A WEEKLY GLIMPSE OF REAL ESTATE FINANCE NEWS
4/28/2025
Chase Service, Not Rates: At first glance, it seems logical for would-be home loan borrowers to shop for interest rates. Maybe NOT! The majority of conventional mortgage loans are underwritten to Fannie Mae and Freddie Mac guidelines. (Note: Closing costs can vary marginally between lenders and rates will adjust, with all lenders, depending upon the borrower’s specific loan profile).
While rates vary little between lenders, there are often significant differences regarding how a borrower is treated during the loan process. Evaluating a lender’s service includes how you feel after the first encounter. Were you “interviewed in order for the lender to provide specific information to meet your individual needs. Were you encouraged to ask questions and were those inquiries answered – good information is required if you are to make good decisions. Does the lender have a reputation for closing transactions on time? Is this a lender who will be available to you throughout the entire transaction, metaphorically, holding your hand when necessary?
Honesty, integrity, availability, follow through and education – the lender’s service record – may be more important to your having a successful mortgage outcome than saving $200 on the closing cost ledger. Trust your instincts and shop service in your search for the right lender. Ironically, the lender most interested nn providing good service accompanied by education is also the one that will make sure that you receive the “best rate” possible.
What to Believe: I wrote last week that there was some nervousness regarding the noise about privatizing Fannie Mae and Freddie Mac. Both agencies are under the guidance of Bill Pulte at the Federal Housing Finance Agency (FHFA). Upon taking office, Pulte ousted 14 board members at Fannie and Freddie, fired the Freddie Mac CEO and installed himself as chairman of both boards. He then announced that he “does not foresee “any more executive leadership changes” at the mortgage giants. This was viewed as “implying” that privatization was not being considered). (Given the propensity for changing directions of this administration can we rely upon this implication? For instance, Treasury Secretary Bessent has recently commented that after dealing with tax policy -his first concern- he intends to visit the issue of agency privatization.)
Pulte fired 100 Fannie Mae employees accusing them, without providing evidential documentation, of fraud. He has established an anonymous website tip line where the public can “submit tips on anyone fraudulently filling out mortgage applications”. (I am unsure how the public knows if someone is filing fraudulent paperwork and those within the industry who see fraudulent activity are charged with reporting it. It feels like this tip line could be abused by persons intent on causing someone intentional harm)
The latest announcement posted on X last week was that the agencies are “evaluating ways to ‘recall loans’ that have been obtained fraudulently.” (Hopefully, there will be clear guidelines for such determinations vs a mere “suspicion” of wrongdoing)
A FED Decision: No rate adjustment was made at the last FED meeting. Chairman Powell had previously indicated that the FED is facing very difficult decisions as the economy reels toward both an upswing on inflation and an employment downward arc. Missioned to control both of these situations, the remedies are opposite levers of the economy. For instance, to curb inflation an interest increase usually occurs but a decrease in interest rates is the typical cure for a slowing economy. The FED therefore is walking a fine line in which a solution for one situation exacerbates the other. Refusing to tip the FED’s hand, Powell indicated that the FED will “go where the data takes them”. That leaves the pundits predicting anything from one to multiple rate adjustments beginning at the June 17th meeting. Even the most aggressive predictions, surprisingly, suggest long-term mortgage rates will remain above 6.50 for the year. Bottom line, everyone can make a prediction with a fairly equal chance of being accurate. (My personal prediction is that the FED COULD make a modest and hesitant .25 point adjustment on May 7th merely as an indication that they are monitoring the economy. Not sure if it would cause any adjustment to the long-range mortgage rate.)
More On The FED: As the current tariff policy continues to evolve among increasing criticism, a seemingly frustrated President suggested that tariff progress was being stifled by the FED, especially Chairman Jerome Powell’s, unwillingness to lower interest rates. After calling Powell names and expressing that “his termination cannot come fast enough”, and watching the markets react swiftly and negatively, the President retracted and commented that he “never intended or even implied that he wanted to fire” the FED chairman. Powell indicated that “the substantial policy changes regarding trade, immigration, fiscal policy and regulation are still evolving and their effects on the economy remain highly uncertain”. Powell went on to express “the level of tariff increases announced so far is significantly larger than anticipated and the same is likely to be true of the economic effects, which will include higher inflation”. Powell’s ending remarks regarding current FED action that it “remains in a mode, effectively, of watching and waiting to see what happens”
CFPB Influence Reduced: The Consumer Finance Protection Bureau was missioned to supervise finance related entities and to reign in nefarious behavior that negatively impacted consumers. The agency’s success was applauded by some but others have sought its termination from its inception 14 years ago. Major companies regularly complained of the Bureau’s interference in their business practices. Federal agencies can only be terminated by Congress but if you cannot fully terminate an agency, what better way to reduce its influence than to eliminate most of its staff. Like many other agency staff firings, 1400 of the CFPB’s staff have been summarily let go. Resources will shift from enforcement and supervision(to now be done by individual States) to a vague priority of mortgages and depository institutions (what does that actually mean). Clearly major financial corporations and businesses will applaud the lack of regulation and oversight resulting in no longer having to fear the CFPB’s interference with any practices, regardless of any negative consumer impacts. Consumers Beware!
(There appears to be a pending court order that prohibits the firing of the CFPB staff.
The on again, off again nature of the executive orders, whether by court order or the mere changing of minds, are difficult to follow. If CFPB employees are not yet officially fired, are they able to perform any meaningful functions- hard to know!)
The Data Conundrum: Depending upon the source of the statistics, the economy is poised to either explode spectacularly or implode disastrously. When I am asked if I think whether home mortgage interest rates will increase or decrease, my ready answer is YES! The widely different expectations are a product of erratic policy procedure accompanied by conflicting information and the markets’ inability to note any confirmed direction. Businesses can’t plan, employees fear for job security, prices continue to rise (mostly based on tariff fears) and wall street shows its confusion via roller-coastering stock and bond markets. “Unprecedented” is the word back in vogue to describe, by most accounts, a thriving economy that has, within four months, become unpredictable. The lack of clarity accompanied by what seems like a constant change of direction makes it difficult to rely upon any statement made.
Until next week, be good to yourself and kind to others.
4/21/2025
HAPPY DAY AFTER EASTER
Looking For Direction: The stock and bond markets, in free fall from the uncertainty aroused by the erratic tariff decisions, received no comfort from FED Chair, Jerome Powell’s comments. Powell confessed that the FED is facing very difficult decisions as the economy reels toward both an upswing on inflation and an employment downward arc. Missioned to control both of these situations, the remedies are opposite levers of the economy. For instance, to curb inflation an interest increase usually occurs but a decrease in interest rates is the typical cure for a slowing economy. The FED therefore is walking a fine line in which a solution for one situation exacerbates the other. Refusing to tip the FED’s hand, Powell indicated that the FED will “go where the data takes them”. That leaves the pundits predicting anything from one-to-five rate adjustments, perhaps to be initiated as early as their May 7th meeting. Even the most aggressive predictions, surprisingly, suggest long-term mortgage rates will remain above 6.50 for the year. Bottom line, everyone can make a prediction with a fairly equal chance of being accurate. (Chairman Powell’s comment that tariffs will have a “significantly larger than anticipated economic effects, which will include higher inflation and slower growth” was not widely appreciated by the administration. In spite of the accepted concept of an independent FED, the President has been engaged in a vigorous media campaign encouraging the FED to lower rates and is now urging Powell’s termination as chairman of the FED, which if successful means we D Not have an independent FED.)
The Data Conundrum: Depending upon the source of the statistics, the economy is poised to either explode spectacularly or implode disastrously. When I am asked if I think whether the home mortgage interest rates will increase or decrease, my ready answer is YES! The widely different expectations are a product of erratic policy procedure accompanied by conflicting information and the markets’ inability to note any confirmed direction. Businesses can’t plan, employees fear for job security, prices continue to rise (mostly based on tariff fears) and wall street shows its confusion via deteriorating stock and bond market. “Unprecedented” is the word back in vogue to describe, by most accounts, a thriving economy that has, within three months, become unpredictable.
Consumer Sentiment Declines: The recent spending spree by consumers that some viewed as evidence of confidence has now been exposed as a rush to purchase before tariff increases hit the market. Advice from the early hoarding days of the pandemic indicate that storing non-perishable supplies (within reason) can be profitable, purchasing too much in daily consumption goods often results in loss due to waste and unuse by expiration dates. A majority of polled consumers’ opinion is that the economy will worsen, job loss will occur, prices will climb and home mortgage rates will increase. This sentiment suggests that potential home buyers are likely to remain on the sidelines waiting for improvement. While I cannot disagree, I am also aware that unexpected opportunities can emerge in such an environment and would-be home buyers might be well served to prepare to take advantage of any favorable options. (This sounds like so much real estate hype, but becoming preapproved and ready to perform could be a valuable action looking forward to market improvement)
Avoid Analysis-Paralysis: Hitchhiking on the above comment, this market requires careful decision making. It is easy to become paralyzed when weighing all the possibilities. You must assess your personal economic comfort level. Do the math. Don’t be bullied into any transaction without clear thinking and assessment of the pros and cons. At the same time, don’t miss out on purchasing that right home simply because of reluctance to make the decision. Finally, trust your intuition. Your lender can help with the facts and figures but the decision has to be yours.
You might face an affordability situation in which you no longer qualify for the necessary home financing. If so, stay positive. Determine what you can qualify for and initiate the path to home ownership so that you are ready when the market readjusts – because it will. Call us to pre-qualify.
Interesting Comment: I heard a news commentator (a kind description of the reporter) indicating that the housing shortage was largely due to immigrants being allowed to purchase homes. The assertion was that after eliminating all of the free housing having been provided for many years, immigrants were encouraged to buy homes. The report further indicated that the recent elimination of HUD’s loan program for “permanent residents” would increase the supply of homes for real Americans. The message seemed to suggest that all immigrants are somehow taking undeserved advantage and should be barred from participation. There were so many inaccuracies in the report that I can only hope that most listeners understood the comments to be uninformed, offensive and discriminatory. It was particularly galling to those of us who, as a part of our professional mission, pledge to assist ALL ELIGIBLE BUYERS WITHOUT DESCRIMINATION.
Fannie Mae/Freddie Mac Update: I know that I have mentioned these two Government Secured Entities (GSEs) of late but a little additional information might explain how critical they are to the continued success of our mortgage arena. It is a challenge to be brief when the subject can be complicated but I will try.
Although neither Fannie or Freddie make loans, their crucial role is providing liquidity by purchasing mortgages from lending sources, freeing up the funds for the mortgage entities to continue making loans. Via government backing, the GSEs provide comfort to investors that they are stable and the risk of purchasing loans (packaged as bonds) from Fannie and Freddie are risk free, guaranteed by the government. Having been saved by (implicit guarantee) an enormous infusion of funds following the 2008 market collapse, Fannie and Freddie were taken from being private entities into conservatorship.
The current administration is promoting a release of the GSEs from conservatory status, back to privatization. Without a formal government guarantee investor risks to purchasing agency bonds would increase along with rates. Even an “implicit” guarantee would likely cause some rate increase. Complexities abound in returning the GSEs to privatization with accompanying shareholders. Becoming private but with a government guarantee against bond holder losses, suggests that investors’ positions would be that they enjoy 100% profits while the government would endure all losses should the market decline. A very enviable position indeed, for any investor but not necessarily for our at-risk nation.
Therefore, most agree that any “release” from conservatory status would have to be accompanied by some form of government guarantee. The business model with the global leverage accompanying the size of the bond market, the access to risk-adverse global investors, the highest of credit ratings and the availability of low-interest rate mortgages all depend upon this government guarantee. Anything short of that will most likely adversely impact lenders and borrowers alike.
Thus, be aware of wonderful sounding suggestions of privatizing Fannie Mae and Freddie Mac. Privatization in the past did not prove sustainable and in an increasingly complicated global atmosphere what could possibly go wrong?
Until next week, be good to yourself and kind to others.
We at Humboldt Home Loans are always available to answer any of your real estate finance questions.
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