Company News

Overview

In observance of Good Friday, the Carrington Mortgage Services, LLC (CMS) Lock Desk will be closed Friday, April 19, 2019. Normal Lock Desk hours will resume on Monday, April 22, 2019.
As a reminder, pursuant to the Lock Policy all lock extensions must be requested prior to expiration. If a lock expires on Friday, April 19th, 2019 it will need to be extended no later than Thursday, April 18th, 2019.
Issues related to locks should be sent via email to lockdesk@carringtonms.com.

Last Week in Review: 10 Reasons for housing to celebrate
Spring is the peak home buying season for many parts of the country. After years of softer home sale activity – thanks to low housing inventory, affordability issues, and more – this Spring home buying season could prove to be one of the best in years. Why?
Call it the "Goldilocks" economic scenario – and here are several bullets that should help housing not just this Spring, but for the foreseeable future:

1. The Fed has stated they will not raise rates in 2019. Yay!!! There is actually a better chance of a rate cut before 2019 comes to an end. This means home loan rates won't go too high.
2. Inflation remains subdued – for now. Low inflation means lower rates.
3. Home price gains are slowing year-over-year to healthier levels, and at equilibrium with personal wage gains. In years past, housing prices were gaining 10% to 15% or more, and wages were growing at 2%. Now we are seeing house prices increase 4% to 5% year-over-year, just slightly more than wages.
4. Housing inventory is increasing. This is a big change from years past and should it continue, buyers will continue to come to the market and take advantage of the "Goldilocks" conditions.
5. The Labor market remains solid. People buy homes because they feel good about their job and their future. Unemployment is at a 50-year low. This is very positive for housing.
6. Europe can't get out of their own way. Their economies are weak and that is keeping their bonds yields ultra-low. This is putting downward pressure on US Bond yields. Yes – you can thank Europeans for your low home loan rates.
7. The Stock market is right at all-time highs. This means higher 401K and IRA values create a positive wealth effect that should provide a nice tailwind for housing. People with money spend it.
8. Consumer Confidence and Sentiment are increasing again thanks to the Fed no longer hiking rates, the strong job market, and Stocks up nicely in 2019. "Confident" consumers purchase homes.
9. No fear of a US recession as Friday's March Jobs Report showed 196,000 new jobs created, a great rebound higher from February's 33,000 – which had stoked some recession chatter.
10. Home loan rates continue to hover near 14-month lows, thanks to the many bullets above.

This past week we saw mortgage rates experience their largest one-week decline in 10 years!!! What caused the sharp decline in home loan rates? Recessionary fears, and the likelihood the Fed's next move on rates may be a cut and as soon as this year.
The Treasury's Two-Month Bill yielded 2.40% this past week and the 10-Year Note yielded a low of 2.34%. This "inverted yield curve", where short-term Bonds yield more than long-term Bonds, elevated the recession talk.
Bond yield curve inversions are not always accurate, and the lead time to a recession can be as much as three years.
It will be more important to track how the 2-Year Note, presently yielding 2.23%, performs against the 10-Year Note in the weeks and months ahead, because a sustained inversion between them would be a more serious recessionary signal.
The financial markets were spooked this week when potential Federal Reserve Board Nominee Stephen Moore said if he were brought onto the Fed, he would immediately vote for a .50% cut to the Fed Funds Rate. This surprise statement brought uncertainty to the financial markets, which led to Stocks moving lower and Bonds moving higher in price.
Bottom line: Inflation is not a threat, and was evidenced in last Friday's PCE reading of just 1.8% year-over-year. Plus, the idea that the Fed may now cut rates next means this complacent "wait and see" attitude may continue to keep home loan rates at low levels for the spring homebuying season, and more.

On March 15, 2019, we surveyed our broker community to find out more about their media consumption habits. 116 people responded and these are the results. We think they are very interesting and we hope you do too.

Last Week in Review: Thank you Jerome Powell
The monetary authority of the United States, the Federal Reserve, meets 8 times a year to discuss the economy and adjust monetary policy to promote maximum employment and maintain price stability (inflation).
The Fed, led by Chairman Jerome Powell, met this past Wednesday and decided to leave the Fed Funds Rate unchanged at 2.50% - this was expected. They also issued their Monetary Policy Statement which includes their outlook on the economy and its interest rate forecast.
Overall the Statement was "dovish", meaning stimulative to the economy. They forecasted slower US growth, and inflation running beneath their target, which led to them forecasting no more rate hikes for the remainder of 2019. This was a nice surprise to the financial markets.
The Fed, inflation, and higher interest rates are not an immediate threat. This continues to push Stocks higher and long-term Bonds, like Mortgage Bonds, to one-year highs. This helps bring home loan rates to one-year lows.
Bottom line: The spring housing market could be one of the best in years thanks to a solid economy, relatively low rates, a positive wealth effect thanks to the rise in Stocks and a Federal Reserve that said rates are not likely to rise anytime soon - if at all.

Overview

Over the past several years FHA has seen a continued increase in certain higher-risk credit characteristics in mortgages it insures, including an increase in cash out refinances and mortgages with high debt-to-income (DTI) ratios, a decrease in average borrower credit scores and an increasing concentration of credit scores less than 640 combined with DTI ratios greater than 50 percent.
To address mortgages with higher-risk characteristics particularly when multiple risk factors are present, FHA has updated the TOTAL Mortgage Scorecard to manage the decrease in average borrower credit scores and the excessive risk layering that results when multiple risk factors are present.
Effective for all case numbers assigned on and after March 18, 2019, when Carrington Mortgage Services, LLC (CMS) submits a mortgage loan to the TOTAL Mortgage Scorecard via an automated underwriting system (AUS) CMS may receive feedback results indicating the loan file must be manually underwritten. In these cases, CMS must document the final underwriting review decision in accordance with existing FHA requirements for manually underwritten mortgages.

Last Week in Review: Complacency heading into spring

Volatility has disappeared in the financial markets and a sense of calm and complacency has emerged. Why?
Well thanks to the Fed, and inflation and higher rates not being a threat -- both Stocks and Bond prices are moving higher.
For 2019, home loan rates have been stable at one-year lows (look at the chart below), and everyone's stock portfolio is increasing in value. What's not to like?
Complacency will change to volatility at some point, and what we are watching is rising wages and how that may increase inflation in months to come.
Should that happen, we could experience a real shock to the US Bond market and the present complacent interest rate market will be over -- and in a hurry.
But for now, complacency is the theme as we head into the Spring housing market...meaning good times for us.

 
Last Week in Review: Disinflation washes up on our shores

If inflation moves lower or is expected to move lower -- rates must go lower as well. That's the situation right now.
The financial markets and interest rates also follow inflation on a global scale. Why is this important to homeowners?
If disinflation or the rate of inflation moderates in places like Europe, interest rates in those countries move lower and tend to drag US interest rates lower as well.
This past week we watched home loan rates revisit one-year lows upon news that the European Central Bank or ECB downgraded their economic outlook and inflation expectations.
The ECB said they now expect 2019 economic growth to come in at a paltry 1.1%, down sharply from a previous forecast of 1.7%. Moreover, ECB officials said inflation, which is already very low, could move lower still.
Again, if inflation moves lower in large countries around the globe -- we tend to see improvement in long-term US interest rates...that is the current trend.
Interest rates don't buy houses, jobs do!
The Bureau of Labor Statistics reported that just 20,000 jobs were created in February, well below expectations of 175,000. This was a disappointing number, but the unemployment rate fell to 3.8% and wages grew by 3.4% year over year...the highest level in a decade. Overall the labor market continues to expand and wages are rising -- all good news for housing.

On March 5, 2019, we asked our broker community about how much of their business is Non-QM. We're curious since there is so much talk in the broker and lending community about Non-QM right now and we wanted to see what you think the future will be. 316 people responded to our survey. Here are the averaged results. We think they are interesting and hope you do too.
Question: What percent of your February 2019 loan volume was Non-QM? 
Answer: 18%
Question: What percent of your total loan volume in all of 2019 do you anticipate will be Non-QM?
Answer: 26%
According to the respondents of this poll, brokers are expecting their Non-QM business to grow 44% from February through the end of the year! Wow! Are you ready for the change?

Last Week in Review: U.S. Economy showing solid growth.

This past week, the Bureau of Economic Analysis (BEA) reported the U.S. economy, as defined by Gross Domestic Product (GDP), grew at a 2.6% rate in the fourth quarter of 2018. Economists and the markets were expecting 2.0% to 2.3%, so this was a nice upside surprise.
This left GDP for all of 2018 at 2.9%. Consumer spending, which makes up nearly two thirds of GDP, expanded by a solid 2.8% in the fourth quarter - yet slower than the previous quarter.
Another solid number within the report was business investment which grew at a swift 6.2% pace.
This Q4 GDP reading was the first of three - so we will see some revisions in the months ahead.
Seeing the economy grow at such a nice clip despite high stock market volatility and the U.S. government shutdown is a good sign as we head into the spring housing market.
The increased wealth effect caused by the recent rally in Stocks along with one-year lows on home loan rates, rising wages and increased housing inventory sets the stage for an improved 2019 housing market.