Homeowners Rush To Refinance Their Mortgages As Rates Hit Record Low
Amidst the market selloff that has been triggered by fears over the potential impact of the coronavirus on the global economy, investors have rushed to the safety of U.S. debt.
With bond yields inversely related to bond prices, yields have collapsed over the last few weeks. For example, the yield on the 10-year Treasury note dropped below 1.0% for the first time ever this week, hitting a new all-time low of 0.899% yesterday. That compares to a yield of 2.72% a year ago and 1.92% at the start of this year.
The drop in yields has also led to a drop in mortgage rates, in fact, by so much that they hit a new record low as well. For the week ending March 5, the 30-year fixed-rate mortgage averaged 3.29%, down from 3.45% the prior week. Compared to a year ago, the 30-year fixed-rate mortgage averaged 4.67%. The less common 15-year fixed-rate mortgage dropped to an average of 2.79%.
The data from last week shows home owners are rushing to take advantage of lower mortgage rates and refinance. According to the Mortgage Bankers Association, weekly refinance applications jumped 26% from the prior week, with refinance volume increasing by 224% from the same period a year ago.
"The 30-year fixed rate mortgage dropped to its lowest level in more than seven years last week, amidst increasing concerns regarding the economic impact from the spread of the coronavirus, as well as the tremendous financial market volatility," said Mike Fratantoni, MBA’s senior vice president and chief economist. "Given the further drop in Treasury rates this week, we expect refinance activity will increase even more until fears subside and rates stabilize."
Quicken Loans, America's largest mortgage lender, even said they saw record volume on Monday and Tuesday as mortgage rates fell. United Wholesale Mortgage chief strategy officer Alex Elezaj said the company approved $2.5 billion in preliminary loans, which is a single-day record for the company.
With rates plunging and mortgage activity jumping, the mortgage industry is anticipating hiring thousands of employees to keep up with demand. Underwriters are needed so badly that some lenders are offering signing bonuses to attract talent.
"If you’re not making a $1 million this year as a loan officer, you’re grossly incompetent," Eric Mitchell, an executive at Michigan-based Gold Star Mortgage Financial said. "I tell them, ‘We’re not working 40 hours a week; kiss your families goodbye.'"
Quicken Loans expects to hire a few hundred employees per month this year to keep up with demand. Elezaj said United Wholesale Mortgage plans to hire 2,000 additional employees this year after doubling its workforce to 5,400 employees last year. At JPMorgan Chase & Co., half of the employees in the home-equity division were told they would be transferred to the mortgage division to meet demand.
With many experts in the industry expecting rates to continue to fall, the mortgage lenders should continue to remain busy keeping up with demand from refinances. If the stock market continues to fall, though, they may not be as busy processing mortgages to purchase a home.
Time to work from home. Amazon, Microsoft and Facebook, which have more than 100,000 employees in Seattle between them, are recommending employees work from home as the city deals with the coronavirus outbreak. Amazon announced one of its employees in Seattle has contracted coronavirus and is recommending employees work from home for the remainder of the month. Facebook said a contractor at its Seattle office contracted coronavirus and the office will remain closed until March 9. Seattle has thus far been the hardest hit city in the U.S. by the coronavirus.
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Wide-ranging corruption at the UAW. Gary Jones, the former President of United Auto Workers has been charged with embezzlement and defrauding the U.S. government following a multi-year investigation. Charges against additional UAW employees could be on the way as court records indicate prosecutors identified four other individuals involved in the scheme that embezzled more than $1 million of UAW funds. Jones took a leave of absences from the UAW on November 3, ultimately resigning from the position a few weeks later on November 20.
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