What to do when rates aren’t falling like they should?
It’s an uncertain time.
We are facing unprecedented global change, and with the 10 year treasury note at 0.028%, I received more calls this week to open refinancing than in the last several months combined. We want to be doing, and in a period where everything seems out of our control, taking advantage of expected historical-low mortgage rates, seemed like a no-brainer.
But the rates didn’t go down…
Quite the opposite in fact.
I know it seems confusing, so let me break it down here.
Workforce Constrictions:
Many lenders have already laid off staff and what staff remains are working remotely. Many traditional lenders did not have systems in place to handle sudden shifts in technology (and keeping your info private) so they have either ceased new pricing altogether OR they have a pretty significant backlog.
Tidal Wave of Inquiries:
Refinance requests jumped 479% in the last month. Lenders very simply have significant demand & limited supply.
So… no reason to lower their prices. And because lenders are in the business of making money, rates are now higher in most cases now than they were 6 months ago.
Think about it like a gas station…
I explained it to a client this morning like this: If the price of oil drops, a gas station owner may drop the price per gallon. But if both he and his competition across the street have a line 7 miles long, neither are going to drop anything until that line starts to thin.
But before you add high refi rates to your list of things to get bummed about:
Sec. Mnuchin announced a $500b treasury buying program designed to provide some downward pressure on rates, and if I am reading the situation right - which I am - We will likely start to see rates fall in two - three weeks.
I’m pretty confident government programs are going to see the quickest drops. And I wouldn't be surprised if we see a re-authorization the 2010 TARP (Troubled Asset Relief Program) that expired in 2019, re-starting the DUrefi+ program.
These programs are essentially streamlined refi options with limited documentation. In a time with rapid changes, that’s excellent news for a lot of folks…
My recommendation:
Move forward, and hold tight.
We are going to continue to move forward.
My strategy is to get everything ready, loaded, and complete. Then, the minute rates drop, we can disclose, lock, submit, and underwrite almost simultaneously.
We know enough about where specific puzzle pieces fit, what needs to be verified, what additional documentation would be needed, and what questions are likely to pop up; before the file even hit an underwriter’s desk.
Stay safe, stay inside, stay squeaky clean.