Comparable Benefits with Easier Qualifications
Although the market for Jumbo loans is bouncing back for traditional banks, Carrington Mortgage Services offers borrowers a better-priced alternative – Carrington Prime Advantage℠ – that has comparable benefits with easier qualifications for loans up to $2.5 million. Dare to compare!
|One loan up to 85% LTV?||No||
|DTI’s Up to 50?||No||Yes|
|FICO’s as low as 660?||No||Yes
Our minimum is FICO 660
|Less than a 2-year Income History?||No||Yes
We allow 1-year of tax returns or W-2s to verify income
|Qualify with bank statements?||No||Yes
We allow 12 & 24 months of personal or business bank statements
|12-month mortgage history?||No||Yes
We only need a 12 month mortgage history when others need 24 months!
|Less than 7-year BK and FC Seasoning?||No||Yes
We require only 48 months seasoning for BK, FC, Short Sale, Modification or Deed In Lieu
|Quick Approvals?||Some may||Yes
Since we underwrite and service ourselves, we control the turn times!
Last Week in Review: Headed Back to the Future
This past week, the U.S. 10-year Note yield, a proxy for long-term interest rates, climbed back above .80% for the first time since June. At the same time, mortgage-backed security prices, which determine home loan rates, declined to their lowest level since July, pushing mortgage rates higher.
Stimulus, Stimulus, Stimulus
With two weeks to go before the election, it’s not a matter of if, but when a stimulus plan is coming. At the moment, it’s looking like a plan of at least $2 trillion or more and the markets are preparing for the “future”, which looks like further economic expansion and a growing threat of inflation — both of which Bonds and rates hate.
In addition to the positive economic outcome, stimulus provides, the new stimulus must be purchased by investors through Treasury auctions and the increased supply weighs on prices and drives yields/rates higher.
Don’t Fight the Fed
This recent rise in rates has the Fed’s attention. At the moment, the Fed is purchasing $120 billion worth of Treasuries and Mortgage Bonds each month to help pin down rates. Should Treasury yields continue to climb and drag Mortgage Bond prices lower still, causing home loan rates to rise, it is very likely that the Fed will step in and either buy even more Bonds and/or institute some sort of Yield Curve Control (YCC) to pin down long-term rates.
The Fed wants to further stimulate the economy by giving more and more people the ability to refinance or purchase a home, and much higher rates would prevent those efforts.
Bottom line: Rates are just above all-time lows, and as we are already starting to see, they may not be for long.
Last Week in Review: Europe Pain is Bonds Gain
U.S. Bond Market = Safe Haven
Last week, investment dollars around the globe flooded into the U.S. Treasury market as a “safe haven” against growing uncertainty in Europe. Germany, France, and other European countries are seeing record levels of COVID-19 cases and have to decide on if and how to shut down parts of their economy.
At the same time, the European Central Bank (ECB) has not yet shown the willingness to add even more stimulus.
As a result of these bad times in Europe, Bond yields fell further into negative territory with the German 10-year Bund yield falling to -.64%, the lowest since March, and near all-time lows.
The decline in European Bond yields pressured our Treasury yields lower, from .79% on Monday to .69% on Thursday.
Not All Bonds Are Created Equal
The decline in Treasuries doesn’t mean lower home loan rates. Home loan rates come from the pricing of mortgage-backed securities — which didn’t improve this week along with Treasuries — so mortgage rates didn’t improve either.
It’s Not All Bad and Uncertain
Despite the growing uncertainty abroad, here in the U.S., we continue to see solid economic reports, strong consumer spending, and corporate earnings. And on top of that, a large stimulus package is coming. Along with a stimulus package comes three things Bonds don’t like:
- Added supply of Treasury notes and Bonds to be sold
- Increased inflation fears
- Aid to the U.S. economy
Bottom line: Rates are at all-time lows and may not be here for long.
Last Week in Review: Interest Rate Outlook – Three Things to Follow
Three Things to Follow
Home loan rates remain right at historic lows fueling unprecedented refinance activity and driving purchase demand. Many are asking: how long will the good times last? Could rates move another leg lower? What’s next for rates?
Here are three things to follow:
1) Don’t Fight the Fed
The Federal Reserve, under the leadership of Chairman Jerome Powell, has been a main driver of low home loan rates. In addition to holding the overnight Fed Funds Rate at 0% for what is likely a couple of years, the Fed continues to purchase both Treasury and mortgage-backed securities to the tune of $120 billion per month.
The Fed deserves all of the credit for stabilizing the Mortgage Bond market when COVID-19 hit and for their continued buying support which has pushed home loan rates to historic lows.
The good news for rates is that the Fed recently said, if necessary, that they would purchase even more Bonds to help pin down home loan rates to support the economic recovery.
2) More Fiscal Stimulus on the Way
This past week, President Trump called off negotiations for a larger stimulus bill until after the election and asked Congress to agree on a “targeted” stimulus package to help airlines, restore PPP, direct checks, and more. At the moment, there is hope and speculation of a “slimmer” stimulus package.
One way or another, we should expect more stimulus and likely a lot more depending on who wins the election and what Congress will look like.
Fiscal stimulus, and a lot of it, may be too much of a good thing and actually pressure home loan rates higher over time. How?
- The Treasury will have to sell even more notes and Bonds at auction to pay for the additional stimulus. Currently, home loan rates and Treasury price gains have been capped due to the already overwhelming supply of Treasuries being sold at auction each week. Adding more supply through more stimulus will put further upward pressure on rates.
- More stimulus elevates inflation expectations. Inflation is the archenemy of interest rates. If inflation rises, rates rise.
- Stimulus is an aid to the economy. It will help economic growth in many ways, which is good news. Bonds and rates don’t like good news.
3) Back to the 80s
Watch .79% on the 10-year Note yield as it traded near that level this past week. This is a key resistance level that has kept a lid on rates. We have only seen the yield close at or above .79% four times since March.
If the 10-year yield moves up and into the .80%s, mortgage-backed securities will likely be pressured lower, with home loan rates moving higher.
Bottom line: Rates are at all-time lows and may not be here for long.
Last Week in Review: Markets Enter the Great Unknown
COVID-19 Hits the White House
Last Friday morning, President Trump and the First Lady tested positive for COVID-19. The news shocked the financial markets around the globe, with global Stocks declining in response to the uncertainty. The news adds the potential for large market swings as we approach the general election in just a few weeks.
Stimulus or No Stimulus
Another big story to follow as it relates to the economy and financial markets is if and when Congress can agree on a fresh fiscal stimulus plan. As of last Friday, Congress has been unable to agree on a plan and this has added to the already incredible uncertainty for the financial markets. Stocks endured heavy losses in September due most in part to the political uncertainty and the lack of a new stimulus plan. Will Congress come together with a large plan to help the economy recover further? If so, how much? And when? These are the questions the financial markets are looking to have answered.
Bright Outlook for Housing
This past week, Pending Home Sales, a forward-looking view on housing, showed the highest reading since 2006. The demand for housing is very strong and the confidence required for individuals to purchase a home cannot be understated. There’s a lot of optimism in the housing sector and the tailwinds of low mortgage rates, an improving economy, and continued improvement in the labor market should fuel housing for the foreseeable future.
Back to Work
Low rates are wonderful, and it’s a major driver of housing and will likely be for quite some time. However, if you don’t have a job, you can’t pay a mortgage. The good news is that jobs continue to return. The September Jobs Report, reported this Friday, showed the unemployment rate at 7.9%, a major improvement from the 14.7% seen in the darkest moments of COVID-19 back in April. We should expect continued improvement in the labor market as states continue to re-open and heavily impacted sectors of our economy — such as travel, leisure, and hospitality — attempt to recover. As mentioned, housing will continue to benefit from the improved conditions.
Bottom line: Rates are at all-time lows and even though a fourth stimulus package is up in the air, we are hopeful it will happen. And if a package is agreed upon, it will likely be good for Stocks and bad for Bonds as it brings even more supply and inflation fears.
Last Week in Review: Uncertainty Takes Over the Markets
Fiscal stimulus refers to policy measures undertaken by a government that typically reduce taxes or regulations and increase government spending in order to boost economic activity.
This past week, both Fed Chair Powell and Treasury Secretary Mnuchin called for more “fiscal stimulus” to help millions of Americans still in need.
The Fed has injected plenty of “monetary stimulus” by holding short-term rates at zero and buying Bonds, like Mortgage Bonds, to help keep long-term rates low. One problem is that many Americans can’t benefit from taking out a business loan if they can’t pay it back — hence, why more fiscal stimulus is needed.
Congress can never seem to work together on behalf of the American people and when the Fed called out Congress for more at its Fed Meeting a little over a week ago, it seemed like something might happen.
But then the passing of Ruth Bader Ginsburg elevated political uncertainty to an extreme and seemingly removed any political will to see a new stimulus package prior to the election.
Adding to the uncertainty are renewed fears of another surge in coronavirus cases this fall and winter, like we are seeing in other parts of the globe, such as Europe.
Stocks and Rates Don’t Always Move in Tandem
September has been an awful month for Stocks with all market indices in a 10% correction or close. Normally, such a swift decline in Stocks would provide even better rates, but home loan rates actually ticked higher.
Supply and Inflation Fears
The Treasury sold $155 billion in securities this week, which weighed on the entire Bond market and limited the gains in price and rate. And ever since the Fed altered their approach towards inflation in late August, long-term rates like mortgages stopped improving and actually ticked higher.
Housing Continues to Shine
August New Home Sales came in at a 1.011 million annual rate — the best reading since 2006. The overwhelming demand for new homes, fueled by low rates, should continue for the foreseeable future.
Bottom line: Rates are at all-time lows and even though a fourth stimulus package doesn’t appear likely at the moment, sometimes Congress can surprise us. And if they come to an agreement, it will likely be good for Stocks and bad for Bonds as it brings even more supply and inflation fears.
Last Week in Review: The Fed Spoke, the Markets Reacted
Last Wednesday, the Federal Reserve issued its Monetary Policy Statement and held a press conference.
An unofficial mandate for the Fed is to maintain “market calm” and not say anything to roil either Stocks or Bonds. Overall, the Fed statement and press conference were extremely “dovish” — meaning they still want loose monetary policy to help stimulate the economy.
And of course, there was no change to rates. In fact, the Fed has forecasted no hikes to the overnight Fed Funds Rate until 2024 or later.
Normally, both Stocks and Bonds would like such a backdrop. However, since Fed day, both Stocks and rates have dropped. What happened?
Bonds Love Uncertainty — Stocks Hate it
Fed Chair Powell said, “More fiscal support is likely needed”, which means the Fed can’t support the “highly uncertain” economy by itself.
Translation: “Congress needs to come together quickly and agree on a fourth stimulus package to help the many people still in need.”
The markets took this as a real problem in the short-term, as Congress has been unwilling to agree on a new package up until now.
Stocks have enjoyed incredible gains since the early summer and are using this “uncertain” opportunity to sell off, with Bonds and rates being the beneficiary.
Bottom line: Rates are at all-time lows, this new uncertainty of a fourth stimulus package could be short-lived, and this modest improvement caused by the uncertainty could quickly evaporate.
The Last Week in Review: Good, Bad, and Ugly Before the Fed
Last week, home loan rates hit all-time low levels despite progress and optimism on a vaccine, the economy, and the job market.
A continued tailwind for relatively low rates comes from the Eurozone, where their central bank, the ECB, left rates unchanged and refrained from adding more stimulus, despite very low inflation. This means rates in Europe, which are negative in most places, will remain lower for longer and that will help keep our rates relatively low as well.
‘Too much of a good thing.’ The Treasury, in an effort to fund the government and pay for the enormous stimulus measures, had to sell $108 billion in Treasuries this past week. The buying demand for these new Bonds and notes was tepid. This applied upward rate pressure on the entire U.S. Bond market and limited the gains.
What will make the buying demand in auctions increase? Higher yields/rates or worse economic conditions, so that today’s low rates make for a relatively sound investment.
Volatility is back in Stocks. The NASDAQ lost over 10% in a 3-day span last week. Fortunately, Stocks were able to cover some of the losses before heading into the weekend.
The takeaway: Typically, when Stocks drop sharply, so do rates. That did not happen last week.
Bottom line: The backdrop for housing could not be better.
The Carrington Mortgage Services, LLC (CMS) Lock Desk will be closed on Monday, September 7, 2020 for Labor Day, which is a Federal Holiday. Normal lock hours will resume on Tuesday, September 8, 2020.
Additionally, the Lock Desk will close early on Friday, September 4, 2020 at 11:00 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, September 7, 2020 cannot be included in the rescission period for refinance transactions.
- Monday, September 7, 2020 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, September 7, 2020 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, September 7, 2020 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 email@example.com.
Please contact your Account Executive or Account Manager with any questions.
Carrington thanks you for your business.
Last Week In Review: Markets Talking About Jackson
This past week, the Jackson Hole Economic Symposium took place. This annual event which started back in 1981 is attended by central bankers, finance ministers, and other officials from around the globe, to discuss and deliver speeches on important economic issues facing worldwide economies.
History has shown this event to deliver market-moving comments and major Fed policy announcements. And this past Thursday, the event didn’t disappoint.
Fed Announced Big Changes at Jackson Hole
First, let’s remember the Fed’s role. The Fed has a dual mandate of promoting maximum employment and price stability. Currently, unemployment is too high at 10.2%, and inflation — as defined by the Fed’s favorite gauge, Core PCE — is too low at 1.3%.
On Thursday, Fed Chairman Jerome Powell announced a major policy shift to help lift inflation, promote job growth, and make it very clear to the financial markets that rates will remain lower for longer.
The Fed is going to remove its 2% target for inflation and allow inflation to drift higher and remain there for some time before hiking rates.
In addition to allowing inflation to rise, the Fed will also allow the labor market to run “hotter” and create even more jobs before considering a rate hike.
This major policy change is the exact opposite of how the Fed previously addressed inflation and improving economic conditions, with frequent rate hikes “before” inflation and the labor market heated up.
What Does the Fed’s Move Mean?
First, it means that the Fed is not likely to hike the Fed Funds Rate for years. So, short term rates like auto loans, home equity lines of credit, and credit cards will remain near current levels for quite some time. Savings accounts will also offer no meaningful interest for savers.
Next, if inflation rises like the Fed wants, home loan rates will rise — period. Inflation is the tide that raises all boats. The good news: Inflation is currently very low and that’s what’s keeping home loan rates near all-time lows … for now.
The Opportunity for Homeowners
Finally, would-be homeowners would be wise to take advantage of current mortgage rates and low inflation because if both rise, you want to be an owner and not a renter of real estate.
In an era of higher inflation and a “hot” labor market, which is what the Fed wants, wages and prices go up. One would want to lock in a mortgage at current rates and make that fixed payment with rising wages over time. Renters will be paying higher rent with higher wages.
One last benefit is that real estate is a real asset and a great hedge on inflation as home prices climb even faster with rising inflation.
Next week, we will get to see important labor market readings with the ADP and the August Jobs Report. With over 16 million Americans unemployed, a lot of work still has to be done to get unemployment to where it was in February, pre-COVID-19.