MBA NewsLink Q&A–Miki Adams of CBC Mortgage Agency Looks Back and Ahead at Interest Rates

Miki Adams is president of CBC Mortgage Agency (CBCMA), a nationally chartered housing finance agency and source of down payment assistance for first-time homebuyers. She joined the Cedar City, Utah-based company in November 2016 as executive vice president and was promoted to president in January 2021. She has 30 years of mortgage lending experience and has managed companies through calm and tumultuous markets. Her background includes credit and collateral underwriting, secondary marketing and portfolio asset management, regulatory compliance, and regulatory audit and examination management.

MBA NEWSLINK: What has happened with mortgage rates over the past year?

MIKI ADAMS, CBC Mortgage Agency: Last year was marked by a steep rise in rates, driven primarily by the Federal Reserve’s aggressive monetary policy stance aimed at curbing inflation. A year ago, we were looking at 30-year fixed rates at around 6.5%, but by October, they had escalated to nearly 8%. It’s been decades since anyone saw 30-year rates that high.

Keep in mind, rates were hovering at slightly above 3% only two years ago, so it’s been pretty shocking to everyone. The surge was so intense that capital markets nearly froze up. The heightened caution among investors resulted in reduced liquidity for mortgage bankers as well as a major shakeup among regional banks and the broader financial sector. Of course, the housing market was impacted, too.

NEWSLINK: How did the market respond to the increase in rates?

ADAMS: For the mortgage and real estate industries, it was devastating. Higher rates almost always translate to lower originations, but the speed at which rates increased over the past two years prompted home sales to drop to the slowest level in nearly 30 years. That’s pretty incredible.

To say mortgage lenders have struggled in this environment would be an understatement. In fact, according to the latest Mortgage Bankers Association numbers, independent mortgage bankers are losing an average of more than $1,000 for each loan they make.

It’s a tough situation that has forced a lot of industry players to right-size their operations and improve cost efficiencies to stay afloat. The market has been particularly grim for first-time homebuyers, especially after several years of rising home prices. While higher rates are finally starting to cause prices to cool, they have also increased the cost of borrowing money. A borrower who gets a mortgage today is probably looking at a mortgage payment that is 60% higher than it would have been two years ago. That’s pretty significant.

NEWSLINK: How has CBC Mortgage Agency reacted to the rate spike?

ADAMS: Our mission as a company is to support families on their journey to homeownership, especially families who live in low-to-moderate income communities. We don’t have much influence over the larger housing market, but we had to do something.

After some brainstorming, we determined we could have the most impact by cutting the rates on the down payment assistance (DPA) second mortgages we offer to borrowers. The idea was to offset some of the financial challenges caused by higher rates, especially for first-time home buyers who found themselves on the margins of being able to qualify. Even decreasing our rates a little can help more families get across the finish line.

We also wanted to show our commitment to serving those in low- and moderate-income communities by offering tangible support to keep their homeownership dreams alive.

NEWSLINK: What have you observed with this year’s mortgage rate activity so far?

ADAMS: This year is already looking much better for rates. In fact, with inflation easing, rates have already fallen back by more than 100 basis points from their October highs. This is providing some relief to American families who are either looking to buy or who already own a home and wish to move up to a larger home to accommodate a growing family.

NEWSLINK: How has the recent easing of mortgage rates affected your company?

ADAMS: When we talk with our mortgage banking partners, we hear a little more excitement in their voices. While mortgage rates are still relatively high compared to where we were two years ago, there’s a renewed sense of energy and optimism that’s really quite palpable. At CBC Mortgage Agency, the shift has been encouraging. We’ve already noticed an uptick in interest and engagement from correspondent lenders about our DPA program.

It’s important to remember that, while interest rates do impact home sales, they are not the sole factor behind when someone decides to buy a home. People buy homes for many reasons. It could be to provide security for their families, or to have something they can pass on to their children, or for all these reasons combined. Even when rates were at their highest, our DPA programs were helping homebuyers who had struggled to save up for a down payment.

NEWSLINK: Where do you expect rates to go this year?

ADAMS: The general consensus in the market circles I engage with is that long-term mortgage rates will linger in the neighborhood of 6%. Of course, there are more optimistic forecasts out there – some predict rates might drop to 5.5% or even lower.

But often, the sunnier outlooks come from folks who are deeply entrenched in the sales side of things. Because they have skin in the game, their views tend to lean towards the more hopeful end of the spectrum.

Wherever rates land, though, I think we’re all hoping for a healthier, more normal market environment.

NEWSLINK: What opportunities do you see ahead this year?

ADAMS: I think both lenders and borrowers today have a new outlook on what they consider to be “acceptable” in terms of interest rates. Perspective is everything. A year ago, many borrowers were very resistant to getting a 6% mortgage rate after seeing rates at just 4% a year earlier. But after rates spiked to nearly 8%, a 6% rate begins to sound a whole lot better.

This shift in perspective is opening up some interesting doors. For both existing homeowners and potential buyers who put their plans on hold last year, it means reassessing their decision and perhaps being more open to buying at today’s current rates. For lenders, it’s an opportunity to realign their product offerings and services to meet these shifting expectations.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)