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Mortgage Rates Are Amazing and Terrible

March 25, 2020
by admin

Depending on what you’re looking at, when you look, and where you look, mortgage rates could either be amazing or terrible. Large, upstanding, secure, solvent, excellent lenders are as much as a full percentage point apart from one another on the same loan quote. That essentially NEVER happens in the mortgage market–not with all of those qualifiers anyway.

This is a symptom of the “mess” that coronavirus has made of the financial market. For those that want to pretend there’s some unique mortgage-specific issue that makes things more difficult for the mortgage market versus other sectors, look around you. To whatever extent it’s been “inconvenient” for the average 401k to lose more than 20% of its value in 3-4 weeks, the mortgage market has faced “inconveniences” on a similar scale. Compared to airlines, oil, retail, food service, and a laundry list of other sectors hit hard by COVID, the mortgage industry merely gets a participation trophy in this race to terrible.

Things are terrible! Things will get better!

In the meantime, big discrepancies between lenders will be a way of life. Big intraday changes are the norm (HUGE swings in rate offerings, even at the same lender). Anything with what we in the industry refer to as “hits” will be priced terribly. That refers to any price adjustments for things like lower credit scores, non-owner occupancy, higher loan-to-value rations, etc.

Not all of these issues are linked to the same intermediate problem in the mortgage market, but they are all ultimately traced back to the massive market adjustment brought about by coronavirus. To whatever extent disease statistics move in a reassuring direction, so too would many of the problems created in financial markets. That sounds like common sense to the average stock investor, but it’s true for the once-in-a-lifetime inconsistencies in the mortgage market as well.

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