Out of the frying pan and into the fire.
Last week, mortgage pros and potential home buyers breathed a sudden sigh of relief when the Federal Reserve announced that it would hold off on its QE3 tapering. But now the nation is on the edge of their seat again as Democrats and Republicans duke it out over a stopgap continuing resolution, which could lead to increased volatility of mortgage rates.
The Fed’s announcement to wait for continued signs of economic improvement before tapering their purchases of Treasuries and Mortgage Backed Securities came as a pretty big surprise to everyone. And even though this caused mortgage rates to stay fairly steady, they didn’t go down significantly as some people hoped. The good news, however, is that rates did not go up! The continuing resolution, or CR, would maintain current spending levels and temporarily avert a governmental shutdown. This is not to be confused with the pending conversation about increasing the debt ceiling again. Instead, this crisis is being caused by what some consider to be the Republicans’ desire to stall the implementation of the Affordable Care Act (also known as Obamacare). The Democrats, by contrast, are pushing for the program to be fully funded and are insisting that Congress pass what they call a “clean” CR.
Although this is a very divided debate, one thing remains the clear: no matter where you stand on the issue, a government shutdown can affect us all. Real estate and mortgage transactions, as well as mortgage rate volatility, can be influenced by a government shutdown. Some folks may be concerned that they won’t be able to get a government-backed loan like an FHA mortgage or VA home loan. The truth is consumers should still be able to access these loan types; however, they are likely to run into delays.
The Federal Housing Administration says it “will endorse new loans under current multi-year appropriation authority in order to support the health and stability of the U.S. mortgage market.” In order to process and facilitate these loans, mortgage lenders may rely on government employees that will be part of the shutdown. So if a shutdown occurs, don’t be surprised if you experience delays. Unfortunately, neither you nor your lender will have much control over this situation, so just hang tight and bear with them.
Like the FHA, the Veteran’s Administration will also continue to make their home loan program available. However, just like the FHA loan program, VA loans may be held up in the processing. Expect issues like those that occurred during the last shutdown, when loan Guaranty certificates of eligibility and certificates of reasonable value were delayed.
Mortgage Rates Forecast
Currently Trending: Neutral
Last week saw rates staying flat, as there was less volatility in the market’s conditions. There was a small improvement to rebate pricing as the reflection of a small improvement in the MBS (Mortgage Backed Securities) market for the week. This decrease in volatility was largely due to traders sticking with bonds, as the focus was on Washington, D.C. The week ahead will likely bring much more volatility, especially with the pending government shutdown.
So what’s the bottom line?
If you can qualify for a low rate, and you’re ready to buy a home, don’t wait! Things could look a lot different by the end of the week. If you’d like a free rate quote on your next Texas or Oklahoma mortgage, contact The Decker Group today. We offer competitive rates on a variety of home loans, including VA and FHA mortgage programs.
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