⏱ THE MORTGAGE MINUTE

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It’s the most patriotic time of the year! 

Get the grill ready, light those fireworks, and don’t forget to pull out that giant Uncle Sam outfit you’ve been saving in storage. This is your time to shine!

We know you’ve got a busy week ahead, so let’s dive right into this week’s news! 

Market Sentiment & Economic Calendar

Pricing got SMOKED on Friday and Monday!  

Down 45 BPS on Friday and another 20 BPS on Monday. That Presidential Debate was a doozy, and we’re seeing the repercussions! 

It’s been mentioned that bond traders are positioning for a Trump 2024 win and believe he would bring inflation. Others (including us), think the opposite. 

We still believe that rates will trend down into the end of the year, regardless of election outcomes. 

All eyes are on Friday Jobs data. This is our next big catalyst to move rates. 

In the early 1980s, mortgage rates peaked at an astonishing 18%, driven by high inflation and aggressive Federal Reserve policies aimed at curbing it. 

Since then, we’ve seen a steady decline, reaching historic lows during the Great Recession and again during the COVID-19 pandemic, with rates dipping below 3%. 

Rates started their rise again in October 2022 and have been moving in their current channel since then. It feels like we’ve hit a peak and it’s down from here. 

We believe that rate reduction shocks will start to hit the market more aggressively once the lagging negative economic data starts picking up. 

This week’s survey RESULTS: 

How many BPS are you making on average per loan in 2024?

The average BPS for LOs that read this newsletter is:

150 BPS 

Our goal at The Mortgage Minute is to help you gain that edge to increase your BPS average while still doing good for your clients. We’re always thrilled with feedback on how this newsletter is helping our readers in their day-to-day business!

What to Watch This Week:

Tuesday, July 2

• The Fed Chair Speaks! – In his speech today, Papa J. Powell mentioned continued signs of an inflation slowdown, but highlighted the need for more consistent data before any consideration of interest rate cuts. Acting too soon, and we risk inflation rising again, per the Fed Chairman. Looks like it’s more sideways movement in the weeks to come.

Friday, July 5

• June Unemployment and Non-Farm Payrolls – We anticipate that this will be a big market mover on Friday. If folks are losing jobs, rates drop. If the job market is healthy, rates sideways or up. 

Pipeline Save of the Week

“Early Pay Off Notification” (EPO) is never something you want to see in the subject line of your email.

It is so important to have clear communication with your borrowers. Don’t do your due diligence, and before you know it you’ll be saying “EP Owwww, that hurt!”

This week, we heard about a loan officer who almost lost a $10k deal to EPO. 

The borrower had just purchased a new primary residence with the loan officer. They qualified for a purchase loan with their departing residence as a second home.

Post-closing, the borrower decided to fix up and sell the second home and use the proceeds to pay off their primary residence loan. They called the loan officer before signing the check for the payoff. 

Good thing they did! 

The LO asked the borrower to give it a couple of weeks before completing the payoff. It didn’t make much difference to the borrower, but a $10k difference to the loan officer!

Be open with your borrowers about the fact that YOU have to pay massive penalties if they pay off the loan within six months of their funding date (the timeline varies by lender, so be sure to check).

Since the borrower pays month one of loan interest at closing, and month two interest is accruing, the borrower only ends up having to pay four payments to meet the EPO period. Spell it all out for your borrowers, and stress the importance that they come back to you before making any loan decisions. 

Don’t be shy. You’ve been an advocate for your borrower through this whole process. You’ll likely find that they are sympathetic and want to make sure that you are also taken care of. 

Reminder to send in your own Pipeline Saves of the Week to be featured in future newsletters!

Loophole Spotlight

Rocket Mortgage’s EPO Policy

Continuing our EPO talk, we are shouting out Rocket Mortgage this week not only for their exceptional interest rates as of late, but also their EPO policy for pinnacle partners. If you fund five loans a month consistently with Rocket over a three month period, they will waive any and all EPO’s resulted from the sale of a property or the loan being refinanced with a different loan officer. 

This might not seem like a huge deal right now, but when these rates start to fall more sharply in the future, waived EPO’s are going to be gold!

Party Like It’s 2024

Let’s face it, we’ve all spent a little too much money here and there since the pandemic. After all, we were locked in our homes for a year!

(The term “live a little” might have brought on a bit of a new meaning after they let us out, regardless of how we…ahem, got out.) 

However, with continued reports of consumer debt reaching all-time highs, it can be a bit concerning. 

Consumer debt increasing can oftentimes be a sign of economic instability. Consumers who have stretched themselves too thin now have to rack up credit card balances in order to stay afloat. 

This, combined with negative jobs data could be just the catalyst we need to start to see a cooling off of interest rates. 

The question that’s on everyone’s mind now is: How broken does our economy have to be before the Fed reverses course on high rates?

Nevertheless the outcome, we must stay vigilant.

Remember to engage your clients with cash out refinance discussions to pay off that high interest-rate debt. 

Consider offering your clients a free refinance to use once rates drop. (Typically, this means that you’re going to cover their underwriting and processing fees.)

This is a win-win, since the borrower gets to save some money on the refinance, and you get to write a loan (and avoid EPOwwww’s!).

Genevation Z

That’s what we’re calling Gen Z here at The Mortgage Minute, because a recent survey showed that a full 21% of potential Gen Z buyers want to renovate. 

I mean, you could have just told us you hated what your step-parent did to the kitchen. We get it. This is a safe space.

Shut up, Gif. You’re not my real Gif.

Additionally:

40% of those surveyed plan to purchase a home in the next 3 years.

Only 1% said they can afford, but don’t want to buy. 

31% said they wanted to own a home to start or support a family, while another 22% wanted to build generational wealth. 

Among those surveyed, 40% of the men said they were planning to purchase a home on their own, versus just 28% of women.

We can’t help but think about the mass exodus of loan officers in our industry. 

There’s been reports of as high as 80,000 loan officers exiting the industry in the last 12 months. 

This is an important time to recognize the next generation of homeowners entering the market and the lack of loan officers available to serve them. 

For those of you that have hunkered down and made it through this slow time, get ready because the next few years in mortgage lending are gearing up to be absolutely epic.

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!