Monday, January 24, 2022

I will admit, it was a very intimidating conversation. He came highly recommended to me from a past client who told me that Reuben (not his real name) was the top actuary in the firm and an expert statistician. Reuben was very clear from the start that he was looking for “the best mortgage rate” possible and was willing to pay to get there. He was confident that he would be in the home for at least ten years, and by buying-down the rate with upfront points, he would come out well ahead.

Reuben tracked every number to compare me to the other two lenders he was speaking with. He had spreadsheets and calculations and was highly transparent and candid. I respected that. After a few lengthy calls, we developed a good rapport. I appreciated his methodical approach, and he valued my understanding of the markets and my insights. A few days later, with the final calculations complete, he called to congratulate me on “earning his business!”

While I was excited to have edged out my competitors, I realized that I wasn’t entirely comfortable with his analysis. I was conflicted about whether or not to say something as I didn’t want to potentially lose out by speaking my mind. Notwithstanding my hesitation, I emailed Reuben requesting a time for us to discuss his conclusions. I began the call by telling him that my concern was not based on an error in calculation on his part. Reuben laughed and told me, of course it wasn’t, as his numbers were extremely precise. I discussed a few items and concluded, “what if there is a recession (which I subscribed to at that time), and rates drop more than you are forecasting?”

I was wrong. There wasn’t a recession … it was a once-in-a-lifetime pandemic. A few weeks after the world was locked-down because of Covid, we refinanced, saving him a fortune. Had Reuben not considered my advice, he would have lost over $16,000 in buy-down fees. Granted, pandemics, recessions, market meltdowns, and economic crashes are far, and few in between and is not something that would be part of many conversations. That said, absent someone skilled to help with all the variables, there is no telling how much money is lost and wasted in “pursuit” of the best mortgage rate.

We are now turning the corner on this unprecedented market. This past Wednesday,  The Federal Reserve, at their F.O.M.C. meeting proclaimed a stop to the year and a half of easy-money stimulus. The low rates have already started to creep higher, but with their announcement to immediately curtail the purchase of Treasuries and Bonds by 15 billion a month, the party is starting to end.

Mortgage rates are now forecasted to be close to 4% by the end of next year, but home prices are still poised to rise. Now more than ever the guidance of a well established and educated mortgage adviser is critical. As the saying goes, "You can't fight The Fed." We offer valuable tips about navigating the market where the Fed is raising rates. Find out what.

Special shout out and a very happy birthday to my incredible wife Esther.

Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at [email protected]

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