How to Take Advantage of Possible Drops in Mortgage Rates

After hitting a year-high 7.22% in May, the average 30-year fixed mortgage rate has fluctuated, but some experts said it finally seems to be inching down this month, Forbes Advisor reported on Friday.

"The rate rose . . .  in early July, reaching 6.95% in the first week, only to decrease in the second week," wrote Robin Rothstein for the site. "The average rate on the benchmark 30-year mortgage decreased by six basis points, descending to 6.89% the week ending July 11, according to Freddie Mac data."

Many housing market experts said the rates should recede more in the coming months, as long as the Federal Reserve finally institutes interest rate cuts.

Those cuts by the Fed could come soon. According to a report by The Associated Press on Friday, Consumer Price Index (CPI) numbers released this week showed that inflation cooled for the third-straight month in June, "a sign that the worst price spike in four decades is steadily fading and may soon usher in interest rate cuts by the Federal Reserve," the wire service noted.

According to the Forbes Advisor report, the National Association of Realtors (NAR) predicted mortgage rates will average 6.9% in Q3 but predicted 6.7% for Q4.

"In the second half of 2024, look for moderately lower mortgage rates, higher home sales, and stabilizing home prices," NAR Chief Economist Lawrence Yun said in a press statement.

The Mortgage Bankers Association (MBA) expected the rate to decline throughout the year, averaging 6.8% in the third quarter, Forbes Advisor report. MBA economists anticipate that the Fed will implement two rate cuts before the end of the year, with the average mortgage rate dropping to 6.6% by 2025.

The Catalyst: Economists Optimistic

Rothstein wrote that economists at the Bank of America are still optimistic that rates will drop in the coming months, although "inflationary pressures are currently keeping them elevated."

The Federal Home Loan Mortgage Corporation, better known as Freddie Mac, predicted the rate will lower to 6.5% by the end of 2024. "Mortgage rates have been volatile over the past month, but we expect rates to remain above 6.5% through the end of the year," Freddie Mac noted in its June outlook, according to Newsweek.

An article by Laura Grace Tarpley for Yahoo! Finance noted, "The best thing you can do to get the lowest mortgage rate possible is to shop around with multiple lenders. Narrow your search down to three to five mortgage lenders and apply for preapproval with each. This gives you a straightforward way to compare mortgage rates and fees so you can get the best deal on your home loan."

Prospective homebuyers may find it easier to qualify for mortgages at lower rates, according to Experian. There are many options for them to investigate, including several large publicly traded banks and lenders. One private company is also working to shake up the industry with online strategies focusing on attracting younger buyers.

Rocket Companies Inc.

Rocket Companies Inc. (RKT:NYSE) has been the top mortgage lender by number of originations for years, according to Motley Fool.

In 2022, the Detroit-based lender originated more than 464,000 mortgages worth $127.6 billion, giving it a 5.5% share of the market by origination.

Rocket has been ranked number one in customer satisfaction in America by J.D. Power for at least nine times. The rankings are based on client feedback by the independent research firm. It also ranked at the top of the listings for digital channels, being easy to do business with, keeping clients informed and educated, and resolving problems or questions.

Nerd Wallet currently has a 4 out of 5 score for Rocket Mortgage, saying it "stands out as the nation's No. 1 FHA lender, helping borrowers with limited down payment funds, but all home buyers and refinancers can take advantage of the lender's convenient website and app to both apply for and manage their loans."

According to TipRanks, out of nine analysts rating the stock in the last three months, five rated it Hold and four rated it Sell, with an average price target of US$12.18 per share.

On July 9, Barclays raised its price target on Rocket Companies to US$10 from US$9 and keeps an Underweight rating on the shares.

According to the company, it had an adjusted revenue of US$1.2 billion , an adjust EBITDA of US$174 million, a 96% client retention rate, and US$8.9 billion total liquidity as of the end of the first quarter of 2024. Its next earnings are expected Aug. 1.

Reuters reported that management and insiders own 6.88% of the company, and institutions own 73.77%. The rest is retail.

Top shareholders include Fidelity Management & Research Co. with 8.76%, The Vanguard Group Inc. with 8.2%, Boston Partners with 6.73%, JP Morgan Asset Management with 5.81%, and Fidelity Investments Canada ULC with 4.97%.

It has 1.988 billion shares outstanding with 128.6 million of them free float traded shares. Its market cap is US$24.88 billion, and it trades in a 52-week range of US$15.81 and US$7.17.

Loan Depot Inc.

According to the Motley Fool's list, Loan Depot Inc. (LDI:NYSE) ranks third in the country for home loan originations, with more than 156,000 new loans in 2023 for US$52.53 million.

In May, the company released its first quarter 2024 financial results, with revenue increasing US$15 million or 7% to US$223 million.

In February, the company was hit by a cyberattack that affected 16.9 million customers, affecting its expenses for the quarter. The company noted it incurred US$15 million of net charges directly related to the attack but adjusted net loss for the quarter decreased 35% to US$38 million.

In June, the company's President and Chief Executive Officer Frank Martell earned Inman's 2024 "Best of Finance" award for the second year in a row. Inman is a news source that covers the industry.

In a research note on June 16, Price Target Research gave the stock its highest rating, an "A."

"LDI's future returns on capital are forecasted to be in line with the cost of capital," the firm said. "Accordingly, (although) the company is expected to continue to be value creation neutral, loanDepot has a current value trend rating of A (highest rating)."

The company also has been noted for its attention to Hispanic and non-white mortgage applicants. In 2022, the company placed 37 agents on the National Association of Hispanic Real Estate Professionals list, the highest number of any company.

"We continue to advance the pillars of our Vision 2025 plan by serving today's increasingly diverse community of first-time homebuyers and creating new ways to develop a lifecycle relationship with our customers," said Martell.

According to Reuters, 20.16% of Loan Depot shares are held by management and insiders. CIO and Head Economist Jeff DerGuarahian has 7.33%, and Jeff Walsh has 4.88%.

About 33% is with institutional investors. Cannell Capital LLC has 5.79%, The Vangaurd Group Inc. has 5.22%, Parthenon Capital Partners has 4.86%, Brandywine Global Investment Management has 3.67%, and Knightsbridge Wealth Management has 3.35%. The rest is in retail.

Loan Depot has a market cap of US$614 million and more than 324 million shares outstanding. It trades in a 52-week range of US$1.14 and US$3.71.

Wells Fargo & Co.

Wells Fargo & Co. (WFC:NYSE) is the fourth largest mortgage lender according to originations, Motley Fool said, with 142,769 loans last year for US$79 million.

Business Insider reported that the bank offers "a variety of low-down-payment mortgage options and features like down payment assistance to help first-time and low-income borrowers get into a home. Overall, Wells Fargo is a very affordable lender for first-time homebuyers. But the lender ranks extremely low in trustworthiness."

For those with thin or imperfect credit, Wells Fargo's "Dream. Plan. Home. Mortgage." program has more flexible credit standards and was created for people who are at or below 80% of the area median income. It allows down payments of just 3%, Business Insider noted.

The company released its earnings for the second quarter on July 12, including a net income of US$4.9 billion and diluted earnings per common share of US$1.33, an 8-cent rise from US$1.25 in Q2 2023.

According to research report by Trefis on July 11, the company is the third-largest bank in the U.S. by assets and the largest by market capitalization.

High interest rates continue to boost its net income, "which is likely to remain elevated (until) the Fed's rate correction cycle is completed."

Trefis estimates a target price for the stock of US$63.73.

About 0.09% of the company is owned by insiders and management, according to Reuters. Institutions own about 78%. The rest, 21.91%, is retail.

Major shareholders include The Vanguard Group Inc. with 9.07%, BlackRock Institutional Trust Co. with 4.67%, Fidelity Management & Research Co. with 4.55%, State Street Global Advisors (US) with 4.21%, and Dodge & Cox with 3.3%.

It has 3.49 million shares outstanding with a market cap of US$201.6 billion, and trades in a 52-week range of US$62.55 and US$38.39.

Beeline Loans Inc.

Beeline Loans Inc. is a digital mortgage lender that stands out from the crowd due to its online portal and A.I.-powered chatbot that connects with consumers and evaluates their eligibility for loans.

According to Beeline, this is "a radically new way to apply, like five steps in 8 minutes radical. Do it from the sofa even." It believes that this digital approach to conventional mortgage lending will increase engagement with young people who have been hesitant to buy homes in recent years.

The chatbot, named Bob, which is available 24 hours a day and is capable of answering complex questions. Based on these conversations, the chatbot will provide the customer with a personalized quote. A representative of the company stated that the chatbot "poses highly personalized product-specific questions to generate a quote in real-time."

The company has expanded its offerings to offer better service for Hispanic customers, as well. A new version will instantly detect the language of the consumer and give faster more accurate answers. Colmena users will automatically be routed to a bilingual loan officer to guide them through the process.

"Colmena will feature tailored mortgage products that are culturally aligned to address the specific needs and preferences of Latino homebuyers, plus educational resources to promote homeownership and empower individuals and families to achieve their dreams of owning a home," said Miguel Vega, who is spearheading the initiative for the company.

Beeline has stated that it offers a variety of options, including refinancing, to consumers through the digital platform. Beeline has built its premise on making homeownership more accessible to a wider, more diverse market, making it an attractive prospect if mortgage rates continue to fall.

The company launched a proprietary front-end mortgage platform during Q3 of 2020 and closed 1,500 mortgages by the end of 2021, and 2024 is expected to be Beeline's strongest year.   

Despite the timing — which included COVID-19, the highest percentage increase in rates in 25 years, war in Ukraine, and housing inventories and consumer confidence being near all-time lows — the company has gained market share against larger legacy lenders.

"While other mortgage lenders have been slumping, Beeline is gaining traction," wrote Guy Bennett in an article for Yahoo Finance.

Robinhood revolutionized the stock-buying industry by fractionalizing stocks. This allowed people who previously were excluded from the stock market to enter the industry and paved the way for those people who may have been excluded to get involved. Beeline is now doing for mortgages what Robinhood did for the stock market, and it's powered by AI.

Beeline Loans is a private company, and the company reports that its largest shareholder is founder Nick Liuzza. According to Beeline, it has invested US$40 million in the company. It reports that the Cavalry Investment Fund, Atalaya, and Ellington have made significant investments in the company.

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1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Beeline Loans Inc.
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