My Sore Displeasure
Just when I thought last week was the worst week that ever hit the mortgage business, yesterday happened. Everything tanked and the mortgage markets almost collapsed resulting in a major change in rates for those that are refinancing. Please note that if you have locked your rate, then this will not apply to you. Also, if you are purchasing a home, lenders are still in business, but I would check on rates!
What happened yesterday
On March 18th, the markets did not respond well to the Fed actions. There was such a massive market swing that anyone wanting to refinance has pretty much been priced out of the market. Due to the unexpected volatility and sell-off, there is basically no "mortgage money" available for refinances. (This is a watered down explanation so bear with me). The situation is so bad that many lenders have shut down all refinance activity and I have even heard of large warehouse lines (the money that lenders use to fund loans) being shut off. I predicted this on my blog. We may not even be in a refinance environment for another 30 to 60 days.
Interest Rate Disaster
Just to give an example of the massive volatility in the markets, not a single quote I made resulted in a lock on 3/18. Pricing changed too fast. We had 5 different rate changes. Most clients are now priced out of even being able to refinance... for now.
A Silver Lining
I do believe that when the dust settles (and there are liquidity and stability in the markets) we should be able to do something beneficial for a lot of folks. Refinancing will come back, but what do you do now? Be ready for the onslaught! Get an application on file with your lender and then ask for a rate quote. This is kinda backwards, but based on how fast everything is moving, it's what is necessary.
Keep in mind that if you are over 4% or have other needs (i.e. cash out, etc), please still check with your lender. Additionally, I personally am keeping an eye on rates for my clients as best as I can. I would recommend having a "target rate" that is pre-agreed-upon between you and your loan officer so when that number hits, they can lock it in.
What Is Next?
As I mentioned my article, the Fed is taking some unprecedented actions to help the economy but it is hurting mortgage rates. This may be short-term but in my opinion, we will not see rates dip much even after the dust settles. Lenders across the country have lost millions due to this market and have some catching up to do. The bigger picture is that this market has set a dangerous precedent. I see more government regulation (yuck) and also I see lenders taking steps to protect themselves from secondary market volatility. This may come in many forms yet to be seen. Welcome to the new norm.
www.loanwithrick.com with any questions or concerns.