Mortgage rates forecast

The $16 trillion U.S. mortgage market — epicenter of the last global financial crisis — is suddenly experiencing its worst turmoil in more than a decade, setting off alarms across the financial industry and prompting the Federal Reserve to intervene.

Mortgage rates rose sharply this week as originators looked to manage the overwhelming demand from consumers, according to Freddie Mac.

Impac Mortgage Holdings decided a year ago to emphasize its non-qualified mortgage lending operations and placed the company in position to succeed when the housing market returns to normal.

Increased refinancing volume led Fannie Mae to raise its 2020 estimate by $300 billion and 2021 projection by $280 billion.

Companies in the mortgage business were already focused on processing a lot of loans and generating efficiencies before the latest uptick in business hit.

Paradoxically, mortgage rates actually increased this past week, even as the 10-year Treasury yield plumbed new depths, likely because lenders are too busy to handle the influx of applications.

Mortgage lenders could benefit from the surge in refinancing due to widening market spreads, and that could help offset damage to servicing rights portfolio valuations, according to Keefe, Bruyette & Woods.

The 10-year Treasury yield fell below 0.5% and the 30-year yield dropped under 0.9%, taking the whole U.S. yield curve below 1% for the first time in history.

It's hard to overstate just how wild bond markets have gotten amid the coronavirus scare, forcing traders to rethink what's possible.

Capacity constraints among mortgage lenders are leading to wider spreads between mortgages and the 10-year Treasury yield even after it remained below 1% for an extended period this week.