No More VA Termite Reports, CPI and PPI inflation, VantageScore 4.0 Rollout, and Fed Rate Cut Talks

Good morning and happy Friday. Jordan Keck here, your lender buddy, with your weekly market update coming with interest rates going from 6.79% last week to 6.81% this week. So up just a little bit, but we did hit as high as 6.85% in the middle of the week, so we're coming back down from that. Still not a whole lot of changes overall. Most clients are getting rates into the 6s here, a little bit of buydown on it. And just a reminder, as well as clients are always going to be rate sensitive to some degree at looking online, really try and educate the clients on recognizing the rates that people are seeing online are often going to include some portion of a rate buydown, origination fees, underwriting fees, processing fees, and that the rate is not Everything doesn't tell the full story. They want to truly compare lenders, looking at the exact same scenario at the exact same interest rate and comparing the lender-specific origination fees is the accurate way to do that. And of course, making sure it's on the same day to avoid market fluctuation or changes. They can do that even before pulling a credit report, before getting under contract, and that's going to easily allow them to look at what's the difference between lenders for those rates. Need any help with that? Always happy to help people compare, make sure they're making a good choice early and not having to go on through that can of worms once they're already under contract. As far as weekly mortgage tip, last time I talked about how the VA was making Oregon mandatory for termite inspection reports. Well, they changed their mind. That is no longer required. I'm not sure exactly what happened, but the VA did make their official announcement that Oregon was going to be requiring them and then within a week or two removed that requirement. So now we're back to the way that we were. Oregon is no longer being required to have termite inspection reports on VA loans. So there have been a couple I know have already had to get them, maybe already closed for them. Sorry, it was a requirement for a moment there, but moving forward, those should not be required. Next up, the June CPI, Consumer Price Index, inflation report came in up 3.3%, matching estimates. The year-over-year number rose from 2.4% to 2.7%, which is showing an increase there, but mostly that's just because June of 2024 showed 0%, and so the rolling 12-month average replacing that showed that higher as a result. The core rate, which strips out food and energy prices, rose 0.2%, and year-over-year rose from 2.8% to 2.9%, which is slightly below expectations of a 3% increase year over year. PPI wholesale inflation for June was flat, below estimates of 0.2%. May was revised higher by 0.2%, so it ends up being a wash between those two, basically coming in in line with estimates. Year over year rose to 2.3%, which is down from the previous report of 2.7% and the estimations or expectations of this one coming in at 2.5%. So good beat there. Next, the VantageScore 4.0 that I briefly talked about, FHFA had come out saying that it was ready. They were willing to accept it. That doesn't mean that we're able to roll that out yet. With that, because it was kind of a surprise announcement, a lot of lenders aren't prepared for it yet. You've got the AUS, so Fannie Mae and Freddie Mac Automated Underwriting System. They haven't necessarily implemented the new models yet. And then you also have FHA, VA, and USDA that have not come out saying that they will accept it. So in the meantime, even once this gets rolling, if it's only something that can be used for conventional, a lot of lenders are going to say, well, why would we just pull one credit report for conventional knowing that if they had to change, we'd have to pull a different credit score model for government loan types. So once those, imagine, fully get adopted, it's ready to go in all the systems, we'll probably see more of it. And there's some pretty cool potential implications on this one because FHFA, the VantageScore talked about how it might unlock as many as 5 million new homebuyers because they're taking into account things like rental, utility bills, telecommunication, and phone bills into a score and don't necessarily require a 6-month history before generating a score. So you might have some buyers qualifying with a score on VantageScore that didn't qualify with the FICO scores. Then question about that, we'll be able to utilize both of those. And so will lenders start choosing to pull both credit scores and then using the higher of the two? That might be something we see because this isn't replacing FICO scores. It's going to be added as an additional alternative to the current models. So more information on that as they continue to roll out. And lastly here, Fed Governor Waller made arguments for a July rate cut at their meeting the end of this month. And to be clear, the chances of that rate cut are still very, very close to zero. So not something we expect. But he had some great points that might start to sway the Fed in that direction. Well, it's again, extremely unlikely to happen. His arguments were that inflation is already very close to the estimations that they have, that anything above where their goal for inflation was likely due to the one-time impact of tariffs that won't be continuing in the long term. And so he also is looking at the strength of the BLS jobs report we'd seen. Normally, that would be a reason not to cut because strong job numbers means there's not a weakening or softening as much in the economy, which they would want to do to cut rates. And he's looking at, well, about half of the strength in the BLS jobs report came from government jobs, which are very hard to seasonally adjust to this time of year. And the BLS has known for a track record of massive revisions to the weak side after their initial headline numbers. So how much are they really going to rely on that upfront? Ultimately, time will tell. See if he continues to sway more and more of the Fed members to that opinion moving forward. But at least for now, nice to see that there are some people who are trying to make those rate cuts happen. Again, probably not counting for it in July. So we'll see what happens in future months. As always, hopefully this is helpful. Have a great weekend and we'll see you next time. Take care.