Possibly the biggest news story today is the announcement from Wells Fargo that they are going to lay off 2300 mortgage related positions nation wide. We’ll also look at four tips for an easier mortgage refinance, and what’s really happening with mortgage rates.
Wells Fargo Cutting 2,300 Mortgage-Related Jobs
The Wall Street Journal Online reported that Wells Fargo & Co. said Wednesday it is cutting 2,300 mortgage-related jobs across the country and concluded that the refinancing boom is over.
Wells Fargo is the largest mortgage lender for the U.S. housing market originating approximately 70% of the country’s mortgages. A Wells Fargo spokesman was quoted that the bank has refinanced 3 million home loans since 2011. The spike in interest rates in June had a dampening effect on refinances, and the Wells Fargo spokesman also stated that refinancing activity has fallen by nearly half across the industry.
Other banks could soon follow, say analysts. Already, J.P. Morgan Chase & Co. said in February that it plans to eliminate 17,000 jobs by the end of next year, and the majority will come from its mortgage group.
“This is just the beginning,” said Guy Cecala, publisher of Inside Mortgage Finance, an industry publication. “It’s clear that [refinancing activity] is not going anywhere but down in the foreseeable future.”
What’s Really Happening With Mortgage Interest Rates
Mortgage rates seem to be quite volatile right now, according to a Credit.com article posted on Yahoo Finance. It can be really frustrating for first time homebuyers who won’t know from one minute to the next if they can afford a home.
Yesterday’s afternoon release of the minutes from the last FOMC meeting did cause some volatility in the markets and mortgage rates even though they didn’t reveal anything significant. One of the biggest concerns was that the Feds didn’t reassure that they wouldn’t back off from their bond purchasing. This is important because currently, the Feds are buying $85 billion in mortgage securities and mortgage-related bonds each month. Once the Fed does begin to taper their purchases, there will be less liquidity in the market. This makes people nervous, and nervous people lead to volatile interest rates.
But should you lock in a rate? And what does that mean anyway?
Locking in an interest rate means you’ve committed to an interest rate that will be used for the term of the loan, e.g. 360 months for a 30-year fixed-rate mortgage. Mortgage lenders offer varying periods for locking in an interest rate ranging from 30 days to 90 days.
The opposite of this is floating your interest rate which means you don’t lock in, and won’t lock in until you have the offer in and need to finalize the loan.
Pro’s of Locking
- Monthly payment is clear and known.
- More time to budget and plan your finances during the escrow process.
- More time for the loan officer to get loan package through underwriting.
Con’s of Locking
- If the interest rate goes down, you don’t get lock in at that, and miss out on a lower monthly payment.
Pro’s of Floating
- You can take advantage of all opportunities for lower interest rates and costs.
- Depending on your individual lender’s policies/procedures,you can switch loan programs during the loan process, such as going from a 30-year fixed-rate mortgage to a 15-year fixed-rate mortgage.
Con’s of Floating
- You could end up with a high interest rate if the rates spike on the day you lock.
- You also could no longer qualify for a mortgage if the interest rate spiked.
So your best bet is to find a professional loan officer who follows the economic reports that impact interest rates as well as studies all of the mortgage programs available and can help you find the right plan for your situation.
Four tips for an easier mortgage refinance
Since the market is volatile, you want your loan process to go smoothly and quickly. Yahoo Homes published this list of four tips for an easier refinance:
- Gather up all the documentation you need to prove the source of your money.
- Don’t change jobs until your loan is in the clear.
- Check your credit report six months prior to the refinance.
- Don’t buy anything that requires you to take out a new loan.
Do you have any tips that have helped you with refinancing or getting a new loan?