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A Look Ahead with COVID-19

Alexis: Hey, everybody. Welcome back to the Mortgage Rundown. My name is Alexis Quinney, and as always, I'm here with Jason Obradovich, CIO of New American Funding. Hey Jason, how are you?

Jason: Good Alexis, how are you?

Alexis: I've been doing good! So, in the last couple of weeks, since we last talked, what's been going on with rates?

Jason: You know, in terms of rates, what we've seen obviously, right, in all of 2020, we've seen rates drop and we had some volatility in March, which we talked about in prior episodes, but really, in the last 30 days, mortgage rates keep coming down. And so that might be a trend that continues, but it's really hard to say. Obviously, we've talked before about the Fed holding rates low until 2022 or through 2022. So, you're just seeing that right now, right? Even though the stock market is going up, interest rates are continuing to fall. And, you know, we're going to have low interest rates for quite a while.

Alexis: All right. Well, okay. I'm just curious, with the country starting to open back up, do you see that moving the rates at all?

Jason: You know, there's been a lot of speculation around whether it be vaccines or other things that might potentially impact rates. It's not like I am going to run back out and okay, the economy is going to restart again, and we're going to see interest rates jump back up. The problem is, with the country shut down as long as it has been, with as many job losses as there's been, you're not going to see mortgage rates move as quickly as when the country starts opening back up again, right? There are still a lot of potential permanent job losses. There is still a lot of damage to the economy. There is still a lot of delinquent borrowers. There are still a lot of borrowers in forbearance plans. So, the Fed's not going to move quickly. They're going to keep rates low and that's why they said, ‘look, we're going to keep rates low for a long time. We understand what a pandemic is. We understand the disruption there is going to be. We've looked, you know, from prior events in the past, and we just know the rates have to be low for a long time. It really doesn't matter what happens in one county or another where their cases spike up or down like this has all been expected.'

Alexis: Okay. And with COVID starting to be more of a serious threat again, why would you say the stock market is doing so well right now?

Jason: You know, I think the stock market surprises a lot of people. And the thing that you have to remember is, where you're seeing the stock market really take off is in the tech sector. And technology is not really, necessarily impacted. Actually, it's been almost impacted in a positive way. Yeah, there are people losing jobs and maybe they won't buy as many devices, but I think there is this belief that technology is a lot more bulletproof than other sectors, right? Hotels, restaurants, and other areas of the economy are actually being harmed. The travel industry, airlines, and other things are being impacted. Even banks are really being impacted. And so, yeah, the stock market is being driven up, but you have Apple, you have Google, you have all these other tech stocks, you know, Facebook and others that are just driving the index. You know, when you look at the stock market, you will think, oh, the S&P, we got to remember, like, it's heavily weighted in especially a lot of technology stock, which is dragging it up. But there are certainly a lot of sectors that are really suffering.

Alexis: Yeah, that makes a lot of sense. So, something else we've been hearing a little bit about is a vaccine for COVID-19. So if that becomes available, do you think that will cause mortgage rates to move up or down in any way, or what can you tell us there?

Jason: Yeah, the vaccine, I think, is an unknown, right? It's kind of an X factor of what happens. You know, will there be a vaccine? When could it come out? How many people would it impact? I think the thing you have to remember is, typically vaccines get tested for several years. It's not something where we say, ‘Oh, we found a cure. We'll hand it out tomorrow, then we can all go back outside and enjoy our lives.' You know, there's going to be limited availability. And, in vaccines, you have to remember, there are a lot of side effects. So, there might be a lot of people it can't help. And so, you really have to, you know, think about it as a vaccine is really a test, it's not a solution. And so, yeah, they'll be testing different vaccines, and there will be ones that help certain groups of people. But there are a lot of people that won't have availability or will not take it. You just can't expect to have this hugely positive result from a vaccine. I mean, I think it creates a lot of hope, and I think it puts a lot more confidence that we're getting closer to the end of this. But it certainly is not going to really quickly accelerate that process.

Alexis: Right. That makes a lot of sense that it may help, but it's not going to be a solution for everybody. So, it'll be interesting to see how that goes. Well, looking forward to the remainder of 2020, what do you think is going to happen?

Jason: You know, in terms of mortgage rates, I think we're just going to stick on the path that we are on, right? Mortgage rates are really, you know, for a lot of people are in the twos. You know, low threes were fantastic at the beginning of the year. Now we're talking about high twos and low threes for certain borrowers. It really depends on your scenario and kind of your risk profile. Likely through the rest of the year, you're going to see mortgage rates in the twos. We don't generally note a dip down from here, but it's certainly not going to race a lot higher. So, you know what? If I'm a betting man, I'd say expect mortgage rates to be staying the twos on a 30-year fixed. It's pretty phenomenal.

Alexis: Yeah, that is phenomenal for sure. All right.

Alexis: Well, that was all I have for today. Thank you so much for meeting with me again. A lot of great information. And it was great talking to you.

Jason: Yeah. Good to see you, too. Take care, Alexis. You, too.

Alexis: Bye, Jason.

Jason: Bye, everyone.