Morning! This is MF Lending - we’re the fool-proof way to serve up mortgage and real estate market knowledge without any of the guesswork. So you’ll look like the smartest agent in the room.

Here’s what we’ve got for you today:

1. Nashville Mid-Yr Housing Report 🏡

2. Fed Week: Here’s What to Watch For 👀

3. FHA 100% Financing Proposal 📝

By the way, this article on Realtor Confidence Index is the most clicked link in this newsletter, you should check it out if you are interested.

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Nuwave Rates Today

Nashville Mid-Yr Housing Report 🏡

Greater Nashville Realtors released their mid-year report for the Nashville market.

If you or your clients were to look at the year-over-year numbers, you’d certainly see a pullback…but that doesn’t tell the full story. This report suggests a positive and upward trend in the Nashville market.

Here are the key insights from Jan-May of 2023:

• Median sales price: +5.5%

• Closings: -17% year-over-year, but nearly 100% increase from Jan - May

• Available Inventory: 3.5 months

Fed Week: Here’s What to Watch For 👀

I looked up today, and it was the last week of July…can someone let me know where the month went?

In any case…it’s Fed week! 

I know you were all like children on Christmas Eve, but we made it. Here’s what to expect this week:

1. We will see a 25bp rate hike on Wednesday

This is all but guaranteed - the Fed Watch Tool has the probability today at 99.8%.

For clients preapproved and out-looking, this does NOT mean that their expected rates will raise 25bps.

This increase is already expected by all of the mortgage companies and the secondary market. Meaning - this increase is already priced into the market.

2. The Dot Plot Will Move the Market

The bigger question for the Fed this week is - where are we going? This is answered by the Dot Plot.

The Dot Plot is a chart recording each Fed official’s projection for the central bank’s Fed funds rate.

This will give investors, banks, and homeowners a look into the Fed’s idea of where interest rates will go for the remainder of the year.

After the rate pause in the June meeting, Jerome Powell indicated that two more interest rate hikes were expected this year…we will see if that holds true on Wednesday.

How the Dot Plot is presented is what will move the market. I would expect absolutely no movement in interest rates from today through Wednesday. I also expect an over-reaction Wednesday afternoon.

Mortgage companies are quick to raise rates if they get an inkling that money could be lost. I am expecting a negative swing in interest rates that will cool off by the beginning of August.

As always - keep an eye out for our Wednesday Fed Lunch & Learn Edition of MF Lending to get the most up-to-date coverage of the meeting.

FHA 0% Down Proposal - Opinion📝

Former president and CEO of Ginnie Mae, Ted Tozer, proposed two ideas for FHA lending in an effort to make home purchasing more attainable for first-time buyers.

He proposed two ideas:

1. FHA to allow lenders to self-fund down-payment assistance (DPA) programs directly.

2. Make FHA program a zero-down loan option.

Option 1: Self-funded DPA

His paper suggests two options for DPA that are not currently legal:

• Self-funding - The lender could charge the borrower 1% higher interest rate to fund a 3.5% down payment, which would allow the lender to issue a Ginnie Mae - guaranteed mortgage-backed security (MBS) that would generate enough of a premium to fund the required down payment

• Grant Programs: Lenders could offer grants from their corporate funds.

Option 2: 100% Financing

The alternative solution is the idea of making the FHA program a 0% down payment program.

We already see this by other government-backed loans - such as VA and USDA - neither of which require a down payment.

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While this would lower the bar for homeownership for many underserved buyers today…I do not think this is the time to put something like this into effect.

The issue in today’s market is not the demand from homebuyers…it’s inventory.

If Congress passes something like this, a flood of new, interested borrowers will enter the market. All while there is not enough inventory to feed potential buyers already.

I do think this is a great idea…but I think we need to put this on hold until the inventory issues are resolved and we can control the flood of new buyers.

Let me know your thoughts in the comments.

The Cul-de-Sac

Meme of the Week:

Brought to you by @MortgageMemes on Instagram:

Tip for buyers - when an underwriter sources assets for a down payment they will look at the last 2 months of bank statements. They are required to “source” (aka paper trail) any deposits that are more than 50% of your qualifying income.

For example - if you make 10k per month, any deposits over 5k (outside of payroll) need to be sourced.

So, if you transfer everything to one account, that means the underwriter has to get bank statements from every account.

A better option - don’t move anything. Instead:

1. Set up multiple wires for down payment (ex. one from Buyer 1 , one from co-buyer)

2. Move all the money BEFORE you want to buy a house

Thanks for reading - that is all we have for today 😎

Please forward this to your friends and colleagues if you found it valuable.

— Michael F DiLucchio