Market Commentary | June 22, 2018

MarketCommentary_0618.png



FED RAISES RATES AGAIN; APPETITE STILL STRONG FOR HUD BACKED LOANS

The Fed recently raised rates for the second time in 2018 and signaled that two additional rate hikes were expected before year-end. Committee members noted continued strength in the labor market, household spending and business investment, with a slight uptick in inflation. The Fed acknowledged that inflation is moving closer to the Fed’s stated 2% target.

Since the beginning of 2018, we have seen the 10-Year Treasury yield rise steadily from 2.46% at the beginning of the year to a high of 3.11% in mid-May. The 10-Year Treasury yield seems to have settled in the 2.89% to 2.96% range for the time being. A healthy yield curve will have a spread of 140 to 150 basis points between the 2-Year Treasury yield and the 10-Y Treasury yield. Right now, the spread is only 37 basis points. And additional rate hikes will likely cause the yield curve to flatten out even more.

In the first quarter, investors of Ginnie Mae project loans widened their spreads considerably in order to achieve higher coupons that are available to investors across other sectors.  Investor spreads have tightened slightly, but not enough to counteract a gradual rise in interest rates. The bottom line for our borrowers is that while we are experiencing some volatility out there, even though interest rates are considerably higher when compared to the last few years, interest rates for FHA insured mortgages are still lower than other long-term financing products. There continues to be a strong appetite for FHA insured mortgages wrapped with Ginnie Mae securities.

At Love Funding, we are in tune with the market movements throughout each business day in order to provide our borrowers with the information needed to lock their interest rate. As rates continue to rise, we have the ability to tap in to our large pool of investors in order to achieve a successful execution. We also have the ability to offer split interest rates on our construction/permanent products to help maximize proceeds when debt service constraints come in to play.

CONTACT US

Related Posts

New MAP Guide Released September 15 915 2011
HUD Takes Aim at Loan Delays March 1 301 2012
Certainty Of Execution March 2 302 2012
Dealmaker of the Day March 8 308 2012
Dealmaker of the Day March 8 308 2012
Multifamily Real Estate in Demand September 11 911 2013
Ohio Housing Conference October 24 1024 2013
RAD Program Updates January 28 128 2015
New MAP Guide Changes February 1 201 2016
Exciting Changes at HUD February 3 203 2016
HUD Construction Financing March 18 318 2016
VAHCDO Annual Conference March 19 319 2016
New LEAN Handbook May 23 523 2016
ahf-faq-5-copy_26562408-1.png Affordable Housing Finance FAQ January 11 111 2018
Top 5 Reasons We Love HUD January 31 131 2018