When the Federal Reserve first came into the bond market and applied their new Quantitative Easing purchasing bonds and mortgage backed securities adding liquidity to the financial market to counter COVID economic issues, it had an unintended consequence of disrupting the mortgage market.
In a nutshell, the Fed was buying to many bonds. When lenders lock a loan for a borrower, they’re promising a specific rate and point structure for a specific time in the future. To guard themselves financially against market volatility, they hedge the funds they locked, by shorting the mortgage backed securities. Unfortunately the Fed was buying more bonds than were being generated, forcing the pricing down so fast, the lenders were realizing margin calls on their short holdings.
The result, this added to lender’s financial strain, that they were already realizing. Lenders minimized the ability to lock loans, many loan programs suspended, and some lenders at the point of bankruptcy.
The upside, after the wild rate swings for a few weeks (circled on the chart), the Fed has adjusted their quantity of purchases of bonds so we’ve now are in a more stable market (reflected in the chart).
The mortgage market is still stressed because of forbearances, etc, but we are starting to see lenders open up locking capabilities, interest rates stabilizing, and some non-QM loan programs coming back.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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