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Vaultedge Newsletter - Purchase vs Refi.

Vaultedge Newsletter - Purchase vs Refi.
By Sanat from Vaultedge • Issue #51 • View online
Late last month I attended the Western Secondary Conference in Dana Point, CA. The conference was worth attending, both for the sessions and for the very beautiful location & hotel (the Waldorf Astoria hotel) it was held in. Mary Ann, the President & CEO of Guild Mortgage was on one of the panels and she said something very interesting:
“A Purchase loan is an emotional transaction compared to a Refinance loan, which is purely a financial transaction.”
Loan Officers will do well if keep this in mind when they talk to potential borrowers. With interest rates where they are now, it is only natural that there will be very few opportunities to find a Refi borrower. But Purchase loans are an entirely different ball game. Interest rate is only one of the many factors driving the purchase decision of a home. Many of these factors (meeting an important life goal, long term wealth creation, making room for expanding family, moving closer to kids’ school etc) remain as strong as ever. Even the affordability aspect (monthly payments being high because of high interest rate) can be addressed by a variety of means:
  • Sell an ARM
  • Ask a lower down payment
  • Sell a 2-1 buy down loan
  • Educate the borrower that she can Refi in a few months
So even in the current environment, if you are not able to sell a Purchase loan, it is completely on you. Don’t blame it on interest rates! 
The Data from MBA’s latest weekly survey reported a 0.2% week-over-week uptick in its Market Composite Index, a measure of loan application volume. However, on an unadjusted basis, the index was down 0.3% compared to the previous week. The report also showed that refinance applications rose 4% week over week and were 82% lower than the same period a year ago. The purchase index, on the other hand, dipped 1% from last week and was 19% lower than in 2021. 
Sam Khater, Chief Economist at mortgage giant Freddie Mac, post the 75 basis rate increase by the Federal Reserve last week said, “The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise over the course of the year”. He also commented recently that even though rates continue to fluctuate, the recent data suggest that the housing market is stabilizing as it transitions from the surge of activity during the pandemic to a more balanced market. Drops in purchase demand continue to dwindle while supply remains fairly tight across most markets. The consequence is that house prices likely will continue to rise, but at a slower pace for the rest of the summer.
The inflation numbers shook up the markets in the second week of August but this time the numbers appeared to be less threatening. The Labor Department’s producer price index (PPI) showed the cost of wholesale goods fell by 0.5% in July. That was the first time in two years the PPI saw a month-over-month decrease. On an annual basis, wholesale prices were up by 9.8% which was well below June’s year-over-year increase of 11.3%. 
Consumer prices also showed signs of relaxing with gasoline prices decreasing and dragging down the annual gain. The consumer price index (CPI) released by the Bureau of Labor Statistics showed consumer prices rose by 8.5% year-over-year in July. 
With a slow-paced US inflation rate, Federal Reserve may have a chance to temper the speed of future rate hikes. The softening of consumer prices was just one step in what the Feds would call, a very long process along with a red-hot job market and suddenly buoyant equity prices suggesting the economy needs more of the cooling that would come from higher borrowing costs. Neel Kashari, President of the Federal Reserve Bank at the Aspen Ideas Conference emphasized that the Fed is “far, far away from declaring victory” on inflation. 
PacWest Bancorp and its banking subsidiary, Pacific Western Financial institution, went down on their ratings provided by Fitch. On Wednesday at a press launch, Fitch introduced the revision of PacWest’s long-term issuer default ranking from “BBB” to “BBB-”. This change in rating was mainly because of the “speedy, growth-driven deterioration” of the financial institution’s widespread fairness Tier 1 ratio.
loanDepot, the nation’s second-largest retail mortgage lender, has so far cut nearly 4,000 jobs since the end of last year, but last week it said it’s planning to end its wholesale lending business. The company’s President announced that it was a ‘strategic’ decision to exit the wholesale business. The planned reductions had been outlined in July when loanDepot announced its Vision 2025 plan.
New data from American Advisors Group shows that the Gen X will have the same problems as the Baby Boomers when it comes to helping their parents with financial aid. To understand how Gen X adult children are feeling about their parents’ financial state, AAG, a national leader in home equity solutions for seniors, conducted the Adult Children Survey with more than 1,500 participants aged 40-55 who have senior parents. According to the study, more than half of Gen X adult children do not have enough money to help their senior parents. The study also found that 55% of adult children said they are not financially prepared to care for their parents in a time of need.
This week for us was rather busy. You know we are now available on Microsoft AppSource. So, you can connect with your favorite salesperson at Microsoft and available our services. Our products are built on the Microsoft Azure platform to provide high scalability (10K+ loans processed/day). We are razor-focused on helping lenders and servicers reduce costs and improve response time through automation, at the same time making life easy for end-users-loan officers loan processors, underwriters. We will be happy to take you through our offerings, just schedule a call with us.
Finally, a very Happy Independence Day for all our Indian friends & colleagues. Early in my career, when I met people from outside India, I used to tell them - You travel 300 miles in any direction in India, you will see that everything changes. Language, food, attire, festivals etc, are all different in different parts of India. So the country is as diverse as it can get, and it is still held together strong by a national pride. When I was growing up in India, this was a popular song that celebrated the diversity of India. I am sure, there are many out there that will feel nostalgic about this song.

MIle Sur Mera Tumhara - 720P High Quality - Doordarshan
MIle Sur Mera Tumhara - 720P High Quality - Doordarshan
Mortgage rates still in a flux, reflecting inflation
Purchase market continues to experience a slowdown
Fed officials say more rate hikes needed, despite slowing inflation
Mortgage Rates Above 5% Again, Home Prices Keep Rising - ValueWalk
Fitch downgrades PacWest, citing 'deterioration' of key capital ratio
There's more blood on the tracks in the non-QM market
loanDepot Dumping Brokers, Exits Wholesale
UMortgage lifts the lid on its influencer marketing strategy | Mortgage Professional
SEC: Angel Oak Capital Advisors Misled Investors – NMP
Half of serious mortgage delinquencies are at least 6 months late
Home Prices In Q2 Rose By Double-Digits In 4 In 5 Metro Areas
Mortgage credit availability sinks in July as lenders pull back - HousingWire
Solid Jobs Report Move Employment, Unemployment Rate to Pre-Pandemic Levels - MBA Newslink
Gen Xers may not be able to help parents financially | Mortgage Professional
75 Years of Indian independence
75 Years of Indian independence
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Sanat from Vaultedge

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