Fed outlines $2.3 trillion plan, mortgage rates stay low
The stock market ended this week with an upswing at all three major indices saw double-digit wins. The market is closed today in observance of Good Friday. The S&P 500 raced to finish up more than 1% Thursday putting it up more than 12% for the week. This has been its best week since 1974. The Nasdaq and Dow also put together double-digit victories this week, rising by 10.6% and 12% respectively.
We did see some volatility this week as the coronavirus continues to dominate the sentiment on Wall Street. Good news sees positive swings and vice versa. Monday's wins put the Dow up more than 1,600 points, most of which were quickly lost as more data came out about the virus on Tuesday. Wednesday the Dow went back up above 23,000 points on the combination of news from Dr. Anthony Fauci saying their total death estimate was revised down and Senator Bernie Sanders dropped out of the presidential campaign.
But the biggest news this week came from the Federal Reserve. On Thursday, the Fed revealed more details about its $2.3 trillion plan to help stimulate the economy. A large portion of the relief plan is meant to help small to mid-size businesses and municipalities by offering liquidity through providing cash to back loans. The Mortgage Bankers Association released an excellent summary of what the Fed has proposed.
This announcement by the Fed rallied equities despite the fact that Thursday's unemployment numbers continued to balloon. The report from the Labor Department shows that more than six million more Americans filed for initial unemployment claims. That means around 16 million Americans have lined up at their local government offices to apply for unemployment over the last three weeks.
Mortgage rates set to move lower?
The silver lining of everything happening is that mortgage rates are continuing to stay historically low. Freddie Mac's 30-year fixed-rate mortgage average on a 30-year loan remained unchanged at 3.3%. Analysts with Freddie Mac's Economic & Housing Research group also predict that mortgage rates will not only stay low, but move lower as 2020 progresses.
That is good news for folks looking to potentially refinance and save money over the long-term. However, as more than 16 million Americans are relying on unemployment benefits and a stimulus check to get by, forbearance is still the main thought on the mind of those with a mortgage.
Hundreds of thousands of calls have been made to mortgage servicers over the last couple of weeks as Americans get curious about their options. However, according to the Mortgage Bankers Association's latest report, just 1.69% of loans of the companies they surveyed have gone into forbearance. Federal Housing Finance Authority Director Mark Calabria noted that they don't have any indication or expectation that we will reach 20% of Fannie and Freddie loans in forbearance. He also mentioned that he has been in discussions with larger, nonbank servicers expressing the ability to take on the capacity of smaller servicers should that need arise. It is extremely important to note that people seeking forbearance on a loan do not get that payment forgiven. That money will need to be repaid at some point and it's imperative that the borrower understand the terms of the forbearance before they enter into an agreement.
