Mortgage Rates

There's a mortgage REIT meltdown—Here's what's happening





CNBC’s Kelly Evans talks with Dom Chu and Diana Olick about the mortgage REIT meltdown as mortgage servicers face severe liquidity risk.

An increase in interest rates, combined with a massive shutdown of the economy caused homeowners and potential homebuyers to back away from the mortgage market.

Total mortgage application volume fell 29.4% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 3.82% from 3.74%, with points decreasing to 0.35 from 0.37 (including the origination fee) for loans with a 20% down payment. That is the highest level since mid-January.

“Several factors pushed rates higher, including increased secondary market volatility, lenders grappling with capacity issues and backlogs in their pipelines, and remote work staffing challenges,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

Applications to refinance a home loan, which had been surging dramatically in the last month, fell 34% for the week but were still 195% higher than a year ago, when rates were 63 basis points higher. Refinances tend to be volatile, moving weekly with interest rates.

Mortgage applications to purchase a home are usually less volatile and less sensitive to weekly rate moves. Those applications decreased an unusually wide 15% for the week to the lowest level since August and were 11% lower annually. Buyers are clearly rattled by the economic shutdown, job layoffs and the massive drop in the stock market.

“Potential homebuyers might continue to hold off on buying until there is a slowdown in the spread of the coronavirus and more clarity on the economic outlook,” Kan said.

Purchase applications fell even more dramatically last week in states hardest hit by the coronavirus: down 35% in New York, 23% in California and 17% in Washington.

Mortgage rates have already pulled back this week, as the Federal Reserve is now pouring money into the mortgage-backed securities market to restore liquidity.

Lower rates, however, are unlikely to cause any surge in homebuying. Real estate agents and homebuilders are reporting a big drop in demand, and open houses are shuttered. They are doing virtual home tours, but sales are predicted to drop dramatically for the next few months.

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42 comments

  1. Short More Junk Bond 🔥🔥🔥🔥🔥🔥🔥

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  2. Here we go again

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  3. 2:24

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  4. This lady definitely lives in Westchester

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  5. housing crash when?

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  6. Printing money seems like a good idea (initially).

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  7. no analysis needed. Fed is everything.

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  8. he just called them boomers LMAO

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  9. Hey, end of the line. recession 2020. The rich win. (they own it all especially Washington )

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  10. the us gov will bail the market… why are people panicking???… seriously.. freeze the market then open it back up in 6 months… simple as that.

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  11. It's good to see Boomers are hardest hit here… #BoomerRemover

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  12. And that boys and girls is how financial pyramid schemes collapse. 😀
    Time to put wall st. in prison.

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  13. Theyre out to steal all the boomers money. Plain and simple.

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  14. It’s time to throw away all of our federal reserve notes, stop paying our debts, and just trade in gold and silver

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  15. So strange to see all these anchors in their own homes.

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  16. news flash… the bottom is not in..
    see u end of april

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  17. The FED is buying everything – fake economy.

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  18. This is like going to the casino and betting a huge sum on roullette losing and the casino giving you the money back..

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  19. So these industries are going to get bailed out so they get their money but still take people's homes? Even though they got the money? So we need to have sympathy for these industries but they don't have sympathy for the citizens? I'm hearing a lot of talk about pitch forks lately..

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  20. There is no free market. It's just an American illusion. Our Government is picking winners and losers by artificially printing money. They are printing money and giving it away to the Corporate Welfare Queens who asked for a handout 15 days into this mess. The economy wasn't great before this crisis!!!!

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  21. They have insurance or something though, right? Catastrophic asset insurance? Is there even such a thing?

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  22. Best for the government to do nothing. Absolutely nothing. Those not at the top are ready for a reset of this fraud.

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  23. Why the hell are taxpayers bailing out Banks that only screw hard working Americans? Dump Trump and all corporate Political puppets.

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  24. If your smart and have a home, you will use this opportunity to borrow money dirt cheap. Under 3% on a 30 year. So cheap! It’s coming!

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  25. Borrowing money to buy "borrowed money to buy a property" bonds makes not sense at all. Nobody pays with cash anymore.

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  26. The Corporate and the rich will use our tax dollar to keep every thing beyond our Reach

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  27. A person making $75.000 a year..
    ÷52 week's = 1.440 ..
    😎 thank you.. free money $$%

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  28. It looks like Dominic Chu plays a lot of golf!

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  29. Barrack was talking about Commercial Mortgage REITS or CMBS Investors like IVR and CLNC

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  30. The market that they regulate is working the same way it always has, for them not us

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  31. The Mortgage servicers get lines of credit from banks to make the payments. But again, their business model is the risk so why should we have to pay for that? What a joke! Republicans all turned into worse than Bernie!

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  32. I just love this phrase: Privatize the profits, socialize the losses. Just like 2008.

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  33. why did the guy make a weird face hahahahah

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  34. So do we buy REITs while they're cheap or not??

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  35. This is theft of the real estate in America by the elite who own the federal reserve.

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  36. This is crony capitalism. I’ll take Bernie Sanders and real socialism instead of crony capitalism.

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  37. Private profits, public risk? No, thanks, let them fail.

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  38. What's with the crazy face Dom made at 2:25 ? Thought he was off camera…..

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  39. Over priced homes sky rocket the rents . Housing need to reset . I’m ready to buy after this .

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  40. Most times, "I TOLD YOU SO!" is exactly what needs to be said.

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  41. Thousands of Americans homes rolling on the markets

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  42. Burn baby burn

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