Mortgage Weekly Roundup – July 20

July 20, 2018 Best Rate Referrals

For the week ending July 17, interest rates bumped up slightly, but mortgage application volume rose as well — an 8% jump. The application volume increase is in spite of the continued slip in refinances.

Home purchases are the leading force supporting the growth in mortgage application volume. Despite rates for adjustable rate loans often averaging lower than their fixed counter partner, the 30-year-fixed-rate mortgage remains the most popular option among borrowers.

Q2 earnings reports for many lenders show dips in revenue, which may be stimulating the loosening of eligibility limitations, the expansion of loan limits and the offering of niche products for credit-impaired, self-employed or foreign national prospective borrowers.

Here are the big stories in the mortgage market for the week ending July 17.

"Americans Are Still Shunning Adjustable-Rate Mortgages 10 Years After the Crisis"

Published by Realtor.com on July 10, 2018

  • In 1998, 20% of total mortgage loan applications were adjustable-rate mortgages (ARMs). During the financial crisis a decade later, floating rate mortgages plummeted to a 1% share of volume.
  • Since the great recession, many borrowers have viewed ARMs as risky and unstable, as a result, the ARM product has barely rebounded to a low 6% share of mortgage loan volume this year even though average ARM interest rates are lower than the rising 30-year-fixed rates.
  • There would need to be a much larger delta between interest rates for ARMs and fixed-rate-loans for the share of ARM loans to increase, according to Freddie Mac Chief Economist, Sam Khater.

"Homebuyers Fuel Jump in Mortgage Applications, as More Listings Finally Emerge"

Published by CNBC on July 11, 2018

  • Homebuyers are starting to have more access to inventory than earlier this year when the housing shortage was more severe and are now the leading borrower segment, driving an increase in mortgage applications.
  • Mortgage application volume finally rose, jumping 8% from the previous week, after two consecutive weeks of declines.
  • Rates remained relatively unchanged this summer, but are expected to reach 5% by 2019.

“Mortgage Rates Settle in for the Summer

Published by Washington Post on July 12, 2018

  • The tumultuous tides of rate swells seem to have calmed, as interest rates remain relatively flat week to week.
  • Year over year, 30-year-fixed rates are 12% higher. But, overall, rates have remained reasonably stable since April 2018.
  • Bankrate.com’s weekly mortgage rate trend index predicts similar performance for the rest of July.
  • Job growth and employment gains have helped purchase loan volume strength while rising rates are the leading cause of poor refinance activity, according to the Mortgage Bankers Association (MBA) President, David Stevens.

"Mortgage rates rise for Friday"

Published by Bankrate on July 13, 2018

  • Rates for both the 30-year- and 15-year-fixed mortgages ticked up this week. The 5/1 and 10/1 ARMs also experienced increases.
  • Even with positive rate growth, overall interest rates remain historically low, according to reporter Bernadette Gatsby while urging borrowers to consider both fixed-rate and ARM products depending on the length of time they intend to stay in the home and saving advantages over the life of a loan.
  • Prospective borrowers are urged to lock interest rates early and avoid waiting for lower rates to become available.

“Mortgage Rates Inch Up as Housing Market Braces for Slowing Momentum

Published by MarketWatch on July 16, 2018

  • The 30-year fixed-rate mortgage averaged 4.53% during the July 12 week, up one basis point, according to Freddie Mac. The 15-year fixed-rate mortgage averaged 3.99%, down from 4.02%.
  • These rate changes provide a welcomed reprieve for prospective borrowers who had feared additional rate surges.
  • For the year, the 30-year fixed-rate mortgage averaged 4.42%, up from 3.99% in 2017.
  • Housing affordability is at the lowest point since the last decade.

“Big Bank Mortgage Results Hurt by Spring Real Estate Market”

Published on Investopedia on July 16, 2018

  • Quarterly results for many U.S banks show weakness in originations due to housing price and interest rate increases earlier in the year.
  • Reported Q2 mortgage earnings for Wells Fargo are down 30% year over year.
  • JP Morgan saw a dip to $1.35 billion in Q2, down from $1.42 billion the year prior.
  • At $140 million in Q2, Citigroup’s revenue was down 5% from Q4 2017 and 25% from the year prior.

“Mortgage Industry Increases Focus on Jumbo Loans Amid Rising Home Prices”

Published on HousingWire on July 17, 2018

  • With mounting increases in residential home prices, several mortgage lenders are honing in on higher loan amounts.
  • Verus Mortgage Capital announced an increase in its loan amounts to $5 million for multiple non-qualifying mortgage (non-QM) programs and higher loan-to-value ratios for interest-only loans as their President, Dane Smith, noted non-QM lending could provide “solutions to fill a very real void in our industry.”
  • Colorado jumbo mortgage lender, Eave, announced a new line of loan products comprising up to $20 million for jumbo home mortgages.

What Do Recent Mortgage Reports Mean?

Interest rates in summer 2018 are higher year over year, up from 4.03% in 2017 to 4.53%. But rates have fallen from their May peak. Average rates for the 30-year-fixed-rate loan, which is the most popular among borrowers in 2018, are comparable to rates from 2013 and 2014. Despite the minor rate decrease, new borrowers are still racing to lock in rates early to avoid increases.

With many banks and non-depositories reporting net losses, borrowers could be in a position to take advantage of lender desperation. Looking to avoid additional branch closures and layoffs, originators and origination companies are developing creative niche programs meant to differentiate their products and attract a new set of borrowers.

There is little hope the refinance market will recover in 2018, so lenders are shifting their attention to the purchase business. As fixed-rate products continue their irregular behavior, lenders may begin increasing their education regarding the benefits of adjustable-rate-mortgages.
 

What Should Mortgage Marketers Do Next?

Competition in the mortgage market is heating up as banks and non-depositories loosen loan limits and offer alternatives for new borrower audiences, including the self-employed and foreign national borrowers. Promoting only jumbo and FHA products may not be enough to strongly position your brand for exposure and recognition. Consider how your brand is targeting millennial buyers, the generation driving the purchase market. Analyze both your organic and paid search campaign performance to determine if you are reaching this audience at optimal capacity.

Mortgage marketers should evaluate their ARM product portfolio and determine if their floating rate loan offerings are positioned strategically. Consider reviewing client testimonials and highlight borrowers with recent positive ARM experiences.

Lastly, even though the refinance market has declined, borrowers are still looking to pull equity from their homes. Nurture your database with education about cash-out loans and home equity lines of credit (HELOCs). Both of these products have the potential to attract homeowners with growing home values.

Contact the expert team at Best Rate Referrals to gain insight on how to best tackle current market conditions and win. Looking for purchase mortgage leads or prospective HELOC borrowers? Best Rate Referrals can help. Call 1-800-811-1402 to talk with a mortgage marketing expert about mortgage lead generation strategies that meet the needs of today’s market.


Additional Sources:

https://www.realtor.com/research/

http://www.freddiemac.com/pmms/

https://www.mba.org/2018-press-releases/july/mortgage-applications-decrease-in-latest-mba-weekly-survey-x236524

About the Author

Best Rate Referrals

Best Rate Referrals is an award-winning mortgage marketing firm and an industry leader in generating high-quality mortgage leads and driving inbound calls to mortgage lenders. The Best Rate Referrals team has broad mortgage market experience with proven lead generation practices that produce measured results for the lending and real estate industry. Best Rate Referrals has a long history of connecting high-intent consumers with a diverse network of lenders for a variety of financing products including Home Purchase, HARP, VA, FHA, Cash-Out, 203k, USDA, Conventional, Reverse Mortgage, ARM, Fannie Mae, Freddie Mac, First-Time Homebuyer, Jumbo and Debt Consolidation. The company's flagship website, www.MortgageAdvisor.com, is a one-stop mortgage financing shop that matches consumers with mortgage lenders and provides an array of online tools and information to educate potential borrowers on achieving their financing goals. Best Rate Referrals is a subsidiary of Digital Media Solutions.

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