Annual Inflation Heating up

Last Week in Review:
Annual inflation ticked up while small business optimism neared record highs.

The Consumer Price Index (CPI) rose 2.9 percent in the 12 months ending in June, up slightly from the 2.8 percent annual reading in May. This was the largest annual increase since the year ending in February 2012, and it was led higher by energy costs. On a monthly basis, CPI increased 0.1 percent in June. Core CPI, which strips out volatile food and energy prices, rose 0.2 percent in June and was up 2.3 percent year over year.

The Producer Price Index (PPI), which measures wholesale inflation, rose 3.4 percent year over year in June, the largest increase in more than six years. The rise was also due in part to increasing energy prices. From May to June, PPI was up 0.3 percent.

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Rising inflation is always a concern for fixed investments, like Mortgage Bonds, since inflation reduces their value. Home loan rates are tied to Mortgage Bonds, so they are negatively impacted when Mortgage Bonds worsen. However, many factors influence the markets. For example, if trade issues heat up, Bonds could benefit at the expense of Stocks if investors seek a safer haven for their money.

In the latest week, Stocks benefited from positive earnings and the news that the NFIB Small Business Optimism Index remained near record highs in June. Mortgage Bonds and home loan rates remain attractive and near their best levels historically.

ANNOUNCEMENT – 25 bps to 100 bps Pricing Improvement 

25 bps to 100 bps Pricing Improvement 

Effective immediately, Carrington Mortgage Services, LLC – Wholesale Lending Division has improved pricing on our Flexible Advantage programs (non-prime/near prime) :

  • Full Doc Loans
  • 12 Month Bank Statement Advantage
  • 24 Month Bank Statement Advantage

Program Enhancements 

  • Max Loan Amount increased to $2 Million
  • Maximum Cash out Increased to $750,000

Contact your Account Executive for more information, and make sure to check out our rates.

Become an Approved Carrington Broker Today! Apply now.

Jobs skyrocket in June

Last Week in Review:
The Jobs Report for June was better than expected. The holiday-shortened trading week saw market volatility due to global trade issues.

Non-Farm Payrolls rose by 213,000 new jobs in June, above the 195,000 expected, the Bureau of Labor Statistics reported. The figures for April and May were also revised higher by a total of 37,000 new jobs. Professional and business services, manufacturing, and health care saw an increase in jobs, while retail trade lost jobs.

The Unemployment Rate rose to 4.0 percent, while the Labor Force Participation Rate edged higher to 62.9 from 62.7 as more Americans entered the labor force.

There was a downside, however, as the lack of meaningful wage growth continues. Average hourly earnings increased just 0.2 percent in June, after the 0.3 percent rise in May. Over the last year, average hourly earnings were up 2.7 percent.

Home loan rates moved lower in the latest week as Mortgage Bonds improved due to the volatility in the markets.

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New Home Sales Rise

Last Week in Review:
Sales of new homes rose in May while annual inflation readings edged higher. First quarter GDP disappointed.

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Sales of new homes rose 6.7 percent from April to an annual rate of 689,000, the Commerce Department reported. However, April’s sales figure was revised lower to 646,000 from the original reading of 662,000. From May 2017 to May 2018, sales surged 14.1 percent. There was a 5.2-month supply of new homes for sale on the market, just below the 6 months that is considered normal.

The final reading on Gross Domestic Product for the first quarter of 2018 came in at 2.0 percent, below the second reading of 2.2 percent. GDP is the monetary value of all finished goods and services produced within our borders in a specific time. It is considered the broadest measure of economic activity. GDP readings between 2.5 to 3.0 percent are considered healthy, so the final reading for the first quarter was a disappointment. However, many forecasters are expecting a stronger GDP reading for the second quarter.

The inflation-measuring Personal Consumption Expenditures (PCE) and Core PCE, which excludes volatile food and energy prices, both ticked up 0.2 percent from April to May, in line with expectations. However, on an annual basis Core PCE ticked up to 2.0 percent, after rising 1.8 percent annually in April. The bottom line for inflation is that it reduces the value of fixed investments like Mortgage Bonds. Home loan rates are tied to Mortgage Bonds, so rising inflation can also cause rates to move higher.

For now, home loan rates remain attractive historically.

Carrington Flexible Advantage/Advantage Plus Program Enhancements

Overview

Carrington Mortgage Services. LLC (CMS) is pleased to announce the following product improvements for the Carrington Flexible Advantage (formerly Non-Prime) and Carrington Flexible Advantage Plus (formerly Near-Prime) Programs.

  • Maximum Loan Amount increased to $2M (formerly $1.5M)
  • Maximum Cashout increased to $750K for loans with LTVs ≤ 75%; $500K for loans with LTVs > 75

Note: These improvements apply to all Primary Residence, Second Homes, and Investment Properties occupancy types.

View the matrices here.

Independence Day Holiday Lock Desk Hours

The Carrington Mortgage Services, LLC (CMS) Lock Desk will be closed on Wednesday, July 4, 2018, for Independence Day, which is a Federal Holiday. In addition, the lock desk will close early (10:00 AM PST) on Tuesday, July 3, 2018. Normal lock hours will resume on Thursday, July 5, 2018.

Locks that expire on the holiday will automatically roll to the next business day. In addition, there are some important disclosure considerations associated with the holiday:

  • Wednesday, July 4, 2018, cannot be included in the rescission period for refinance transactions.
  • Wednesday, July 4, 2018, cannot be included in the seven (7) business day waiting period between the date the initial Loan Estimate (LE) was provided to the borrower and the consummation of the loan
  • When re-disclosure of the LE is required, Wednesday, July 4, 2018, cannot be included in the four (4) business day waiting period between the date the revised LE was provided to the borrower and the consummation of the loan.
  • When re-disclosure of the CD is required, Wednesday, July 4, 2018, cannot be included in the three (3) business day waiting period between the date the revised CD was provided to the borrower and the consummation of the loan.

Issues related to locks should be sent via email to lockdesk@carringtonms.com.

Existing Home Sales are down 3 percent from last May

Last Week in Review:
Existing Home Sales fell in May. Housing Starts signaled potential hope for would-be buyers.

May Existing Home Sales fell 0.4 percent from April to an annual rate of 5.43 million units, the National Association of REALTORS® reported. From May 2017 to May 2018, Existing Home Sales were down 3 percent. While sales rose in the Northeast in May, they fell in the Midwest, West and South. Inventory of homes for sale on the market remains low with a 4.1-month supply, below the 6 months seen as normal.

Lawrence Yun, the NAR chief economist, said, “Inventory coming onto the market during this spring’s buying season … was not even close enough to satisfy demand.”

The latest Housing Starts report had some good news for would-be buyers struggling with limited inventory, as the Commerce Department reported that new home construction surged in May. Housing Starts rose 5 percent from April to an annual rate of 1.350 million units, which is also a 20.3 percent increase from May 2017.

Single-family starts, which account for the largest share of the housing market, rose 3.9 percent from April to May and were up 18.3 percent annually. Multi-family dwellings of five or more units rose 11.3 percent monthly and jumped 27.4 percent annually.

However, future new construction could ease a bit as Building Permits fell 4.6 percent monthly after declining in April.

Stocks struggled in the latest week due in part to escalating trade war tensions while Mortgage Bonds leveled off after a few weeks of high volatility. Home loan rates remain near historically low levels.

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Elevate Your Performance & Housing Summit

Coming to Sacramento July 12th!

Elevate your performance as a Loan Originator in the Sacramento area with the information and tools provided by attending this free event. Gain new insights into your local market and national trends. Get ahead of your competition by leveraging this information to elevate your performance and better serve customers in your area.

You Can’t Afford to Miss This Event

Exclusive for Loan Originators and Mortgage Brokers hosted by Carrington Mortgage Services, LLC a leader in the serving the underserved market and known for being the Go-to-Lender for Tough Loans.

  • 8 am – 9 am Complimentary Breakfast and Networking Opportunity
  • 9 am – 9:45 am Local and National Real Estate and Housing Market Update
    Find out what’s happening in the US economy and the housing market with a mid-year market update, and forecast for 2018 and beyond by Carrington Executive Vice President Rick Sharga, a frequent contributor to national media outlets such as CNBC, FOX Business, the Wall St. Journal, and Housing Wire.
  • Elevate Your Performance with Carrington
    An introduction to Carrington’s new Non-QM home loan programs that can elevate your performance and assist you in closing more loans for borrowers with less than perfect credit, late payments, recent blemishes on their credit, high balance/jumbo or self-employed borrowers.

REGISTER

Government Seasoning and Net Tangible Benefit Requirements

Carrington Mortgage Services, LLC (CMS) complies with the Government Refinance Seasoning and Net Tangible Benefit requirements as described below.

Please note: FHA/USDA seasoning days calculation has been revised based on updated guidance from GNMA.  Encompass has been updated to enforce these requirements.

Seasoning Requirements

Net Tangible Benefit Requirements

 

Footnotes for Seasoning and Net Tangible Benefit tables:

(1)    GNMA requires Seasoning regardless of the type of loan that is being refinanced (FHA/VA/USDA/Conventional), but seasoning is not applicable if property owned free and clear of mortgage lien

(2)    VA IRRRL LTV: Drive-By or Interior Inspection Appraisal required if discount points are charged; Points > 1% Max 90% LTV; Points <= 1% Max 100% LTV; No Points: No appraisal required

(3)    FHA Refinance:  Credit Qualifying Streamlines are not exempt from Seasoning/NTB requirements; FHA Simple Refinance and Rate/Term Full Doc Refinance are exempt from requirements

Retail Sales Rise

Last Week in Review:
Retail Sales were on the rise while inflation showed some warming signs. The Fed also hiked its benchmark rate.

The Commerce Department reported that Retail Sales jumped 0.8 percent from April to May, well above the 0.4 percent expected. From May 2017 to May 2018, Retail Sales were up 5.9 percent. When stripping out autos, Retail Sales jumped 0.9 percent. If consumer spending continues in a similar fashion, the U.S. economy will continue to grow at a solid pace in the months ahead.

As expected, the Fed raised the benchmark Federal Funds Rate by 0.25 percent, bringing the new target range to 1.75 to 2 percent. The Fed Funds Rate is the short-term rate at which banks lend money to each other overnight. It is not directly tied to long-term rates on consumer products like purchase or refinance home loans. The Fed noted that the economy is doing well and that investors should look for four increases to the Fed Funds Rate this year, up from the three previously mentioned.

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The Fed also raised the inflation forecasts for 2018 and 2019. The May Producer Price Index, which measures wholesale inflation, rose 3.1 percent on an annual basis, the largest increase since January 2012.

The more closely watched Consumer Price Index (CPI) rose 2.8 percent annually. Core CPI, which strips out volatile food and energy prices, rose 2.2 percent annually. However, the monthly CPI reading was a bit muted, showing inflation rose 0.2 percent from April to May, below expectations.

The key takeaway is that inflation reduces the value of fixed investments like Mortgage Bonds. Since home loan rates are tied to Mortgage Bonds, rising inflation could lead to an uptick in rates, which is why inflation data is always important to monitor.

For now, home loan rates remain near historic lows.

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