Mortgage rates are influenced by the yields on mortgage-backed securities, which need to remain competitive with the 10-year Treasury yield. The two have a complex relationship that does not always flow as expected, evidenced by periods when the 10-year yield was higher in the past and mortgage rates were lower. What specific factors are causing the current fluctuations and how can homebuyers navigate such an unpredictable market?

The spread is narrowing between the 2-year and 10-year Treasury yields, which had previously signaled the potential for a recession according to some economists. However, that fear has now subsided as the U.S. appears headed for a “soft landing” with low unemployment and rapidly declining inflation. Will that make a substantial difference in the market going forward?

Around 70% of household debt is mortgage debt. Every financial situation is different, and borrowers often face significant challenges on the path to homeownership. The dynamics of the industry depend on how money is circulated, starting with the federal government lending to member banks, who then lend out for mortgages. Those mortgages are sold to GSEs like Fannie Mae and Freddie Mac, who package the payments into bonds to replenish the lending pool. What can prospective borrowers do that don’t qualify for these traditional loans, such as those who are self-employed or gig economy workers whose income may not be fully represented on tax returns? Are other strategies like rate locking or floating viable options to consider?

This week, Jeff’s guests include:

– Maureen Reynosa (Newrez Wholesale) discusses Newrez’s non-QM programs like Smart Edge for borrowers who don’t qualify for agency loans and the Smart Self program for self-employed borrowers.

– Seth Soloway (LoanWyse) highlights LoanWyse’s programs for self-employed and “gig economy” workers whose income may not be fully represented on tax returns and asset-based programs for borrowers with significant assets.

– Charles Giscombe (United Security Financial) emphasizes the critical role of clear communication and transparency in the loan process and shares strategies for locking in rates in a volatile market.