Skip to main content

Dan Habib Talks Mortgage-Backed Securities, Market Predictions And More

Navi Persaud
Oct 15, 2020
Photo of Dan Habib and a quote from 10/14/20 MLO.

Daniel Habib, executive vice president and one of the founders of MBS Highway, appeared on Wednesday’s Mortgage Leadership Outlook. He and series' host Andrew Berman, head of engagement and outreach for National Mortgage Professional magazine, discussed how important his service was this year with the volatility and artificial influence on rates to manage liquidity and volume, what the near future of rates look like, what they look like in the long-term and more.

Habib has been in the mortgage industry for more than 16 years. With MBS Highway, Habib and his team developed the Mortgage Market Guide to help industry professionals master the market.

Habib said getting into the mortgage business was in his blood as he remembers watching his dad, Barry, rise up the ranks from an originator to one of the top producers in the industry. He added that his father was able to be successful by understanding what’s driving the market.

Highlights from the interview:

  • “In the February, March and April area there was massive volatility going on in the markets. The reason being is because the Fed came in and tried to stimulate the economy. They were buying a massive amount of mortgage-backed securities to try to keep rates low.”
  • “This caused a big problem for companies. You really have to understand how rate-locks truly work. When someone says I’ll lock in your rate, a company is promising that customer that you’re going to deliver a 3% rate at closing. But, of course, we know that rates can move up and down. So, how does a company protect itself from rates moving higher? Well, what they do is they short mortgage-backed securities; it’s called hedging.”
  • “The Fed bought so much in mortgage-backed securities that it caused [them] to rise precipitously. So, [the companies’] short positions were so underwater that they were getting massive margin calls. Some … were getting margin calls of $10 million a day and they were like ‘I can’t sustain this for much longer.’”
  • Habib and his team got in front of the Federal Reserve and got it to curtail their purchases back from the massive amount to an even level. The team was responsible for breaking down the aforementioned information so that folks can really understand how the markets work.
  • “Right now, mortgage rates are really attractive. While it’s hard to pinpoint an exact timeframe on what’s going to happen, … there is a potential in the near term for rates to move a little bit higher. Because of inflation, we could see rates move up. We’ve already started to see [a spike]. If you look at the Fed’s favorite measure of inflation, which is Personal Consumption Expenditure, the core rate … strips out food and energy prices because that’s what they can control. It has recently moved higher to 1.6% and the Fed has said its target is 2%. The PCE is a little bit of a bad inflation gauge because it doesn’t have a big weighting on out-of-pocket medical expenses and the cost to put a roof over your head. We think the Consumer Price Index is a better gauge and that’s at 1.7%.”
  • “I saw some interesting stats recently where almost 69% of all mortgages are below 4.5% and as you guys out there do more refinances that number is going to increase. So, it doesn’t take rates to go up that much for almost 70% of refis to kind of no longer be in the money or no longer make sense.”
  • “If we do see rates go up, then you better make sure you’re focusing on your purchase business and you better make sure that you’re really being an advisor, to not only combat your competitors out there but also the fintech companies and to really make sure you bulletproof your business into 2021.”
  • “Now longer term, I think rates are going to remain attractive for a very long time.”

Check out the full interview between Habib and Berman below.

Click here to check out last week's MLO with MobilityRE's Ben Teerlink. Previous guests include Robert Broeksmit, Josh Friend, Joe Dahleen, Tim Nguyen, Kristy Fercho, Tony Thompson, Mat Ishbia, David Luna, Barry Habib, Rob Chrisman and more.

See all the interviews from the Mortgage Leadership Outlook series on its YouTube channel.

Published
Oct 15, 2020
Reports: Evergrande Group Arranges Bond Extension

Reuters, REDD say company's billionaire chairman has agreed to provide additional collateral to ensure a construction project tied to a $260M bond is completed.

Industry News
Oct 21, 2021
New American Funding Hires Regional Manager

Mark Tribuna will lead effort to expand company's partnership with affordable nonprofit builders in mid-Pacific region

Industry News
Oct 21, 2021
Rocket Pro Announces Initiatives To Boost Brokers

Company brings Rocket Tech, the Rocket Network and Rocket Marketing to mortgage brokers across the country

Industry News
Oct 19, 2021
FormFree Taps Amazon Web Services For Consumer Financial Identity Solutions

FormFree will use Amazon's blockchain technology to manage its latest consumer Financial DNA solution and its newly introduced FormFree Exchange.

Tech
Oct 19, 2021
Synergy One Lending Increases Its Capital By $50M

San Diego-based Synergy One Lending Inc. completed a $50 million corporate note financing with a consortium of institutional investors.

Industry News
Oct 19, 2021
TransUnion Sees Untapped Growth Opportunity For The Mortgage Industry

A study conducted by TransUnion, which explores the creditworthiness of low-to-moderate income consumers, revealed that the segment represents a $300 billion growth opportunity for the mortgage industry.

Analysis and Data
Oct 19, 2021