2019 began the year with rates near 12-month lows and they managed to drop further. Volatility was also down in January as some of the uncertainty regarding the government shutdown and trade wars seems to have tamed. However, positive news for the economy can also lead to higher rates. On the flip side, Fed Chair Powell remains dovish and they decided to not to raise interest rates during the Fed’s January meeting. We don’t anticipate a rate hike through at least quarter 2 of this year as inflation remains in check.
The Federal Government remained shut down until January 25th when it was temporarily lifted to give lawmakers more time to discuss “The Wall” and the budget. More than 800,000 federal workers were furloughed, placed on temporary leave, or required to work without pay. Those same law makers were NOT affected and continued to be paid as usual. Does this seem proper? We don’t think so. But there is some good news. Part of the spending bill is likely to include backpay for those affected by the 35-day shutdown.
This shutdown took its toll on mortgages as well. Government workers who were without pay faced financial hardships both in paying existing mortgages as well as closing on new homes. In addition, government programs, such as USDA mortgages, ground to a halt causing delays to those purchases until the government re-opened and they are still trying to catch up from the backlog. Tax Transcripts and other government verifications were also a challenge during this time. Unfortunately, the government is slated to shut down yet again this Friday February 15th if lawmakers can’t come to an agreement.
Mortgage companies and banks are continuing to tighten their margins and unfortunately layoffs are well underway. In addition, some financial institutions are changing their entire model to adjust to slowing conditions. Earlier this week, Provident Bank Mortgage announced it was closing its doors and laying off 120 employees. This is something Mountain State Financial Group does not subscribe to as we believe this will directly affect service levels across the industry. We strive to make the lending process as seamless as possible. But there is a bright side! As loan volume decreases, a pricing war amongst many of the major mortgage players is well underway. This means better rates, especially in the Jumbo arena.