Last Week in Review: Uncertainty helping rates
The ongoing and unresolved US/China trade turmoil is the biggest story to follow right now. The uncertainty and negative headlines associated with the negotiations have pushed Stocks lower for most of May, with Bonds and home loan rates being the beneficiary.
We would like to think that the talks over the past year or so will bring forth a positive agreement — but it’s unclear whether this will come to pass. The next round of talks is scheduled for June 28-29 at the G20 meeting, so there is likely to be no progress before this time. If that is the case, US interest rates will remain near multi-year lows.
One thing’s for sure…the Fed will not be hiking rates anytime soon if this trade turmoil goes unresolved or escalates. In fact, there’s actually a chance we see a Fed rate cut in 2019 — especially if the US economy reacts poorly to the US/China trade dispute.
It’s important to understand that this story, while very negative and uncertain at the moment, could change very quickly. If a positive resolution comes to pass, we should expect Stocks to reclaim all of their recent losses and more — all at the expense of bonds and home loan rates.
Bottom line: Home loan rates are back near 16-month lows and coupled with the current strong US economic backdrop, it is an incredible moment to either refinance or purchase a home.
The Lock Desk will be closed on Monday, May 27, 2019 for Memorial Day, which is a Federal Holiday. Normal lock hours will resume on Tuesday, May 28, 2019.
Additionally, the Lock Desk will close early on Friday, May 24, 2019 at 10:00 A.M. PST due to the early close of the financial markets.
Locks that expire on the holiday will automatically roll to the next business day. In addition there are some important disclosure considerations associated with the holiday:
- Monday, May 27, 2019 cannot be included in the rescission period for refinance transactions.
- Monday, May 27, 2019 cannot be included in the seven (7) business day waiting period between the date the initial Loan Estimate (LE) was provided to the borrower and the consummation of the loan
- When re-disclosure of the LE is required, Monday, May 27, 2019 cannot be included in the four (4) business day waiting period between the date the revised LE was provided to the borrower and the consummation of the loan.
- When re-disclosure of the CD is required, Monday, May 27, 2019 cannot be included in the three (3) business day waiting period between the date the revised CD was provided to the borrower and the consummation of the loan.
Issues related to locks should be sent via email to firstname.lastname@example.org.
Last Week in Review: US/China uncertainty
The biggest story in the financial markets and around the globe is the ongoing US/China trade negotiations.
At the moment, there is no resolution and it appears there will be no resolution for at least several weeks as the US and China are not expected to talk again until the G-20 Summit June 28-29.
The uncertainty surrounding the talks helped home loan rates improve this week, and are at lows seen in January 2018.
The US, China and the entire globe would benefit from a deal and should it happen, Stocks will likely recover all of their recent losses and then some. At the same time, should the story drag on and escalate as higher tariffs are instituted — it would have a negative effect on global economies and Stocks may suffer as home loan rates improve further.
Looking at the US economy, it continues to do very well. Walmart posted incredibly strong corporate earnings this past week. Seeing they have $500B in annual sales — if Walmart is doing well, the US economy is doing well.
In housing news, April Housing Starts and Building Permits came in higher than expectations, providing further evidence of confidence in the sector.
Bottom line: The backdrop to housing could not be much better. The economy is strong and home loan rates are historically low. Today presents an incredible window to consider buying or refinancing a home.
Carrington Mortgage Services, LLC (CMS) has made an immediate adjustment to the Wholesale Rate Lock policy. Effective, May 14th, 2019, the Lock Desk will no longer process any lock extensions on VA IRRRL transactions. In addition, automated lock extensions are no longer available in BrokerIQ/CorrIQ/Encompass on VA IRRRL loan programs.
Last Week in Review: Americans favor owning
Americans Favor Owning Versus Renting a Home
The Census Bureau recently reported a homeownership rate of 64.2% in the first quarter of 2019, up from the 10-year low of 63.7% in the first quarter of 2015.
A recent study by LendingTree shows that 67% of homeowners surveyed aged 22 and older believe that owning a home is a better option that renting. In addition, the longer you remain in a home, the stronger you believe that owning is better than renting. The survey revealed that 72% of homeowners who have resided in their home for seven to nine years agree with the statement.
The survey also showed that about 15% of homeowners believe renting is easier than owning a home, and another 18% are neutral on the topic. “Just 13% of homeowners across all ages wish they could go back to renting, but when broken down by age, 1 out of every 5 homeowners ages 22 to 37 say they miss renting.”
In conclusion, the US “Goldilocks” economy includes:
- Slowing home price gains
- Rising wages
- Uptick in homes for sale
- Strong job market
- High Consumer Confidence
- Historically low rates
The above points will continue to be a tailwind for new home buyers on their way to the American Dream of owning a home.
In response to continued feedback and clarification from the VA and others, the Carrington Mortgage Services, LLC (CMS) VA Interest Rate Reduction Refinance Loan (VA-IRRRL) Guidelines and Matrix are being republished with updated requirements regarding recoupment and NTB.
As a reminder, The Protecting Veterans From Predatory Lending Act of 2018 (the Act), was enacted to protect Veteran borrowers from predatory lending practices known as “loan churning” or “serial refinancing”, when obtaining a VA-guaranteed refinance loan. CMS has taken steps to ensure all VA-guaranteed loans meet the fee recoupment, net tangible benefit and loan seasoning requirements.
Loan applications submitted on or after May 9, 2019 must meet the following requirements. There will be no impact to the existing pipeline.
When issuing a VA-IRRRL, Lenders must provide the Veteran or borrower with the following fee recoupment and net tangible benefit requirements:
(1) VA IRRRL LTV: Drive-By or Interior Inspection Appraisal required if discount points are charged; Points > 1% Max 90% LTV; Points <= 1% Max 100% LTV; No Points: No appraisal required.