Where R Rates / MBS Market Update
JOLTS HITS RATES TODAY
Lots of red on the screen. Here is the good news. It is not the end of the world. It is just Tuesday in the mortgage industry : )
I intentionally waited this morning to send this out until the JOLTS (Job Opening and Labor Turnover Survey) came out. This index monitors the number of job openings and the number of people quitting their jobs.
Labor is a huge market indicator and today it is no exception. Job openings was down over 550K jobs less than expectations. That is a very large number. Jobs people were quitting was less than expected. So less people are voluntarily quitting their jobs. The two offset each other although the massive difference in openings is definitely impacting the markets for the better.
The markets may show in the red right now. Just before the JOLTS report came out they were about 10 BPS better so we got some mortgage bond friendly news today and morning rate sheets will be better than what they could have been.
Not to be political as I stay completely out of that arena it is an interesting notation to see. When we were at our best rates we have seen in a long time is when Trump was at his lowest rating in the polls. Ever since that day Trump has been polling higher in the polls and rates have gotten worse. This is not to say that Trump is bad for mortgage rates.
This is to say that the markets do not like huge shifts in fiscal policy and a Presidential election absolutely brings change if it swaps parties. This is one of the big items that investors look at when calculating the future financial happenings across many different fiscal areas.
In the absence of news we have to look at the technical trading and what we think will happen Right now the technical trading is not going in our favor and we still have quite a bit of room to lose. Right now we are at 4.31 on the 10 year. The next big stop is 4.50 which is a big jump in mortgage rates if we end up there.
With the right news like today’s JOLTS report we can also go back the other way. Although we will need pretty strong headline news to make it there especially before next Tuesday’s results.
We have an important 7 year bond auction today which could move the markets depending on demand this afternoon.
Stay tuned as there is always more to come.
| YESTERDAY CONV 5.5% – DOWN 29 CONV 6.0% – DOWN 17 GOVT 5.0% – DOWN 28 GOVT 5.5% – DOWN 27 10 YR NOTE – UP 4 TO 4.28 DOW JONES – UP 273 |
| SO FAR TODAY CONV 5.5% – DOWN 14 CONV 6.0% – DOWN 10 GOVT 5.0% – DOWN 15 GOVT 5.5% – DOWN 12 10 YR NOTE – UP 5 TO 4.31 DOW JONES – UP 7 |
GREEN is GOOD for Rates – RED is BAD for Rates
Product & Guideline Highlights
TOP 10 LOAN DENIAL REASONS
If you were to know the top ten reasons mortgages were denied in the United States would you find it wise to make sure on your checklist you use to originate mortgages all 10 of those would be on the list of items to check?
We do not have an exact count of how many mortgage applications we have currently. In 2022, HMDA shows there were 14.3 million home loan applications, of which 11.5 million of them were regular fixed rate or closed in mortgages.
This year we are likely around the 10 million mark if we were to have to guess which is what this is. Per the MBA we are running about a 6-10% denial rate. If you take the midpoint on that number that means we have around 800K loans to be denied this year.
Rather than sending up a loan to get it denied I find it much more helpful to make these top 10 reasons part of your initial conversation with the realtor as well as the buyer.
Come up with some questions to make sure you cover all of these bases before sending up to underwriting only to realize you wasted a lot of people’s time, including yours working on something that may never close.
TOP 10 REASONS LOANS ARE DENIED
#1 – LOW CREDIT SCORE – Before you pull credit, ask them what they believe their score is. If they say a low number ask them why. They may give you the immediate answer right away.
#2 – HIGH DTI – Not only ask about the tradelines on their credit. Make sure you add are there any recurring debts on the bank accounts they are going to give you to show available assets and if so, what are they? Do a manual calculation on what their income needs to be based on the loan size they are asking for and monthly debts they give you.
#3 – INSUFFICIENT INCOME – Rather just asking for employment and hourly income. Ask how they are paid, have they had any gaps, did they take any unpaid time off, do they have a unique pay scale, is any portion of the income commission or bonus or OT. Especially for nurses.
#4 – UNVERIFIABLE EMPLOYMENT HISTORY – Did they get paid cash under the table. Did they report their full income on S/E, did they write off a lot and do they report their rental income on the Schedule E.
#5 – INSUFFICIENT DOWN PAYMENT – Where are they getting the down payment from? Ask where it came from and if they are gifting and who they are gifting it from. The key is what can they paper trail and document.
#6 – PROPERTY ISSUES – Have a candid conversation with the realtor and/or buyer if there are any issues with the property or unique contract negotiations like giving furniture or allowances.
#7 – LOAN TYPE RESTRICTIONS – This is where originators sell a product that a borrower does not qualify for. Most of these are USDA over the income limit or all of the new AMI specialty products. I also see quite a few who sell with a community second that they do not qualify for and kills the deal due to no other options for down payment.
#8 – RECENT CREDIT HISTORY – Always ask IF they have bought anything recently or if they plan to before closing. The inquiry section of the credit report is there for a good reason. Also, any financing for items from Amazon, Ebay, Walmart etc.
#9 – INADEQUATE DOCUMENTATION – Ask if they are able to provide tax returns, stubs, W2’s etc and if there is anything you should know that may be on them.
#10 – LEGAL ISSUES – Asking about judgments, liens, collections or legal issues is part of the declarations. Dig in and be clear that you pull a report that will show any items in the past or currently happening.
The more questions you ask the more prepared you will be to serve your clients. Trust me when I say I know the originators and processors that ask and I know the ones that do not. The success ratio between the two are substantial.
Always make sure you are helping borrowers who are able to be helped. Give advice to those in need and give loans to those who qualify.
Jackism of the Day
ARE YOU IN THE RIGHT JOB?
(Yep, a long one today. You may need it)
How many times have you asked yourself this question? I know for me it has been asked a lot. But how do you truly know if you are in the right job?
I have had one huge aha moment in my career choice and I recently experienced what I believe to be a very powerful update to my first one.
I started in the mortgage and finance business in 1991. For much of my career from 1991 up to I guess it was around 2010. I had always used this business as my source to provide for my family until I could truly do what I really loved to do.
That true love of mine which I thought was going to be my legacy was to be in full time paid ministry. I spent over 15 years as a volunteer youth pastor, marriage enrichment, budgeting and financial ministries, homeless ministry, elder, deacon, events and maintenance teams. I loved it and still do in some of those areas.
It was a morning where my reality was altered to a new vision after one conversation at a Waffle House. I was meeting my Associate Pastor for breakfast to just hang out which we did. I had been passed up by the current pastor for a couple positions that I was told I would likely be considered for. His position being one of them. I never held it against him though as he was applying for the same position I was and he had more experience. It made sense.
I asked him what his thoughts were on the upcoming position. He said, Jack, as long as Howard is still here you will never be in full time ministry. Howard was the senior pastor at the time and we had a good relationship. But there was something I obviously did not know and still don’t to this day.
As I left that meeting, I left feeling peace and joy in my life that I was not going to be in full-time ministry and I was strangely happy about it. It was at that moment that I changed my mission field from the church to my industry.
I realized that I have a voice, I have a podium, I have an opportunity to serve and to love and to care about people regardless of where I am. I did not need a building with four walls or a management team to prove anything to. I could be the me I was created to be no matter what industry I am in. That is when my business began to grow. It grew because my business was now the mortgage business. it was my future and my new mission field. By mission field, I mean lives that I can impact. Not necessarily lives I will preach to. I let my life do the preaching and if it sends a message then great. If not, which is often the case then I just have to forgive myself, get up, dust off and move forward.
I never looked back. I still love ministry and I do it on a volunteer level and enjoy each moment of it.
The problem was I have always still looked for that dream job. The one I could truly love and enjoy. I looked for businesses to open, things I would be good at, types of jobs I think I would like. The same things most of you have looked for. After all, I or you can do whatever and still be the genuine us.
I was watching seal team the show last night with David Boreanaz. His life has always been a seal operator kicking down doors. He stepped down due to thinking it was time and he hated his new position. To really make this a long story made short he walked in to the Commanders office and said I want to get back to doing the one thing that I find energy in when I wake up in the morning. I want to be Bravo One operator again.
I went to bed and could not stop thinking about that. I think the reason that I never found that franchise or business I actually wanted to do or could never think of the position I would really like to do is because I was already in the job that I look forward to getting up each morning to do.
I honestly did not think it was. This job drives me bat crap crazy sometimes. It is high stress, annoying originators sometimes, crazy market shifts, 100% commission, unpredictable behaviors and no control over what I will have to sell from one day to the next.
It was then that I realized I love getting up in the morning, I love a challenge, I eat negativity up and spit it out and do not let others impact my attitude, my mindset or my drive. Holy crudola, I am in the perfect job. I actually love what I do. I am good at it and I get energized to wake up each morning and do it.
I do not love everything about this business at all. But I am in the right role for what I truly enjoy to do and am good at.
You may not realize you are in the perfect job until you realize how good you are at it. Embrace the opportunity you have been given. Then realize you actually live to do it. If that is not you, then you have a decision to make. This may or may not be your mission field. Sometimes the best news you will ever hear is you’re not ever gonna make it as long as you continue down this path.
For me, my greatest turning point was when I was told I could not follow my passion only to find another passion I was more suited to do and could make an even larger impact. How about you? Are you in the right job? As much as you hate it are you energized to get up each morning to do your job? Do you get antsy to get back to your job when you’re on vacation? Those are all signs of what you are meant to be and to do.
So I ask you. Are you in the right job?
