I. If you’re ever feeling down, read THIS (so you can just be glad you’re not in the mortgage industry).
It’s a very interesting thread by Lance Lambert about how dire things are in the mortgage industry.
I’ve blogged about this a few times already this year, but I’m hitting it again because things have gotten even worse.
- Rates unexpectedly climbed above 7.0% because of the Iran War.
- Purchase activity is at a multi-decade low because of the high rates.
- Purchase activity slowed even further because of the time of year.
- Lenders are not able to make up volume with refinances because rates are so high.
- We are back to 1995 volume levels, but America has 75 million more people today.
So – expect a lot more layoffs and mergers…
I should note, though, that JVM Lending is doing just fine, thankfully.
II. JVM’s Free-fi™ (Extremely Popular Right Now)
Every borrower we help in this rate environment wants nothing more than to refinance into a lower rate as soon as rates dip.
And – they will at some point, as I have explained many times, because rates never move in a straight line.
This is my reminder that JVM’s Free-fi™ remains intact and more popular than ever (borrowers love it when we bring it up).
It’s our promise to cover nonrecurring closing costs for refis on all eligible loans whenever rates drop enough (and they will, and we’ll contact every eligible borrower immediately).
III. Why The Fed Does Not Raise Rates When Inflation’s Hot & Well Above The 2% “Target”
The Fed (like most central banks) has a “target” inflation rate of 2%.
When PCE inflation is above 2%, the Fed is supposed to raise rates to tame it.
Currently, all three major inflation indices are way above 2% (CPI = 3.7%; PPI = 6.3%; and, most importantly, PCE = 3.6%).
So yesterday, when the Fed did not raise the Fed Funds Rate, X was abuzz with conspiracy theories about Fed Chair Warsh being wimpy, being dumb, being in Trump’s pocket, being politically motivated, being you-name-it…
And to be sure, Mr. Warsh didn’t clearly explain why he didn’t raise rates. So, I want to provide one major reason.
Today’s inflation is driven primarily by supply shocks (from the Iran War), not by too much money floating around the economy.
Raising rates will do nothing to ease supply shocks or increase production of oil, fertilizer, gas, diesel, etc.
