Last Week in Review: The Lowest Rates EVER
Bonds love bad news, uncertainty, and fear, which is causing rates to move lower.
This past week, the escalation of the coronavirus fears caused enough anxiety to push rates down to the lowest levels in U.S. history.
Here's what we know: Mortgage Bonds, which determine loan pricing, ticked to the best levels ever on Thursday, and the 10-year Note yield hit 1.25%, the lowest EVER!
Here's what we don't know: what is next for the coronavirus or its impact on the global economy.
With that said, if the coronavirus story brightens at all and becomes less uncertain or better, we could easily see rates move up just as quickly as they moved lower. On the other hand, should the coronavirus story worsen deeply, we should expect rates to fall further.
Bottom line: with rates at the lowest level in our history and hinging on the status of the coronavirus outbreak, now may present the opportunity of a lifetime to either refinance or purchase a home.
Company News
The Lowest Rates EVER
Definition of Goldilocks
Last Week in Review: A Great 2020 Housing Story
Here's some good news... the continued strength of the labor market, along with historically low mortgage rates, will keep positive housing momentum alive in 2020.
The Unemployment Rate is currently at a 50-year low of 3.6% with expectations for the index to push even lower to 3.25% by year's end, matching lows last seen in 1953.
Freddie Mac recently reported that 30-year fixed rate mortgages are at three-year lows while mortgage activity continues to increase.
Low rates, a solid economy, and a strong labor market have also cut mortgage delinquency rates. The Mortgage Bankers Association recently reported that the mortgage delinquency rate in Q4 2019 fell to its lowest level since the current survey series began in 1979.
In addition, the Census Bureau announced that the U.S. homeownership rate rose to 65.1% at the end of Q4 2019, the highest since the end of 2013.
The Fannie Mae Home Purchase Sentiment Index is near all-time highs reflecting that it is a good time to both buy and sell a home.
Finally, the New York Fed reports that $750B in new mortgages were originated in Q4 2019, more than any quarter since Q4 2005.
Bottom line: jobs buy houses, not low rates. But as we move into 2020, we have both a robust labor market and historically low rates -- a true Goldilocks situation -- fueling housing.
Three Reasons Why Rates May Have Bottomed
Last Week in Review: What the Market Is Saying
Home loan rates continue to hover right near three-year lows. There are many "smart" folks on Wall Street who say rates are going to push even lower at some point...and they may be right. But what if they're wrong? What if rates have bottomed for the foreseeable future?
Yes, locking a home loan right here would be wise.
Here are three reasons why rates may have bottomed -- at least for now:
- Solid economic numbers continue to be reported. We are seeing a historically strong labor market, rising wages, high consumer and business confidence, and an overall boost in housing. Bonds hate good news and there is simply too much good news to go around at the moment.
- Signs of improvement around the globe. One of the main tailwinds to our low rates is the relative underperformance of countries around the globe. It appears that many parts of the world are doing a bit better thanks to central bank monetary stimulus. If this trend continues, it's tough to see much better rates anytime soon.
- The trading action in the Treasury market. This may be signaling that further rate improvement from here may be tough to achieve. In recent weeks, in the face of heightened fear and uncertainty surrounding the coronavirus (which usually lowers rates), the 10-year Note yield was unable to move beneath 1.50%, which is also close to a historically low yield seen just a few times in the last decade. If the 10-year Note can't improve in the face of very uncertain news, a near-term bottom might be in place.
So, what would push rates to historically low levels? It would likely take some very bad news like an escalation of the coronavirus outbreak or possibly something worse.
Bottom line: the U.S. economy is performing very well. Rates are near historic lows and the markets are telling us this may be about as good as things get -- for now. So, if you, your family, friends, or clients are considering a home loan, now is a terrific time to lock in at incredible rates.
Presidents Day Holiday Lock Desk Hours
Overview
The Lock Desk at Carrington Mortgage Services, LLC (CMS) will be closed on Monday, February 17, 2020 for Presidents Day, which is a Federal Holiday. Normal lock hours will resume on Tuesday, February 18, 2020.
Rate 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:
- Monday February 17, 2020 cannot be included in the rescission period for refinance transactions.
- Monday February 17, 2020 cannot be included in the seven (7) business day waiting period between the 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, Monday February 17, 2020 cannot be included in the three (3) day business 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, Monday February 17, 2020 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
Back to the Future for the Financial Markets
Last Week in Review: Recovering From the Coronavirus
This past week was a bit rough for the Bond market as home loan rates steadily ticked higher and off the best levels in three years.
The coronavirus has been a tailwind to the Bond market and home loan rates for the past few weeks, but this week the story seems to be less negative and less uncertain. As better news started to emerge in the coronavirus headlines, financial markets started paying attention back to the economic outlook or "future" of our economy.
The news has been solid across the board with better than expected readings in manufacturing, services, and jobs.
The end of the impeachment process also removed uncertainty and helped Stocks focus on the good economic news at the expense of Bonds and home loan rates.
Bottom line: while rates ticked up week over week, they remain within a whisker of the best levels in three years. If the coronavirus outbreak story becomes more positive, home loan rates could inch higher still, meaning now is a great time to refinance or purchase a home.
North Carolina Bona Fide Discount Points Assessment
Overview
In the state of North Carolina, borrowers may be charged bona fide discount points for the purpose of reducing their interest rate. For Owner Occupied Loans with a balance of $300,000 or less, up to 2.25% (Agency products) or 0.25% (Non-agency products) may be charged as Discount Points under the North Carolina Max Fee Rule if the bona fide assessment is met.
Determining Maximum Discount Points
North Carolina does not use the Average Prime Offer Rate (APOR) like the QM Test does. They use the Fannie Mae Average Rate.
The Fannie Mae Average Rate can be accessed on the following website:
https://www.fanniemae.com/singlefamily/historical-daily-required-net-yields
In this example the Fannie Mae Rate is used for bona fide discount point assessment.
3.34 + 1 = 4.34
If the Starting Adjusted Rate does not exceed 4.34, you can exclude 2.00 points, and have a maximum of 2.25% in Discount Points charged.
3.34 + 2 = 5.34
If the Starting Adjusted Rate does not exceed 5.34, you can exclude 1.00 point, and have a maximum of 1.25% in Discount Points charged.
If the Starting Adjusted Rate is greater than the comparable rate +2.00, no points are eligible for exclusion, and the maximum Discount Points are 0.25%.
Starting Adjusted Rate is the Rate closest to PAR.
Compliance Fails
Locks with non-bona fide Discount Points will encounter Compliance Fails in BrokerIQ, and the interest rate will need to be raised in order to reduce the Discount Points to proceed. If a higher rate with lower Discount Points is not available, Brokers should contact their Account Executive to review.
Home Loan Rates Decline Again
Last Week in Review: Home Loan Rates Decline Again
The coronavirus outbreak in China continued to grip the financial markets this week. The total affected and number of deaths rose sharply throughout the week suggesting the virus is not yet contained.
Stocks hate uncertainty and Bonds love uncertainty. As a result, Bonds traded higher to their best levels since October, pushing home loan rates lower to the best levels in three years.
It wasn't all bad news this week though as economic readings here in the U.S. continue to show that our economy remains strong.
We also had a Fed meeting where the Fed left rates unchanged and did say the U.S. economy remains in a good place. Fed Chairman Powell also said the impact of the coronavirus on the global economy remains uncertain.
Over on Wall Street, corporate earnings overall have been very positive with Apple doing much better than expectations.
Bottom line: home loan rates will continue to be supported by the coronavirus uncertainty until they aren't -- meaning, the present quick decline in rates the past two weeks may prove fleeting should the coronavirus outbreak become more contained and less uncertain.
2020 Martin Luther King Jr Holiday Lock Desk Hours
Overview
The Lock Desk at Carrington Mortgage Services, LLC (CMS) will be closed on Monday, January 20, 2020 for Martin Luther King Jr. Day, which is a Federal Holiday. Normal lock hours will resume on Tuesday, January 21, 2020.
Rate 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:
- Monday January 20, 2020 cannot be included in the rescission period for refinance transactions.
- Monday January 20, 2020 cannot be included in the seven (7) business day waiting period between the 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, Monday January 20, 2020 cannot be included in the three (3) day business 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, Monday January 20, 2020 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.
The Good News Flow Continues
Last Week in Review: The Good News Flow Continues
This past week, we watched home loan rates tick modestly higher and retreat from three-year lows.
Why?
There are three main reasons:
- U.S and Iran. On Wednesday, the de-escalation of tensions between the U.S. and Iran brought an immediate sense of calm to the financial markets. As a result, Stocks traded to all-time highs at the expense of Bonds and home loan rates.
- Jobs, jobs, jobs. Both the ADP and Jobs Report showed continued health in the labor market. The positive data is good news for the economy and good news for housing. Bonds hate good news, so rates ticked up.
- Improvement in Europe. Germany reported surprisingly stronger economic data, suggesting their economy is on the mend. In response to the good news, German rates ticked higher this week while putting upward pressure on our rates.
Bottom line: home loan rates are within a whisker of the best in three years and near the lowest in the history of our country. Coupled with a strong consumer and housing backdrop, this makes it an incredible time to either purchase or refinance a home.
New Year, New Decade, Same Story
Last Week in Review: Nice Start to 2020
The new year and new decade started, and good news, some things don't change. Stocks picked up right where they left off in 2019 by touching all-time highs. And Bonds, which also performed well in 2019, continue to hover near three-year highs, keeping home loan rates near 3-year lows.
Many are wondering how the economy and markets will perform in 2020. So, for that reason, here are 3 trends to follow:
- Don't fight the Fed. As the saying goes, there doesn't appear to be any chance of a Fed rate hike in 2020. The economy is strong, but not too strong. Plus, the Fed is fighting disinflation, so a rate hike would counter those efforts. Moreover, it's a presidential election year and the Fed has historically tried it's best to avoid any monetary policy moves in those years. Bottom line: good for Stocks and less good for Bonds.
- Stock gains. Post-World War II, Stocks on average have gained 10.1% in presidential election years where the incumbent is up for re-election. It's tough to fight that trend, even with Stocks soaring in 2019. Bottom line: Stocks are set to finish 2020 higher.
- $1,000,000,000,000. That was what the U.S. spent in holiday retail shopping in 2019. That massive record highlights the strength of the U.S. consumer who makes up 70% of the U.S. economy. Bottom line: there is no recession in sight, great news for housing and the overall economy.
Bottom line: absent of a Black Swan event or unforeseen negative surprise, 2020 is shaping up to be a great year for housing and the U.S. economy, with the labor market strong, wages rising, inflation muted, and interest rates low.