- 5 days ago
On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about portable mortgages, purchase apps and the latest resignation at the Federal Reserve.
Related to this episode:
FHFA eyes assumable and portable mortgages, raising questions for lenders
https://www.housingwire.com/articles/fhfa-assumable-portable-mortgages/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
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To learn more about Trust & Will, click here.
https://trustandwill.com/
The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate.
Related to this episode:
FHFA eyes assumable and portable mortgages, raising questions for lenders
https://www.housingwire.com/articles/fhfa-assumable-portable-mortgages/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
More info about HousingWire
https://lnk.bio/housingwire
To learn more about Trust & Will, click here.
https://trustandwill.com/
The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate.
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about the idea of a
00:11portable mortgage, also the big beat on purchase apps, and Bostick leaving the Fed. Before we get
00:17started, I want to thank our sponsor, Trust & Will, for making this episode possible. Logan,
00:22welcome back to the podcast. Wow, what a day. Man, a lot has happened this morning. So we have
00:29a lot to talk about. We do. Let's start with the purchase apps, because that surprised a lot of
00:35people. Didn't really surprise you. No, I mean, one of the things we talked about recently is that
00:41we're going to have some really, really low comps coming up in the next few weeks, because last year
00:46at this time, mortgage rates shot up to above 7%, and then it impacts some of the data lines,
00:55of course. But this was one of the best purchase application data prints we've had in years,
01:01because it's not so much of the 31% year-over-year growth. Whenever you're running 30% year-over-year
01:07growth plus, you're running. It's like Christian McCaffrey on that toss sweep he gets, and he's
01:12got good block, and he's gone. You're going to get a good play. You can have 5% to 12% year-over-year
01:18growth in purchase apps that have nothing happening with sales. It would just be flat or maybe slightly
01:23higher. You really want to see double-digit year-over-year growth with weekly growth to
01:27go in it. But when you're running 31%, that's material. I mean, when the COVID-19 recovery
01:34was happening, and I brought up the theory that existing home sales are going to be positive,
01:39everybody's like, there's no way existing home sales are going to be positive. It's like,
01:43we're running 30%, 35% positive data lines now. So we are good. In that context,
01:52I think that was shocking. But to me, the best part was the week-to-week data. 6% week-to-week,
01:5930%. You can run a lot of stuff with those kind of data lines. So a positive, this happened a little
02:06bit with a little bit higher rates recently. So a good report. And again, we want to see at least 12
02:15to 14 weeks of positive weekly data. This makes it nine, right? And we've had these little runs
02:22in late 2022, mid-2024, and now we're having one again. So we got three or five more weeks to go.
02:29We've talked about this recently that Thanksgiving, December, maybe we could get to there as long as
02:36rates stay near 6%. The whole key is getting rates to stay near 6% with duration.
02:41That is good news. And it echoes what you wrote in the tracker this last week that we're seeing
02:46demand up a little bit, not huge, but up a little bit. And that's great at this time of year.
02:52Well, it is. The other aspect about purchase apps, because I think purchase apps is very confusing,
02:57because some of our better sales data reports that we've had in the last three years,
03:03we had no year-over-year growth in purchase apps, but the weekly data has got better. But here,
03:08weekly data, positive year-over-year, you could get something working there. Of course,
03:14the weekly pending contracts data of ours showed 15% year-over-year growth. Again, a little bit of
03:20a low cop because rates rose, but you could get something working here, right? And this is the whole
03:25thing. All this talk about 50-year mortgages, portable mortgages, just getting rates down to six.
03:33You don't need three, you don't need four, you don't need five, but just you could get something
03:38moving out there. Maybe that'll alleviate the public angst and policy angst of trying to get
03:45things moving. Because I had this good discussion this morning with a Wall Street trader that if you
03:52look at the new home sales market, it's 2019 levels. It's pre-COVID. That would equate to one
03:58to 1.2 million more existing home sales. But that marketplace is running between 4.75 to 5.75
04:05mortgage rates. So you don't have that in the existing home sales report. So you just get rates
04:10a little bit lower, how low existing home sales are, you can get a little bit of kick. And we take
04:14it from there, right? The housing dynamic shifted here in mid-June. So it's positive that we're seeing
04:22this now because this looks out 30, 60, 90 days. And you want to keep that momentum because what
04:28we've seen in the last few years is that the seasonal demand curve and purchase apps are starting
04:34earlier, right? November, December in the last few years. We tested that last year with rates being
04:40elevated and the year-over-year data was still holding up. But it used to be the second week of
04:47January, the first week of May after May, total volume is on. So maybe part of this is the seasonal
04:52curve. But again, all of this, net positive. Housing isn't booming or any of that stuff. But
04:58we're seeing a positive demand curve with rates getting just near 6%, which has been our theme for
05:03a very, very long time. And it's good to see it now for the third time the model works.
05:10We will take that positive news. Let's talk about, you mentioned portable mortgages. So this is the
05:16latest thing. Obviously, Trump has gotten a ton of pushback. Pulte has gotten a ton of pushback
05:20on the 50-year mortgage idea. Here's another thing they're talking about. And on the positive side,
05:26it's nice to have conversations about what could get mortgage going, what could get home buying going.
05:31Portable mortgage, how do you feel about that? And is this a potential winner compared to the 50-year
05:38mortgage? If I had to choose between a 50 and a portable, first of all, if I had to choose at all,
05:43I wouldn't do any of these. But clearly, they're hearing it from homeowners and people that...
05:51This is the aspect that the Federal Reserve still hasn't realized. They look at... They're
05:58academics. So they look at economics as numbers. But housing is what we always said, sex, marriage,
06:05babies, moving, life, right? Life finds a way. When you have the third calendar year of the lowest
06:12home sales ever, right? And then all of a sudden, when people see demand pick up a little bit where
06:18rates go lower and then rates go back up, people start to get a little bit more chippy. And we
06:23talked about this early or late 2024 that we might see some policy changes just because people want to
06:32get things going again because it's a function of how we live in this country.
06:36Portable mortgages have some logistic issues, kind of like assumable mortgages where you have to get
06:44the difference of the loan and you have to make sure you qualify. But you still have 70% of the
06:52country that has rates 5% and under. So the theory is that if you can move that, it does make the cost.
07:02Imagine just hypothetically, just hypothetically, everyone just put down your bias out of the
07:09equation. What if mortgage rates were at 5% now for one year? Do we think demand gets worse or do we
07:18think the demand gets better? Demand gets so much better.
07:21Yeah. I mean, demand will get better. I mean, we see it getting better. We're near six.
07:25So if you have 70% of the marketplace at 5% and under. So we'll see. I mean, obviously,
07:33there was a big backlash to the 50-year mortgage, but portable mortgages seem to be a little bit more,
07:40people are a little bit more open to the idea out there. I mean, me personally, I wouldn't do,
07:46I wouldn't change a thing, but that's me and I'm not making the choices. But if I had to choose
07:50between them both, that would be it. Well, let's talk about what a portable mortgage is,
07:55because there might be listeners to this podcast that's like, I'm not exactly sure what that is.
07:59Is that you take your, you know, your same loan and you move to another house? Like, can you,
08:04can you explain exactly what that is? I mean, just to keep it as simple, because there's so many
08:09different components into it and there's different forms of portable mortgages. You basically kind of
08:13take the rate and you kind of reapply for this house that you want to move to and you keep the rate,
08:19but you got to qualify for the loan. If there's a difference between the loan balance, you've got
08:24to bring that money in. So sometimes you've got to bring a second. If the loan balance is under,
08:28you've got to, you know, there's, it's kind of like an assumable mortgage, but you're just basically
08:33taking your current rate and you're moving it to the next property. So it has to be, you know,
08:39a convergence of, I'm taking this, here I go, I move it. Usually you have a 30 to 120 day grace period
08:46to make that transaction work in terms of, you know, you, you prefer, for a bank, it'd be perfect
08:51if you do it all the same day and you just transport your port. It's, it's, it's what,
08:56it's what it sounds like. You just take the, take the mortgage and move it over here and take the
09:00rate. So because you have so many people in the country with, I mean, it goes into the mortgage
09:07rate lockdown discussion, which that's a whole different topic, but people have always been selling
09:12their low mortgage rates to buy. But I think what the white house is saying is that more people will
09:17sell their homes and move if we can move that mortgage rate over out there. So that's, that's
09:24in the simplest way, just think of it as that, because there's all, there's all these other
09:28different variables that go into it and procedures that might confuse people, but clearly the 50 year
09:35trial balloon didn't work. So let's just try portable and assumable mortgages and go with that.
09:41Does, you know, how, how does industry feel about this? How, how do loan officers,
09:44would they be like, yay, portable mortgages? Is that good for our industry?
09:48It really, see, this is where the logistics of, you have to find the details of what they want.
09:53If you have to reapply for a mortgage and just transfer the rate, you have to like,
09:58basically do the loan over again. And that can be a transaction. The, the banks might not like
10:07this as much. But it's one of the, it's, it's a very confusing topic because we, we do have this
10:16assumable loan discussion and the assumable loans aren't getting any traction, right? Because you've
10:21got to get a seller that wants to buy that house. And then that person takes it. And then that person
10:26has to do something with the property. And then you have to get a second mortgage and it takes too
10:30long. So here I'm just, I hate all of these ideas. I mean, I mean, I'm sitting here, I have to talk
10:37about them, but I hate the 50 year mortgage and I hate the portable mortgage. We have a functioning
10:41system. It's just that the fed has kept policy too restrictive for housing, but we have to talk
10:46about this. So if you can get a transaction off of a portable mortgage that a loan officer can do,
10:55then you have something there. If for some reason there is no transaction allowed in this process,
11:01then it's basically, you know, the, the, the servicer is basically going to be the processor.
11:06So that means you do not have a loan out there. So that'd be less transaction volumes, but it really
11:13depends on how they want to format that. This is why I don't want to confuse people because there,
11:19I could already see people saying, Oh my God, there's going to be a lot less transactions. This is
11:22really bad for loan officers. And then some people go, well, loan officers have to do this again. So
11:27this is the thing about trial balloons. You can, you can take a lot of things. I, I urge and caution
11:34everyone do not put much weight into any of these things until you see the legal ramifications of what
11:40they're going to do and how the process works. So I don't, I, I, I've already seen very extreme takes
11:46on this. They're going to say volumes have to go down for, for loan officers. But that's, that's
11:52the gist of it in terms of some of the talking points today. But I, I know for a fact that you
11:58do have to reapply for a new mortgage. You can't just take your 5% and, and move it here because
12:04what if you bought a house that was X amount, you have to bring money into the loans. You have to
12:08balance it out. You have to qualify for it. Does the qualified mortgage laws go into portable
12:13mortgage? There's all these things that these are trial balloons. They're throwing up in the air.
12:18Do not put much weight into any of them until you see legal action taken, signed and delivered
12:23for now, for, for now. And maybe for a while, we just have our simple, boring 30 year mortgage
12:29and arm products that have been a functioning process of housing. This is why I, I mean,
12:34part of me hates this conversation, but part of me says I have to have this because this is where
12:39we're at right now. When, when you, when housing demand gets, stays low for a very long time and
12:44you don't get any traction, people get angry. And when people get angry, voters get angry,
12:50voters calls, calls, and everybody's trying to do anything. And we're talking about getting rid of
12:53property taxes. We're talking about portable mortgages. This is all because people are mad.
12:59So it is what it is, but this is the, this is the world we live in.
13:03Okay. Well, let's get to your, uh, a better topic for you because you just said, you know,
13:08really, we just need the fed to do what they want to do. We had the announcement, what Bostick today,
13:14um, announced his resignation. He is, um, is he a voting member?
13:19Um, Bostick was somebody we talked about months ago and I said, he's cooked. Boston is the next to go.
13:26Uh, he's, he's not resigning in a sense like he's resigning today. He's retiring. Uh, so Bostick
13:33was one of these, you know, um, he, he used to be a dove and he became kind of hawkish.
13:41So just to keep it simple, he's finished. It's over. He does have, he'll be part of the process up
13:48until February, but, uh, we're already nominating Neil Dutta to replace Bostick, you know, at the Atlanta
13:56Fed, uh, uh, out there and, uh, another positive outcome for the housing market because Bostick
14:03came out today and said, I'm, I don't want to, I don't want to lower rates at all until we get to
14:072% inflation. And I just retweeted that and did the old, uh, nah, nah, nah, nah. Hey, goodbye. You
14:17know, thank you for your service, Bostick. Move along. So, uh, this was in the works a while ago,
14:22but I was, I was almost running out of time for the, the call of the year, but yeah, he, he was on
14:28the, he was next on the list, uh, to go bye-bye positive outcome for housing. Okay. So, I mean,
14:33that does, I was going to say that's, that's the bottom line, positive outcome for housing. Um,
14:38let's talk about where mortgage rates are. Ten-year yield is amid all these other things happening.
14:44Well, the interesting aspect of yesterday is of course the bond markets goes by the way,
14:48to the gentleman who called me and said, why is the bond market so stable? Okay. No holidays stock
14:58market can be open in the bond market. Uh, won't be, um, in any case, the ADP reports, the weekly
15:03curves are, um, uh, uh, ADP is now provided week to week data and their jobs data showed a significant
15:11decline. And then Goldman Sachs came out yesterday and says the October payrolls are down 50,000.
15:16Beth hammock paging Beth hammock right now. Oh, Beth hammock is going, everything's wonderful.
15:21Great. You know, there's nothing wrong with the labor market. Um, because of that bond yields,
15:27when, when evening trading came, they just fell right away. And this morning, I think the last
15:31time I saw it was four or six. So again, paper, rock, scissors, labor over inflation, right? The
15:37only reason mortgage rates are down here, uh, labor data got softer because if the, if it was up to the
15:43Fed, you know, mortgage rates will still be elevated. Uh, number two, the, uh, uh, uh, mortgage
15:49spreads, of course, hug a spread. All of you get to see that chart that I put up there, especially on
15:53the weekend tracker. Uh, it's made now a significant move on a year of year basis. So we wouldn't even
15:59be here near 6% if it wasn't for the spreads or the labor data. So, uh, this is why it's a kind of a
16:05blessing in disguise. Um, labor data got softer and spreads got better because the 10 year yield
16:10never got down toward three 62, like it did last year. Uh, so, um, you know, we wouldn't, we wouldn't
16:18have rates this low if, if the spreads didn't improve. So we are recording this on Wednesday.
16:24Um, of course the shutdown is, is winding down, but it's still in effect right now. Um, and we talked
16:31about how it might be a while before we get that jobs data, but with that kind of, um, jobs data that
16:36we got from, from other sources, I mean, were you surprised? Did you think we'd go down even,
16:41uh, even more or, or how did you think, how did you interpret that job? I honestly don't think the
16:47fed cares until jobless claims breaks. I've been, I've been saying this, see, it is interesting that
16:52our premise since 2022 was that they will wait until the labor market breaks before they start
16:59getting dovish. They are sitting here today saying they are modestly restrictive. And there's now
17:07finally admitting that the labor data is deteriorating, but they still are saying they're
17:12modestly restrictive. Why they need the damn thing to break before they turn. They have stayed
17:18consistent. And again, now part of the thing with, you know, one of the things I try to explain to
17:23people is that the fed has already told us we're not going to take any of the labor data seriously
17:28during the shutdown because you know, it could be hit and then we'll just rebound. So they will
17:32throw everything they can to keep policy as restrictive possible. Cause that's that, that's
17:37what they told everyone late 2022. At least that's how I interpreted. Um, so it is not shock. We're just
17:44the same little trend, but you're probably going to have to wait for the rebound in, um, uh, after the
17:50post, uh, shutdown data for the fed to like, maybe take it a little bit more seriously. Now, now this is
17:55not all the fed members. There's the civil war. There's a lot of fed people that are saying, Hey,
17:59listen, there is demand destruction and it's impacting the data lines. We are basically little
18:07job growth, uh, a little, uh, firings, you know, we are very prone to maybe some type of shock. So
18:14the civil war is good, uh, makes the December meeting good. But again, to me, it's always been
18:19about jobless claims because the, I mean, the federal reserve even did their own jobless claims
18:24analysis this year that they shared out with people. Now they, they would say, well, when
18:28jobless claims gets to 400,000, then the labor market is, Oh, no, it's a rate of change. It has
18:35to have a first level break before, you know, you get to those levels. So, uh, not surprising,
18:40but again, does, does, does this part of the fed really care? Because I know this part of the fed
18:46does, but this part of the fed does it not until yet. So we are slowly moving down to neutral.
18:52We are modestly restrictive when they use that sentence. We no longer want to be modestly
18:58restrictive. We would like to get to neutral as policy, neutral policy as fast as possible.
19:03And then if we need to go accommodative, that's the ball game switch when they start saying that,
19:10but they did it. Remember Powell, we said rates are near 6%. He's going to freak out. So what did Powell do?
19:16Hey, wait a second. You know, everything's great. There's an emergency cut, you know,
19:21uh, this is insurance cuts. There's a, whatever it is there. They are, they are basically acting
19:26as predictable people or characters in a place. So, uh, uh, uh, but that explains why bond yields,
19:32a lot of people are like, why are bond yields falling into labor data? Like what labor data?
19:35And you show them the ADP report, Goldman Sachs headline. So again, just imagine that
19:41if we didn't see weakness in the data and we didn't have the spreads improve, we're still near
19:477%. So that's, that's the modestly restrictive federal reserve policy. That's why housing permits
19:54have been in recession for years. That's why housing starts have been in recession for years.
19:57We're losing residential construction laws, especially contractor trade jobs have been lost.
20:01And they're asking, I wonder if there's any real demand destruction. Where do you get these people?
20:10It's literally there in the monthly reports for two years. Come on now. So, um, but the unfortunate
20:17reality is that the fed doesn't make its policy around housing. It makes a policy on their dual mandate.
20:24That's why labor is very important. So the growth rate inflation is picking up.
20:28I think some of the fed is surprised that it didn't pick up higher, but they're, they're near their targets
20:34for 2025, but their labor data got worse than they thought. If you were giving, um, if you're giving a
20:40forecast of, do we get a rate cut in December? Where are we right now? I would say rate cut because you
20:46can't have this kind of deterioration. I know Daryl Fairweather, who's the economist for Redfin, she sits
20:51on the, um, Dallas fed board. And she was talking about that. The fed doesn't have a lot of data
20:58to make a decision. Yes, you do. You do have a lot of data. If all the data miners in the,
21:03in the world are looking at aggregate data and it's not looking good, then you have to tell the
21:08public right now, we want to put a little bit more weight on inflation. So don't, you know,
21:14this is why I'm, I'm, I'm in the December rate cut camp because let's just say the labor data started
21:20getting better. Let's say Revolio's data was positive. ADP was positive. Goldman Sachs said
21:25we had 50,000 plus jobs created. Then that's a different variable because those are things that
21:30we're used, that we're all using as data miners of the federal reserve is not using them. Then
21:34all of them should be fired, but there's enough stuff out there. It's their choice, right? It's
21:40a policy choice. So you have the Hawks, you have the doves, the civil war, Ironman versus captain
21:46America. There you go. You know, that kind of stuff is, is, uh, uh, is happening. So December is up and
21:53live, but I think that the, the, the labor data shocked some people yesterday, uh, out there.
21:59And you, you, now you have a string of data lines, Revolio, ADP, and then Goldman's estimates of
22:05payrolls. It's, it's really hard to, to say to people, we still want to be modestly restrictive
22:11in that environment. If the labor data got better, Hey, listen, I will tell you that rates are going to
22:16go up, right? Rates are going to go up. The only reason we're here. So I would say December cut in,
22:21but again, the bond market, the closer you are to 4% on the 10 year yield, the bond market is pricing
22:26in a lot of rate cuts. So just kind of keep it at that. It's really hard to get below 380 on the
22:3210 year yield with modestly restrictive or neutral policy. This is why we kind of pulled the line right
22:37there. Uh, last year, obviously it broke, but last year everyone was bent on the recession. That
22:43didn't happen. Incredible. Thank you so much for walking us through all of the things that are going
22:47on right now. Logan, we will talk to you again soon. Pleasure.
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