By Charles Howell, Princeton Mortgage Wholesale
Photo by Teddy Kelley on Unsplash
The MBA reported that application volume is up a little over 4% in the past 6 weeks and nearly 6% from this time a year ago. Refinance requests significantly spiked, which is surprising news to most since interest rates and costs to originate conforming loans slightly increased over last week.
Purchase applications also rose from last week’s mark, and are up nearly 7% higher than a year ago. Factoring in fear of continued rising interest rates seems to be the most logical explanation for the increased applications during these traditionally slower and cold winter months.
But even if we fear continued rate increases from the Treasury, there are some signs of confidence in the housing market, along with encouraging progress with lending outside of QM restrictions. The Federal Housing Finance Agency (FHFA) substantially increased the Conforming loan limits, and there is much optimistic buzz around the potential revision of the Dodd-Frank Act. But if restrictions are lifted and smaller banks/credit unions are encouraged to originate AND keep these riskier loans on their books, who exactly will still honor it as QM lending and will help with potential bailouts if it backfires? Does the reward outweigh the risks for the smaller banks/credit unions that could qualify to lend like this?
Personally, I think it is refreshing to see real effort with loosening lending restrictions for smaller banks and credit unions, and I think it can work. Debates on smaller banks/credit unions to lend despite a higher-than-desired DTI sure beats the debates giant institutions are having due to President Trump’s new tax law. While general trading performance is down, large banks have been significantly impacted by having to claim more foreign earnings now taxable under new law. Ouch!
It’s a balmy 4 degrees in Pittsburgh today, but it looks like we might be able to thaw out over the weekend. My hope is that I’ll be able to finally take my Christmas decorations down!
Thanks as always,
Charles
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.