Where R Rates / MBS Market Update

IT’S FED DAY

Markets are waiting on Fed results today. The times to make sure you are aware of is 1:00 PM Central and 2 PM Eastern which is when they release the one page interest rate decision and summary of their meetings. If you are on the fence of locking or not do it before this time if concerned.

Then at 1:30 PM Central / 2:30 Eastern we have the Fed Chair Press Conference where Powell will give more details and the opportunity for Q&A will bring out more statements. Then over the next few days we will be hearing a lot from Fed members.

Mortgage applications week over week increased by 1% for purchases and applications to refinance decreased by 3%. 

The average 30 year fixed rate increased from 6.67% to 6.75% week over week. Not too bad with the big MBS losses we had last week. 

Building permits were up month over month more than expected and housing actually getting started on foundation was less than expected. The two counteracted each other and it is good to have more building permits than expected as that tells us the future of housing starts to increase our supply of available homes for you to finance.

Let’s see where the day takes us folks!

GREEN is GOOD for Rates – RED is BAD for Rates

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Product & Guideline Highlights

BIG FANNIE CHANGES

During the week of January 11, 2025 Fannie Mae will be rolling out their DU Version 12.0 and they are making some significant changes. Changes that will help more borrowers get more loans. 

This will apply to all AUS runs on or after January 11th that are new or re-submitted.

All of these changes are to help get more approvals. I do not see any that will limit the approvals. For example, the positive items below will help more customers and will not limit those that do not fit the below scenarios. This is good.

REVOLVING DEBT COMPOSITION
Here is what they changed.
DU will continue to evaluate the composition of the borrower’s debt; however, DU will no longer look at the composition of revolving debts within the borrower’s total monthly expenses. DU will continue to look at the borrower’s debt composition in relation to student loan debts.
What we think that means is that AUS reads how the revolving debt is made up. As in balance to high balance ratio, newness of revolving debt and the overall make-up of revolving debt. After all, people make a lot of bad choices when it comes to credit card debt. Credit agencies will still hit the score. AUS will not.

EVALUATING STUDENT LOANS
This pertains to the above paragraph as well. When student loans are present on an AUS, the findings will consider this a positive attribute of the loan file and give more approvals. Fannie risk assessments have found that borrowers with student loans perform better than loans without student loans.

EVALUATING VARIABLE INCOME
Income variables such as OT, Bonus and Commission income will no longer be a factor in the AUS approval. Prior to, the presence of these type incomes were not a positive attribute. This is the reason when someone would run AUS with the entire income under base income and receive an approve/eligilbe and then when the underwriter broke it out properly a refer would be the end result. Now, the presence of these incomes will not be a hit to the approval. Their credit risk assessment has found that these attributes do not affect the loan performance very much.

FIRST TIME HOMEBUYER
The presence of a borrower being a first time homebuyer is now a positive attribute for AUS approvals. Fannie has found that First Time Homebuyers perform better than Non-First Time Homebuyers if all other variables are the same. Expect to see more of these get approved.

Fannie Mae has made more changes and I will be revealing the remaining items tomorrow so not to make this too long. Stay tuned!

Jackism of the Day

SOWING A HARVEST

Before and after pictures. From vision to results. Birth comes before death. You must rise before you can fall. 

We tend to be in a hurry to get from the beginning to the end. What is truly important is the inbetween.

As important as fundings are for me to make a living. It is not the fundings that I look forward to seeing each day. For me it is the registrations that matter the most. It is impossible for me to fund a loan if a registration is not completed first.

In life, we tend to focus on the results right now and allow it to impact our mindset and attitude when we are not experiencing the results we are looking for.

Robert Stevenson quote says “Don’t judge each day by the harvest you reap but the seeds that you plant.

What a great truth that is to remind ourselves of the importance of doing the right things now to prepare for a better future later.

I exercise 5 days a week even though when I look in the mirror now it is not my end goal. But the only way to achieve the end goal of being healthy I must plant the seeds of exercise now.

I could go in to the importance of building your pipeline in order to find success in the months ahead. That is nothing new and is vital to being successful in business. By what you do this month I can tell you the results of your January and February.

What I want to encourage you to think about today is something a little bit different. We are about to go in to two weeks of Christmas week and New Years week. It is not likely you will get a bunch of work done due to either you are not working that much or borrowers not being as accessible as normal.

What seeds do you need to plant with your family where you are looking for a better harvest next week and next year. We are about to come in to the season of family and giving and love and friendship and beginning a new year with a new plan.

We focus on business year round. Yet the most important comment a person makes on their death bed is always about family and the importance of relationships.

My challenge to you today is to choose a relationship or two or three that some seeds need to be planted in order to change the harvest in the near or far away future.

Now is the time and the opportunity to sow some much needed seeds in different areas of our lives. Children, spouse, in-laws, ex’s, siblings, grand parents, grand children, co-workers, community members and anyone else you know a seed needs to be sown.

Go enjoy the time we have been given and turn your now in to a great future by making the relationships in your life the #1 priority.