On Friday, there were three major factors pushing up mortgage rates: (1) too much business – lenders are pushing up rates to stem excess volume; (2) too little liquidity – too few buyers of mortgage-backed securities in the marketplace forced lenders to offer higher yields to attract more buyers; and (3) RISK (a new factor) – investors are afraid borrowers are going to lose their jobs and miss payments b/c of the COVID-19 crisis.
FED TO THE RESCUE
The Fed came to the rescue today by announcing “unlimited Quantitative Easing,” meaning that the Fed will now buy as many mortgage-backed securities as necessary to keep mortgage rates low.
In other words, the Fed is addressing the liquidity crisis and it is working so far, as rates are significantly lower this morning.
MORTGAGE AND APPRAISAL RELIEF MEASURES
There are numerous proposals and directives popping up everywhere from Congress, Fannie Mae and other regulators that should give even more relief to the beleaguered mortgage and real estate industries.
Fannie Mae announced today that they will accept either desktop appraisals or exterior inspections only. The industry is still trying to adapt to this – so it could be a few days before we can take advantage of this new allowance.
VERIFICATIONS, GAP INSURANCE AND ONLINE NOTARIES
Regulators and lawmakers are also trying to push through provisions that will make employment verifications easier (when so many HR departments are out of commission), e-recordings universal, closing without recording acceptable with gap insurance or other provisions, and online notarizations 100% acceptable – among other things. While all these provisions are not in place yet, they are no doubt coming soon.
The results of this COVID-19 crisis are undeniably tragic with respect to job losses, the loss of loved ones and just mass disruption in general. However, there are silver linings or reasons for optimism still. Some of the above relief measures will remain permanent and thus make our industry much more efficient. Also, I saw dozens of families outside over the weekend enjoying each other in ways they probably have not done so for years if at all – the WSJ wrote about this here: “Mommy, I like the coronavirus“. And lastly, I have seen several references in regard to effective drug treatment programs surfacing for COVID-19 that are already working. These won’t prevent the spread of the virus but they could greatly curtail its adverse effects and allow the economy to come to back to life sooner than expected.