While the Economy is Falling, Home Prices Keep Rising. Here’s why.

National Association of Realtor's (NAR) existing home sales report for April 2020 reported that the Median Sales Price rose a staggering 7.4% year-on-year. April's increase marks 98 straight months of year-on-year increase. Even a more recent data (for the week ending May 15, 2020) from Altos Research shows that the Median Sales Price is still increasing. This, when 38 million Americans have lost their jobs and the unemployment rate is at the highest levels since the Great Depression of 1933, mostly due to Covid-19 pandemic (see chart below). It seems that all the…continue reading →

As Lending Standards Tighten, Mortgage Credit Availability Index Drops to a 5-year Low

Mortgage Bankers Association (MBA) after analyzing data from Ellie Mae's AllRegs® Market Clarity® business information tool reported that the Mortgage Credit Availability Index (MCAI) in April dropped to the lowest level since December 2014. The decline is MCAI shows the tightening of lending standards showing decreased availability of mortgages for potential borrowers. The MCAI index fell by 12.2% to an index of 133.5. The rate of decline in the last 2 months is the sharpest in over a decade. As evidenced by the chart below, the MCAI fell for every product category. The…continue reading →

Getting a Mortgage has suddenly become Hard (and about to get even Harder)

Mortgage credit supply decreased 16 percent in March to the lowest level since June 2015, with declines in availability across all loan types. There was a reduction in the availability of loans with lower credit scores and higher LTV ratios, and the largest pullback came from the jumbo and non-QM space. With the mortgage market shaken badly by the Coronavirus pandemic, both purchasing and refinance loans have become harder to get. JP Morgan believes that at 10% unemployment, we may be looking at 2 million new mortgage delinquencies. The number could go up…continue reading →

How does the Mortgage Payment Forbearance Plan work?

The CARES Act is a law now.  In place of a series of whack-a-mole moves, the administration has come up with the Mjolnir this soon in the battle. Instant aggression! Good approach!  To prevent the Coronavirus pandemic genie from coming out of the bottle, the $2 trillion stimulus bill from the government sounds like a plan. The big headline for the home mortgage industry is the loan forbearance plan made available to the borrowers on all the government-backed mortgages. By uttering nearly as little as I CAN’T PAY, borrowers can forgo mortgage payments…continue reading →

Ignoring Fed’s Moves, Mortgage Rates Climb to the Highest Levels in Nearly a Year

In 2008 Mortgage Industry largely caused the crisis that led to the Great Recession, in 2020 it's a mere innocent bystander that is getting beat. All kinds of asset markets (Mortgage Bonds, Treasurys, Stocks, even Oil, and Commodities) are in an unprecedented, unchartered territory where the traders have no clue what to do with them. Let's look at some numbers just in the last two weeks: VIX, which measures the volatility in the stock markets, rose from 13 to 75 (100 being the most volatile)The S&P 500 has dropped ~25%Oil prices have fallen…continue reading →

Breaking Down the Fed Announcement and its Impact on Mortgage Rates

Federal Reserve cuts rates to zero and launches a massive $700 billion quantitative easing program The Fed on Sunday said it will begin buying $200 billion of mortgage-backed bonds, a move that will stabilize and likely lower mortgage rates, which moved sharply higher last week. Fed also lowered the Funds rate to zero. So, when can you see a 0% rate on the mortgage statement? Probably - never. And that is because the Fed Funds rate has pretty much nothing to do with mortgage rates. This blog that I published last week goes…continue reading →

Mortgage Rates Jump 0.25% even as Fed cuts Rates and Treasurys Tumble

Mortgage rates went from ridiculously low to not-so-bad in just over a week. Everything that the media thinks should have happened to keep it at the ridiculously low level did happen. Fed cut rates by half a percent. Treasurys tumbled to levels never seen before and the stock market crashed to a point where the Dow officially entered the bear market, ending the 11-year run in the bull market territory. Given all this, mortgage rates should have fallen more. Instead, it climbed 0.25% in the last couple of days. What happened here? Let's…continue reading →

Mortgage Rate Recap and Outlook for the Week Ending February 21, 2020

The speed of residential construction has shot up over the past few months and is well in line to reach its best figures in over a decade. For a market that has been short on inventory for some time now, this is great news, especially with the spring season already calling on us. Mortgage Rates: rates increase all around This week’s Mortgage Banking Associations’ (MBA) weekly rate survey reveals an increase across the board. According to the MBA Weekly Survey: “The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 3.77 percent…continue reading →

Mortgage Rate Recap and Outlook for the Week Ending January 31, 2020

The mortgage market had reacted favorably to the Coronavirus threat. Now that the trend is reversing, we may see a partial correction in the mortgage market. It is nothing new. Global threats that loom suddenly bring about economic movements with it and just as soon as the threats disappear, the money movement returns to its initial levels. The refinancing activity and demand for homes are on a move in the meantime, buoyed by near-record interest rate levels. Mortgage Rates: rates decrease all around This week’s Mortgage Banking Associations’ (MBA) weekly rate survey reveals a decrease across the board.…continue reading →

The FICO 10 Suite: Will It Make Borrowing More Difficult?

Triggered by very high consumer-debt levels, markets went into a tailspin in 2008. Back then, the debt figure was $13 trillion. Status Alert:  the same figure is $14 trillion now. Fair to say, the lenders are getting a little fidgety. It is true that the demons of recession aren’t giving them nightmares yet but the lending fraternity knows that the phase of expansion can’t last eternally and that the USA might feel the pinch someday if generous (and fingers-crossed kind of) lending continues. FICO Score 10 Suite It is in this context that…continue reading →