Mortgage rates dropped 20 basis points to 6.57% after the BLS revised jobs numbers downward and fired its commissioner. Jordan Keck breaks down FHA versus conventional loans, the Fed's expected 25-basis-point rate cut in September, and how the new Trigger Leads bill will restrict credit bureaus from selling consumer contact information.
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Good morning and happy Friday. Jordan Keck here, your lender buddy, with your weekly market update. Kicking off, interest rates got a nice jump lower, almost 20 basis points, from 6.75% last week to 6.57%. Big part of that was a big drop in the market here due to some revisions from the jobs report we've seen, which we'll get into in a moment here. But for our weekly mortgage tip, wanted to talk— have a lot of conversations recently with people about the pros and cons of going with FHA or conventional. Now, there's a lot of clients who will fall in the category of being approved for both of these loans and then choosing which of them is going to be better, because you can get pre-approved for both and be able to decide, I want to make an FHA offer on this house or a conventional offer on that house. Case by case. So which is better? Well, really comes down to the situation. There's so many moving pieces that in general, the higher your credit score and the higher your down payment, the more advantageous it is to go with conventional. And then simultaneously, or I guess similarly, the lower your credit score and sometimes lower your down payment, the more sense it can make to go FHA. The main reason for that is FHA is going to be a lot more generous or a lot more easygoing on credit scores that are in the 600 range. So the difference between your interest rate if you have a 660 score and a 760 score with conventional— or excuse me, with FHA— is very little if any. There's usually not even a difference in pricing tier there. Whereas conventional, the difference between, let's say, a 700 score and an 800 score is a really big difference in interest rate and in mortgage insurance. Mortgage insurance on conventional is variable based on down payment, credit score, Whereas with FHA, it's just a flat percentage regardless of your down payment or your credit score. And then the other factors involved would be that FHA does have a one-time upfront funding fee that gets added into your loan amount of 1.75%. So that's a bit of a drawback, but the interest rate's lower. So case by case on those, if somebody is right in the middle, let's say with a 720 credit score and they're putting 5% down, can go either way. FHA probably gives them a little bit better of a monthly payment But conventional may be more advantageous for offers, so that may be the way they go. So if you have questions about a specific client, uh, you know, do they have the option of going one or the other, maybe to make their offer look stronger? Or sometimes FHA can get you approved for more than conventional. Let me know, happy to chat through those. But I wanted to at least cover a few of those pros and cons and why we might go one way or the other with a client pre-approval. Next up, the BLS commissioner was fired. After the last jobs report revision. You've been watching for a while, hearing me talk about the BLS jobs reports. They are notorious and have been this way for years of posting a strong jobs report number and then coming out the next month and 2 months later revising those significantly lower. And this one was no exception. President Trump fired the commissioner after a revision that moved the total number of jobs reported in the previous 2 months down by 258. Thousand after months and months of continued misses and revisions. And for perspective, we might get a jobs report saying that there was a total of 115,000 jobs created in a month. So for the past two months to have a 258,000 negative revision effectively means what initially might have moved markets in a very strong way positively to come back and say, oh, just kidding, none of that was real. So hopefully the methodology is used to report these numbers will get cleaned up moving forward because this is something the market relies very heavily on. And once these revisions came out, that actually did move the markets as of Monday, and that's why we saw such a big improvement in interest rates overall. Next up, Fed Governor Ugler resigns, stepping down months before the end of her term was up, I believe in January. She was appointed by Biden in 2023. So which allowed Trump to be able to report to replace with somebody who is ideally going to be more friendly towards rate cuts. And just today he announced that that was going to be Stephen Myron. There is a possibility that Myron is going to be the frontrunner for the Fed chair position vacated by Jerome Powell when his term comes up in May, because you need to be a Fed governor before you can be the Fed chair. And so putting somebody into that governor spot can set them up potentially for that for that chair position. Myron has been a proponent of using tariffs to be able to help with, um, some of the economic policies Trump's been wanting. So someone that is very aligned with that idea of, hey, we're trying to get inflation down, but at the same time more aggressive rate cuts to help make sure economic activity is stimulated. Between that and between the BLS jobs revisions numbers gives the Fed a lot of ammunition to be able to cut rates moving forward. So markets are starting to price in a 25 basis point rate cut at their September meeting. As a reminder, this does not mean interest rates on mortgages immediately go down, but the overnight Fed funds rate could drop a quarter, which will immediately affect things like credit cards, things like home equity lines of credit, car loans. And we'll see ultimately if that has an impact on inflation or the broader economy. That's going to be more of what impacts mortgage rates. Next up here, great news. The Trigger Leads bill was signed into law. It was passed pretty much unanimously and will go into effect in 6 months. So we got 6 more months to make it through here, but this, it could severely limit the circumstances where a credit bureau is able to sell a consumer's contact information after the credit report is pulled. Not sure if you've had this or had any clients, but there's some cases where after a client has their credit report pulled, doesn't matter if they, if they're putting in their information or not with the lender, the credit bureau who compiles all of their data will sell whatever contact information they have on file. And some clients have reported as many as 2 dozen phone calls in the first day. Really, really become a problem. So this will allow that once it goes into effect in 6 months here, would only allow credit bureaus to provide trigger leads if The lender buying them has certified that the consumer explicitly consents to receive solicitations. Don't think there's going to be many people signing up for that. 2, the third party has originated the current residential mortgage. So if you did their mortgage in the past, you could get alerted when they're going to be having their credit pulled again. Or 3, they're servicing the existing mortgage. Or 4, they're a bank or credit union who has a deposit account for the consumer. So really, really limiting that. I don't think we're going to see much of a problem at all once this goes into effect. Again, we've got 6 months now that has been signed into law before we see that happening. And lastly here, initial jobless claims rose 7,226 for first-time filers last week. Still a pretty low number, but continuing claims right now are the highest they have been since 2021, going up 24,000 more than estimated to 1.974 million. And seem destined to be able to hit that 2 million number. And this is the 11th straight week we've seen a number above 1.9 million in continued claims. And it's the same story we've seen before. Employers are holding on to workers the best they can, hence the initial low claims, but it's taking a lot longer to find jobs with less hiring, hence the higher continued claims. So when somebody loses their job, when they get let go, taking a lot longer to be able to get back in the workforce even though there's not a whole lot of people being let go. It's the lower initial claims numbers. As always, hopefully this is helpful for you. Have a fantastic weekend. Stay cool as the temperature is about to rise again here, almost touching 3 figures. We'll see you next time. Take care.
