The mortgage market activity on Thursday brings bad news for potential home buyers, rates are up in a majority of the mortgage options.
The rates for a 30-year fixed-rate rose this week, after three weeks of decline, making this the first-time rate increase of 2017.
The rate on a 30-year fixed-rate rose to 4.19 percent, according to mortgage buyer Freddie Mac. That rate is up from 4.09 percent just last week. While that is higher than last week, it is even higher than the average 3.65 percent for the entire year of 2016. A year ago, the benchmark rate was at 3.79 percent.
The average rate for the 15-year fixed-rate also increased this week. A 15-year fixed-rate is up from 3.34 percent last week to 3.4 percent this week.
Banking analyst, Dick Bove, of Rafferty Capital Markets warned people that the mortgage markets in the U.S. are in “more disarray than they were in 2008.”
“In my view, the mortgage market in the US is now broken down. And it’s causing an impact on the ability to sell houses, and through that, the economy,” Bove said.
Bove has his own three reasons why he believes the mortgage market is in such disarray.
First, he references that he feels there was a breakdown in mortgage rules at the origination level of the rules.
“The new qualified mortgage rules (QMR) put in place by the Consumer Financial Protection Bureau demand that banks follow underwriting guidelines that effectively eliminate low-income home buyers from purchasing a home. This is particularly true if one is a first-time home buyer or if one is still paying down a student loan,” he wrote.
Second, he discusses his thoughts that there was a breakdown in the function of mortgage insurance.
“The refusal of the FHA to make good on its insurance in the 2008 housing crisis caused most of the nation’s biggest banks to lose faith in dealing with this agency and possibly the VA, also,” Bove wrote.
His third reasoning is that he feels that Fannie Mae and Freddie Mac do not have the ability to back their guarantee.
“The government argues that it is not backing the loans guaranteed by Fannie Mae and Freddie Mac. This is not accepted by anyone since neither Fannie Mae nor Freddie Mac have the capital to back their guarantees and the marketplace rates the debt of these companies as if they are government guaranteed issues,” Bove wrote.