We’re going into the final week of 2015, which means that there are only four more days to close loans this year. With fears about what to expect in the coming year, including fines, unsaleable loans, and UDAAP violations, many people are having to make tough decisions as to whether to lock in now or wait until after the start of 2016. So, what’s the best choice?
Fortunately, both Christmas and New Year’s Day fall on a Friday this year. This makes it easier to predict market activity. At the moment, the momentum continues to be fairly flat. For the next few days, we’re looking forward to the 5 year Treasury Auction, the 7 year Treasury Auction, the Case Shiller Home Prices, and Consumer Confidence reports. Any of these could have a powerful effect on mortgage rate activity, up until the markets close early on Thursday and remain closed throughout the New Year celebration. However, we’re not expecting much activity from this cycle of auctions. All things considered, the current flat trend may very well continue into 2016.
Mortgage rates were already near 2015 highs going into the Christmas holiday. On the 23rd, activity in mortgage-backed-securities only made this problem worse. Though the movement in MBS was a relatively small one, and one that would usually translate to a very slight change in mortgage rates, rates moved up to their highest level in the past five months.
This unusual fluctuation can be attributed to the volatile nature of the holiday season. Lenders are considerably more conservative about adjusting their rate sheets when market activity dies down during the holidays. The previous day was a far weaker one for MBS activity, but many mortgage lenders were not adjusting their rate quotes as much as they may otherwise have. Therefore, the 23rd started off on a much weaker foot than rate sheets indicated.
If you are trying to decide whether to float or lock, it would seem that the odds are in your favor. Should MBS prices linger where they are, mortgage rates could experience a significant improvement as we head into 2016.
Back in the period between 2005 and 2008, instances of mortgage fraud were at a peak. Fortunately, increases in regulation and lending standards led to a strong reversal of this trend, and we have seen very little in the way of fraud in the past few years. However, according to Bret Fortenberry of CoreLogic’s Insights blog, there is reason to believe that mortgage fraud is once again on the rise.
CoreLogic has been tracking mortgage fraud risk since 2010. Risk has moved up and down significantly, dipping into a deep valley early this year, but the overall trend still seems to be moving gradually upward. Low interest rates and rising home prices, which give unscrupulous individuals an opportunity to misrepresent down payments, can be attributed to much of this risk. Moving forward, the group expects these trends to continue, placing us at the bottom of a peak that should reach its highest level at some point in the second quarter. According to projections, this could be the highest level of fraud risk since CoreLogic first started tracking.
Last week ended with the release of the jobs report, which represents the most influential piece of economic data in the world. Though many were expecting a lackluster report, and hoping that it would inspire the Fed to postpone the rate hike they scheduled for December, the report exceeded expectations across the board. Employers added more jobs than they have in any month since December of 2014, with a total of 271,000. The unemployment rate dipped down to 5%. Meanwhile, hourly earnings went up by 0.4.
The main takeaway is that the Fed is now almost certain to raise rates next month. With this revelation, mortgage rates jumped significantly higher today. Most lenders are offering their highest rates since July. This may result in some of the pressure being released, and it is not impossible that we may see this trend reverse throughout the coming days. However, floating remains a risky prospect, outweighing the potential rewards for most people looking to secure a loan in the near future.