LOs claim that the banking industry’s turmoil has had little effect on day-today lending.
The banking sector turmoil that saw Signature Bank and midtier Silicon Valley Bank collapse has caused borrower anxiety but has not had an actual impact on mortgage lending. Moreover, interest rates have fallen and borrowers have expressed concern about the implications for the economy and their home-buying journey. Breon Price, a branch manager at UMortgage, said that it was never good to see banks fail. “But, for the average consumer [who is looking to purchase a home], you won’t see much impact because they don’t invest in crypto. A few loan officers stated that a financial crisis could have serious consequences for mortgage lending. Mortgage professionals are monitoring to see if the financial markets continue to turbulence will continue to lower rates. According to Freddie Mac’s latest survey, interest rates fell 15 basis points to 6.6% on March 16. This is the first drop in more than a month. “Our clients aren’t expressing fear about bank failures, at minimum in regard to funds on deposit,” Randy Howell, president of Mortgage Power, Inc., said. “Rather, they are discussing the impact it will have upon the interest rates for mortgages. The likelihood of rates rising will increase the more the Feds intervene [by raising Fed Funds rate]. “The Federal Reserve will announce today what will happen to mortgage rates. “We have all accepted the fact that they will raise 25 basis points,” Michael Borodinsky (Vice President and Branch Manager at Caliber Home Loans in Bridgewater in New Jersey) said. “That’s not what the uncertainty or concern is about. It’s what Jerome Powell said. What will he say about the future direction of Fed action? Everyone will be looking for a pause following this. Borodinsky stated that he expects more job cuts to spread with the announcements of Amazon layoffs and continued cuts in the tech sector. He also said that interest rates will drop by one percent over the next six to nine month. He said that recession is a possibility for the economy. “All that negativity is going to bring good news for interest rates. This will be good news both for affordability and for the housing market. “So far, potential homebuyers are not being affected by events in banking, but some have begun to express concern that instability in the bank industry will cause a market crash,” said Christian Hernandez, vice president for mortgage lending at Guaranteed rate. Hernandez stated that there is a lot of uncertainty right now due to higher rates and rising inflation. Customers are concerned that the market will crash and are afraid to buy. Others are waiting for the market crash to grab outstanding deals as they believe they will be able snag a good deal. They also predict that there will be many foreclosures and then it will become the right time to buy. Alex Naumovych (loan officer at Draper and Kramer Mortgage Corporation) stated that the mortgage industry will only feel a pinch if instability spreads to large depositories. While the mortgage rates are currently lower due to recent bank failures, if the big banks fail it could lead to a repeat 2008, where everyone will be scared and stop lending loans. It would make it more difficult to obtain any type of loan, including a mortgage, car loan, or personal loan. Price stated that although IMB’s executives expressed confidence in their depository lending partners recently, this could change quickly. He said that if the banking industry is experiencing instability on a greater scale, “going out to get new warehouse lines will be more difficult and this’s how it might trickle to the mortgage industry.” “As a consequence, we may see a tendency where messier loans’ such as big statement loans DSCR loans or renovations loans go away, just as during the pandemic,” he said. Heidi Patalano contributed reporting.