Why Most Agents Need to Refi Before October 15th; Will Rates Ever Fall?

    A savvy agent emailed last week asking when she could refinance her condo which is currently at 6.5%.

    She was anxious to refi BEFORE she files her 2022 tax returns, as her income was down markedly in 2022, compared to 2020 and 2021.

    Which is the case for most agents!

    So, this is just another reminder to agents and all self-employed borrowers to: (1) not file taxes prior to the Oct. 15th deadline – if they have not been filed already and if 2022 was a down year; and (2) to submit a loan application prior to the Oct. 15th deadline – so lenders ONLY ask for a copy of the extension request and proof that estimated taxes have been paid (to avoid having lenders request 2022 tax returns).

    There are a few nuances and precautions borrowers should take when filing extensions, such as making sure there is sufficient estimated income to still qualify, but these nuances and precautions should be discussed with a JVM Client Advisor or a qualified loan officer.

    AND – if a borrower does file 2022 taxes, she needs to be sure to let her lender know – as lenders will find out the taxes were filed when they request “tax transcripts” from the IRS.

    So, the next question is – will rates fall soon enough for people to refinance prior to October?

    And my answer remains yes, I think so.

    Coincidentally, I received an email this morning from the mortgage industry’s most prominent blogger, implying that rates will not only remain higher but likely continue to climb.

    This is based on the strong employment report Friday, seemingly persistent inflation, and rumblings in the press about a “soft landing” or avoiding a recession – among other things.

    Many Reasons Why Rates Will Fall

    Here is my response:

    Less optimistic people might point out that (1) the decline in hours worked more than offset those ostensible job gains; (2) the facts that income growth slowed and that unemployment ticked up were more than disconcerting; (3) household survey data is both more accurate and much less encouraging than the BLS data – which is laden with assumptions and invariably gets revised; and (4) employment data LAGS recessions in any case, meaning that we don’t see major upticks in unemployment until after the recession has fully set in.

    Pessimists might also illuminate a few ticking time bombs and other concerns – such as a flat China re-opening; a pending collapse in China’s real estate sector; a German recession; a potential collapse in the U.S. commercial real estate sector; a surging dollar and the potential for sovereign debt and currency crises; falling prices in many areas such as shipping and commodities; a potential collapse in the auto loan sector; very weak manufacturing numbers; more banking crises looming; a massive slowdown in bank lending; declining GDI numbers (which have never failed to predict a recession); Eurodollar futures curves which are screaming rate cuts (which have also never been wrong); and unsustainable debt loads at the consumer, corporate and government levels (particularly when rates are so high).

    This all reminds me of 2008 when Fed members were STILL saying that we might avoid a recession all the way through August – and then Lehman very inconveniently collapsed in September. And then… that soft landing turned into a 500 mph crash into concrete.

    So, I am not sure when rates will fall exactly, but I do remain quite certain that they still will fall, and my best guess is that they will fall significantly by September at the latest.

    Jay Voorhees
    Founder | JVM Lending
    (855) 855-4491 | DRE# 1197176, NMLS# 310167

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