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.
Last week, October ended with one-month highs in mortgage rates. As we go into November, rates are inching up even further. Much of this activity can be attributed to the recent Fed Announcement, which promised to tighten policy. This serves to push up US Treasuries, which influences the mortgage-backed securities that directly influence mortgage rates.
The good news is that, as this represents the market correcting itself in anticipation of the Fed’s policy rate hike, we can likely expect it not to be affected any further by the time the hike goes into effect. In the meantime, though, the market will be under all the more pressure. The more it looks like the planned hike will happen in December, the more we can expect rates to move upward. This week in particular has a high potential for volatility, with the upcoming jobs report on Friday morning marking the time of highest risk. Unless you can afford to take risks, you would be well-advised to lock into current rates by Thursday.
According to Freddie Mac, about half of the country’s large metropolitan areas have returned to a historic stable range. This is according to their Multi-Indicator Market Index, or MiMi. Using proprietary data along with local market data, including home purchase applications, payment-to-income ratios, proportions of on-time mortgage payments, and local employment rates, MiMi rates cities based on their own individual stable ranges.
At present, a full forty-seven of the United States’ one hundred biggest metros fall within the stable range. Cities throughout the west coast have been particularly strong, with Seattle, Portland, and all of California’s big cities ranking as “in range”. Washington State itself is among the most improved states, with an improvement of 10.41%.
The national MiMi value currently stands at 81.2. Such a number is indicative of an overall housing market that is on the outer range of stable. This represents an improvement of 37% over the all-time low experienced in October of 2010. However, it still has a way to go to reach the high of 121.7.
Friday closed with the highest mortgage rates for the month so far. Fortunately, these rates still represent an improvement over most of September. These rates remained steady through Monday, as is normal for a three-day weekend. What to expect as we move forward, though, remains very much in question.
The stocks and bonds markets are both at a significant crossroads, both with the potential to either move back into the range seen in June and July or continue a long trend of downward-moving yields and stock prices. There may be some risk for rates to quickly move higher, if we can take the Fed at their word and ignore the weak trends in global economic growth. The Fed seems convinced that the economy will allow for a rate hike by the end of 2015, but many critics are saying otherwise.
All things considered, it may be too optimistic to expect rates to dip any lower than they currently are; anyone looking to float should expect to play the long-term game, and be prepared to pay more if you turn out to be wrong.
October opened with some wild activity in the mortgage market. With the introduction of European quantitative easing, investors have been moving money to take advantage of European rates, and domestic rates have been feeling the benefits. On Friday, the average conventional thirty-year, fixed-rate mortgage quote plummeted. Almost all lenders opened the day offering the lowest levels we have seen in over five months. Unfortunately, the afternoon saw a substantial reversal in the bond markets that most affect mortgage rates, increasing the chance of rates shooting upward again.
One of the big factors at play currently is the recent September jobs report, which came in slightly weaker than was expected. This weak activity promises to call a Fed rate hike into question, and deter any general economic growth. It is difficult for long-term rates to go up significantly without a positive growth outlook.
In the near-term, we can still expect some volatility in mortgage rates. Anybody not prepared to deal with this volatility would be well-advised to lock into the current five-month lows.
There are a lot of scams out there these days, none that we find as frustrating though as the infamous online credit score! Here we have one of the all-time greatest inventions to rip off the average consumer, why isn’t anybody creating a fuss about such a magnificent scam? The reason is because almost nobody understands how it all works and the powers to be keep it all very hush hush.
How many people have checked their scores online at some point? There is no great data on this but we are thinking the majority of everyone has checked their scores online. Now, out of all these millions of people, how many could use these exact scores for lending purposes? We are going to go with 0, give or take. This is due to the fact that online scoring models, even the ones provided by the bureaus themselves, are completely different from the scoring models that lenders use when a loan is being applied for. This makes the average online and the credit bureau’s scoring models completely worthless.
How is this legal you may ask? They don’t claim they are giving a FICO lending approved scores, they are saying is what “we” calculate your score to be, based on our system. Even on the rare occasion if they use a FICO model, there are over 50 of those scoring algorithms created so it’s unlikely to be the one your lender is using. Some of the online scores are so off it seems like a bad joke, like Transunion direct source who is Truecredit, their score range goes from an 501 to a 999 so you easily see yourself with an 800 or 900 but that doesn’t mean it’s worth the paper it’s printed on.
Another laughable aspect about this system is that you notice how a consumer never applies for a loan only to find out that their score is actually much higher than what they recently pulled online. In fact the average online score is roughly 40 points higher than what you see through a lender. The conspiracy theory behind this is that the better score you show someone on average, the more people you will attract to your website through referrals.
Kick your feet up – lean back, and rest assured you can be in the driver seat – when you meet with a real mortgage lender and get your true FICO mortgage score – and know all about the loan programs, options, LLPA info then you will be well informed to make the right decision.
So, What Is Your Credit Score?
Mortgage rates are poised to end September on a strong note. Entering the final week, rates moved close to recent lows experienced in the previous week. We can likely expect many borrowers to see these same rates through Friday, enjoying noticeable gains in the form of low closing costs and high lender credit. All in all, it’s one of the best days we have seen since early May.
This strong activity can be attributed to broad economic weakness. Fears among investors are driving stocks downward, which is generally good news for the mortgage market. The Federal Reserve’s decision to keep interest rates near zero has not provided investors with the certainty they need to pour money into riskier assets, so money has been moving out of stocks and into bonds, causing prices to go up and rates to go down.
Anybody planning to close on a loan within the coming thirty days may be well advised to lock in to current rates. Contact us to talk to a Lynnwood mortgage broker right away.