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September is here and that means it’s time to put pumpkin spice in anything and everything! We figured—why stop at food? 

Introducing a brand new exclusive at The Mortgage Minute: Pumpkin Spice Refinances! 

If you’re interested in getting your very own, limited edition Pumpkin Spice Refi, all you need to do is…

Ok, we are totally kidding. Had a few of you going there for a minute, didn’t we?

But, sadly, you can’t put pumpkin spice in refinances. 

Everyone knows you can only put pumpkin spice in new purchases.

Anyway, on to the news!

Market Sentiment & Economic Calendar

This morning, the unemployment rate came in at expectation (4.2%). Non-farm payrolls, on the other hand, came in at a big miss (142k vs. 160k forecast) with a revision down on the prior read from 114k to 89k. 

As a result, stocks are down, and the bond market is off to the races. 

CPI will be released on Wednesday, September 11th. If past becomes prologue (and in finance, it often does), the market will be extremely sensitive to this CPI read.

We anticipate seeing a lower CPI, which will lead to a continued bond rally next week. 

The 10 year treasury just broke through a key level of support and has a nice, big gap down before the next major support level is tested.

Get ready to lock in those loans on these big incoming green days!

Major upcoming economic releases that will impact the rate markets:

• Wednesday, September 11th – 8:30 AM EST – Core CPI - August

• Thursday, September 12th – 8:30 AM EST – Jobless Claims

Survey of the Week

Pipeline Save of the Week

Pushing It to the Limit

Picture this: You’ve got a loan that is literally bursting at the seams. Your borrower’s income ratio is maxed out. Your loan value ratio cannot increase by even a fraction more, or disaster falls upon you. Income is…dynamic, so you show the best case scenario in submission.

And the rate that you’ve quoted to the borrower holds the whole thing together.

You send it to underwriting with hopes that they will see the deal in the good light that you’ve presented it.

And even if all of those cards are stacked exactly where you need them, an appraisal could blow the whole thing up.

Your yield spread premium tanks and suddenly that $10,000 deal has shrunk down to pennies.

In this week’s Pipeline Save, we had a loan officer write in to tell us about this trifecta of mishaps.

They hadn’t seen a refinance in months and forgot about several of the factors that can come into play.

The appraisal came in lower than expected.

The borrower took time off work earlier in the year, requiring an adjustment to average the income over that full timeframe from underwriting.

This spiked the debt to income ratio and now a nine month reserve was required instead of the usual six.

But the borrower only had six months of reserves, and cash out to pay off credit card debt was maxed out, as well.

Tough pickle, right?

In this case there was enough room in the yield spread to drop the rate while still maintaining some earnings for the loan officer.

An exception was granted from underwriting to use a full 40 hours of income for the borrower.

The deal was saved.

The takeaway here is to make sure you are setting proper expectations for your borrowers from the beginning, especially when a deal is as tight as this one. There are so many variables that can make a loan fall apart that can be out of the loan officer, broker, or lender’s control, but often times that’s where the blame from the borrower falls.

Helping your borrower understand what can make a deal reach the finish line (and what might make it fall apart) can help with those difficult, uncertain conversations later.

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

Originations Spring into Action

This spring’s homebuying season, along with improved mortgage rates, brought on a booming second quarter, with 1.62 million residential mortgage originations, up 23.2% from the first quarter or the year. 

Refinance deals were up 10.3% from the quarter prior, home equity lines of credit up 26.5%, and purchase loans were up a whopping 32.7%!

With anticipation of an interest rate cut on the horizon this month, we should be seeing a continuation of this increase of activity! 

Be ready!

Fraudsters on the Rise

American consumers lost $10 billion to fraud last year, according to an earlier report from the Federal Trade Commission, and fraud in the real estate sector continues to be a concerningly large part of that.

Seller impersonation fraud, wire fraud, elder fraud, and money laundering are all categories that nearly all title companies surveyed are working to combat, both in education and training for their employees, as well as technology, tools, and resources that work to block these attempts. 

While we are deep in the real estate trenches day in, day out, most of our borrowers are only completing a handful of loans in their lifetimes, so they won’t know what to look for unless someone warns them.

The real estate sector has been making moves to protect consumers, but it’s important that we continue to remain vigilant and help our clients along the way.

This is a topic that we will continue to return to because it’s important borrowers know the risks that they face in these transactions, so they’re not blindsided by unruly actors. 

The majority of American’s largest asset is their home. Let’s do our part to help them protect it.

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!