Guardian Residential Lending Industry News, June 4-11, 2020

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

Inventory Problems, Mortgage Volume explosion and more news…

Quarantines Lift, Mortgage Volume Explodes (Mortgage News Daily, June 10)

The Mortgage Bankers Association (MBA) says that mortgage application volume rose significantly during the week ended June 5 as many states began to lift restrictions on individuals and businesses imposed in response to the COVID-19 pandemic. MBA’s Market Composite Index, a measure of mortgage loan application volume, increased 9.3 percent on a seasonally adjusted basis from one week earlier and was 20 percent higher on an unadjusted basis.

Purchase applications continued upward, gaining 5 percent from the previous week on a seasonally adjusted basis, the eighth straight week of gains. The volume was up 15 percent before adjustment and was 13 percent higher than during the same week in 2019.

The Refinance Index gained 11 percent compared to the previous week and was 80 percent higher than the same week one year ago. The refinance share of mortgage activity increased to 61.3 percent of total applications from 59.5 percent the previous week.


Federal Reserve predicts unemployment will fall to 9.3 percent by end of 2020 (Washington Post, June 10)

The central bank said it is keeping the benchmark U.S. interest rate near zero and continuing its bond purchases to aid the economy.

Federal Reserve leaders predict the U.S. unemployment will fall to 9.3 percent by the end of this year and 6.5 percent by the end of 2021, signaling confidence the economy will begin to recover in coming months from the stunning recession caused by the coronavirus outbreak.

In addition to releasing new forecasts Wednesday, the Fed also announced the benchmark interest rate would remain near zero and the central bank’s extensive bond buying programs will continue “at least at the current pace” for the foreseeable future.

Interest rates are likely to remain near zero through at least 2022, the Fed indicated. Low interest rates make it cheaper for Americans to borrow money to buy a home or car and for businesses to take out loans. Mortgage rates fell to an all-time low at the end of May, causing a surge in home buying, even during the pandemic.


Fed to Keep Buying Bonds and Sees No Rate Hike Through 2022 (Cheddar, June 10)

Confronted with an economy gripped by recession and high unemployment, the Federal Reserve made clear Wednesday that it will keep supplying all the help it can by buying bonds to maintain low borrowing rates and forecasting no rate hike through 2022.

The Fed has cut its benchmark short-term rate to near zero. Keeping its rate ultra-low for more than two more years could make it easier for consumers and businesses to borrow and spend enough to sustain an economy depressed by still-widespread business shutdowns from the coronavirus.


Mortgage Rates Surge Lower After Fed Announcement (Mortgage News Daily, June 10)

Today’s mortgage rate move is NOT related to the Fed forecasting near-zero rates through 2022.  Those forecasts pertain to the Fed Funds Rate which applies only to overnight transactions between banks.  Mortgage rates are nowhere near 0%.  That said, they are right in line with the all-time lows seen on June 1st and May 21st.  A few lenders are slightly better, actually.

For the average lender, this means the ability to offer ideal borrowers in ideal scenarios conventional 30yr fixed rates of 2.875-3.125% , with the average lender erasing a good amount of the weakness seen last week.


Redlining’s Legacy Of Inequality: Low Homeownership Rates, Less Equity For Black Households (Forbes, June 11)

A decades-old housing policy known as redlining has had a long-lasting effect on American society and the economic health of black households in particular, according to a new report by Redfin real estate brokerage.

The racist 1930s-era policy that was outlawed in the 1960s effectively blocked black families from obtaining home loans and remains a major factor in the country’s already substantial wealth gap between black and white families.

The typical homeowner in a neighborhood that was redlined for mortgage lending by the federal government has gained 52% less—or $212,023 less—in personal wealth generated by property value increases than one in a greenlined neighborhood over the last 40 years.


Unemployment rate surprises, declining to 13.3% in May (HW, June 5)

Homebuilders and remodelers added 226,000 jobs, Labor Department data shows


The United States economy officially entered a recession in February (Washington Post, June 8)

The U.S. economy officially entered a recession in February, according to The National Bureau of Economic Research, which announced that a 128-month expansion officially ended then. The expansion, which had begun in June 2009 after a recession, was the longest on record.


Potential homebuyers are going to face historically low inventory this summer (HW, June 8)

Should homebuyers expect a bidding war?


Can the Refinance Boom Continue? (M Report, June 10)

-What’s been going on globally with the pandemic, we’re seeing that the purchase market is likely to get pushed deeper into the year. Although, we still expect that there will be a purchase market—probably not during April, May, or June, but it will more likely shift to June, July, and August timeframe, provided things start to improve and curves start to get flat relative to COVID-19.

-What’s been surprising is just to see how strong this refi market has been and the potential for it to have a second wave. What we’ve been tracking very closely is the interest rate environment and seeing how consumers are taking advantage of it.

-Certainly, we have seen a lot of them take advantage of the lower rates, but there’s still a possibility that we could see a 30-year fixed rate down at 3%, or even slightly below that. Last year, across our platform, when you look at the loans closed last year, 75% of them had an interest rate of 3.75% or higher. If we continue to see the rates stay as low as they are, or even get down to a 3% flatrate, we’re going to see the second wave of people who are going to take advantage of a 75-basis point spread between what their current payment versus what it could be.

-In today’s environment, where everybody is really looking at how they lower their ongoing monthly costs—their mortgage payment is the biggest one that they have, so that sort of a rate spread could create a second wave of refinances.


Who will buy an iconic Irvington B&B? A big family, investor or Airbnb booker? (The Oregonian, June 10)


Thanks for reading, and be well.