In this week’s mortgage market update, we’ll take a look at the rise of the electronic mortgage process – a technological advance that can save money, time and resources.
We’ll also look at the current trends for mortgage rates and where these rates may be headed in the near future.
Mortgage Rates At-A-Glance
- Currently Trending: NEUTRAL
- 7 Day Forecast: NEUTRAL
- Volatility Level: HIGH
E-Mortgages Will Speed Up Closings, Cut Costs
If you’ve been following the latest mortgage news stories, you’ve likely heard about the emergence of the new e-mortgage process. An electronic mortgage process could potentially shave 30 days off the average 52 days it normally takes to close a loan, according to a Fannie Mae study. Furthermore, because this new process is totally paperless, e-mortgages could save the home financing industry an average of about $1,100 per loan. That translates to roughly $1 billion a year!
Even with these impressive statistics, the industry hasn’t been too quick to adopt an electronic mortgage process. Like with any switch-over to new technology, there are many hurdles to clear and challenges that must be addressed. However, the process is expected to get a boost from the Consumer Financial Protection Bureau’s new mortgage disclosure forms that will be disseminated electronically.
“This will allow stakeholders much earlier in the origination chain to derive value from going electronic,” says Nancy Alley, vice president of strategic planning at Simplifile, a company that helps record mortgages electronically. “That should help adoption. Plus, an electronic process should drive a better consumer experience.”
According to Fannie Mae data, there were about 25,000 mortgages with electronic promissory notes in 2013, representing only about 1 percent of all U.S. mortgages originated last year.
Where Rates are Headed
Conventional and government lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS), which are traded all day in real time on the bond market. Because the pricing of MBS changes, mortgage rates change as well. This is why you may see a lender advertising a certain rate one day, and then see that the rate increased or decreased the next day. Basically, when MBS pricing goes up, mortgage rates generally go down. When MBS pricing falls, mortgage pricing tends to go up. Tracking these securities in real time is critical for lenders and mortgage professionals; however, it’s surprising how few lenders have access to live trading screens during market hours. We at The Decker Group are among the few lending professionals that has this access.
Because we have access to these trading screens, as well as other market data, we can predict where mortgage rates may be headed with a fairly high level of accuracy. According to the data we’ve seen for this week, we predict that mortgage rates will likely remain neutral, but with a high level of volatility.
According to Sigma Research, the rate markets still hold an improving bias. However, Sigma Research doesn’t expect mortgage pricing to improve much unless the data released between now and Friday continues to reflect slowing economic growth.
Sigma Research also says there will be lots of economic data this week that is likely to have an effect on the bond market. Volatility will be high, as mortgage pricing will be affected by expected economic news. Of course, there is also the chance that rates can change due to unforeseen events.