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.

The 10-year U.S. Treasury Breaks Above 1% After Democrats Secure The House
As I write this article, it is projected that The Democratic Party will take control of Congress for the first time in a decade, after Democrats Raphael Warnock and Jon Ossoff won their Senate runoffs in Georgia. This comes a few short months after Joe Biden became the first Democrat in 28 years to win Georgia, in a highly contested battle by President Trump. News of Congressional control by the Democrats caused the 10-year U.S. treasury to surge past 1.00%, it’s highest levels since the COVID-19 pandemic began.

In other breaking news, the ADP Employment Report showed a loss of 123,000 jobs in the month of December, which was much worse than the 130,000 job gains expected. Needless to say, this number was very disappointing and is causing a bit of concern on projections of future jobs data and economic growth. In fact, this Friday’s BLS jobs report was revised lower, and expectations are for a weaker number than previously forecasted. In more disappointing news, the Mortgage Bankers Association released data that showed overall mortgage volume decreased over 4% over the past two weeks, for both purchase and refinance loan activities – despite a 1% lower interest rate from this time last year.

So, where does that leave the Republican Party and Mortgage-Boom Party? On Wednesday, as indicated, we saw the 10-yr break above the psychologically significant 1% level, breaking above resistance levels of 0.96%, which previously held strong after weeks of challenge. Similarly, mortgage-backed securities sold off drastically, breaking beneath its 25-day and 50-day moving averages, which previously held a firm level of floor support. The Dow Jones Industrial Average also soared to a new high, hitting nearly 31,000 as of press time.

With Democrats picking up both Georgia Senate seats, it will be a lot easier for President-elect Joe Biden to get his cabinet positions picks, his fiscal stimulus package, and his other aggressive tax changes. Prepare to see changes in the top income tax bracket to 39.6% without too much resistance. We anticipate that the corporate tax rate will be increased to 28% and expect that other unfavorable changes to the capital gains tax and state taxes will be introduced as well. There will be big rollouts to other Governmental spending programs, and we foresee regulations against tech companies and additional financial legislation and regulation in banking. There will undoubtedly be other areas of focus for the housing and mortgage industries that will impact HUD, FannieMae, and FreddieMac directly impacting real estate markets.

For those keeping score at home, the last time the Democrats controlled the house was in 2009, when Barack Hussein Obama took office. I went back to look at how the bond markets reacted, and I was distraught to see what happened. The 10-year UST, which reached a low of 2.04 in December 2008, spiked up to 3.75% by June 2009. In a few short months, the mammoth spending and policy changes by Obama and company caused rates to spike drastically in anticipation of all the massive debt and deficit it caused. With the backdrop of a worldwide pandemic, all historical statistics will take a backseat, and only time will tell how the markets react in real-time. I cannot emphasize how important it is to consider your mortgage options today before things “change.”

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