FHL.SG - FED. HOME LOAN MORTGAGE CORP. R

Stuttgart - Stuttgart Delayed Price. Currency in EUR
1.8830
+0.0310 (+1.67%)
As of 8:09AM CEST. Market open.
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Performance Outlook
  • Short Term
    2W - 6W
  • Mid Term
    6W - 9M
  • Long Term
    9M+
Previous Close1.8520
Open1.8830
Bid1.8810 x 3200000
Ask1.9170 x 3200000
Day's Range1.8830 - 1.8830
52 Week Range1.1500 - 3.6700
Volume0
Avg. Volume2,293
Market CapN/A
Beta (5Y Monthly)N/A
PE Ratio (TTM)N/A
EPS (TTM)N/A
Earnings DateN/A
Forward Dividend & YieldN/A (N/A)
Ex-Dividend DateN/A
1y Target EstN/A
  • MarketWatch

    FSOC to evaluate risks posed by the secondary mortgage market

    The Financial Stability Oversight Council said Tuesday that it will begin a review of the secondary mortgage market. The evaluation will determine what risks activities in the secondary mortgage market pose to the stability of the broader financial system. Regulators will also work to see what approaches best mitigate those risks. The announcement received the support of the Federal Housing Finance Agency, which regulates mortgage giants Fannie Mae and Freddie Mac . "As demonstrated by the 2008 financial crisis and again by COVID-19, Fannie Mae and Freddie Mac must be well capitalized in order to support the mortgage market during a stressed environment," FHFA Director Mark Calabria said in response to the news.

  • GlobeNewswire

    Freddie Mac Prices Approximately $1.6 Billion Securitization of Re-Performing Loans

    MCLEAN, Va., July 10, 2020 -- Freddie Mac (OTCQB: FMCC) today announced pricing of the second Seasoned Credit Risk Transfer Trust (SCRT) offering of 2020—a securitization of.

  • Fannie-Freddie Profit Sweep Draws U.S. Supreme Court Review
    Bloomberg

    Fannie-Freddie Profit Sweep Draws U.S. Supreme Court Review

    (Bloomberg) -- The U.S. Supreme Court agreed to decide whether investors can challenge the 2012 agreements that let the federal government collect hundreds of billions of dollars of Fannie Mae and Freddie Mac’s profits.The justices said they will hear an appeal by President Donald Trump’s administration of a ruling that would force the government to defend against a shareholder lawsuit. The investors say the agreements exceed the authority of the Federal Housing Finance Agency, which regulates the two mortgage giants.Fannie jumped 5.7% to close at $2.22 in New York trading, while Freddie rose 6.7% to $2.23.A ruling in the investors’ favor would give them a chance to collect a massive settlement. Fannie and Freddie have paid more than $300 billion in dividends to the Treasury under the so-called net-worth sweep.The administration told the court the dispute “is of immense practical importance.” The justices will hear the case in the nine-month term that starts in October.The Supreme Court on Thursday also agreed to hear an appeal from shareholders challenging the profit sweep under a different legal theory.Fannie Mae and Freddie Mac keep the U.S. housing market humming by buying mortgages from lenders and packaging them into bonds that are sold to investors with guarantees of interest and principal.‘Cloud of Uncertainty’After the housing market cratered in 2008, the companies were put into federal conservatorship and sustained by taxpayer aid. They have since returned to profitability and paid $115 billion more in dividends to the Treasury than they received in bailout funds. Since 2013, most of their profits have been sent to the Treasury under the net-worth sweep.The administration contends the 2008 law that set up the FHFA precludes lawsuits that challenge the profit sweep. The law bars courts from doing anything to “restrain or affect the exercise of powers or functions of the agency as a conservator.”A splintered New Orleans-based federal appeals court let the lawsuit go forward, saying the FHFA wasn’t acting as a conservator when it agreed to the net-worth sweep.The suing shareholders said the appeals court reached the right conclusion. But they nonetheless urged the Supreme Court to hear the Trump administration appeal, saying all sides would benefit from clarity.“So long as there is a credible threat that litigation will invalidate the net-worth sweep, a cloud of uncertainty will hang over the companies’ capital structure,” the shareholders told the Supreme Court. “Investors will not be willing to supply the tens of billions of dollars in new capital that are essential to Treasury’s reform plan.”Shareholders in the New Orleans court said that the FHFA, which has a single director who can’t be fired without cause, has an unconstitutional structure, making its decision to enter the profit sweep invalid. While the divided New Orleans court agreed with shareholders that the FHFA’s structure is unconstitutional, it said that fact alone could not invalidate the sweep, leading to the shareholder appeal.“FHFA looks forward to the U.S. Supreme Court taking up” the case and clarifying the issues involved, the agency said in a statement.Trump administration officials, including Treasury Secretary Steven Mnuchin, have long stated that they want to end federal control by releasing Fannie and Freddie from conservatorship. Wall Street analysts have said they are skeptical of that happening before the November election, meaning the administration’s goal largely depends on Trump winning a second term.The government’s appeal is Mnuchin v. Collins, 19-563, and the shareholders’ appeal is Collins v. Mnuchin, 19-422.(Closes shares, adds FHFA statement starting in 3rd paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Moody's

    Mississippi Home Corporation -- Moody's assigns Aaa to Mississippi Home Corporation Single Family Mortgage Revenue Bonds, Series 2020B (Non-AMT)

    Moody's Investors Service ("Moody's") assigns a rating of Aaa to the proposed $48,715,000 of Mississippi Home Corporation (the "Corporation") Single Family Mortgage Revenue Bonds, Series 2020B (Non-AMT). Moody's maintains the rating on the outstanding program bonds. The Aaa rating reflects the high quality of the collateral which is comprised of 100% mortgage backed securities (MBS), the high overcollateralization of the program at 114%, as well as the strong profitability of 20.94% in 2019, based on audited financials after Moody's adjustments.

  • GlobeNewswire

    Mortgage Rates Hit Another All-Time Record Low

    MCLEAN, Va., July 09, 2020 -- Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing that the 30-year fixed-rate mortgage.

  • GlobeNewswire

    Freddie Mac Prices $1.1 Billion Multifamily K-Deal, K-111

    MCLEAN, Va., July 09, 2020 -- Freddie Mac (OTCQB: FMCC) recently priced a new offering of Structured Pass-Through Certificates (K Certificates), which are backed by underlying.

  • Moody's

    NYS HFA - Affordable Housing Revenue Bonds -- Moody's assigns Aa2 rating to NYS HFA, Affordable Housing Rev. Bonds, 2020 Series E and F; outlook stable

    Moody's Investors Service has assigned the rating of Aa2 to the proposed $164,100,000 of New York State Housing Finance Agency (the "Agency" or "NYS HFA") Affordable Housing Revenue Bonds, 2020 Series E (Climate Bond Certified/Sustainability Bonds) and $22,500,000 Affordable Housing Revenue Bonds, 2020 Series F (collectively the "Bonds"). Moody's also maintains an Aa2 rating on all outstanding parity debt issued under the Agency's General Resolution adopted on August 2007 (the "Resolution").

  • Fannie-Freddie Overseer Puts Squeeze on $50 Billion Bond Market
    Bloomberg

    Fannie-Freddie Overseer Puts Squeeze on $50 Billion Bond Market

    (Bloomberg) -- A bond market once thought to be key to the futures of Fannie Mae and Freddie Mac -- and the roughly $5 trillion of home loans they backstop -- could instead find itself on the scrap heap due to their own regulator.In the past several years, so-called credit-risk-transfer securities have been a primary way for government-controlled Fannie and Freddie to offload the risk of borrowers defaulting on their mortgages to private investors. The market value of such assets, known as CRT, has grown to about $50 billion, with mutual funds, hedge funds and real-estate investment trusts among investors snatching up the bonds.Some former government officials and housing-finance executives have even loftier ambitions and believe the swelling CRT market can largely eliminate the likelihood that U.S. taxpayers would ever again bail out Fannie and Freddie, as they did during the 2008 crisis.But a new rule proposal by the Federal Housing Finance Agency, which regulates the mortgage giants, would drastically cut Fannie and Freddie’s incentive to continue selling the bonds. The move would likely shrink the market significantly, in effect leading the companies to keep as much risk as they did when the housing market collapsed more than a decade ago, according to the proposal’s detractors“We think it might kill CRT, and that this might be their intent,” said Michael Bright, chief executive officer of the Structured Finance Association, whose members include investors in the risk-transfer securities.‘Likely Demise’The FHFA’s treatment of the assets “has been taken by many housing-finance policy specialists as an attempt to deliberately render the program uneconomic and thus ensure its likely demise,” former Freddie CEO Donald Layton wrote in a blog post published Monday.Layton released a separate white paper this week in which he wrote that FHFA Director Mark Calabria has expressed skepticism in private conversations over the effectiveness of CRT. Calabria, according to Layton, has sometimes compared the securities to credit default swaps, assets that didn’t provide the protection that investors expected during the 2008 meltdown and contributed significantly to the global credit crunch.The regulation that’s generating the debate over CRT is a plan FHFA released in May to boost capital standards for Fannie and Freddie by tens of billions of dollars. The objective is to ensure they have adequate cushions to absorb losses, thus paving the way to follow through on the Trump administration’s goal of releasing the companies from federal control. But the proposal, which could be finalized this year, would also severely curtail the capital relief that Fannie and Freddie receive for issuing CRT securities.Read More: Fannie-Freddie Capital Plan Seeks Buffers Above $200 Billion”The proposed rule continues to provide significant capital relief for CRT while ensuring that regulatory capital is appropriate for the exposures retained” by Fannie and Freddie, FHFA spokesman Raphael Williams said in an email. Williams said the agency will seek input to better assess how the proposal may impact the companies’ future business.Fannie and Freddie don’t make mortgages themselves. Instead, they buy loans from lenders, wrap them into securities and guarantee the payment of principal and interest to bond investors. That process has helped make the 30-year fixed-rate mortgage a fixture in the U.S. But it also leaves Fannie and Freddie exposed to losses if borrowers stop making their payments.To lessen the risk, Freddie and Fannie in 2013 began to sell credit-risk-transfer securities. CRT are a kind of bond whose performance depends on that of a pool of Fannie or Freddie mortgages. Money that investors use to buy CRT is put into a trust, and the investors get paid principal and interest unless too many mortgages sour.Former President Barack Obama’s Treasury Department, members of Congress and the FHFA under past Director Mel Watt all encouraged the issuance of CRT, since they believed the securities could transfer default risk to private investors and away from taxpayers.The secondary market for CRT is still relatively small, and at the beginning of the coronavirus pandemic, it nearly froze, with some investors reporting that they were having trouble even getting prices for some bonds. But by June, it had mostly recovered amid unprecedented government stimulus from the Federal Reserve and other agencies.Freddie’s OfferingOn Monday, Freddie announced the issuance of its first single-family CRT since March, saying that strong investor demand had prompted it to double the size of the offering.The capital hit that the FHFA rule would impose on such transactions is hard to overstate. In fact as of September 2019, the month that the FHFA used to illustrate its proposal, Fannie and Freddie wouldn’t get any capital relief at all, because the agency said the companies would be bound by a minimum leverage ratio.Even in other economic climates, when the leverage ratio wasn’t binding, Fannie and Freddie would get about half as much credit under Calabria’s proposal as they would have through an earlier regulation put forth by Watt that was never finalized.“If the rule as proposed goes through, it would make CRT uneconomic for Fannie Mae and Freddie Mac,” said Andrew Davidson, founder of Andrew Davidson & Co., a mortgage analytics firm.‘Punitive Approach’Advocates for the bonds have already started pushing back.At a House hearing with Treasury Secretary Steven Mnuchin and Fed Chairman Jerome Powell last week, Republican Representative Blaine Luetkemeyer of Missouri said the FHFA’s proposal “seems to have taken a confused and more punitive approach to certain types of CRT.”Mnuchin and Powell agreed that Fannie and Freddie should receive capital relief for issuing CRT. Mnuchin said the Financial Stability Oversight Council -- a Treasury-led panel whose members include Powell and the heads of other regulators -- was reviewing the FHFA’s proposal. It’s also being examined by the Fed, Powell added.The FHFA is accepting comments on the capital proposal until the end of August and has said it hopes to finalize the rule this year.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Mortgage rates hit a fresh record low ahead of Fourth of July weekend
    MarketWatch

    Mortgage rates hit a fresh record low ahead of Fourth of July weekend

    Could average mortgage rates drop below the 3% mark? If the recent trend continues, that’s a distinct possibility. The 30-year fixed-rate mortgage averaged 3.07% for the week ending July 2, down six basis points from the week prior, Freddie Mac (FMCC)  reported Thursday.

  • Fannie-Freddie Bulls Get Warning in High Court’s CFPB Ruling
    Bloomberg

    Fannie-Freddie Bulls Get Warning in High Court’s CFPB Ruling

    (Bloomberg) -- Fannie Mae and Freddie Mac investors just got another reason to hope that President Donald Trump turns around his sagging poll numbers and ultimately prevails in November.That’s because a Monday U.S. Supreme Court ruling signals that it’s going to be much easier for presidents to oust heads of some federal agencies. Fannie and Freddie’s regulator, the Federal Housing Finance Agency, is now run by Mark Calabria, a libertarian economist who’s committed to something shareholders desperately want: the mortgage giants’ release from government control. Calabria won’t likely get the chance to finish that job if Joe Biden wins the White House and fires him.In its Monday decision, the Supreme Court said the president has broad authority to remove the director of the Consumer Financial Protection Bureau because Congress went too far in insulating the financial industry watchdog from political pressure. In the 2010 Dodd-Frank Act, lawmakers stipulated that the president could only terminate the CFPB chief for “inefficiency, neglect of duty, or malfeasance in office.”The CFPB and FHFA have identical structures -- they are independent agencies run by a single director. Last September, a panel of federal appeals court judges in New Orleans concluded that the FHFA structure was unconstitutional. The Supreme Court has deferred acting on that case until it resolved the CFPB fight. The high court could now deal with the FHFA matter as soon as July 2.“This ruling should ensure that the president can now remove the FHFA director at will,” Cowen analyst Jaret Seiberg wrote in a note to clients. “This means election risk is significant for efforts to end the conservatorship, as Joe Biden could fire Calabria as FHFA director on Jan. 20 if the Democrat wins the election.”Fannie rose 6% to $2.15 in New York trading Monday, while Freddie gained 4.4% to $2.16.In a statement, Calabria said he respects the Supreme Court’s CFPB decision, while adding that it doesn’t “directly affect the constitutionality of FHFA, including the for cause removal provision.”Read More: The New Twist in Endless Fight Over Fannie and Freddie.Hedge funds and other shareholders have long wanted the Trump administration to help them make a windfall by halting the practice of funneling Fannie and Freddies’ profits to the Treasury and freeing the companies from conservatorship. Many of the policies implemented by Calabria since taking over in April 2019 have been focused on ending government control.Compass Point analyst Isaac Boltansky said Monday’s Supreme Court ruling could prompt Calabria to take on a “sense of urgency” because he may not have many months left leading the FHFA.(Updates with closing share prices in sixth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Mortgage rates keep falling to record lows — so is now a good time to refinance?
    MarketWatch

    Mortgage rates keep falling to record lows — so is now a good time to refinance?

    Homeowners stand to save money by refinancing, but some factors may make getting a new loan less worthwhile.

  • The number of Americans skipping mortgage payments drops for the first time since March
    MarketWatch

    The number of Americans skipping mortgage payments drops for the first time since March

    A smaller share of home loans are now in forbearance, but that could change if government assistance dries up.

  • Mortgage rates drop to another record low — here’s why Americans may not want to wait too much longer before locking rates in
    MarketWatch

    Mortgage rates drop to another record low — here’s why Americans may not want to wait too much longer before locking rates in

    Low mortgage rates are stoking the housing market’s recovery from the coronavirus, but there may be limits to how much of a boost they will give.

  • U.S Mortgage Rates Hit a New Record Low. Can COVID-19 Deliver sub-3%?
    FX Empire

    U.S Mortgage Rates Hit a New Record Low. Can COVID-19 Deliver sub-3%?

    COVID-19 delivers a fresh record low in U.S mortgage rates. Can they fall lower? Trump may contribute and lay claim…

  • Morgan Stanley Advising Fannie on Exit; JPMorgan Assists Freddie
    Bloomberg

    Morgan Stanley Advising Fannie on Exit; JPMorgan Assists Freddie

    (Bloomberg) -- Fannie Mae hired Morgan Stanley to advise the mortgage giant on its eventual exit from U.S. control, while Freddie Mac retained JPMorgan Chase & Co.The Wall Street firms will assist Fannie and Freddie in implementing strategies to build up their capital buffers and get out of conservatorship. Fannie and Freddie, which the federal government took over at the height of the 2008 financial crisis, announced the hires in Monday statements.The announcements show that Fannie and Freddie are still pursuing plans to potentially raise billions of dollars through share sales even though the coronavirus crisis is raising questions about the health of the housing market. While releasing Fannie and Freddie is a top goal of the Trump administration, the pandemic has pushed back the time frame for ending U.S. control.Federal Housing Finance Agency Director Mark Calabria, Fannie and Freddie’s regulator, has said the companies could try to tap the capital markets as soon as next year, though it could take multiple share offerings spread over many months to fully capitalize them. A win in November by Democratic presidential candidate Joe Biden would complicate those plans if he tried to halt their exit from conservatorship.In its statement, Fannie said Morgan Stanley will provide strategic counsel on a range of topics, including options for raising capital. Freddie made similar remarks about JPMorgan in its statement. Calabria has said they need much bigger capital cushions to protect against losses outside the government’s grip.Fannie and Freddie don’t make mortgages themselves. Instead, the companies buy home loans from lenders and wrap them into securities to sell to investors with guarantees against borrowers defaulting. The U.S. took control of Fannie and Freddie as the housing market collapsed more than a decade ago.(Updates with background on plans for raising capital in fourth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Housing Is Hot With the Economy in the Deep Freeze
    Bloomberg

    Housing Is Hot With the Economy in the Deep Freeze

    (Bloomberg Opinion) -- No matter how you look at it, the economic fallout from the coronavirus is going to be brutal, with a projected 6.5% decline in real gross domestic product in 2020 and an unemployment rate of 9.3% at year-end, according to the Federal Reserve. In ordinary times, and without any policy response from government, a blow of this magnitude should weaken the housing market.Yet, what we're starting to see is the very opposite. For various reasons, the supply of homes on the market continues to fall to record lows and home prices are, if anything, accelerating. For many homeowners stressed about the value of their biggest investment, it's a welcome relief. But this signals one more hurdle for would-be millennial homebuyers as they age into their family-forming years.The biggest reason we're seeing home-price growth accelerating in the middle of a pandemic is that the disruption to the supply of housing is persisting longer than the disruption to demand -- that is, would-be buyers. Wednesday's weekly mortgage data showed that purchase applications rose for the eighth consecutive week and are approaching an 11-year high on a seasonally adjusted basis. Part of the reason for the quick rebound in demand is surely the decline in interest rates on mortgages to all-time lows, with few signs they are likely to rise for the foreseeable future.But as is always the case in the housing market, supply doesn't respond as quickly as demand. Single-family housing starts plunged in March and April, with the most recent report showing a 25% year-over-year tumble. Part of this decline is because construction in some states shutdown, and much more so in some regions than others. Single-family starts fell 73% in the Northeast but only 13% in the South. Even where construction continued, the pace slowed as builders adopted social distancing and other health measures to prevent the spread of the coronavirus.Even as demand rebounds, homebuilders may be slow to acquire new construction lots and might hold back on increasing production after getting the scare they did in March and April. They may prefer to wait a while to make sure these revived levels of demand are sustainable, while they also shore up their balance sheets before beginning to build at the same pace as earlier this year.Beyond the impact on construction, a little discussed factor leading to fewer homes on the market is mortgage forbearance programs put in place by banks, states and Fannie Mae and Freddie Mac. From a policy standpoint it's great that banks and governments are helping to prevent a deluge of foreclosure as millions of people lose their livelihoods because of the pandemic. But a consequence of that policy change is that it deprives the housing market of the supply of foreclosed properties that occurs even in strong economies and solid job markets; this amounted to almost 500,000 houses in 2019.Some homeowners may also be delaying the listing of their homes for sale because they're sheltering-in-place, or have lost their jobs and can no longer provide income verification to buy a different home. They may also not be comfortable having potential buyers, who could be carrying the virus, walking into their homes for sales showings.Put it all together and housing supply continues to fall. Mike Simonsen of Altos Research, who tracks real-time housing data, notes that there are only 700,000 single-family homes for sale in  U.S. compared to more than 900,000 at this time last year. Normally at this time of year the housing supply has been rising for a few months amid the traditional spring buying season, only to fall later in the year as activity slows. But that's not what we've seen during the past few months, as supply continues to contract. As a result, the percentage of homes for sale with price reductions is the lowest he's seen in his database, a leading indicator suggesting faster home-price growth in coming months.Presumably, at some point the coronavirus crisis will pass, foreclosures will move forward again and all participants in the housing market from would-be buyers, sellers and homebuilders resume normal behavior. To the extent home prices rose too high because of supply distortions, we should see home prices leveling off or even declining. But it's not clear that this will be a 2020 story. And in the meantime, steadily rising home prices may join steadily rising stock-market prices in the middle of a pandemic as a phenomenon that continues to flummox everyone.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Conor Sen is a Bloomberg Opinion columnist. He has been a contributor to the Atlantic and Business Insider.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Mortgage rates are circling record lows — will the Fed’s actions push them lower?
    MarketWatch

    Mortgage rates are circling record lows — will the Fed’s actions push them lower?

    The Federal Reserve plans to keep the interest rates it controls around 0% for the foreseeable future.

  • U.S Mortgage Rates Tick Up as Stimulus and Stats Point to a Speedier Recovery
    FX Empire

    U.S Mortgage Rates Tick Up as Stimulus and Stats Point to a Speedier Recovery

    Mortgage applications continue to rise, with a minor uptick in mortgage rates doing little to deter home buyers. Supply is becoming an issue, however…

  • Mortgage rates are at historic lows — but the coronavirus pandemic is making homes less affordable for buyers
    MarketWatch

    Mortgage rates are at historic lows — but the coronavirus pandemic is making homes less affordable for buyers

    The 30-year fixed-rate mortgage increased to an average of 3.18% during the week ending June 4, a decrease of three basis points from the previous week when rates dropped to a record low, Freddie Mac (FMCC) reported Thursday. The 5-year Treasury-indexed hybrid adjustable-rate mortgage fell three basis points to an average of 3.1%. Mortgage rates are once again roughly tracking the direction of long-term bond yields, particularly the yield on the 10-year Treasury note (BX:TMUBMUSD10Y) which rose in recent days.

  • Government backstop grows to 98% of new financing in residential mortgage-bond market during pandemic
    MarketWatch

    Government backstop grows to 98% of new financing in residential mortgage-bond market during pandemic

    The government is dominating the $11 trillion U.S. housing debt market more than before the pandemic, as private sources of capital evaporate, according to Barclays.

  • Banks to Benefit as Mortgage Rates at New Lows Amid Coronavirus
    Zacks

    Banks to Benefit as Mortgage Rates at New Lows Amid Coronavirus

    Banks with mortgage banking operations are expected to benefit from a rise in refinancing and origination activities as mortgage rates fall to a new low.

  • U.S Mortgage Rates Fall to a New All-time Low
    FX Empire

    U.S Mortgage Rates Fall to a New All-time Low

    U.S mortgage rates fall for a 2nd consecutive week to an all-time low as mortgage applications surge amidst the economic doom and gloom.

  • Mortgage rates hit another all-time low as home buyers rush to secure cheap financing
    MarketWatch

    Mortgage rates hit another all-time low as home buyers rush to secure cheap financing

    The number of people applying for loans to purchase a home has increased for six consecutive weeks after falling earlier in the coronavirus outbreak.

  • TheStreet.com

    What Is a Conventional Loan?

    If you're interested in buying a home, you'll probably need to know about conventional loans.

  • Don’t Expect Mortgage Rates to Drop Much Further
    Bloomberg

    Don’t Expect Mortgage Rates to Drop Much Further

    (Bloomberg Opinion) -- On March 17, bond markets were freaking out. The benchmark 10-year Treasury yield had soared 38 basis points, entirely reversing the stunning 34-basis-point drop from the previous day. High-yield credit spreads had just surpassed their early 2016 peak to reach the widest in nearly a decade. Fixed-income exchange-traded funds were in an “illiquidity doom loop.” Some 1,600 miles away from Wall Street, a friend of mine in Houston was perplexed, too.We hadn’t talked in months, but he reached out that day because he wanted to refinance his mortgage. The issue: He was having trouble making sense of banks’ quoted interest rates. They offered 3.125% on March 9, a few days after the Federal Reserve cut short-term interest rates by 50 basis points in its first emergency action since 2008. Correctly anticipating that the central bank would soon have to ease further, he waited. And yet the quotes went up, stuck at 3.5%.“Do you think mortgage rates will go down, aka do you think I should lock? 10Y Treasury yield is lower today than it was late last week,” he texted. “I’m a bit disappointed rates didn’t go down as I thought with the Fed rates down near 0.”I told him what I knew at the time: That refinancing applications had soared to the highest since 2009, creating a backlog and allowing banks to keep rates sticky; that residential mortgage rates aren’t exactly driven by the Treasury curve but rather the to-be-announced market; and that the rampant market volatility was probably causing chaos somewhere in the chain of borrowers and servicers and lenders. (Bloomberg News would soon report that interest-rate hedges forced margin calls upon regional dealers and lenders.)He went ahead and locked in his mortgage rate at 3.375% after what he described as “truly a roller-coaster ride.” Refinancing home loans at ever-lower rates has been nothing short of an American right over the past 38 years during the raging bull market for bonds. Mortgages make up an overwhelming majority of the $14.3 trillion in U.S. household debt, standing at $9.71 trillion as of March 31, according to the New York Fed. Sure, interest rates on savings accounts are once again veering toward zero, in yet another a punishing blow for savers. But on the flip side, to paraphrase “Arrested Development,” there’s always money in mortgage refinancing. Or perhaps not. While the Fed’s various lending programs have calmed markets and halted margin calls, mortgage rates have gone nowhere. Rates for 30-year U.S. mortgages average 3.24%, compared with 3.29% on March 5, according to Freddie Mac. The Mortgage Bankers Association’s U.S. 30-year contract rate is 3.41%, compared with 3.47% on March 6, while Bankrate.com’s measure of the average 30-year rate is 3.54%, compared with 3.55% in early March and well shy of the all-time low 3.32% in September 2016. While it’s true that 10-year Treasury yields are also little changed in recent months, it stood to reason that the yawning gap between the two wouldn’t be a permanent part of the mortgage market.However, at least by some measures, the benefit of benchmark interest rates near record lows is failing to reach U.S. homeowners to an unprecedented degree.Consider this: During the worst of the financial crisis, when markets were collapsing, the difference between 30-year mortgage rates and 10-year Treasury yields remained above 250 basis points for 10 weeks, from November 18, 2008, through January 28, 2009, before reverting back to a more historically normal level. The current stretch above 250 basis points has lasted 12 weeks and isn’t especially close to falling below that threshold, which has otherwise never been breached in data going back to 1998.It’s not clear what, if anything, can change this dynamic. In mortgages, Mark Fleming, chief economist at First American Financial Corp., told Bloomberg News’s Prashant Gopal in March that rates probably can’t go any lower than the “high 2s” because fixed costs in the transaction, like paying the servicer and the originator, typically amount to 1.5% to 2%. Yes, with strong credit, a large down payment of 20% or more, and a stable, well-paying job, an individual can lock in a sub-3% 30-year mortgage rate. But on the other side, U.S. home-loan delinquencies surged by 1.6 million in April, the largest one-month increase ever, data compiled by Black Knight Inc. showed last week. That’s one reason why taking past spreads and applying them to the current market simply won’t work. At the end of the day, no lender will put their money at risk if they’re locking in a meager gain at best and a steep loss from forbearance or repossession at worst.As for Treasuries, the minutes of the Federal Open Market Committee’s April meeting released last week revealed that at least a few members were starting to think about some form of yield-curve control in short- to medium-term maturities later this year if the economy is still in jeopardy. That would seemingly keep 10-year yields pinned in their current range of 0.54% to 0.78%. Signs of a stronger-than-expected recovery would presumably lift long-end yields and potentially mortgage rates along with them.For now, inertia in the two markets is hitting the wallets of Americans across the country. Yelena Shulyatyeva of Bloomberg Economics calculated in a recent report that a 1 percentage point drop in mortgage rates, from 3.5% to 2.5%, would lower the average monthly payment on a median-priced house to $893 from $1,015. When communities are doing all they can to support shuttered small businesses, an extra $100 or so a month for each household could go a long way. Instead, she concludes, “mortgage-rate stimulus may be a thing of the past.”Like most things related to the coronavirus pandemic, it will take months, if not years, to get a sense of how this affects the economic recovery. So far, the housing market outside of refinancing is at a relative standstill. Sales of previously owned homes in the U.S. fell in April by the most since mid-2010, according to data from the National Association of Realtors. However, the median home price increased 7.4% from a year earlier, while inventory fell to the lowest ever for any April. The equilibrium among supply, demand, price and interest rates coming out of this crisis has yet to be reached.Still, if the first five months of 2020 are any indication, waiting around for a rock-bottom mortgage rate might end up being costly, and possibly never happen. In Houston, my friend says his neighbor locked in a 2.65% rate for 15 years before the Fed’s first March action. He’s disappointed he didn’t get the most optimal rate but acknowledges no one can be a perfect market timer. These rates, while seemingly high relative to the trillions of dollars of negative-yielding debt, are still among the lowest they’ve ever been. That’s a bit of certainty in an uncertain world.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.