At Supreme we are open for business! Corporate offices have gone through an Electrostatic Deep Cleaning and the majority of employee’s have been provided with the equipment to have Work-from-home Strategy with customary work hours. We are working with our title partners to make sure we have accommodations in place to close and fund your borrowers on time. Supreme is here to help you and your borrowers during these tough times and to make their home buying process a pleasant one
OK, let’s talk about the market…….Last week the Federal Reserve announced that they would be lowering the Federal Funds Rate to almost zero. You ask what is the Federal Funds Rate? In a nut shell this is the rate that banks and credit unions lend reserve balances to other depository institutions on an overnight basis to provide liquidity in the markets. This reduction has more of an impact on short term rates (Auto, credit cards, installment loans, etc.) and not long term rates like mortgages. I’m sure you are hearing from your clients in search of a mortgage that this must be the best time for rates! It depends. We have to watch and see how the markets (DOW/Bonds/Treasuries/Mortgage Backed Securities) react to this decision. Also when the FED reduces rates there are other economic or geopolitical concerns in the market that will influence how markets react. From the chart below you can see what happened after the recent FED announcement. Bonds actually sold off for 3 days (LOWER BOND PRICES = HIGHER YIELDS = HIGHER RATES). A lot of this volatility is due to the COVID-19 crisis and with the low FED rate investors look at other countries that may have a more attractive rate so there is limited investment in are markets. In response to this the Fed has purchased 32.7 billion in mortgage backed securities in the past week to help mortgage rates and you can see how that impacted the market on Friday with a nice bounce that I hope will continue on Monday. The last thing the US Economy needs is higher rates where people are not purchasing homes and the FED has several tools they can implement to help prop up the housing industry.
This is what I would recommend to your borrowers. Get with their lender (Supreme) and get their supporting documents in so they can get the pre-qualification/pre-approval process started so when the markets move they will be in a position where they can get locked in. At Supreme we have a “Lock & Look” program (please call me and we can discuss in more detail) where we can lock your borrowers in even if they do not have a property but they will at least be protected in these volatile times.
Again I hope all is well and please know that myself & Supreme Lending are here to assist you and your buyers/sellers in any way we can!
God Bless and have a great week!
Reading these charts the red is a reduction in bond prices and the green is increase in bond prices. Remember we want higher bond prices that will lead to lower rates.
Senior Loan Offcer
Branch: (214) 644-2500