Tag: mortgage broker portland

The shutdown’s impact on mortgage rates

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

The government shutdown is now the longest running shutdown in our history.  Over 800,000 federal workers remain without a paycheck.  Meanwhile, the government is accruing back wages to the tune of $2,000 per second.

How is the shutdown impacting home loans?

Mortgage Rates

The government shutdown has helped contribute to lower mortgage rates.  How?

First off, political uncertainty encourages investors to be less risky with their capital.  When investors seek safety mortgage-backed securities attract greater demand which drives yields lower.

Second, lower government spending has a slowing effect on the economy which is bad for the stock market.  As we know the US stock market has traded lower for the past two months which also helps interest rates improve.

Mortgage Processing

Most borrowers will not experience any delays as a result of the shutdown.  However, some applications require that the tax returns provided with the application be verified through the IRS.  They are not currently providing this service so those applications are likely to be delayed.

Furthermore, the VA and FHA are currently understaffed.  For applications which require specific underwriting guideline questions lenders are left to either proceed with the application without clarity from the VA/ FHA, deny the loan, or delay it.

Economic Data

The federal government issues most of the economic reports that analysts rely on to make forecasts.  Some reports are being issued on schedule but others are not (see a list of reports HERE).

The all-important jobs report is scheduled for release on February 1st (for now) but the financial markets may not react to the report because the reliability of the results will be called into question.

Given that there does not appear to be a compromise in sight we will maintain a floating bias BUT borrowers should be warned that we expect home loan rates to rise once the shutdown is over.

 Current Outlook: floating

Mortgage Rate Update February 23, 2017

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Despite there being a lot of noise mortgage rates are unchanged from earlier in the week.

There has been much speculation that the Trump administration will push Fannie Mae & Freddie Mac out of government conservatorship and return the companies to private shareholders.

But will they?  As industry expert Rob Chrisman laid out, imagine your son or daughter returned to your house during the recession and cut a deal with you that they would not be able to pay any rent to live under your roof in the near-term but once their financial conditions improved they would pass along their income to you and you could kick them out whenever you wish.  How quickly would you push them out if they were paying you ~$3 billion per month (not be confused with 3 brazilliion)?  Fannie & Freddie have now delivered profits to the US Treasury for 27 consecutive quarters.  The latest sum is a combined $10 billion.

Given the amount of money Fannie & Freddie are paying the US Treasury its hard to imagine a return to private shareholders.

The Dow Jones Industrial Average closed at a record high for the 9th consecutive day yesterday.  That has only happened five times since 1897 according to stock market legend Art Cashin.  Generally speaking when stocks rally it is bad news for mortgage rates.

Looking back at those five rallies though investors should be cautious.  Four out of the five aforementioned stretches led to stock market crashes (1929 & 1987) or prolonged bear markets (late 1960’s).  Should the stock market enter a down market now it would likely help mortgage rates remain low.

Lastly, minutes from the last Fed meeting were released yesterday.  The notes indicated that the Fed may act to raise short-term interest rates quicker than previously expected.  Their next meeting is March 14-15.  However, I’m not too worried because the Fed does not directly control mortgage rates and the Fed has a history of talking a big game but then not following through.

What was more substantial for me was the fact that they did not specifically mention any plans to curtail the reinvestment of principal prepayments back into the mortgage-backed bond market.  This will come at some point and when it does will likely cause mortgage rates to shift higher (see HERE to learn more).

Current Outlook: floating

Mortgage Rate Update March 3, 2016

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Mortgage rates are unchanged for the week.  That may all change tomorrow with the release of the all-important jobs report.

If you remember back to last month the jobs report missed expectations coming in at only 158,000 new jobs created.  This month analysts expect the report to show 190,000 new jobs created.  If the actual figure comes in higher than expected mortgage rates are likely to worsen and vice versa.

It’s always difficult to predict the monthly jobs report but based on what I am seeing I think there is more risk in floating than there is in locking.  Why?

First, from a technical perspective momentum is working against us.  See the chart below.

03-03-US 10yr Mortgage Rates Portland Oregon

Second, recent domestic economic data has been relatively healthy.  Private Payroll company APD released its version of the monthly jobs report yesterday and it showed that 214,000 new jobs were created last month.  In a separate release, the Fed released a report which showed that consumer spending rose in much of the nation during the first part of the year.

Lastly, given that last month’s report was released well below expectations I believe that there is a greater likelihood that it will be subject to a revision higher which would put upward pressure on mortgage rates.

Current Outlook: locking

Mortgage Rate Update February 22, 2016

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Mortgage rates are unchanged from the latter half of last week.

Friday’s Consumer Price Index (CPI) report from the Bureau of Labor Statistics suggests that the Fed may have to get back on the path of hiking rates.  The report showed that the Core CPI, prices for consumer goods excluding food and energy, rose by 2.2% on a year-over-year basis.  This is the “hottest” figure since June 2012 and above the Fed’s target of 2.00%.  Inflation is the primary driver of long-term interest rates including for home loans.

Is inflation ahead? If so, it would pressure mortgage rates higher.
Is inflation ahead? If so, it would pressure mortgage rates higher.

This Friday we’ll get the Personal Consumption Expenditure price index which is the Fed’s favorite gauge for inflation.  If that also comes in higher than expected then it would likely pressure mortgage rates up.

Looking at the rest of the economic calendar this week the Case Shiller Home Price index is due out tomorrow.  We’ll also get readings on consumer confidence and existing home sales.  On Wednesday the FHFA will release their home price figures and on Friday we’ll get the 2nd estimate for 4th quarter 2015 GDP.  I wouldn’t be surprised to see some volatility this week given the depth of data scheduled for release.

From a technical perspective mortgage rates are trading within a ~.125% range.  I don’t necessarily see a catalyst for rates to improve in the near-term but I also don’t see them increasing so I will shift to a neutral position.

Current Outlook: neutral