As the headline suggests, the Fed purchases of Mortgage-Backed Securities came to a screeching halt on Wednesday. The only surprise to me was that the market didn't "bake in" the known-certain drop off in demand prior to the actual date. Sure enough, on Wednesday the markets dropped precipitously as the chart at the right shows
So what was the effect on residential 30-year mortgages? You can see the long red tail has taken us into territory close to lows for the year. Remember that this chart reflects supply and demand pricing for MBS, lower prices means higher yields and higher interest rates on loans. By Friday, rates for Signet Mortgage lenders conforming 30-yr fixed were at 5.00% for the price of an origination. Today's opening has us very near 5.125% for the same.
We have become spoiled to look for rates with a 4 on front. When was that ever the norm? 5 and even 6% interest rates are still a fantastic deal for 30 year money. And for your friends and clients that have a specific time plan for being in a home for perhaps 5 years, they would do well to explore with us the adjustable programs that are locked for 5 years with current rates of 3.625% for the price of an origination. That's right 3.625%; fully 1.50% below the 30-year fixed rates.
It wasn't all Fed purchase drop off that opened the door to the rate spike. The green bar on Friday went both directions before settling at about its starting point is a reaction to the unemployment and jobs numbers. Initial reaction was that jobs numbers were improving and what is good for the economy (better jobs) is bad for potential inflation. Ultimately, the reality of weak employment reflected in still-increasing underemployment numbers held on and the MBS buyers drew more comfort and started buying again into the green area.
On the commercial lending front, Congress has a bill well underway to finally implement a couple of the SBA loan program expansions we have talked about. They previously extended temporarily the fee waiver for 504 and 7(a) programs. The next step will be extending those waivers to the end of the year AND expanding the programs by
- Allowing commercial loan guarantees to $5 million per borrower (up from $2m), and
- Allowing 504 lending to refinance properties (a real boon with its 90% LTVs and decreasing property values.)
We will get another notification out on the status of that legislation this week. In the meantime, let your friends, clients and relatives know that you know someone with the answers in the lending world. We will insure they receive the treatment you and they deserve. These days, more than ever, experience counts! Make it a great week!
Comments(0)