Guardian Residential Lending Industry News, August 8-15, 2019

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In the Know: A Roundup of This Week’s Local and National Real Estate Stories 

Is a recession coming? What’s going on with interest rates? FHA to make financing easier for condo owners, and more news below…

A Danish Bank Is Offering Mortgages With Negative Interest Rates— What would happen if interest rates turned negative in the U.S.? (Realtor.com, August 12)

It would become harder — or, at least, expensive — to save money. Banks would be charging negative rates on deposits, meaning that consumers would be paying the bank for opportunity to squirrel away money.

Bank customers could turn to more risky methods of stashing money, Hale said, such as holding onto actual cash or putting it into riskier investments. This could also have ripple effects across people’s financial lives. “This might put some pressure on home buyers to shorten their home searches, to avoid having down-payment money eroded by negative rates,” Hale said. “It could also make it more difficult to save up for a down payment.”

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Is a recession coming? Here’s what that means for housing (Curbed, August 15)

Experts agree that the housing market is on much firmer footing than it was in 2008

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Stocks losses deepen as a key recession warning surfaces (The Washington Post, August 14)

On Wednesday, the U.S. stock market tumbled after a reliable predictor of looming recessions flashed for the first time since the 2008 financial crisis. The Dow Jones industrial average fell around 800 points, or 3 percent, and has lost close to 7 percent in the past three weeks.

Two of the world’s largest economies, Germany and the United Kingdom, appear to be contracting. Argentina’s stock market fell nearly 50 percent in recent days, and growth in China has slowed.

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FHA to make financing easier for condo owners (HW, August 14)

The Federal Housing Administration has finally issued a long-awaited update to its condominium rules, announcing Wednesday that it will now allow individual unit approval and is taking other steps to loosen requirements that make these properties eligible for FHA financing.

Under the revised guidelines – which take effect Oct. 15, 2019 – an individual condo unit in a building of 10 units or more may be eligible for spot approval if no more than 10% of the units are FHA-insured. For units in buildings with fewer than 10 units, no more than two units can have FHA insurance.

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Refinance Spree Continues with Rates at Near 3-Year Lows (Mortgage News Daily, August 14)

Joel Kan, MBA’s Associate MBA’s Associate Vice President of Economic and Industry Forecasting, explained the week’s application activity.  “The 2019 refinance wave continued, as homeowners last week responded to extraordinarily low mortgage rates. Fears of an escalating trade war, combined with economic and geopolitical concerns, once again pulled U.S. Treasury rates lower. The 30-year fixed mortgage rate decreased eight basis points to 3.93 percent – the lowest level since November 2016 – and has now dropped more than 80 basis points this year. Refinance Spree Continues as Rates at Near 3-Year Lows,” he said. “In just the last two weeks, rates have decreased 15 basis points and the refinance index has increased more than 50 percent, reaching its highest level since July 2016. The government refinance index, driven by a 25 percent increase in VA refinance applications, is now at its highest level since May 2013.” 

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Here’s Why Mortgage Rates Dropped Even Though Markets Disagreed (Mortgage News Daily, August 9)

Mortgage rates moved lower today even though the broader bond market suggested they should have remained flat or higher.  In several of this week’s previous articles, we’ve discussed the volatility that’s been wreaking havoc on the world of mortgage rate setting for lenders.  Simply put, when the moves get bigger and when the direction changes more frequently, mortgage rates take extra damage relative to Treasury yields (a risk-free benchmark for most any other rate in the US).  

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‘Big Short’ investor Steve Eisman says Zillow has one of the ‘most flawed’ business models he’s seen” (CNBC, August 8)

One of his more high-profile shorts is against Zillow, the mammoth real estate listing site that, in addition to being a housing marketplace, is venturing off into other endeavors like a platform for home-flipping. Eisman thinks the company is in over its head.

“I actually think the company doesn’t understand the real risks, which are massive,” he said.

Ditto for investors: “I’m convinced the investor base doesn’t have a clue as to what this business is really all about,” he added.

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Thanks for reading!