Gov Shutdown, Consumer Confidence, JOLTS, ADP Jobs, Pending Home Sales, Appreciation New FICO Model

Good morning and happy Friday. Jordan Keck here, your lender buddy. First Friday of October here with your weekly market update. Interest rates, fairly steady week over week from 6.38 to 6.34, and again, that is for top-tier scenarios, the largest loan amount, biggest down payment, highest credit score for, and with a small amount of points and some lender fees in there as well. So just remember that this is not a quote for your particular clients. It's an indication of where the market's moving on average for that scenario for lenders across the country. Every scenario is different on that. A lot of stuff to get into this week, but I will start off with mortgage tip. I'm going to cover the impact of the government shutdown on mortgages. First time government shutdown since probably about 7, 8 years ago now at this point. As a result of this, there will be some delays, there will be some pauses. So VA and FHA still going to be funding loans like usual, but it could be delayed, especially if there needs to be any government employee involvement because of furloughs and reduced staff workloads. USDA loans appear at the moment to be put on pause indefinitely, at least until the government shutdown is done. Now, this could be changing very quickly, and so by this time next week, Things could be different, but at least that's the way that looks right now. Any mortgage that's requiring FEMA flood insurance, they are not writing any new policies. So those will be on hold. Luckily, a few years ago, most of the loan types allow now private flood insurance. So private flood insurance isn't going to be affected. This is only going to impact those that require or are using FEMA-specific flood insurance. For self-employment, Fannie Mae has come out and given some waivers on things that could hold us up. Haven't seen those yet from FHA or from VA on self-employment. So things like, uh, verification of federal employees, verbal verifications near closing. Fannie Mae has come out and waived that, saying the lenders can basically just write a letter stating what's going on. Another one is pay stubs. Usually they'd have to be dated within 30 days of closing. If this continues to go further, Fannie Mae says you don't have to have it within 30 days. One requirement they did add is if this goes past November 3rd and we're still under a government shutdown for federal employees, any federal employees who are getting loans do have to have at least 2 months of reserves after closing because we don't know when they're going to get paid again yet. The last one, IRS tax transcripts on Fannie Mae files don't need to be in the file before closing if we can provide proof of e-filing or an IRS response that no transcript is available. Again, this is Fannie Mae specific guidance here. FHA, VA haven't come out saying those. You may run into some issues with self-employed borrowers if we don't have those tax transcripts prior to closing for those government loan types. Again, this is developing in real time, so as new information comes out, I'll try and stay up to date on that and update you again next week. As far as some news, other news this week, Consumer Confidence Report fell from 97.8 to 94.2. Pretty big drop. Within the report, the weakest components were on the labor front. We had 26.9% of respondents said jobs were plentiful, which is down from 30.2% in August. 19.1% said jobs were hard to get, which is unchanged. 16.1% expected more jobs to be available, which is down from 17.9%. 25.6% anticipate fewer jobs in the future. The only thing really on the positive side is the plans to purchase a home rose to a 4-month high. So that increased from the previous. The August job opening reports, the JOLTS report, showed 7.2 million job openings. Didn't really change much from the previous report, but still at a very weak level overall. There were almost 200,000 more job openings in healthcare and social assistance, as well as leisure and hospitality, meaning many of the other sectors ended up seeing a drop in job openings to be able to offset those gains. The hiring rate did set a new recent low, falling from 3.3% to 3.2%, which which ties the lowest level since 2013 when removing COVID. Next up, the September ADP jobs report showed 32,000 jobs lost versus an expected gain of 50,000 on the headline number. August was also revised lower by 57,000. So not only did the headline have a miss of 82,000, but had 57,000 jobs from last month to make last month's a net loss of 3,000 jobs instead of the initial read of 54,000 job gains. The biggest area of job losses was in services with 28,000. Both medium and small-sized businesses end up having a net loss, so we really only saw job gains in large businesses, which added about 33,000. The market's now pricing in a 100% chance of another Fed rate cut at their meeting in October and a 92% chance of another rate cut in December. Remember, when the cuts actually happen, the market is already pricing those in right now. So the actual cut will not change mortgage rates. It'll be what is the market expecting and how is the Fed commenting on it when that actually happens. So remember to talk about this with your clients. Pending home sales for August showed sales were up 4%. It was a big beat on the expectations that it would come in flat with a likely number, uh, the likely The number likely being aided by the drop in rates. Year over year, sales are up 3.8%, and that's for signed contracts for the month of August. Next, Case-Shiller and FHFA both reported home prices down 0.1% for the month of July. Year over year, prices are still up 1.7%, but the pace is definitely slowing or decelerating here. This does report home prices when rates were higher. So because that was for the month of July, when August, September, and October's numbers come out. Be interesting to see if that had an influence in home price appreciation, if there's been some additional demand drivers throughout the country as a result of lower rates potentially causing higher demand. And lastly here, you might have seen in the news, brand new information announced late Wednesday night coming up really to late Thursday morning, is that FICO announced new direct-to-lender model for credit reports and scoring. Bypassing the major 3 credit bureaus. This comes after Bill Pulte, director of the FHFA, been putting pressure on FICO, calling them a monopoly, and really looking at the cost of credit reports going up from around $15 to $20 a report not that long ago within the last decade to now nearly $100 a report. Again, this was a surprise announcement here. The industry hasn't adjusted to it yet. And so there's still few details about how this will be implemented, if there will actually be a cost savings, what this model can look like for consumers. And so brand new information, hopefully getting a handle on that in the coming days as well. And I'll let you know as I have a better idea. And again, hopefully driving down costs of the already very expensive process for consumers. Always, hopefully you have a fantastic weekend. Take care. We'll see you next time. Mm-hmm.