Rates were generally unchanged this week as markets continued to be assured by dovish comments by a number of Fed governors, who indicated that future Fed policy would be “data driven”, meaning that rates would not be increased unless there is reason to believe that inflationary pressures are building that require action by the Fed to slow economic activity. Because inflation data has been benign (today’s report showed Core inflation up .2% for the month and 2.2% for the year, within Fed guidelines) and because there are potential blocks in the economy with the China trade situation, government shutdown, etc., it seems unlikely that the Fed will raise rates in the foreseeable future.
The market in the last few years has been characterized by below-market rates being offered by many major banks. This practice reflects their continued low cost of funds, which enables loans to be made below secondary market levels while maintaining bank profit margins. While this can be great for consumers, an overlooked aspect of bank lending is that they often have specific underwriting guidelines that are not consistent with, nor as liberal as, agency lending guidelines.
A case in point is a client we preapproved in December. When her offer was accepted she checked rates at a major bank and was quoted a lower rate than what we were offering at the time. While that bank was not going to be able to close in the contract timeframe, the buyer insisted on going in that direction. Three weeks later the loan was declined based on an unpredictable and, frankly, incomprehensible guideline that the buyer did not meet. She came right back to us and we resumed the process. The escrow will close a few days late, but at least it will close: she had gone in non-contingent. It’s hard to predict when this is going to happen: if a guideline is non-standard and maybe illogical, how can you anticipate it? Mortgage bankers with few/no overlays (like us) will generally have the most lending flexibility and fewest surprises.
©2019 Finance of America Mortgage LLC | Equal Housing Lender | NMLS 1071 | Mortgage Banker License #0910184 | Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act. All information contained herein is for informational purposes only and, while every effort has been made to ensure accuracy, no guarantee is expressed or implied. Any programs shown do not demonstrate all options or pricing structures. Rates are subject to change without notice and are subject to underwriting approval. Some products may not be available in all states and restrictions apply. Check with your Mortgage Advisor for specific down-payment requirements. Rates effective as of 1/11/2019