Daily Rate Briefing:

OIL SHOCKS MARKETS

What in the world happened yesterday? Markets were down 25 to 30 BPS at one point and somehow finished the day up about 6 BPS. That is quite the ride.

The simple answer is oil.

Middle East tensions with Iran pushed crude oil prices sharply higher, and oil is one of the biggest drivers of inflation because it touches almost everything in the economy. When oil spikes, markets immediately start thinking about higher inflation.

Remember, mortgages trade in the bond market through Mortgage Backed Securities. Bonds are fixed rate investments. When investors buy them they are locking in a fixed return. That means inflation becomes a major risk. If inflation rises, the value of the dollar goes less far and the real return on that investment drops. When trillions of dollars are invested in fixed rate securities, even small inflation changes matter.

Yesterday oil shocked the markets. We had been trading in the $60 range for WTI crude. The Iran conflict pushed oil up $5 to $6 per day and we quickly moved into the $70s. Then overnight yesterday crude briefly shot all the way up to about $120 per barrel. That move blew the markets up. By the end of the day oil had pulled back into the $80s which helped bonds recover and brought mortgage pricing back from the morning lows.

You probably heard President Trump mention last night that this is expected to be a short period of conflict and that tensions should wind down. Markets are always forward looking, so the idea of a shorter conflict helped calm things down in overnight trading.

Regardless of where anyone stands politically, this is the environment we are operating in right now. Global events are moving markets daily.

This is also a great conversation to have when someone asks whether they should lock their rate. Explaining how events like oil shocks and geopolitical tension impact mortgage rates helps clients understand something important. We simply cannot predict the market.

Lock when you are comfortable with the rate. Now is not the time to gamble with other people’s money.

Today we are starting the day down 19 BPS which is not a good thing. Govt is up 3 so not hit like conventional rates. This is just market volatility. Oil is hanging around where it closed yesterday. We are sitting on a floor in the trading windows. This just means we are hitting a point in trading where the markets show a common floor before rates could bounce and move to the better. But if you break through the floor then that floor becomes your new ceiling.

We do have an opportunity to bounce to better rates if buyers fill the void. Think of a stock and the concept of buy low, sell high. Right now we are low but that does not mean we can’t go lower and is also an opportunity if you do buy it could pay off well.

Hang in there and educate your clients with what you know. Global events will rule the markets.

DYK – Mortgage Playbook:

THE PAGES SKIPPED

Let me ask you something. When was the last time you opened underwriting guidelines and actually read the first few pages? Not the credit matrix, not the LTV chart, not the income documentation section. I mean the pages before all of that. The part most people skip.

I was reading through the AD NQM guidelines recently and it reminded me of something that is easy to forget in this business. Guidelines are not just rules. They are principles.

Every loan we originate is evaluated on three simple pillars. Credit, capacity, and collateral. Does the borrower have a history of managing credit responsibly, do they have the ability to repay the loan, and does the property provide sufficient equity protection. Underwriting is simply balancing those three things. When one area is weaker, another area needs to be stronger to offset the risk. That is how real lending decisions are made.

But there is a deeper why behind all of it. Fair lending. Every borrower must be evaluated the same way regardless of race, religion, gender, age, marital status, or background. The decision must always come down to the loan profile, not the person.

Then there is the foundation that drives modern underwriting. Ability to repay. Lenders must make a reasonable, good faith determination that the borrower can actually afford the loan. That means verifying income, reviewing debts, analyzing credit history, and making sure the payment makes sense for their financial life.

It sounds simple, but if you have been in this business long enough, you know there are moments when things get uncomfortable. Maybe the income is a little questionable. Maybe the story feels a little too convenient. Maybe someone asks you to look the other way.

Those are the moments that define who we are in this business. Because guidelines are not just about getting loans approved. They are about protecting borrowers, protecting the integrity of lending, and making sure we are doing the right thing even when there is a commission on the line.

The first pages of the guidelines remind us of something simple. Good lenders do not just know the rules. They know why the rules exist. And they follow them even when nobody is watching.

Jackism – A Thought For Today:

FINISH THE WORK

This morning in my quiet time I read a passage I have read countless times in James, but today it landed differently. Maybe it was because of a couple of days I had last week that I am ashamed of my lack of grace under pressure. I started well, but somewhere along the line frustration took over and I did not finish the way I know I should have. My guess is I am not alone in that. If we are honest, we have all had moments where we begin a situation with the right mindset but somewhere along the way the pressure builds and we fall short of the person we know we want to be.

The message in the passage is simple but incredibly challenging. Trials test our faith, and that testing produces perseverance. But the part that stood out to me was the instruction that perseverance must finish its work. That means it is not enough to start strong or push through part of the struggle. Perseverance only does its work if we see it all the way through.

That is the part I see myself miss sometimes. I can start well. I can push through the early stages of a challenge. But if the pressure keeps building or frustration creeps in, I sometimes deflate like one of those big inflatable decorations on the front lawn when the power goes out. Everything that looked strong a moment before just collapses. And the truth is, perseverance that stops before the end is not really perseverance at all.

The purpose of trials is not just to see how we react for a moment. The purpose is to develop something deeper in us. When perseverance finishes its work it changes us. It produces maturity and completeness in ways that cannot happen any other way. But if we stop halfway through the trial, we never see what the outcome could have been. We never experience the growth waiting on the other side because we ended the process before it had the chance to finish.

A few verses later we are told that those who persevere through trials receive the crown of life. That phrase can mean different things to different people, but for me it means a life well lived. It is the reward of becoming the person God is shaping us to be. It is the joy of knowing we stayed faithful to the right path even when it was difficult.

So today I am asking myself a simple question, and maybe you can ask it with me. Where in my life did I start the race but fail to finish the lap? Was it in a conversation where frustration took over, at work where patience ran out, or in a situation with family, finances, health, or relationships where I simply stopped short of who I know I want to be?

The good news is we do not have to stay there. Today is another chance to take one more step forward. Not ten miles, just one step beyond where we stopped before. When we choose to continue, when we let perseverance finish its work, we begin to see the results that were waiting for us on the other side all along.

That is where maturity grows. That is where strength is built. And that is where we begin to experience the crown of a life well lived.