Blog - Insignia Mortgage

Market Commentary 6/12/20

Posted on June 12, 2020 by Damon Germanides

Stocks sold off hard this week following a strong rally last week which had been ignited by a better than expected May jobs report. Thursday of this week (June 11, 2020) was a risk-off day that shook the equity markets as the market digested sobering comments by the Fed chair regarding the economic recovery combined with regional upticks in Covid-19 infection rates. Yet there is a positive takeaway in yesterday’s brutal pull-back. After a dramatic rise over the past several weeks in stocks, sharp sell-offs washed out speculators and may help prevent a bubble. Lately, there has been a lot of chatter about speculators profiting by betting on de facto bankrupt companies whose prices in some instances have surged more than 100% in a single day.

Friday morning provided some relief to equities with a partial rebound. This is a welcome sign that Thursday’s sell-off was not the beginning of a deep sell-off. Treasury and mortgage rates fell as money moved into the safe haven of government-guaranteed bonds. The Fed’s stimulus operations will continue indefinitely which will keep interest rates very low and will also entice investors into more risky assets such as stocks, high yielding debt, and real estate.

The Fed is committed to propping up the markets as we work through the process of getting our economy back on track. No doubt this will take time but there are some encouraging signs of a nascent economic recovery. However, the economy remains very fragile.

Currently, mortgage rates are low and may go lower. Lenders are slowly gaining the confidence underwriting files a bit more generously. Housing supply is in our main market, Southern California, and buyers are re-entering the market. These are all welcome signs that the worst may be behind us. Continue to expect mortgage rates to be priced favorably, especially on higher loan-to-value loan transactions, but perhaps not quite as well one would expect. Once banks have a better handle on the direction of deferred payment, we believe pricing overall will improve even further. Keep an eye on infection rates, manufacturing data, and consumer confidence. If these data points move favorably, interest rates on mortgages will price sharper in the coming months.

Market Commentary 6/5/20

Posted on June 5, 2020 by Damon Germanides

The May jobs report reminds me of Warren Buffet’s comments a few weeks ago when he said, “Never bet against America.” Who would have thought that May saw 2.5 million jobs created versus estimates of an expected loss of 8.5 million? Wall Street certainly liked the number as equities exploded higher, as did bond yields. The jobs report came a day after the ECB scaled up its bond-buying and increased stimulus firepower in response to the economic stress sparked by Covid-19. The massive rally in markets is no surprise, given that interest rates are near zero or below zero in some countries, and the most powerful global central banks have pledged to buy debt at unlimited quantities. Risk assets such as equities and real estate should benefit greatly if the economic recovery charges on.

The positive jobs report supports the V-shape recovery. We remain cautiously hopeful that the awesome May jobs report is a trend in the right direction, and we are cheering for better days to come. Earlier in the week was another positive signal: the ISM reported improvements in non-manufacturing and manufacturing activity.

Bond market yields moved higher in response to the good economic news coupled with other evidence that the worst is behind us on the Covid-19. The improvement in jobs numbers data is positive for lenders and should help ease some temporary underwriting restrictions imposed due to the pandemic.

Here at Insignia Mortgage, we are seeing significant demand for refinancing, and also a major uptick in purchase loan activity within the last three weeks. We are greatly encouraged by the inquiries as a further sign that sentiment has improved by a large margin since March.

Market Commentary 5/29/20

Posted on May 29, 2020 by Damon Germanides

Core inflation is non-existent in the U.S. and for the moment presents no challenges to the Fed.There’s a massive stimulus being pushed out to the debt and equity markets as well as to Main street in response to Covid-19’s biologic shock translating into an economic one.

On Friday, Fed chair Powell reiterated a by-any-means-necessary attitude to support the economy in the event of the second wave of virus-related economic setbacks. Later in the day, the equity markets responded with relief to President Trump leaving the U.S.-China trade deal untouched.

Mortgage rates have remained flat even after Core PCE fell to less than 1%. While we believe mortgage rates will move lower later in the year, we still believe that banks are keeping interest rates padded above their corresponding benchmark U.S. treasury yields while simultaneously keeping an eye out for easing loan deferments and reduced unemployment.

Americans’ savings continue to increase due to a combination of government assistance and sheltering in place. Evidence is mounting that consumption will rebound as life begins to return to normal. Traffic to websites such as Zillow has surged as prospective home buyers are researching potential new homes. Also, the stay-at-home orders have prompted people to re-evaluate their current housing situations. As a result, many families are deciding that it is time to look for a new home or upgrade their current home.

In closing, Insignia Mortgage’s brokers are encouraged by the increase of purchase activity in the last few weeks. The coronavirus situation has temporarily stalled action in the real estate market, boosting supply. Buyers are definitely taking advantage of this situation and benefitting from historically low mortgage rates, which make housing payments very manageable.

Market Commentary 5/22/20

Posted on May 22, 2020 by Damon Germanides

The U.S. economy is slowly reopening, a welcome sign to our small business owners. Social distancing will keep customer-facing businesses operating well below capacity. However, it is important that businesses open before too much time passes and customer habits change for good, and employees move on. Policymakers will be looking to balance the threat of the disease against the risk of long-term structural economic destruction as our country tries to normalize. It will be interesting to see how consumers respond to the re-opening of malls, restaurants, and other communal businesses. So much remains to be seen. We hope only for the best.

The weekly unemployment numbers continue to increase, but at a slower pace and within the range of economists’ expectations. Lower-paying, customer-facing jobs have been most affected. The government response to this crisis, while far from perfect, has been effective at getting money to those who needed it most. The government is expected to take some hit on the PPP loans and other disaster relief programs but those programs are providing a lifeline to small businesses. The Federal Reserve back-stopped the entire bond market preventing a total collapse in both the equity and debt markets. If the Treasury and Fed had not worked as quickly as they did, things would be much worse at the moment. While there is still a tremendous risk to so many business owners, and there’s a long road to recovery ahead, never underestimate American entrepreneurship and innovation.

How the housing market will be affected by the pandemic over a longer period of time remains to be seen, but there are signs that some consumer behavior will begin to normalize. There is certainly pent up demand for many products which is encouraging for the housing market, and our consumer-led economy. Low interest rates (which may even go lower assuming a successful re-opening of the economy) should act as a tonic to both the purchase and refinance market. Home supply remains constrained and the warmer weather of late spring and summer should act as a tailwind for people looking to buy homes as studies suggest coronavirus appears to be less virulent in the warmer weather.

Insignia Mortgage remains committed to helping clients access attractive financing. Our lenders continue to make common-sense decisions and offer out of the box solutions with very attractive interest rates and terms.

Market Commentary 5/15/20

Posted on May 15, 2020 by Damon Germanides

In another dismal week of economic data, equity volatility increased while bonds closed the week out the week essentially unchanged. Further adding to the horrible economic news, U.S. and China tensions increased as well as the U.S. is set to impose restrictions against Huawei Technologies.

Fed chairman Powell spooked markets this week with his comments calling for more federal financial support or risk long-term damage to the U.S. economy. Truthfully, no one knows how the economy will re-open and we need to support our citizens with both monetary and fiscal stimulus to avoid small business owners sinking to a point of no return. Federal support along with congressional bipartisanship is needed as businesses many businesses will need the lifeline of the government to be in order to hang on long enough to gradually reopen during the coming months.

On the residential lending front, we are starting to see a little bit more optimism as some lenders begin to loosen up Covid-19 related guideline overlays. This is welcome news as we are also seeing a slight uptick in new purchase inquiries in what is normally the busiest home-buying season of the year. Some lenders have lowered interest rates and expanded loan-to-value guidelines in a bid to grab market share. Overall, the lending landscape remains tough to navigate, but transactions are closing, and that’s a win in this otherwise challenging moment.

Market Commentary 5/8/20

Posted on May 8, 2020 by Damon Germanides

The April jobs report was the worst on record with over 20 million of the U.S. workforce currently unemployed. Our hearts go out to each and every person who has lost their job as a result of Covid-19. However, the U.S. equities market is trading up today, so we ask ourselves, “what gives?” Perhaps the market is telling us the worst is behind us. We sure hope so, but we still believe there will be a tough road ahead as our governors and mayors slowly begin to re-open up the economy.

Interest rates remain pegged near zero on U.S. T-Bills and the 10-year U.S. Treasury bond has traded within a tight range over the last couple of weeks as volatility has subsided. However, mortgage rates have untethered from the U.S. Treasury rates as banks have raised interest rates and tightened guidelines, understandably. We expect mortgage rates to trade better if and when the U.S. economy can re-open without significant spikes in Covid-19 infections.

Commercial lending, including multi-family, so far has been hit the hardest due to so many tenants or renters unable to pay their rent. Despite this, we are starting to see some relief as lenders slowly re-enter the market. Expect several months of payment reserves as part of the loan request, also known as an interest reserve, and reduced loan-to-values and risk-based pricing.

On the residential lending front, there has been no better time in my career to be a mortgage broker. Insignia Mortgage’s many long-term relationships are paying off as we are customizing loans for our clients day in and day out. Our suite of lenders all have different risk appetites, so having optionality and pricing power with different lenders has resulted in our ability to place loans that other large money center banks have declined.

We continue to offer the loans for the following scenarios with very fair rates and terms:

Interest-only purchase loans, refinances, and cash-out loans for primary residences, second homes, and investment properties.
Non-occupant co-borrowers.
Foreign national loans.
Cross-collateralized loans and Asset consumption loans.
1031 exchanges and loan structure with LLC, LP, or corporation as borrowers.

“Talking three P’s of 2020 with this year’s Top Originators” – Scotsman Guide 4/30/20

Posted on May 6, 2020 by Admin

Insignia principal and co-founder, Damon Germanides, was interviewed on April 30, 2020, along with two of his nationally ranked peers in the mortgage industry for their thoughts on how the industry is moving forward under the shadow of COVID-19.

Each was asked for their Perspectives, Predictions, and Pointers. Damon noted that at Insignia Mortgage, “We’re getting deep into the financials to ensure that the bank can get comfortable with the deal, because that’s what this environment calls for.”

Read the full article on the Scotsman Guide website.

Market Commentary 5/1/20

Posted on May 1, 2020 by Damon Germanides

Economic pain caused by Covid-19 deepened this week as the unemployment numbers hit 30 million people. Expect next week’s April jobs report to hit 20%. With consumer spending down, and so many people out of work, it was no surprise that Q1 2020 GDP contracted by – 4.80% and will likely be followed up by a much larger drop in Q2 2020. The Fed and the federal government are implementing a “by any means necessary” approach, which is echoed by the European and Japanese central banks and governments as well. These trends continue to backstop our economy. It’s hoped that the approach will boost economic recovery once the U.S. economy is turned on again, as well as support asset prices. We sure hope this is the case but are also aware that consumer and business behavior has changed due to the pandemic and the recovery could take much longer than anticipated.

Regarding housing and lending, Covid-19 hit the spring buying season hard. However, interest rates remain low and may drop further over time, enticing more buyers into the market. There are also signs that the non-QM market is slowly reviving, which is a positive sign, especially for cities such as Los Angeles which have many self-employed borrowers. Big banks continue to pull back from the marketplace. Our office has received an unprecedented number of requests for financing the past few weeks as borrowers look for alternative financing options. We are happy to report that for the most part, our partner lenders remain committed to pulling out all the stops to help borrowers refinance or purchase homes. In our opinion, there has never been a better time to be a broker with long-term lending relationships and that is proving to be a great benefit for our clients during this very difficult time.

Marketing Commentary 4/24/20

Posted on April 24, 2020 by Damon Germanides

This week saw better performing U.S. equity and public debt markets as day to day volatility subsided. The Fed and Treasury continue to step up to provide liquidity as Covid-19 has put most of the country on a standstill. Mortgage rates remain elevated against their historical benchmark of U.S. treasuries, and underwriting standards continue to tighten. Despite all this, our lending relationships are working very hard to close transactions. The job picture is awful, but that is expected as are poor earnings reports from U.S. public companies. There is no fixed or agreed-upon timetable for a return to normalcy, but we are seeing some U.S. cities and foreign countries start the process of normalization with a focus on social distancing. Oil fell below zero as demand for this commodity is low and storage is full. We are watching auto sales, oil prices, and weekly unemployment for clues as to what to expect next. The only thing for sure is that no one knows for sure.

It is vital in this market to have strong lending relationships and that is what Insignia Mortgage was built around. Whether borrowers are looking for non-QM loans, bridge loans, investment property loans, or traditional financing, our team members are structuring transactions with our lenders day in and day out and securing financing for our borrowers on purchases and refinances. Rates are fair, and turn-times are manageable.

Damon Germanides in Bloomberg.com

Posted on April 22, 2020 by Admin

Insignia principal Damon Germanides was interviewed this week, on April 21, 2020, in Bloomberg.com in the piece “Wealthy Mortgage Borrowers Face Cold Shoulder From Lenders,” authored by Prashant Gopal, John Gittelsohn, and Shahien Nasiripour.

The article covers the counterintuitive situation in which many holders of jumbo loans find themselves in. With federal rates approaching zero, those seeking an advantageous refinance are finding lenders unavailable to offer favorable terms. Because jumbo loans are not backed by the federal government, they’ve gone from a lucrative market for banks to a near-pariah overnight.

Mr. Germanides is quoted at the end of the article in a comment on how a rock-solid homebuyer he’s working with is finding it more challenging to obtain a mortgage than he would have before the pandemic crisis hit. Loans are still going through, but it is harder “get them across the finish line.” Read the whole article here.