Refi remains king with mortgage rates historically low

As of this week, more than 26 million Americans have filed for unemployment. That number is staggering. This week alone, according to the Labor Department, 4.4 million more Americans filed initial unemployment claims. The positive that we can draw from that is perhaps we have reached the peak of job loss as this number was down from previous weeks. It's still not a good number by any means, but it's better than the week prior. 

Potential for more financial relief amid the economic shutdown came Thursday night as the House of Representatives passed a $484 billion spending bill meant to help small businesses. President Trump is expected to sign the bill Friday morning. 

The bill includes:

• $310 billion in new funds for the Paycheck Protection Program, which gives small firms loans that could be forgiven if they use them on wages, benefits, rent and utilities. Within that pool, $60 billion will specifically go to small lenders.
• $60 billion for Small Business Administration disaster assistance loans and grants.
• $75 billion in grants to hospitals overwhelmed by a rush of Covid-19 patients.
• $25 billion to bolster coronavirus testing, a core piece of any plan to restart the U.S. economy.

Dow futures were trading up Friday morning with the 10-year Treasury note yield on a downward trajectory. The yield was trading at 0.599% in the early Friday hours. 

Oil takes center stage 

The price of oil garnered headlines this week when, for the first time ever, we saw negative prices on an oil contract. This was not good by any means. However, once you understand how oil contracts work you realize it wasn't as bad as the headline made it seem. 

In an article for CNBC, Pippa Stevens writes, “Futures contracts are tied to a specific delivery date. Toward the end of a contract's expiration date, the price typically converges with the physical price of oil as the final buyers of these contracts are entities like refineries or airlines that are going to take actual physical delivery of the oil.”

As the contract nears its end, traders start buying up the next month's contract. Monday's crash, therefore, was quickly alleviated as the May delivery contract expired on Tuesday. Thursday morning, West Texas Intermediate crude rallied. Futures contracts were up 30% to $18 dollars per barrel. 

Forbearance rise, purchases flounder 

Interest rates are a saving grace of the housing industry right now as they continue to stay at historically low levels. This week, the average for a 30-year fixed-rate mortgage was 3.33%, according to Freddie Mac. 

The caveat is that many lenders have raised their standards for loans, putting minimum credit scores at 700. Movement Mortgage boldly moved this week to reduce that credit score requirement. By retaining servicing of a majority of the company's loans, Movement was able to move FICO credit score requirements down to 620 for most loan offerings. 

Weekly data from the Mortgage Bankers Association shows some positive news as purchase  applications were up 2% week-over-week. However, year-over-year, purchase applications are down 31%. Refinance applications were down week-over-week, but refis are up an astounding 225% year-over-year. 

"The pandemic-related economic stoppage has caused some buyers and sellers to delay their decisions until there are signs of a turnaround," said Joel Kan, the MBAs associate vice president of economic and industry forecasting. "This has resulted in reduced buyer traffic, less inventory and March existing-homes sales falling to their slowest annual pace in nearly a year."

The main issue in housing right now is the number of Americans requesting a forbearance plan. With tens of millions of Americans out of work, it's no surprise that these requests have skyrocketed. According to data from Black Knight, just over 3.4 million Americans are now in a forbearance, which equals about 6.4% of all mortgages outstanding. 

The MBA's latest Forbearance and Call Volume Survey shows that “the total number of loans now in forbearance jumped from 3.74% of servicers' portfolio volume in the prior week to 5.95% as of April 12.“

Ginnie Mae loans led the way in the report with 2.37% more loans in forbearance week-over-week with the largest overall share of the forbearance load at 8.26%. Loans backed by Ginnie Mae include VA, FHA and USDA loans. The share of Freddie Mac and Fannie Mae loans in forbearance also grew, increasing to 4.64%.