are, in some ways, the ultimate aspirational trip for kids of all ages. Children dream of visiting, and Super Bowl champions have turned it into a winning catchphrase.
“This is a place for everyone,” D’Amaro says. “When you go walk around, you’ll see people from everywhere, from all walks of life.”
Yet prices keep climbing.
Disney experimented with a “Star Wars”-themed “hotel,” a one-of-a-kind immersive experience that ultimately failed due to its high cost (rates started at $5,000 for two nights). Now, the company is launching a $115,000 private jet tour that takes passengers to all 12 parks around the world, plus the Taj Mahal, the pyramids of Giza and the Eiffel Tower. It’s only open to 75 people.
“We have to have options for guests,” D’Amaro says. “I want to make sure there are as many choices presented to you as simply as they can be. You could stay at a value resort if you choose to, or you could stay at the Grand Floridian or the Grand Californian if you’d like to.”
That choice includes visiting during peak school breaks when prices are higher or on cheaper off-peak dates, though not every family has the flexibility or feels comfortable pulling their kids out of school to enjoy a less expensive ride on Space Mountain.
D’Amaro notes that there are now more days available at the lowest price (about $100 per person per day). Earlier this year, The Walt Disney Company also eliminated self-parking fees for Disney World hotel guests, a 4-year-old charge that angered many Disney fans. It represented the beginning of a multiyear era that removed some previous inclusions, such as the Magical Express bus and MagicBands, and saw the addition of new add-on charges like Genie+ and Lightning Lanes.
Related: Disney World making changes to simplify visits and bringing back a fan-favorite perk
It’s a balancing act, D’Amaro acknowledges. If the price is too low, lines will be unbearable, souring the experience for all. But if it is too high, the parks become inaccessible for a large share of the population.
“I’ll repeat the same thing I said before: We don’t always get it right,” he notes.
That led me to ask about Star Wars: Galactic Starcruiser, Disney’s attempt to turn a themed hotel into an immersive “Star Wars” drama with actors, battles and adventures that brought guests into the story and experience.
D’Amaro said he’s always pushing the park designers (known as Imagineers) to take risks and not be afraid to try something new.
“Raise the bar. Try things that the guests aren’t even asking for because they don’t know to ask for that,” he says. “I know not everything’s going to work. What did work, though, is we took creativity and storytelling to a completely new level, to a level that had never existed before. … It didn’t work commercially. And so, when we realized that, you just make a call and move on.”
So, what will become of the hotel after the last guests check out in September?
“No hints yet,” D’Amaro says, smiling, “but something will happen.”
SCOTT MAYEROWITZ/THE POINTS GUY
There are few people as close to Disney’s evolution as D’Amaro.
For the past 25 years, he’s been working in the parks, starting with a team at Disneyland that planned out park operations.
“On day one, I sat in a meeting with probably 14 people and I could not believe what was happening in front of me,” he recalls. “These people, cast members, were talking about the most granular details on Main Street. Where should the trash bins go? What if we moved this from here to there, which way do we think the guests are going to go? The pain and the detail and the concern that the people in that room were taking … is burned in my memory.”
He eventually rose to become president of California’s Disneyland Resort, where he opened the wildly popular Star Wars: Galaxy’s Edge land before moving on to become president of Walt Disney World Resort in Florida in 2019.
Then, in 2020, Bob Chapek, who was the chairman of parks and resorts, was promoted to CEO of the entire Walt Disney Company, opening up the opportunity for D’Amaro to become the one responsible for overseeing the entire parks and experiences empire.
Chapek’s tenure as CEO didn’t last long, and Bob Iger came out of retirement in late 2022 to once again take the helm. But given Chapek’s rise from chairman of parks to CEO, it isn’t all that surprising to learn that D’Amaro’s name has been floated as Iger’s replacement when he steps down for good. If that happens, many Disney fans will likely be pleased, as they are already familiar with D’Amaro. In fact, he’s a bit of a celebrity when he’s in the parks.
As we walked through Disneyland on a Friday afternoon, people would scream out his name: “Josh! Josh! Can I get a photo please?”
And it wasn’t just one fan. It was dozens, all within minutes, including a couple from Louisiana spending five nights of their honeymoon at the California resort.
“You’re a celebrity to me, actually,” the newly married man said. “It’s nice to meet you.”
A few paces later, a middle-aged woman getting a selfie told him, “This is a big day for a Disney adult.”
It was almost like Anna and Elsa were strolling the parks in terms of excited fans making requests for photos. (For the record, D’Amaro’s three favorite characters are Mickey, Goofy and Buzz Lightyear, while his favorite villain is Maleficent.)
JEFF GRITCHEN/MEDIANEWS GROUP/ORANGE COUNTY REGISTER/GETTY IMAGES
“I don’t love the recognition for the sake of the recognition,” he says. “I love the fact that people will come up and talk to me and tell me what they love and tell me when their family first came here and tell me what they would love to see change.”
For some politicians, Disney doesn’t warrant the same reaction. To them, Disney has become the villain in America’s fairy tale.
Around the globe, guests can stroll Main Street, U.S.A., Walt Disney’s sanitized vision of what a small town should look like — a place where a band still plays “God Bless America” in the afternoon.
Yet Disney, as a company, has thousands of employees and millions of consumers who care about modern-day issues and don’t want executives frozen in some idealized past vision of America.
Most notably, Disney has clashed with some Florida Republicans over a new law restricting classroom instruction about sexual orientation and gender identity, a measure dubbed “Don’t Say Gay” by its opponents. The company also battled California officials over when to reopen the parks amid the COVID-19 pandemic. Add to that the politics and challenges of operating parks in China during the past few years, and it’s safe to say that D’Amaro’s job of keeping sometimes conflicting groups happy isn’t easy.
D’Amaro acknowledges the political struggles but says he tells his team to just focus on what they do best.
“That is telling incredible stories, continuing to innovate and making sure that every one of these guests out here have a great time when they’re in our theme parks,” he says.
Sometimes, those debates spill over to the parks themselves.
Disney recently shut down Splash Mountain, a water ride that featured characters from the 1946 film “Song of the South,” which has been criticized for its racist themes. The ride will be reopened as Tiana’s Bayou Adventure, a ride based around Disney’s first Black princess.
Related: These are the best rides at Disneyland
While many praised the change, there were plenty of critics, some accusing Disney of being “woke.”
“I think that as guests have points of view on what we might do inside of the theme park, changing an attraction or changing a walkway, what that says to me is: People care about our product,” D’Amaro says. “What am I going to do? I’m going to listen and make sure that I do the best for all the guests that I possibly can.”
Almost on cue, a mom with an 8-year-old daughter approaches D’Amaro. Her daughter has never been on Big Thunder Mountain Railroad. They have a Lightning Lane pass to skip the line, but the girl is frightened.
“I’ll tell you what’s going to happen,” D’Amaro tells the girl. “You’re going to finish it up. You’re going to be laughing and you’re going to say: ‘I can’t believe I was worried about going on that.’ You’re going to tell all your friends, and you’re going to look cool. I would do it.”
They pose for a photo, then the mom says, “He makes this park amazing. He’s the reason why.”
The walk continues on, and the conversation shifts to hidden Mickeys (abstract circles that look like the famous mouse hidden in plain sight) and other more hush-hush aspects of the parks.
Naturally, I ask if he has ever been questioned about and revealed the locations of the park’s secret tunnels.
“Yes,” D’Amaro says. “And I don’t tell them.”
Then, we entered the land D’Amaro opened as Disneyland president. He recalls watching the first guests come into Star Wars: Galaxy’s Edge on opening day. Kids were running around, and 50-year-old men were crying.
Oga’s Cantina. SUMMER HULL/THE POINTS GUY
Before long, he hints at another park secret.
“When we opened this land and before everything was kind of sealed up and ready to go,” he says, pausing and smiling, “I had a chance to get out here and do some fun things that I think will go down — maybe — someday in history.”
Then, like the great show master that he is, D’Amaro moves the conversation on, not offering up any more details about his own contribution to the “Star Wars” universe.
SUMMER HULL/THE POINTS GUY
Much of the modern-day Disney empire developed well after Walt Disney’s death in 1966.
The first “Star Wars” movie wouldn’t hit theaters for another decade. Disney World wouldn’t even open for five additional years. Yet Walt Disney’s force, attention to detail and belief that nothing is ever truly finished are still very much felt in the parks today, especially with executives like D’Amaro focusing with Walt-like attention on the small details, like ensuring that paint isn’t chipped.
So, what would Walt think about the “Star Wars” campus?
“I think he’d be pretty proud. I think he would actually be pretty amazed at the evolution of storytelling,” D’Amaro said. “I don’t think he could have ever imagined it was this, but at its core, we’re doing the same thing he wanted to do. We could just do it so much more effectively now.”
More than three quarters of homeowners across 20 large metro areas agree local governments should do more to keep housing affordable, and most agree that allowing more building would help, according to a new Zillow survey.
But while there is meager support for new large multifamily buildings, more than half of homeowners say they and others should be allowed to convert their homes to create additional housing.
That’s according to the latest Zillow Housing Aspirations Report, which asked homeowners for their feelings about how best to help quell affordability issues by allowing more homes into their neighborhoods, and comes as in-law suites and backyard cottages gain attention as possible solutions to sharply rising housing costs. Previous Zillow research has shown that even modest rezoning to allow for more accessory dwelling units – creating two, three or four dwellings where only one sits now – could spur the creation of millions of new homes nationwide.
This kind of mid-density is often referred to as “missing middle” housing, slotted between single detached homes and much larger apartment complexes of several hundred units. “Missing middle” units are the only type of home to have gotten more affordable in the past year, but very few have been built in the past 20 years compared to previous decades: They make up only 4.3% of homes built since 2000 compared with 8.2% in the 1980s.
In
all, 57% of those surveyed agreed that homeowners should be able to
add additional housing on their property, and 30% said they would be
willing to invest money to create housing on their own property if
allowed.
The
strongest support comes from younger and lower-income homeowners and
those in the West, where housing tends to be the most expensive. The
highest support was in the San Diego (70%), Seattle (67%) and San
Francisco (64%) metros, and the lowest was in the Detroit (47%),
Phoenix (50%) and Dallas (51%) areas.
Support
also was strongest among homeowners of color – two-thirds (67%) of
Black homeowners supported this type of density, compared with just
over half (54%) of white homeowners – perhaps because of persistent
homeownership gaps due in large part to historical discriminatory and
exclusionary housing policies.
Advocacy
was more muted for larger multifamily buildings. Only 37% of
homeowners surveyed said they would support a large apartment
building or complex in their neighborhood – and that support was more
starkly divided among generations. Nearly 60% of younger homeowners
(18-34) were open to large buildings, compared with only a quarter of
those 55 and older.
Overall
support for development of these larger apartments is highest in the
Chicago (47%), Miami (45%), Washington, D.C. (44%), and San Francisco
(43%) metro areas, and lowest in the Atlanta metro (29%).
However
housing comes about, more than three-quarters of homeowners surveyed
said single-family neighborhoods should remain that way, with more
older homeowners (81%) agreeing than younger homeowners (69%). And a
little more than half said adding homes was acceptable if they fit in
with the general look and feel of the neighborhood. Homeowners
expressed concern about the impact of more homes on traffic and
parking, with 76% saying that it would have a negative impact. About
half said it would have a positive impact on amenities and transit.
“In
an era of historically low supply and escalating housing prices, the
need for more solutions to create housing opportunities is greater
than ever. Our latest research shows that homeowners in major markets
are generally supportive of providing a range of housing options that
allow for not only more housing units, but also a diversity of
housing types in existing communities,” said Zillow senior
economist Cheryl Young. “Homeowners may continue to shy away
from adding large multifamily buildings nearby, but are open to
adding units in their own backyards. This ‘missing middle’ housing,
they believe, could help alleviate the housing crunch without
sacrificing neighborhood look and feel while improving local
amenities and transit. These findings show that broad-based support,
especially from homeowners, provides the middle ground necessary to
move the needle needed to bring relief to the housing crunch.”
Additional
Zillow research has shown that “missing middle” homes tend
to be more affordable. Renting a home in a 2-, 3-, and 4-unit
building is less expensive than a single-family house in 42 of the
largest 49 metros with available data.
Accessory
dwelling units also seem to be becoming more popular. While “in-law
units” and “cottages” are the most common listing
terms nationally for secondary units on Zillow, the term “ADUs”
rose to 5.7% in 2019 from 1.2% of listings in 2015. The share of
listings mentioning a secondary housing unit in any way rose from
1.7% of all listings to 1.9%. And the shift to using the term “ADU”
indicates that officially sanctioned secondary units are fast
becoming a valuable selling point.
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected]
Permit me to introduce a new term into the financial planning lexicon: goals-based budgeting. (Well, a Google search turned up a few other instances of its use, but they’re on government websites, so no one has seen them.) I came up with the term after reading through the comments of my last article (“The High Cost of Modern Living”) and reading J.D.’s recent article about his entry into the Third Stage of personal finance, which he explained thusly:
I’ve paid off my debt, built a cash cushion in savings, and am maxing out my retirement accounts. And after doing all of these things, I have money left over to spend on comic books and travel.
In my previous article, I listed several items we spend our money on — for instance, cell phones, cable TV, chocolate-covered pork fat — that didn’t exist in the past, and suggested that the allure of these modern inventions may explain why some people haven’t saved enough for retirement.
A few readers rose to defend their expenditures, arguing that many modern devices and services save time, increase efficiency, and replace older/costlier/less-efficient Stuff. Those are all valid points…if those purchases are aligned with your financial goals, or you’re saving enough to meet your financial goals and have money left over to spend on thingamajigs, doohickeys, and whatchamaspankits. This is J.D.’s “third stage” — the point at which you can relax a little bit with your spending.
Which brings us to this reader comment appended to J.D.’s article:
Whenever I hear that someone is “maxing out retirement accounts”, a red flag goes up. Depending on how late in life you’re starting and how much it will take to sustain your lifestyle, “maxing out” may not be enough. I hope that instead you are looking at how much you’ll need to accumulate and feel you are on track with that.
A very important point, indeed. If the analysis cited in a recent Wall Street Journal article is to be believed, nearly three of five baby boomers will run out of money in retirement. These folks have been walloped by stinky stocks, evaporating home equity, and interest rates that pay no interest. But many of them just didn’t save enough. For all of them, saving more is the solution.
Running Your Retirement Numbers How do you know if you’re saving enough for retirement, or any other money-reliant goal? The best (though still imperfect) way is to use some sort of financial calculator, be it online tool, software program, or spreadsheet. There are loads of these available. Do a Google search on “retirement calculator” and you get 84,700 hits. No, wait — that’s what you get when you search on “Goldman Sucks.”
Well, no matter; you don’t need to search for a retirement calculator because I’m going to point out a few in this post. In fact, I’ll walk you step-by-step through my favorite among The Motley Fool’s calculators. Click on “Retirement,” and then on “Am I saving enough? What can I change?” This calculator can handle all kinds of variables: Social Security, pensions (and whether they adjust for inflation), anticipated spending levels in retirement, and Roth and traditional retirement accounts.
So gather your retirement account statements, pull up the online calculator, and get ready to peer into your possible future.
Getting Cozy With the Calculator This calculator has input boxes, most of which have been completed with default data. You can get rid of those by typing in your own numbers (or zero if that field doesn’t apply). Certain areas are accompanied by a question mark. Click on one, and you’ll get an explanation of the desired data. Now, let’s start entering.
Personal information. The first few fields are pretty self-explanatory. If you plan to work part-time in retirement, enter your expected income and how long you plan to work.
Social Security benefits. Yes, you will receive Social Security (a topic I will cover in my next post). If you’re 55 or older, assume you’ll receive your estimated benefits. If you’re younger, be conservative by assuming you’ll receive 25% to 75% of your projected benefits, depending on the margin of safety you want to build into your analysis. The calculator will estimate your benefit, though you can enter the amount you received from your most recent Social Security statement (which arrived in the mail a few months before your last birthday) or visit the official government Social Securituy calculator to get an estimate.
Pension or defined-benefit plan. Make sure to indicate if your benefit will increase with inflation. This is also where you’d enter the payments you’ll receive from any other source of lifelong income, such as from an immediate annuity, reverse mortgage, or trust.
Your projections. For inflation, enter a number between 3% and 4%. Yes, inflation may go nuts down the road, but it hasn’t happened yet. What’s more likely (nay, inevitable, in my opinion) is that tax rates will rise. Soon-to-be retirees can expect their tax rates to drop once they retire. However, for my analysis, I’m assuming that won’t happen to me (I don’t plan to retire for 30 years). As for your income, assume it will increase at the same rate as inflation, unless you’re on the proverbial fast track. Finally, unless you know the day you’re going to die, choose an age between 90 and 100, depending on your health and family history. (If you’re looking for an estimate of your life expectancy, visit LivingTo100.)
Your projected monthly living expenses. The calculator allows you to break up your retirement spending in three phases. Generally, retirees spend more in their first five years as they enjoy their newfound freedom. Then, spending tends to decline in most categories (health care is the notable exception). Plug in the number in today’s dollars; the calculator will adjust for inflation. One big determinant of your retirement spending: Will your mortgage be paid off?
Your future, one-time investments. Expect an inheritance or to sell a business down the road? Enter those windfalls here. Just be realistic — many expected inheritances don’t materialize, often due to end-of-life medical expenses.
Your monthly savings (taxable accounts). This is where you enter the values and contribution amounts to non-retirement accounts, such as savings accounts and brokerage accounts that aren’t IRAs.
Your monthly savings (tax-advantaged accounts). Here’s where you input the values and contribution amounts to your retirement accounts. If you or your spouse has a 403(b), 457, or other defined-contribution plan, enter those values in the 401(k) fields. This is important: Enter future contributions to employer-sponsored retirement plans as a monthly amount, but enter future contributions to IRAs as an annual amount.
A note on returns: Be conservative when projecting investment returns. Young investors with stock-heavy portfolios shouldn’t assume more than 6%, and retirees with a mix of stocks and bonds should cap their assumed returns at 4%. I certainly hope that returns are higher, but I’m not betting my retirement on it.
And the Verdict Is… It’s time to score your test. At the bottom of the page, click “get your results.” The analysis will be expressed in months, e.g., “Your living expenses after retirement will be fully funded for 173 months.” Divide that number by 12, and you’ll get how many years your savings will last.
If the calculator gives your retirement plan high marks, congratulations! If not, click on the “inputs” tab at the top and adjust the variables to see what combination of increased savings, reduced retirement income, and later retirement age will give your plan an acceptable score.
Don’t Take One Tool’s Word for It While I think crunching your numbers is important, the truth is, the analysis will be wrong. There are just too many variables — such your rate of return, the rate of inflation, and how long you’ll live — that are unknowable. The best this tool will be able to do is give you a rough idea of whether you’re on track. Therefore, it’s important to do two things: 1) Run an analysis every year to see if you’re still on track, and 2) try other tools to get a second and third and fourth opinion. Here are a few others to consider:
If you’re looking for calculators that aren’t exclusive to retirement, head to Dinkytown (which, it should be noted, is not as fun as Funkytown).
Each calculator will give you a different result, due to how they run the numbers. You’ll be looking to see if a consensus emerges from the tools. If three of four calculators indicate that your retirement plan will succeed, then you’re probably on the right track. If three of four say you’ll run out of money, it’s time to plan to save more or work longer — or both. The same goes for your other financial goals.
Which brings us back to goals-based budgeting: If you’re saving enough for your priorities, then go nuts with the rest of your money. But I can tell you that there are millions of people in their 50s and older who wish they could turn back time and trade their purchases of yore for more savings today.
Mortgage application volumes increased for a third straight week, although interest rates provided few clear trends, the Mortgage Bankers Association said.
The MBA’s Market Composite Index, a measure of weekly loan application activity, based on surveys of the trade group’s members, climbed up a seasonally adjusted 3% for the seven-day period ending June 23. The data included adjustments for the Juneteenth holiday.
The latest uptick follows increases of 0.5% and 7.2% earlier in the month, but compared to the same week a year ago, volumes remained 33% lower.
Meanwhile, interest rates moved in different directions across categories tracked by the MBA, as investors try to determine the impact of recent economic data and policy decisions, but both 30-year conforming and jumbo averages finished higher. The contract average for the 30-year fixed mortgage with conforming balances above $726,200 inched up 2 basis points to 6.75%. Borrower points remained at 0.64 for 80% loan-to-value ratio loans.
The 30-year jumbo rate sped up even more rapidly, jumping 11 basis points to average 6.91% from 6.8% the prior week. Points increased to 0.69 from 0.49. The jumbo average came in higher than the conforming rate for the third week in a row, bucking recent trends and pointing to a pullback in availability of such loans.
“To put this into perspective, from May 2022 to May 2023, the jumbo rate averaged around 30 basis points less than the conforming rate,” said Joel Kan, MBA’s vice president and deputy chief economist, in a press release.
Both purchases and refinances came in higher to push the composite index upward last week. The MBA’s Purchase Index rose 2.8% on a seasonally adjusted basis to hit a high not seen since early May. But numbers still ended up 30% under the mark of a year ago.
“Existing-home sales continued to be held back by a lack of for-sale inventory as many potential sellers are holding on to their lower-rate mortgages,” Kan said. Scarce supply is also limiting the extent prices can fall, with average purchase sizes consistently above $420,000 over the spring among MBA lenders.
While showing no imminent signs of a reversal to begin the summer, the mean purchase-loan amount stayed flat last week, falling by a fraction to $428,000 from $428,400 seven days earlier. The association’s numbers mirror housing industry reports, showing home prices rising this year after a late 2022 pullback. As a result, new-home sales are seeing a noticeable jump in buyer interest.
While purchase amounts edged downward, the average size of new refinance applications headed higher by 2.5% to land at $267,200 from $260,700. The overall average size reported was $384,200, up by 0.3% from $383,200 the previous week.
The Refinance Index similarly accelerated by 3.3% in the MBA’s latest survey, but volumes clocked in 39.5% lower than during the same period last year. The share of refinance applications, relative to total activity was 27.2%, up from 26.9% seven days earlier.
The share of federally sponsored loan activity remained mostly constant, with the Government Index also rising, but at a slower rate of 2.3% compared to overall numbers.
Federal Housing Administration-backed applications accounted for 12.9% of volume, down from 13.3% the prior week, but the share of Department of Veterans Affairs-guaranteed loans grew to 12.2% from 11.9%. Mortgages sponsored by the U.S. Department of Agriculture comprised 0.4% of activity, the same percentage as the previous survey.
Although conforming and jumbo rates ended up higher week over week, other fixed averages dropped. The contract average of 30-year FHA-backed home loans slid 11 basis points to 6.63% from 6.74%, with points used by borrowers rising to 1.08 from 1.03.
The 15-year contract fixed mortgage average slid to 6.23% from 6.26%. Points used on these loans also decreased to 0.69 from 0.71.
On the other hand, the average of the 5/1 adjustable-rate mortgage jumped 19 basis points for the second week in a row, surging to 6.28% from 6.09%. Points decreased to 1.02 from 1.4 for 80% LTV loans. The loans stay fixed for a five-year term before adjusting to market levels. Meanwhile, the share of all new adjustable-rate mortgages applications relative to total activity decreased to 6.1% from 6.3% one week prior.
Mortgage rates have been all over the place lately. They rose this week, reflecting the volatility of the U.S. economy brought by inflation and Russia’s war in Ukraine.
The average 30-year-fixed rate mortgage increased to 3.85% for the week ending March 10, up from 3.76% in the previous week, according to the latest Freddie Mac PMMS Mortgage Survey.
A year ago, the 30-year fixed-rate mortgage averaged 3.05%. The PMMS report is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. The survey said buyers paid 0.8 mortgage points on average.
According to Sam Khater, Freddie Mac’s chief economist, over the long-term, rates will continue to rise as inflation, which spiked 7.9% in February, broadens and shortages increasingly impact many segments of the economy. “However, uncertainty about the war in Ukraine is driving rate volatility that likely will continue in the short term,” he said in a statement.
Mortgage rates usually move in concert with the 10-year Treasury yield, which reached 1.94% yesterday, compared to 1.86% on the previous Wednesday. The 15-year-fixed-rate mortgage averaged 3.09% last week, up from 3.01% the week prior. A year ago at this time, it averaged 2.38%.
Economists have said that the war in Ukraine could bring a short-term reduction in mortgage rates, as investors flock to safe haven assets like mortgage-backed securities and bonds. However, longer term inflation brought on by the conflict, mainly via oil prices, will cause mortgage rates to rise
The expectation of higher rates increases borrowers’ appetite for new loans. Mortgage applications jumped 8.5% for the week ending March 4. Compared to the same week one year ago, applications dropped 35.8%, according to the Mortgage Bankers Association (MBA).
Borrowers’ demand for mortgages increased across the board. The MBA‘s seasonally adjusted refi index rose 8.5% from the previous week, with a larger gain in government refinances. Meanwhile, the purchase index was up 8.6% in the same period.
As the capital and most populous city in Utah, Salt Lake City is one of the Mountain West’s premier tourist destinations and most desirable places to call home. Since hosting the Winter Olympics in 2002, Salt Lake City has gained more international acclaim and become a must-see spot for travelers and adventurers from around the globe.
Listed below are some of the locally loved businesses and locations that make Salt Lake City a great place to eat, drink, play and explore.
Source: facebook.com/Oquirrhrestaurant
Best bites in Salt Lake City
Salt Lake City is full of passionate chefs and eager restauranteurs. Here are eight of the top spots to grab a great bite to eat in Salt Lake City.
Oquirrh
Guided by the goal of supporting local artisans, farmers and ingredients, Oquirrh specializes in locally-sourced American fare. Leveraging their relationships within the community, Andrew and Angie Fuller, the dynamic duo behind this Central City restaurant, constantly evolve their menu to reflect the season outside and the passion in the kitchen. While this is the ideal spot for a romantic date night, they also serve up a legendary brunch on the weekends starting at 10:00 AM.
Arlo
Arlo is an “elevated casual, chef-driven restaurant” in the Capitol Hill Historic District. Drawing inspiration from all around the world, Arlo’s menu is compiled of a diverse selection of cuisine styles that create a cohesive and intriguing selection of delicious dishes from American to Mexican to Italian and more. Regardless of what you’re craving, there’s something of the highest quality waiting for you on Arlo’s menu.
Yoko Ramen
Named after the ramen capital of Japan, Yokohama, Yoko Ramen specializes in its namesake dish but also churns out other delectable delights like chicken wings, gyoza and sandwiches, to name a few. Opened nearly five years ago, Yoko Ramen has solidified itself as a bonafide success in the burgeoning Central City restaurant scene. Stop in and slurp up some of SLC’s best ramen at this hotspot.
Salt and Olive
Fast casual meets fine dining in this historic building turned chic restaurant space. Salt and Olive is backed by head chef, Chef Naza and head mixologist, Cory Dudis. This dynamic duo running the show brings forty-plus years of experience to the table and that’s apparent from the moment you walk through the doors. The menu here is decidedly Italian, but due to the restaurant’s dedication to local, fresh ingredients, there’s always something new and exciting to enjoy at Salt and Olive.
Pago
Boasting two locations within the Salt Lake City limits,—one in East Central and one Downtown—Pago is a “wild to table” restaurant that focuses on utilizing fresh, local and sustainable ingredients. Pago’s menu is season-driven and always changing to reflect what’s fresh and available. Pago partners with local artisans, farmers and more to collect the highest-quality ingredients and employs passionate folks to put them to use.
Pretty Bird Hot Chicken
With two locations in Salt Lake City, one in Park City and a fourth in Midvale, Pretty Bird is beloved all throughout Utah, and with good reason. Pretty Bird Hot Chicken is just darn good, no other way to say it. If you’re going to make a living off of fried chicken sandwiches you better make them good because the competition is stiff. Pretty Bird holds up to and outdoes the competition in a deep field by frying up one of the tastiest birds on a bun you’ll ever have the pleasure of putting in your mouth.
Nomad Eatery
Located within Unita Brewhouse Pub, Nomad Eatery provides all your classic bar bites, but what sets them apart is that they’re executed to perfection. Loaded fries, wings and burgers are just some of the highlights that grace the menu of this inviting gem tucked away near the airport in the Glendale neighborhood.
Table X
Table X is, you guessed it, another restaurant on this list that prioritizes the use of locally sourced, sustainable ingredients. Fine dining without the fuss is the overall vibe at this unique yet classically appealing space. Table X serves a tasting menu in which every dish, from the bread to the final bite, is thoughtful, intentional and downright delicious. A truly one-of-a-kind experience from beginning to end, Table X is as much an adventure as it as an undeniably tasty meal.
Source: facebook.com/alibislc
Four great places to get a drink in Salt Lake City
While not known as a drinking town, Salt Lake City still has its fair share of hip watering holes to help you cut loose.
Alibi Bar and Place
Alibi Bar and Place is your everyday neighborhood bar on an elevated level. With a rotating offering of live music and DJs on a daily basis, cocktails made with fresh ingredients, local craft beers and an expertly curated wine list, Alibi is a great place to let happy hour turn into a great night out.
Seabird
Craft cocktails, craft beer and vinyl are what you can expect at Seabird, a downtown cocktail bar with a killer patio. This hip hangout is warm, welcoming and always serving up great vibes alongside creative cocktails made with love. Ideal for a nightcap after a long day or your first drink on a Friday afternoon, Seabird is a safe bet for a great time.
Post Office Place
Located smack dab in the center of Salt Lake City, Post Office Place is an elegant bar and eatery. Boasting a menu full of creative small plates and sensational cocktails, Post Office Place is the type of spot that asks you to expand your comfort zone and open your eyes to something new. Whether that’s trying chicken liver mousse (you won’t regret it) for the first time or dipping your toe into the complex world of Japanese whiskey, you’re in for a treat when you walk through the Post Office Place doors.
Varley
Immediately recognizable by the half-moon-shaped mirrors and shelving behind the bar, Varley is an elegant cocktail bar located in the heart of Salt Lake City. Moody decor, music that keeps the vibe going and creatively crafted cocktails prepared by a dedicated and talented staff are just a few of the things you can expect to encounter when you decide to stop into Varley.
Source: facebook.com/threepinescoffee
Staying caffeinated in Salt Lake City
There’s a lot to do in Salt Lake City. You’re going to want to stay caffeinated to get the most out of each day.
Three Pines Coffee
Minimalist decor meets maximum talent manning the machinery in this hip and airy coffee shop. Three Pines Coffee was founded with a singular idea in mind, that Salt Lake City needs great coffee shops. Due to the large LDS population, SLC has been a bit late to the craft coffee scene, but with places like Three Pines leading the charge, the future is looking bright for all the Salt Lake-based caffeine freaks. Three Pines Coffee is known for inventive espresso drinks, tasty pastries and overall quality across the board. Stop by and start your day off right.
The Daily
The Daily does three things extremely well. Those three things are coffee, pastries and an inviting atmosphere. The perfect place to perk up on a Monday morning, or kick back on a sturdy afternoon, The Daily is a great go-to coffee shop, regardless of the time of day.
Kahve Cafe
Kahve Cafe specializes in Turkish coffee. If you haven’t had Turkish coffee before, here are a few things you should know. It’s delicious, it’s strong and it has a distinct texture. If you like an intense coffee flavor, you absolutely have to try a cup from Kahve. This welcoming and well-run cafe is as authentic as it gets in SLC.
Cupla
The people behind Cupla accomplished something very unique with their shop. They managed to create an industrial space that is also undeniably cozy. Many concrete-floored, brick-walled coffee shops come off as cold and uninvited, Cupla, on the other hand, is a cozy hideout from the hustle and bustle of Downtown Salt Lake City and an ideal spot to enjoy a hot cup of joe on a cold Salt Lake Sunday.
Source: facebook.com/TavernacleSLC
Where to catch a live show in Salt Lake City
Salt Lake City is a hotbed of talented artists, entertainers and stellar spots to see their shows. Here are four great places to see a live show in Salt Lake City.
The Tavernacle Social Club
Dueling pianos, karaoke, comedy and drag — these are the things you think of when you think about Salt Lake City, right? If not, they should be because The Tavernacle Social Club has one of the most eclectic selections of talented performers in Salt Lake City. Shows take place stage six days a week (closed on Mondays).
Crowdsourced Comedy
Improv is one of those things that’s either really good or really bad. There isn’t much gray area when it comes to being funny. Did you laugh or not? That’s really the only question that needs answering. Luckily, the talented folks of Crowdsourced Comedy, a Salt Lake-based improv group, always coax out the laughter. Check out their website for show and class information or to book them for your next party!
Kilby Court
Kilby Court is the “longest running all-ages venue in Salt Lake City” and, as such, it has developed quite the reputation as a great place to catch a small live show in Salt Lake City. This indoor/outdoor venue features muraled walls, heavily stickered windows and a great stage. If your vibe leans a little more off the wall, Kilby Court is the spot for you.
Garage on Beck
Just north of Downtown Salt Lake, in the Rose Park neighborhood, Garage on Beck is a 21-and-over bar, grill and live music venue. Known for killer comfort food and stellar stage talent, Garage on Beck is worth the short trip outside town and offers an atmosphere entirely its own. If you’re hoping to catch a show, concerts are held on Fridays, Saturdays and Sundays.
You didn’t come to Salt Lake City to stay inside, did you?
Bonneville Shoreline Trail
Bonneville Shoreline Trail is a great area for easy to moderate hikes and slightly more strenuous mountain biking. Located just under a half hour north of Downtown SLC, this recreational area exhibits the best of the pristine nature that surrounds the Crossroads of the West. Be warned though, if you go shortly after rain, you should expect very muddy and slippery conditions.
Red Butte Canyon Overlook
Red Butte Canyon Overlook is located within the Red Butte Canyon Research Natural Area a little over a half hour northeast of Downtown Salt Lake City. This protected natural recreation and research area is perfect for anyone looking to get their steps in a beautiful setting and be rewarded with a stunning view.
Millcreek Canyon
Located in the Wasatch Mountains in Millcreek, Utah south of Salt Lake City, Millcreek Canyon is a stunning recreational nature area that provides space for camping, mountain biking, hiking and more. Filled with lush greenery in the summer months and serene, snowtopped hillsides in the winter, Millcreek Canyon is a great place to soak up some of the best nature the Salt Lake City area has to offer.
International Peace Gardens
The International Peace Gardens is a botanical garden that has been benefitting the Salt Lake City area for over 80 years. The team at the Peace Gardens nurtures plants from over 28 different countries and is a true representation of some of the most interesting, unique and essential botanicals to be ever be discovered. Also, it’s just a beautiful place to walk around.
See what Salt Lake City has to offer
There’s only one way to get to know Salt Lake City and that’s to immerse yourself in the culture and find your go-to spots. Start your search with the places listed above and you’ll feel fully at home in Salt Lake City in no time.
Mortgage rates haven’t move around a lot this week. In fact, we saw the average rate on a 30-year fixed rate moved a little lower in today’s Freddie Mac Primary Mortgage Market Survey. If you’re considering buying or refinancing, right now could be a great time to lock in a rate. Read on for more details.
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Market Outlook 4.30.17 from Total Mortgage on Vimeo.
Where are mortgage rates going?
Rates continue to hold steady
The trend so far this week has been for mortgage rates to remain in a tight range.
There haven’t been any major news events to really rattle the markets into readjusting their positions.
The Federal Open Market Committee meeting ended yesterday without much commotion, to much surprise to no one.
The nation’s benchmark interest rate–the federal funds rate–was kept unchanged at a target range of 1.5% to 1.75%.
FOMC members did note that inflation is moving closer to their target of 2.0%, as well as some overall improvements to the economy, but that was hardly enough of a change to their written statement to cause a market reaction.
Rates slide in Freddie Mac Primary Mortgage Market Survey
Some good news for anyone looking to buy or refinance right now is that mortgage rates moved lower in the Freddie Mac PMMS this week. Here are the numbers:
The average rate on a 30-year fixed rate mortgage fell by three basis points to 4.55% (0.5 points)
The average rate on a 15-year fixed rate mortgage inched up one basis point to 4.03% (0.4 points)
The average rate on a 5/1-year adjustable rate mortgage fell five basis points to 3.69% (0.3 points)
Here is what the Freddie Mac Economic and Housing Research Group had to say about mortgage rates this week:
“After steadily rising in most of April, average mortgage rates dipped slightly over the past week.
The 30-year fixed mortgage rate declined three basis points to 4.55 percent in this week’s survey. While mortgage rates have increased by one-half of a percentage point so far this year, it has not impacted home purchase demand, which continues to grow this spring. The observed buyer resiliency in the face of higher rates reflects the healthy economy and strong consumer confidence, which are important drivers of home sales activity.
It’s also good news that first-time buyers appear to be having more success so far this year – despite higher borrowing costs and home prices. Our data through April show that first-timers represent 46 percent of purchase loans, up from 43 percent over the same period a year ago.”
Rate/Float Recommendation
Lock now before rates rise
Mortgage rates still look like they could make another decent move higher over the coming months. If you want to avoid the risk of locking in a higher rate, we recommend that you take action sooner rather than later.
Learn what you can do to get the best interest rate possible.
Today’s economic data:
International Trade
The nation’s trade deficit narrowed sharply in March to $49.0 billion. The decline was largely anticipated by analysts.
Jobless Claims
Applications filed for unemployment benefits for the week of 4/28/18 moved up 2,000 to 211,000. That puts the four-week moving average at 221,500.
Productivity and Costs
Nonfarm productivity increased by 0.7% in the first quarter. Unit labor costs rose 2.7%.
PMI Services Index
The PMI services index hit a 54.6 for April.
Factory Orders
Factory orders ticked up 1.6% in March.
ISM Non-Mfg Index
The composite index came in at 56.8 for April.
Notable events this week:
Monday:
Personal Income and Outlays
Chicago PMI
Pending Home Sales Index
Dallas Fed Mfg Survey
Tuesday:
FOMC Meeting Begins
PMI Manufacturing Index
ISM Mfg Index
Construction Spending
Wednesday:
ADP Employment Report
EIA Petroleum Status Report
FOMC Meeting Ends
Thursday:
International Trade
Jobless Claims
Productivity and Costs
PMI Services Index
Factory Orders
ISM Non-Mfg Index
Friday:
Employment Situation
Fedspeak
*Terms and conditions apply.
Carter Wessman
Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.
As lenders become more desperate for leads, prospective homebuyers are increasingly bombarded with calls, texts and emails after applying for a mortgage. A recently proposed bill aims to fix that.
Rep. John Rose, R-Tenn., introduced the Protecting Consumers from Abusive Mortgage Leads Act to Congress June 16.
It’s the second bill on the subject that has been put forward this year. Rep. Ritchie Torres, D-N.Y., introduced the Trigger Leads Abatement Act in April, which is awaiting further action.
What makes the new bill different? The severity.
Rose’s allows the sale of consumer information about mortgage applicants, or trigger leads, in some cases. If buyers of leads have an existing relationship with the customer — if they finance a different loan, for example — or if customers opt in to receive unsolicited offers, trigger lead purchases are allowed.
Torres’ bill, on the other hand, is closer to outright banning the practice — it doesn’t include any allowance for lenders with existing relationships.
Currently, the Fair Credit Reporting Act allows consumer reporting agencies to sell all trigger leads unless customers opt out using the National Do Not Call Registry. Both bills would change the system from an opt-out to an opt-in model.
Trigger leads are sold by consumer rating agencies like TransUnion, Experian and Equifax, but plenty of companies like Zillow and LendingTree sell leads generated through online ads. Neither bill would not affect these.
The cost of trigger leads varies. None of the three major credit bureaus list prices online, but it can cost anywhere from $20 to $100 for a single lead, and many require a minimum deposit of $500 according to mortgage customer relationship management system Jungo.
Trade groups, like the National Association of Mortgage Brokers and the Mortgage Bankers Association, voiced support for trigger reform bills, but their stances differ. The NAMB lobbied for Rep. Torres’ bill, advocating for a more robust ban on trigger leads. The MBA lobbied for Rose’s, and said they support the sale of trigger leads when there’s already a relationship between the homebuyer and the lender.
Ernest Jones Jr., president of the NAMB, said they support the new bill as well, but the organization’s advocacy group is in a “holding pattern,” waiting to see what the representatives do with such similar bills.
“Anytime you can reach a compromise versus killing something, the likelihood of succeeding is — the probability is higher,” Jones said.
Both groups have been vocal critics of harmful trigger lead practices.
“We can’t support anything that would violate, in our opinion, the privacy of the consumer’s information and put them in a disadvantaged position,” Jones said. “Getting those calls does that.”
Chrissi Rhea, co-founder of Southeastern lender Mortgage Investors Group and MBA member, called the practice horrific: “I think the invasion someone feels of their private transaction is really the most appalling of all.”
Rhea knows the feeling herself. She once received 307 voicemail messages from mortgage lenders over eight days without ever applying for a mortgage.
She said her first thought was, “Oh goodness, they breached my bank!”
No breaching was necessary. A bank she worked with pulled a tri-merge credit report as part of its due diligence. This report is commonly used by mortgage lenders, so credit bureaus assumed she applied for a mortgage and sold her information to other lenders.
One of the callers told her about opting out. She registered for the Do Not Call list, but their system takes 30 days to process requests, so it did nothing to abate the flood of calls.
It’s not only customers that are negatively affected by an increased number of unsolicited calls, though. Lenders suffer undue damage to customer relationships.
Rhea has experience with this, too. A client of hers received 97 calls and 60 voicemails within 24 hours of submitting his loan application. He was convinced MIG either sold his information or gave it away for a discount on their credit reports. He threatened to sue.
This story is not unique in the mortgage industry. And it’s getting more common: Bill Killmer, senior vice president for legislative and political affairs at MBA, said because of slow market conditions, trigger leads have become a more intense issue.
“The volumes are down, so competition has become very, very fierce,” Killmer said.
Supporters of trigger leads say they promote competition between lenders and help customers get the best price for their loan. The Rose bill still allows for this competition without sacrificing customer experience, Rhea argued.
“I think the servicer of their current home actually truly has a right to say, ‘Can I give you an estimate of what our costs would be?'” she said. “Competition is not what we’re afraid of.”
TransUnion, whose trigger lead supply would be severely limited with the passing of this bill, said, “This legislation is an opportunity for a real conversation on how to improve the system while preserving a valuable service that helps save consumers money. We welcome that discussion and look forward to a thoughtful dialogue on the issue.”
Experian and Equifax did not respond to requests for comment by deadline.
