Jordan Keck reports mortgage rates dropped to 6.97%, the first sub-7% average in two months, as May inflation data came in cool: CPI flat month-over-month and PPI down 0.2%. He introduces a new DSCR loan product that qualifies short-term rental income from AirDNA without tax returns, and explains a VA policy change letting veterans pay buyer-agent commissions.
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Good morning and happy Friday. Jordan Keck here, your lender buddy, with the weekly market update. Quick reminder as well that next Wednesday the 19th is Juneteenth, which is a federal holiday. As of just a year or two ago, they started that, so be aware for closing timeframes. If you do have a closing set for Wednesday, it's going to have to either be moved to Tuesday or the following day on Thursday. And then also just a reminder for those who've been wanting to get in on the poker game, 28th of this month, we are now on a waiting list. So if there are people who have to back out, let me know if you're interested in getting on that waiting list for those tournaments, or want to receive an invite to future events. This is something it seems like has a great response. It's always been a phenomenal time getting good people together for a good time. So if you're interested in getting added to that invite list or the waiting list, let me know and I'll make sure to keep you in the loop for future events. For this week's market update, rates down a little bit, which is nice, from 7.03% last week to 6.97%, which is the first time in over 2 months now that we've seen rates starting with a 6 on the average there. So great news there for rates. As far as a weekly mortgage tip, I want to talk about a new product we just came out with. So those who are familiar with the DSCR loans or debt service coverage ratio, It's a product for those wanting to buy rentals where you don't have to provide tax returns, you don't have to show any income as long as the income from the property itself is able to fully support the amount of the monthly mortgage obligation. Now, this has been a sticking point because until recently, you've always had to go off of long-term rents, even if you're buying a property to be a short-term rental. Well, starting now, we do have a product to be able to use short-term rental estimates based on AirDNA reports to be able to help qualify. So if you have any clients who are looking at buying short-term rental properties and either don't show enough business income or W-2 income to qualify, or just don't want to have to worry about their taxes, maybe they haven't filed yet, this can be a great way to go as an alternative to a bank statement loan where again we can now count short-term rental income to help qualify for a DSCR loan. So if you are interested in that or have clients interested, let me know. Great product. I'm happy to be able to walk you through that and see if it's a fit. As far as news this week, we got CPI and PPI, so consumer and wholesale inflation reports, both positive for us. And that's really the reason for the lower interest rates. So we had the May CPI, the Consumer Price Index inflation report came in flat for the month, which is below estimates of 0.1%. And anytime we can beat estimates lower, That is positive for inflation. Core inflation for the month, which strips out food and energy prices, is up 0.2%. And then great news on the core reading. It's rounded up to 0.2%, but really the monthly amount's 0.16%. That is on pace to be at or below the 2% Fed mark, the earmark that they want to see inflation at. So obviously we've got to get more than one month in a row strung together for this. but at least having one report at the level we need is encouraging news. Year over year, the headline inflation number dropped from 3.4% to 3.3%, and the core dropped from 3.6% to 3.4%, so making inflation progress in a good way. Next up, PPI, the wholesale inflation, the Producer Price Index report, that also fell 0.2% for the month, which is quite a bit below the 1.0% the 0.1% increase that was expected, so beat it by 0.3%. Year over year dropped from 2.3% to 2.2%, below the increase up to 2.5% that was expected. Gasoline prices did help the headline number drop quite a bit, but then the core rate, which strips out food and energy prices including gasoline prices, that also came in lower. It came in at a 0.3% rise that was expected. We actually ended up being flat for the month. So still beating that by a decent margin. And year over year fell from 2.4 to 2.3%. Next up, something that you probably already heard about, but wanting to make sure it's out there is we talked a little before that the VA said that they were going to issue a circular or a new report saying that they would allow veterans to pay buyer agent commission as part of a transaction. They have officially announced that just a couple days ago on June 11. So it is now valid until rescinded. And so that's part of this. VA is requiring lenders to keep a copy of the buyer broker agreement and disclose any buyer fees paid to the buyer's agent in the initial disclosures. So they also clarified that along with conventional and FHA, that the seller paying the buyer broker fee is not considered a seller concession. So if you do have a maximum, you know, in VA's case, typically 4% seller credit, but then the seller is paying the buyer's agent commission. They're not considered to be the same thing. You can go above and beyond that limit in that situation. So again, on this one, great news that they're actually seeing what's going on here, wanting to make sure veterans are represented and not being left in the cold with these new changes that ultimately I think are going to be good for the industry, but it's always painful to adapt to it. So nice to see VA coming along. And again, just that reminder, if you do have a situation where a buyer is going to be paying some or all of your buyer's broker fee, please make sure to send your lenders those agreements upfront and make sure that they're disclosing them on those initial loan documents. Not everybody's used to this yet, so it might take a little bit of you encouraging and teaching them to make sure that that's done upfront. And lastly here, the NFIB Small Business Optimism Index dropped again from 90.5 to 89.7, which is near the lowest levels in the last 10 years. The NFIB chief economist also stated that for 29 consecutive months, small business owners have expressed historically low optimism, and their views about future business conditions are at the worst level seen in 50 years. Bit of a tough statement there on it, but honestly, we're seeing that across the board where, you know, it's harder to get workers, it's harder to get customers in the door, you've got prices for all of supplies going up, trying to drive traffic has been harder than before. And of course, just a lot of that stems from the inflation, which hasn't been this high for the last 50 years. So makes sense there. Hopefully going to see conditions improve, but it's that double-edged sword where the worse conditions get, typically the better interest rates go. So seems a little bit weird to be cheering for things to get worse in order to help out the industry on it, but ultimately A little bit of stability, I think, is what would help everybody just because of all the turmoil we've seen over the last few years. So as always, hopefully this is helpful for you. Again, if you know somebody who might benefit from getting this, feel free to pass this along. You can have them subscribe down with the link below. And if you also have any clients who need a second opinion, looking for some extra advice, or just a lender who's willing and able to communicate, return calls, explain things in a really level-headed way, always happy to help, so feel free to reach out. We'd love to connect. Have a great weekend. We'll see you next time.
