• Louis Baca

December Market Update

MORTGAGE RATES REMAIN LOW – FOR HOW LONG Long term mortgage rates, on average, have remained below 3.0% for seventeen consecutive weeks, per a recent Black Knight report. The same report states that 19.4 million homeowners could still benefit from a home loan refinance.

Black Knight’s report views prime candidates as 30-year mortgage-holders who have at least 20% equity in their homes, credit scores of 720 or higher, are current on their payments and who stand to cut their first lien rates at least 0.75% by refinancing. –

How long will mortgage rates stay at near historic lows? The market is desperate for positive economic news. The announcement of multiple viable COVID-19 vaccines sent rates higher for a hot minute, but soaring COVID-19 cases and a contested election is causing market strain, keeping rates mostly flat. Once Trump concedes, and the vaccine enters wide distribution, long term interest rates are anticipated to climb. END TO EMERGENCY LENDING On November 19th, Treasury Secretary Steven Mnuchin stated that no emergency lending program be extended beyond December 31st and requested that the Fed return $195 billion initially appropriated for emergency spending. These funds have been used to keep tens of thousands of businesses alive amid the pandemic.

“The Federal Reserve facilities…have clearly achieved their objective,” Mnuchin said in his letter. “Banks have the lending capacity to meet the borrowing needs of their corporate, municipal, and nonprofit clients.

The Fed is in opposition to the Treasury Secretary’s request. “would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.”

President Elect Joe Biden may restart such programs in late January once in office, but the delayed transition and end of emergency lending will further add to the strain of returning the economy to some sense of normalcy. WHEN WILL WE FUND? The average homeowner likely has little concept of just how big of a mortgage boom the country is currently in; that is until they apply for a mortgage. Prior to March, a well-run mortgage company could close home loans in 2-3 weeks. In response to the pandemic, the Treasury started purchasing mortgage backed securities at an unprecedented rate, driving mortgage rates down to historic lows, spurring a frenzy of refinances and purchase transactions. The mortgage industry only has a fixed number of underwriters, processors, closers, funders, etc. There only so many appraisers, escrow officers, etc. These critical parties of a mortgage transaction are not grown on trees. There simply are not enough people to manufacture all the loan volume in a timely fashion.

From September to October, the average time to close all loans increased from 51 to 54 days, with the average time to close a refinance increasing from 54 to 57 days and the average time for a purchase climbing one day to 48 days. That’s a little more than 6 weeks for people trying to move into a house. – Ellie Mae

For mortgage companies with more competitive rates (i.e. higher volumes), or those with fewer resources, turn times can get much longer.

The silver lining, the closing may take a bit longer, but borrowers are capitalizing on rates never seen before, and maybe not again. 2020 is a year for patience and a lot of buying power.

QUALIFIED MORTGAGE PATCH In October, Kathy Kraninger, the Director of the CFPB announced that the Qualified Mortgage Patch set to expire in January of 2021, will be extended. This is a huge win for the mortgage industry and borrowers alike.

Had the QM Patch expired without a remedy, 30%+ of all borrowers that can currently qualify for a home loan would have been ineligible, due to the tightening of debt-to-income guideline restrictions. This would have shuttered the economic recovery and took the wind out of the hot housing market.

The fate of the QM Patch now falls on a new administration, who will address this, and the end of conservatorship of Fannie and Freddie.

FORBEARANCE UPDATE 6.81% of all mortgages are in forbearance. Roughly 3.4 million homeowners are currently in forbearance.

About 29% of total loans in forbearance are in the initial plan stage, while 70% are in a forbearance extension, MBA said. The remaining 1.4% are forbearance re-entries, the report said. - MBA

Today, 7.73% of loans backed by Ginnie Mae are in forbearance. 3.35% of loans backed by Fannie Mae and Freddie Mac are in forbearance. Approximately 30% of those on a forbearance plan are current on their mortgage payments.

Forbearance is not forever, so 3.4 million homeowners will have to find a way out of hardship soon, or the country could see a sharp spike in foreclosures. 2021 CONFORMING LOAN LIMIT INCREASE FHFA announced that the conforming loan limits in 2021 will increase to $548,250, from $510,400. Conforming loan amounts generally have lower interest rates and less restrictive guidelines than home loans with non-conforming loan amounts (i.e. jumbo mortgages). FORECLOSURE PURCHASES ON THE RISE released a report showing a 24% increase in September of completed foreclosure sales; landing at a seven-year high. estimates that foreclosures will exceed 1.1 million by the second quarter of 2021. – It is worth noting, that most distressed housing in 2020 has been protected from foreclosure by the CARES Act. The record foreclosure sales are vacant homes, not protected by the CARES Act.

FIRST WOMAN TREASURY SECRETARY President Elect Biden has appointed former Fed Chairwoman Janet Yellen to be the next Treasury Secretary, the first woman to hold that position in US history. In 2018, Trump replaced Yellen as the head the Fed with Jerome Powell. DOW HITS 30,000 On November 24, 2020, the Dow Jones hit 30,000 for the first time in U.S. history. A remarkable milestone to hit during a global pandemic, a recession, as well as during a contested presidency. The market extended its Tuesday morning gains after President Trump stated that aids would begin to work with the incoming Biden administration, easing uncertainty with the markets. SOARING HOME PRICES The recent S&P Case-Shiller report shows home prices rose 7% in September over the same period last year. The biggest year over year gain in six years. “Home prices are normally sticky, meaning that they often take a while to respond to market shifts,” said Matthew Speakman, economist at Zillow. “These elevated levels of market competition have been placing upward pressure on prices for months, but home prices have just recently begun to take off in earnest. Some measures show home prices now growing at a faster pace than they ever have.” –

Phoenix, Arizona lead the rise in home prices posting an 11.4% gain. Seattle, Washington came in at second place with a 10.1% gain. Home prices show no sign of slowing, fueled by historic low interest rates, diminishing inventory, and not deterred by a global pandemic. HOME SALES STAY STRONG New home sales were down a slight 0.3% in October over September, but up a colossal 41.5% higher than the same time last year. – Department of Housing and Urban Development. The surge in home sales has left a bleak 3.3-month supply of home inventory. The average home price $386,200. NAR UNDER ATTACK BY THE DOJ In November, the Department of Justice (DOJ) filed a lawsuit against the National Association of Realtors (NAR) for violating antitrust laws.

NAR has adopted a “series of rules, policies, and practices governing, among other things, the publication and marketing of real estate, real estate broker commissions, as well as real estate broker access to lockboxes, that have been widely adopted by NAR’s members resulting in a lessening of competition among real estate brokers to the detriment of American home buyers,” the DOJ said in a news release on Thursday. “prohibiting NAR-affiliated multiple-listing services (“MLSs”) from disclosing to prospective buyers the amount of commission that the buyer broker will earn if the buyer purchases a home listed on the MLS; allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free; enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered and to exclude homes with lower commissions from consideration by potential home buyers; and limiting access to the lockboxes that provide licensed brokers with physical access to a home that is for sale to only brokers who are members of a NAR-affiliated MLS.“ Because the practices have been widely adopted by NAR-affiliated MLS networks, they are “therefore, agreements among competing real estate brokers each of which reduce price competition among brokers and lead to lower quality service for American home buyers and sellers,” the complaint alleged. “Buying a home is one of life’s biggest and most important financial decisions,” said Assistant Attorney General Makan Delrahim in a statement. “Homebuyers and sellers should be aware of all the broker fees they are paying. Today’s settlement prevents traditional brokers from impeding competition — including by internet-based methods of home buying and selling — by providing greater transparency to consumers about broker fees. This will increase price competition among brokers and lead to a better quality of services for American home buyers and sellers.” –

NAR has admitted no wrongdoing. The outcome of the lawsuit has the potential to forever change how the majority of homes are sold in the US, and how real estate agents and their companies receive compensation.

U.S. NATIONAL DEBT $27.28 Trillion and climbing. The Congressional Budget Office reports that the US Debt will exceed total US GDP by the end of 2020. The CBO predicts the largest deficit as a percentage of GDP since 1945. Prior to the pandemic, the deficit was inflated due to the 2017 corporate tax cuts.

Interest rates as of 11/30/2020. Conforming interest rates. Interest rates and APR based on loan amount not to exceed $548,250. Loan to value not to exceed 80%. 740+ credit score. Owner-occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote. GENEVA FINANCIAL, LLC NOW LICENSED IN 43 STATES Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, Washington D.C. & Wisconsin

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