⏱ THE MORTGAGE MINUTE

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We don’t know about you, but the heat at The Mortgage Minute headquarters has been pretty unbearable lately. Sipping kiddie cocktails at the pool hasn’t been cutting it, and this high-rate/low-inventory season hasn’t exactly been fun.

But hopefully, you have your umbrella handy because it looks like rates will be falling soon! At The Mortgage Minute, we’re forecasting a boom in your pipeline that you’ve been waiting for all summer!

Market Sentiment & Economic Calendar

Jerome Powell’s speech today at Jackson Hole has given the market a much-needed boost of optimism. 

In his address, Powell hinted that the Fed is leaning towards a rate cut in the near future, with the market currently pricing in a 25 to 50 basis point reduction as early as September. 

This is great news for mortgage rates, which have already started to show signs of improvement. The sentiment in the market is shifting positively, and it’s creating a perfect environment for loan officers to revisit those borderline deals that might now be within reach.

What to Watch This Week:

As we look to the week ahead, here are the key economic releases that could further influence rate movements:

• Thursday, August 29th - 8:30 AM EST: Initial Jobless Claims for the week of August 24th. This report will give us insights into the labor market’s health. A higher-than-expected number could support the case for further rate cuts.  A shock to the upside would likely spark another rally in the bond market.

• Friday, August 30th - 8:30 AM EST: Core PCE (year-over-year) for July. This is a crucial indicator for the Fed’s inflation outlook and will be closely watched. A soft reading here could reinforce expectations of a rate cut in September. We anticipate this number will come in soft continuing to drive mortgage rates down.

Current Sentiment: The outlook for mortgage rates is becoming increasingly favorable. With the market positioning itself for a potential rate cut, there’s a real opportunity for mortgage professionals to capitalize on these improving conditions. 

Now is the time to engage with your clients, especially those who were previously on the fence about locking in their rates. The potential for lower rates is on the horizon, and this positive momentum could be just what you need to close more deals as we head into the fall. 

Survey Results!

How many refinances have you sold since rates started diving on Tuesday, July 30^th? 

We had a healthy dose of responses in the last survey, and it looks like many of you are taking advantage of the moves in the market. With this week’s news, we can’t wait to see what you do next!

Pipeline Save of the Week

Alimony Payment

If you’ve been in the real estate and mortgage industry long enough, after a while, you’ll look back and realize how many of your deals were hobbled together with duct tape and close calls. 

Unexpected discrepancies on a credit report; an all-cash buyer that swoops in at the eleventh hour; or, in the case of this week’s Pipeline Save, a source of income that would run out literally two weeks earlier than the requirements allotted.

The loan officer had a prequalified borrower looking to purchase an investment property using alimony as a source of income. 

Conventional and government loan guidelines allow for alimony income so long as it is scheduled to last for 36 months or beyond from the loan funding date. With a scheduled escrow close date of September 15th, the borrower only needed alimony to continue till September 15th, 2027. 

Easy peasy, right?

We wish.

The final alimony payment is to be–you guessed it!–September 1st, 2027! Two weeks too short!

But all was not lost, because the loan officer was able to quickly pivot to a debt service coverage ratio loan, better known as a DSCR loan. Because this resulted in a higher level of risk to the lender, the rate jumped from 7.5% to 8.125%, but in this instance the borrower had plans to pay down the loan early with future alimony payments, so the higher rate was a non-issue. The file was saved and, per our communication with the LO, closing is pending!

Now, we realize not every scenario will turn out as rosy as this one. But we feel the lesson here is to never give up, until the last option has been exhausted. Knowledge is power, and the more you have, the more deals you can potentially save. Hopefully, with the stories we bring to you, we can help give just that extra bit of duct tape to hold it all together.

Reminder to send in your pipeline saves of the week to be featured in future newsletters! 

Loophole Spotlight

Brushing up on employment gaps

Having employment gaps, especially with an ever-increasing gig and freelance economy, can be a tricky route to navigate when looking for loan approval. Here’s a handy guide to help when underwriting sends your deal back with a toe-tag from the loan morgue (the lorgue?) attached to it, so you can try to bring it back to life. 

VA and FHA Loans:

• Employment gaps are allowed if the borrower had a stable work history before and after the gap.

• The borrower must show a return to stable income.

• Requires a letter of explanation and documentation proving the return to consistent employment.

• If the borrower meets these conditions, the employment gap should not be a deal-breaker.

Conventional Loans:

• Lenders generally require a consistent work history over the past two years.

• Employment gaps may be acceptable if the borrower provides a solid explanation and proof of returning to the same or higher level of income.

• Ideally, the borrower should be back at work for at least six months before applying.

• Lenders may scrutinize the reasons for the gap and assess the borrower’s current stability.

Jumbo Loans:

• Due to the larger loan amounts and increased risk, jumbo loans have more stringent requirements regarding employment history.

• A gap in employment could be challenging unless it was due to a valid reason (e.g., education, medical leave) and the borrower has returned to a stable, well-paying job.

• Lenders may require 12 months or more of stable employment post-gap.

• Detailed documentation and a thorough explanation will be critical.

First-time Buyer Blues

As the political season heats up, debate on what to do with both the housing shortage as well as challenges presented to first-time homebuyers are also heating up.

The Harris-Walz campaign has proposed an expansion of a proposal by the current Biden administration, calling for a $25,000 down payment assistance program for first-time and first-generation homebuyers. Projections estimate this could allot for over 4 million additional homebuyers to flood the market by 2029. But an increased bubble of more interested homebuyers, some argue, can only exacerbate an already uneven supply/demand balance. That’s why there also stands a proposal to increase the housing supply by 3 million homes by the end of what would be Harris’ first term, via subsidies for new construction.

There isn’t really a consensus on what a Trump-Vance administration housing supply/demand policy might be, though both Trump and Vance appear to have a more populous stance on the issue, indicating that a similar program may also be offered.

As in all things Washington, however, getting things passed through a Congress that isn’t monolithically controlled by one party can put a wrench in just about anything. 

Even still, housing is something that impacts all constituents throughout both red and blue states, so watch this space for potential housing-related legislative action regardless of who wins this fall. A legislative-induced housing boom may be coming, and we need to be ready.

Don’t Get Iced Out on Credit Freezes

As if consumers haven’t had enough things to worry about lately, another recent string of data breaches have been reported to have exposed personally identifiable information spanning billions of rows of data. 

Security experts are recommending consumers consider a free credit freeze, which keeps malicious actors with the data from accessing new credit using a person’s stolen data.

While at The Mortgage Minute, we are recommending consumers follow this advice, you want to be sure to remind them of the need to unfreeze at the three bureaus both during the initial credit check and the typical soft check prior to funding the loan at close of escrow. 

It may seem like a pain and an additional, unnecessary step, but imagine the extra steps and time needed if a borrower pulls their credit and there’s tens of thousands of new, unaccounted for credit debt that has been fraudulently attached to them?

Per the Consumer Financial Protection Bureau, a request to remove a freeze free of charge should take no longer than one hour after a request via phone or online, or three business days should the borrower send a request by mail. 

Be sure to confirm ahead of time the method your borrower prefers. We’ve checked our sundials (so you wouldn’t have to) and three days does, in fact, appear to be longer than one hour. You’re welcome.

Data theft is a scary thing in this ever-increasing technological world. Be a beacon of light and help them navigate the system.

Stay Connected

See! We told you! Five minutes or less!

Crazy how much we packed in there, right?

Thank you for being a part of The Mortgage Minute community. Stay tuned for next week’s insights and tips!