Average U.S. 30-year mortgage rate rises from all-time low


Average mortgage rates for a 30-year fixed mortgage increased slightly to 2.87% this week, the second-lowest on record, rising one basis point from last week’s all-time low of 2.86%, while the less-popular 15-year rate fell to a new low of 2.35%, Freddie Mac said on Thursday.

The 30-year rate has broken records nine times since March because of a Federal Reserve bond-buying program that has poured about $1 trillion into the mortgage markets. The central bank resurrected a program it first used during the financial crisis a dozen years ago to create competition for bonds and cause the yields that influence mortgage rates to shrink.

The Fed issued a statement on Wednesday after the end of a two-day meeting that said it would likely keep its benchmark overnight lending rate near zero through 2023, and would continue purchasing mortgage-backed securities “at least at its current pace” for as long as necessary.

Mortgage lending volume this year is likely to break records as homeowners refinance and new buyers scramble to take advantage of some of the cheapest financing costs history, Fannie Mae said in a forecast on Tuesday.

Originations this year are expected to reach an all-time high of $3.9 trillion, boosted by $2.4 trillion in refinancings, the highest level since 2003 and more than double the volume seen in 2019, the mortgage giant said.

“We continue to believe that a low-rate environment will support refinance demand over the forecast horizon,” Fannie Mae said in the forecast. “At the current interest rate of 2.86%, we estimate that nearly 69% of outstanding first-lien loan balances have at least a half-percentage point incentive to refinance.”

The annual average U.S. rate for a 30-year fixed mortgage will be 3.1% in 2020 and 2.7% in 2021, the forecast said, matching Fannie Mae’s prior monthly projection. Both would be the lowest annual averages on record.



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Mortgage forbearances drop 22% from May peak


There are 3.7 million U.S. homeowners with mortgages in forbearance this week, down 22% from May’s peak of 4.7 million, Black Knight said in a report on Friday.

The total weekly drop was 66,000 loans, a slower pace than the decline of 150,000 in the prior week, the report said. Measured as a share of all mortgages, 7% of home loans are in forbearance, down from 7.1% in the prior week, Black Knight said.

The forbearances rate for mortgages backed by Fannie Mae and Freddie Mac, known as government-sponsored enterprises, is 5% this week, down from 5.1% last week, the report said.

The rate for home loans in Ginnie Mae securities, primarily mortgages backed by the Federal Housing Administration or the Veterans Administration, is 11.3%, down from 11.5%. The forbearance share for mortgages held in bank portfolios or in private-label bonds is 7.4%, down from 7.5%.

“We’re seeing a bifurcation in the numbers, with GSE forbearances lower than the rates for the Ginnie space and the private-label space,” said Walt Schmidt, FTN Financial’s head of mortgage strategy.

The overall number of mortgages in forbearance has dropped as the jobs market gained, Schmidt said.

The unemployment rate in August was 8.4%, the lowest level since March. In April, the rate reached 14.7%, the highest in a Labor Department data series that goes back to 1948.

While the economy has added 10.6 million jobs since April, it’s not even halfway toward replacing the 22.2 million jobs lost between February and March, according to government data.

Most economists are predicting the soft jobs market will persist into 2021. Fannie Mae Chief Economist Doug Duncan forecasts the unemployment rate will average 8.8% in 2020 and 7.1% next year.

The CARES Act passed by Congress at the end of March gave mortgage borrowers the option of suspending their monthly payments for up to 12 months because of the pandemic. Borrowers just have to attest to their mortgage servicer that they have experienced a financial loss because of the health crisis.



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Average U.S. mortgage rates rise from record low


Average U.S. mortgage rates for a 30-year fixed rose to 2.96% this week from an all-time low of 2.88%, Freddie Mac said in a report on Thursday.

The average 15-year rate rose to 2.46% from 2.44% last week, according to the mortgage financier.

“Even with this week’s uptick, very low rates are providing a significant boost to the housing market that continues to hold up well during this time of uncertainty,” said Sam Khater, Freddie Mac’s chief economist.

Mortgage rates have tumbled during the COVID-19 pandemic, bolstered by Federal Reserve purchases of Treasuries and mortgage-backed securities.

U.S. existing-home sales rose 21% in June, the biggest monthly gain on record, and the median home price rose 3.5% from a year ago, the National Association of Realtors said in a July 22 report.

Cheaper interest rates are making more Americans eligible to purchase a home because lenders qualify applicants by comparing monthly mortgage payments to income. When financing costs go down the payment shrinks. That also means borrowers find they qualify for larger mortgages, which means they can pay more for a property they want.

“Homebuyer demand remains strong, especially for those in search of an entry-level home where the improvement in affordability via lower mortgage rates has a material impact,” said Khater.

Rates are expected to remain low through 2021 as the U.S. struggles with the economic fallout from the pandemic, according to a forecast from Fannie Mae.

The average 30-year fixed rate likely will be 3.2% this year and fall to 2.8% in 2021, the mortgage giant said in a forecast last month. In 2019, the average rate was 3.9%.



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Fannie gets CICERO certification for its single-family green bonds


Fannie Mae, the largest issuer of green bonds in the world, said on Monday it received certification from CICERO Shades of Green for its mortgage-backed securities that are the first containing loans backed by single-family homes that are energy efficient.

Fannie Mae has issued over $40 million of the MBS since the first bond was created on April 22 to commemorate the 50th anniversary of Earth Day, the company said in a statement. The bonds contain mortgages backed by newly constructed single-family homes with ENERGY STAR certification.

On average, the homes backing the loans in the MBS are 20% more efficient than single-family homes built to code, Fannie Mae said.

“We’ve heard from investors that there is greater demand than there ever has been for investments that are socially responsible,” said Renee Schultz, Fannie Mae’s senior vice president of capital markets.

In the multifamily market, Fannie Mae has issued $75 billion of green MBS since 2010 backed by either green-certified properties or properties targeting a reduction in energy or water consumption, the company said.

Before April, “we hadn’t really carved out something like that in the single-family space,” Schultz said. “This is the first step in that direction, and this is just the beginning.”

The mortgages carry the same interest rates as loans that aren’t backing energy-efficient homes, she said.

“It would be great if there was so much demand on the investor side” that rates in the future could be lower than non-green mortgages, she said.

So far, the bonds have contained mortgages originated by the lending units of D.R. Horton and Lennar, two of the nation’s largest homebuilders. But Fannie Mae plans on expanding, Schultz said.

In addition to meeting investor demand, there is a growing interest among homeowners for energy-efficient homes, said Chrissa Pagitsas, a Fannie Mae vice president.

“We’re all spending more time at home now,” Pagitsas said. “This is really about a homeowner buying a home that’s going to work best for them at a lower cost.”



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Tappable home equity rises to record $6.5 trillion


Tappable home equity, meaning the equity homeowners could borrow against while leaving a 20% buffer, rose to a record $6.5 trillion in the first quarter, Black Knight said in a report on Monday.

More than 75% of homeowners with tappable equity have interest rates above 3.5%, the report said. With rates currently near 3%, the amount they would save each monthly likely would outweigh the cost of the transaction, the report said.

While cash-out refis might provide support to the economy in the future, as people tap equity to renovate homes or pay down credit cards, the levels have fallen this year, the report said.

“Driven by record-low 30-year mortgage rates, the first quarter saw overall refinance lending climb to a 7-year high,” the report said. “At the same time, the number of cash-out refinances, as well as the dollar value of equity withdrawn via refinance, fell for the first time since early 2019.”

Cash-outs accounted for 42% of refinance loans in the first quarter, the lowest share in four years, the report said. The $38.7 billion in equity withdrawn via cash-out refis was down 8% from the prior quarter.

Rising home prices have increased the equity Americans have in their properties. Home values are based on what comparable properties in the neighborhood sell for, so even if homeowners aren’t thinking of putting a property on the market, it increases their equity when nearby homes sell at high prices.

The median price of an existing home rose 4.9% in 2018 and 2019, according to the National Association of Realtors. It probably will increase 3.6% this year, the group said in a forecast on Monday.



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Mortgage rates remain at all-time low


The average U.S. rate for a 30-year fixed mortgage this week is 3.13%, matching last week’s rate that was the lowest on record, according to Freddie Mac.

Mortgage rates remained at the record low as the three most populous U.S. states – California, Texas and Florida – hit new highs for COVID-19 infections, driving money managers to seek fixed-income investments like mortgage bonds in a “flight to safety,” said Keith Gumbinger, vice president of mortgage-data firm HSH.com.

“With the rising incidents of COVID-19 in some states, there’s definitely a little bit of a shift to safety, a shift into bonds as investors wait to see how the story unfolds,” Gumbinger said.

Low mortgage rates have been a bright spot in the U.S. economy since the Federal Reserve stepped into the bond market in March and began buying fixed assets to boost competition and shrink yields. Fed Chairman Jerome Powell has pledged to keep purchasing Treasuries and mortgage bonds for as long as support is needed.

The low interest rates have helped to support home prices. When rates are cheaper, the size of the mortgage borrowers can get becomes bigger because monthly payments shrink as financing costs go lower. That means people can bid higher for a home they like.

Prices for homes in April that were bought with mortgages backed by Fannie Mae and Freddie Mac increased 5.5% from a year earlier, which matched the annual gain seen in April 2019, long before the pandemic emerged.

Rates aren’t expected to jump any time soon. Fannie Mae, the larger rival to Freddie Mac, said in a forecast earlier this month that the average 30-year fixed rate for 2020 probably will be 3.2%, down from 2019’s 3.9%. This would be the lowest annual average ever recorded. For 2021, Fannie Mae said it expects the average rate to drop to 2.9%.



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Jumbo mortgage rates are near record lows, but can you get one?


Jumbo mortgage rates are near record lows, but there’s a catch for borrowers looking for home loans above the amount Fannie Mae and Freddie Mac will guarantee: It hasn’t been this tough to get a jumbo in four years.

Jumbo lenders like Chase and Wells Fargo beefed-up their standards when the economy began crumbling in mid-March and some stopped funding the home loans that exceed the amount the government will back, usually those above $510,400.

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Mortgage rates tumble to another all-time low


Mortgage rates in the U.S. tumbled to another all-time low this week as bond investors reacted to reports showing the economy is struggling amid the COVID-19 pandemic.

The average rate for a 30-year fixed mortgage was 3.13%, down from 3.21% last week, Freddie Mac said in a statement Thursday. It was the second time in two weeks the rate set a new low in a data series that goes back to 1971. The average 15-year rate fell to 2.58%, the lowest in seven years, according to the mortgage financier.

Bond yields, used as a benchmark for mortgage investors, fell sharply last week as investors reacted to news that COVID-19 infections reached record highs in more than half a dozen U.S. states, erasing optimism from the prior week that the nation would recover quickly from the economic contraction the virus caused.

In addition, testimony from Federal Reserve Chairman Jerome Powell to Congress on Tuesday and Wednesday gave a bleak outlook for the economy, adding to the statements he made last week after the Federal Open Market Committee kept its rate near zero.

“The rising incidence of virus is definitely adding more caution to the market, and the Fed had some things to say about the economy that wasn’t encouraging,” said Keith Gumbinger, vice president of HSH.com. “Those two factors took the wind out of the sales of investor optimism, which put downward pressure on interest rates.”

One bright spot in the economy has been the housing market. As buyers emerge from state lockdowns, demand for properties has risen. A seasonally adjusted index measuring purchase applications for home loans jumped to an 11-year high last week, the Mortgage Bankers Association said in a Wednesday report.

“While the rebound in the economy is uneven, one segment that is exhibiting strength is the housing market,” said Sam Khater, Freddie Mac’s Chief Economist. “Purchase demand activity is up over twenty percent from a year ago, the highest since January 2009.”



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Chase now requires 700 FICO score, 20% down payment to buy a home


As the country struggles through the economic impact of the coronavirus, numerous mortgage companies have raised their lending standards to protect both borrowers and themselves. Now, one of the largest mortgage lenders in the country is joining that list.

JPMorgan Chase this week is increasing its minimum lending standards to require nearly all borrowers to have at least 20% down in order to buy a home. Beyond that, Chase is also raising its minimum FICO credit score to 700 on purchase mortgages.

Put simply, if a borrower doesn’t have a 20% down payment and a FICO score of 700 or above, they will likely not be able get a loan from Chase to buy a home. According to Chase, those lending standards also apply to refinances on non-Chase mortgages.

The bank will still move forward with refis under its previous lending standards if the loan is either serviced by Chase or in Chase’s portfolio, but for all other refis, it’s 700 FICO or look somewhere else.

It should be noted that the changes do not apply to Chase’s DreaMaker mortgage program, which makes loans available for low-to-moderate income borrowers with as little as 3% down and reduced mortgage insurance requirements.

According to Chase, the changes will allow the bank to spend more time on the loans it is working on and do the appropriate verifications to ensure the loan is the right move for all involved.

“Due to the economic uncertainty, we are making temporary changes that will allow us to more closely focus on serving our existing customers,” Chase Home Lending Chief Marketing Officer Amy Bonitatibus said in a statement.

With the changes, Chase becomes the latest lender to tighten its lending standards. Certain segments of the business, including government, non-QM, and jumbo loans, have dried up substantially as lenders pull back from loans that are seen as riskier than conventional loans. But as the crisis continues, lenders are beginning to change their conventional lending standards as well.

United Wholesale Mortgage, the second-biggest mortgage lender in the country, recently announced that it will require reverification of a borrower’s employment on the day their loan is scheduled to close. The purpose of that move is to ensure that borrowers are actually still employed when their mortgage closes.

“If people don’t have a job, I’m not going to put them in a bad position,” UWM CEO Mat Ishbia told his employees last week. “By doing this, we’re protecting borrowers, the company, and the country.”

But UWM wasn’t the only one making employment verification changes as COVID-19 pushes layoffs to record levels in the U.S. Fannie Mae and Freddie Mac recently announced that they changed the age of document requirements for most income and asset documentation from four months to two months. What that means is all income and asset documentation must be dated no more than 60 days from the date of the mortgage note.

The bottom line of all these changes is lenders are attempting to protect themselves and borrowers from getting into a mortgage that is not in the borrower’s or lender’s best interest.

And despite Chase being the biggest name to make changes like these so far, it likely won’t be the last lender to do so.

The changes to Chase’s lending policies were first reported by Reuters.



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Lenders get stricter as some borrowers think they don’t have to pay


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Standards for home loans are tightening by the hour as companies like United Wholesale Mortgage, the nation’s largest wholesale lender, beef up rules to ward off early defaults from people losing jobs because of the COVID-19 pandemic.

“I get as many as 10 emails a day from companies announcing new overlays – mostly for re-verification of employment,” said Mark Goldman, a loan officer with C2 Financial in San Diego. “All the lenders want to make sure borrowers are still working and still have cash flow.”

Almost 14 million Americans have filed for unemployment in the last two weeks after businesses were closed and workers told to stay at home by states scrambling to reduce the spread of COVID-19. That record number doesn’t include people who lost their jobs and have been unable to get through to overwhelmed state employment offices to make a benefit claim.

As lenders tightened standards, an index measuring the availability of mortgage credit in March crashed to the lowest level since June 2015, led by a pull-back in jumbo and non-QM lending, the Mortgage Bankers Association said in a Thursday report.

MBA’s Mortgage Credit Availability Index fell 16% led by a 24% plunge in jumbo and non-QM mortgages. A drop in the index means rules are stricter and mortgages are harder to get.

So far, the hit hasn’t been as bad for mortgages backed by Fannie Mae and Freddie Mac. The index measuring the availability of conforming loans dipped 2.7%.

But that doesn’t mean lenders aren’t being more careful with those loans. Many now require re-verification of employment within 24 hours of closing, and some are asking borrowers to sign an affidavit saying they have not been notified of a pending layoff or income reduction.

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