Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
Perhaps President Donald Trump’s favorite catchphrase, “fake news,” will be here to stay, forever, regardless of where he finds himself seated in January. Trump created the slogan to highlight the news outlets he said were responsible for misrepresenting him and producing false reports about his presidency. Love him or hate him, there is no question that he got a disproportionate amount of negative media attention over other candidates and former presidents.
Perhaps in politics, it is somewhat expected that there will be a different “spin” for the various agendas that officials are trying to endorse. You don’t expect much political rhetoric in business – and it’s something I didn’t see in mortgage banking until about a decade ago. Specifically, I am talking about how since 2008, with the creation of the Federal Housing Finance Agency “FHFA,” after the Great Depression, the mortgage industry has become a lot more prejudiced.
A few months ago, after the pandemic erupted in the U.S., the FHFA, which regulates Fannie Mae and Freddie Mac, announced: “Based on their projected COVID-related losses, the Enterprises (Fannie Mae and Freddie Mac) requested, and were granted, permission from FHFA to place an adverse market fee on mortgage refinance acquisitions.” The fee would result in $2,500 in an additional expense for a $500,000 loan (or 1/2% of the loan amount), or approximately.125% higher of an interest rate. Numerous mortgage associations and consumer advocacy groups tried fighting the fee, to no avail. The claim that these governmental enterprises were going to lose money due to COVID-19 was utterly preposterous. It was a money grab, and no one could stop them.
Another “fake news” items that we have been seeing repeat itself almost every week is regarding the weekly Freddie Mac “Primary Mortgage Market Survey.” According to their website, since its inception in April 1971, the Freddie Mac market survey has evolved into the foremost reliable, representative source of regional and national mortgage rate trends and is relied upon by the mortgage industry and the public in gauging market conditions and evaluating mortgage loan options.
For many years, I proudly participated in the weekly mortgage rate survey, when I felt that Freddie Mac was truly interested in publishing weekly statistics on mortgage rates. After the housing crash, Fannie Mae and Freddie Mac, who were then “quasi” governmental agencies, went into full conservatorship of the U.S. government via the newly created FHFA. In the months to follow, in my opinion, the FHFA began unofficial “PR campaigns” to tout how important and beneficial these governmental enterprises were, amongst much other self-promotion.
Gradually, the weekly Freddie Mac mortgage rate survey began publishing commentary and forward-looking declarations, well beyond merely posting interest rate analysis. At that point, I stopped participating in the survey. Media outlets blindly post the notes from Freddie Mac without decerning precisely what information is being included in the survey. I bring this up because each week, I watch major news channels report the “current mortgage rates,” – which get syndicated all over social media and the internet.
The Freddie Mac PMMS survey is inaccurate and should not be utilized by the media to report mortgage rates for many reasons. In the past, rates were broken down by region – which was a lot more accurate – but are now reported as one national number. As part of establishing a market rate, mortgage securities consider the state in which the property is located. For example, a New York loan will have a different rate variable than a California property – which is why the universal number is imprecise. Furthermore, most people (and the media) don’t realize that the survey is only including purchase mortgage loans and not refinance loans. As a result, rates are completely skewed now with the adverse market fee implemented on refinance loans.
These are but a few examples of the inaccuracies that are currently circulating in the mortgage industry. As I often say, only with the guidance and advice of a trusted mortgage professional will you prevail in getting the real news you need to make the best decision.
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