Mortgage Rates Drop After Fed Signals - 8/25/25 Monday Market Update

The mortgage market saw significant improvement last week after Fed Chair Powell signaled a likely rate cut at the September 17th meeting, with rates dropping to around 6.25%. 

Listen NOW for all the details you need to know!

This week we explore property occupancy rules in light of Fed Governor Lisa Cook's mortgage fraud investigation, explaining the critical differences between primary residences, second homes, and investment properties.

Some things to consider -
• Primary residences require occupancy within 60 days and offer lowest rates and down payments
• Second homes need 10% down, must be 100+ miles from primary or have distinct vacation characteristics
• Investment properties require 15% down minimum and carry higher interest rates
• Multiple second homes are possible, as are properties that combine personal use with rental income

Contact Nikki on social media @mortgagesfromMN2AZ or call 952-484-1584 for mortgage questions.

Realtors! Contact Angie at angiegerber@gmail.com

Chapters

• 0:00 Monday Market Update: Rate Cuts Coming
• 3:13 Lisa Cook Mortgage Fraud Investigation
• 5:19 Property Occupancy Types Explained
• 8:28 Investment vs Second Home Guidelines
• 12:09 Changing Property Occupancy Rules
• 14:58 Closing Thoughts and Contact Information

Transcript

Speaker 1: 0:37

Welcome to the Monday Market Update. It is August 25th and I'm excited to see what this week will bring.

Speaker 2: 0:45

Yes, absolutely. So we had a really, really, really good week last week from a mortgage standpoint. After the Jackson Hole meeting with the Fed last week, powell basically went on record and virtually guaranteed a rate drop from the September 17th meeting. So he's pointing to things like the job market, inflation, you know, core PCE, things of that nature, which he recognized have increased slightly. But now because of those increases it's definitely time to start pushing down on those interest rates to help stimulate housing within the economy. The mortgage interest rates really love that. On Friday, as you can see, this big green line showed all the improvement we got on Friday from a mortgage interest rate standpoint, so that those changes affect the bond market and therefore affects mortgage interest rates, would have reached around six and a quarter on Friday. Today we're, you know, kind of probably six and three A's, maybe six and a half today, but really the market really loving the idea that we're going to see some Fed rate cuts. The September 17th rate cut is 93% guaranteed, so pretty high numbers as we start to get over the next couple of weeks, revisions to jobs reports. So what happens is when we get the initial jobs report there's always a number associated job creation number, so for example, $250,000 or $230,000 or whatever that number is. And then the very next month they go and they revise the prior month's jobs report. Why that's important is because most of the time they correct for actual number of jobs that were created that month. So here's the estimate and then here's the correction. This next month, in September, it's going to be very important because we get that number on September 5th, there's an opinion that comes out on September 9th and then, as long as those numbers are lower, it's going to virtually guarantee that drop in the interest rate from a Fed standpoint. So all good things in the market there.

Speaker 2: 2:35

Also, I wanted to talk about the Fed Governor, lisa Cook. So she is a voting member of the Fed. She is currently under investigation for mortgage fraud. If and President Trump has called for her resignation, or he is telling her that if she does not resign, that he will fire her because of the mortgage fraud. And what this whole mortgage fraud is based on is important for the topic that I want to talk to today.

Speaker 2: 2:58

So Lisa Cook purchased a home in Atlanta Georgia a condo in Atlanta Georgia as her primary residence. She also purchased a home in Ann Arbor, michigan, and called that home her primary residence when she purchased that home. The whole basis is was it her primary residence or was it not? Primary residence indicates that you will be occupying that property within 60 days of closing. So the mortgage rules are as such. We have to determine, as mortgage loan originators, what purpose that property is going to be. Is it going to be a primary residence, is it going to be a second home or is it going to be an investment property? Those things are important because it has to do with occupancy and it also has to do with required down payments. Because it has to do with occupancy and it also has to do with required down payments, interest rates and how the loan is being priced overall in general and how it's being sold.

Speaker 2: 3:47

So, prior to and whether or not this happens with Lisa Cook or whatever, the stance is that, especially if you are someone who is in the financial industry, and especially if you are someone who is going to be a voting member for the Fed, you need to be diligent and proper in how you run your finances from a personal side, and it is up to you to be a representative for the American public and read the documents that you're signing. So there's been some talk about how she was like I didn't realize it was a primary residence loan, those things. But her due diligence as a voting member of the Fed would be to read those documents, and so that's kind of really what the rhetoric is and what they're saying. So if we flip that over and we talk to you guys as agents and you're starting to look with first-time homebuyers, well we know that with a first-time homebuyer, most likely that occupancy is going to be a primary residence. They need a place to live. But as you start looking with people who already own homes, people who are maybe moving to different states, people who show interest in properties in different states, people who have a history of investment property, income, things of that nature, we need to be more diligent about what the use of that property is going to be. This is important.

Speaker 2: 4:54

Prior to 2008, prior to the crash, everything they just called a primary residence and there wasn't a lot of question as to it because there wasn't a lot of regulation surrounding it. Occupancy is probably the number one thing that I get questioned about continuously on a loan because of Airbnbs, because of people wanting to buy investment properties down the block from where they're living and want to call it a primary residence, things of that nature, and so I have to be very particular in the questions that I ask and the explanations that go into that file. As to the occupancy On a second home, for example, there's regulations there. So if I want to call a property a second home, it needs to be at least a hundred miles from their primary residence location. If they are not selling that primary residence, it needs to be able to be second home in nature. So, in other words, a different state makes that qualified From.

Speaker 2: 5:48

Let's say, you live in, you know, minneapolis, minnesota, and you want to purchase a cabin up north. If that's not 100 miles away, that can be okay, but it's a cabin on a lake, so therefore we can justify that it is going to be a second home for you. So those are some of the requirements from a second home standpoint. From an investment property standpoint, are you going to be receiving rental income from that property? If yes, it's an investment property. If no, we can look at it in different ways. Are you going to be occupying the property? Is it going to be used as a second home? And there is a way that you can combine second home usage or second home occupancy and still receive rental income for that property and it not be called an investment property.

Speaker 2: 6:36

The catalyst to that is how much time are you going to be personally spending at this second home? So if you can reasonably say that you will be spending at least two weeks a year at this home, occupying it as your second home, what happens to the property the rest of the year is okay if that makes sense. So in other words, if you say, okay, well, I'm going to purchase this property in Florida, I'm going to try to get some income off this property, but it's actually going to be my personal use and I'll rent it out to family and friends if they want to stay there or whatever that is. But I'm not going to try to create a business out of getting investment property income from this property and I'm going to be using it for my own personal use. A lot of the time that can still be considered a second home.

Speaker 2: 7:20

Where we get into trouble is if you say, okay, I'm going to buy this property in Florida, yeah, I'll occupy it for the two weeks just so that I can qualify for a second home and then rent it out the rest of the time.

Speaker 2: 7:29

That is actually more of an investment property situation. So you can see how me, coming in and talking to people about occupancy, I have to be extremely clear on what the options are and extremely clear on what their intention with that property is. If it's found that they purchased a home as a primary residence and then they show investment property income on their taxes and that file gets audited, what's most likely going to happen is that mortgage company is going to call that loan due and payable because they have violated their promise to occupy as a primary resident. So it can be a pretty serious thing if we don't establish occupancy. So, as you're talking to people, as you're keeping in mind, you know, buyers that are going out to the market, make sure we're talking to them about what do you want this property for? Like, why are you doing this, what's your intention? And really have the story behind it so that we can work together to know what that occupancy really is.

Speaker 1: 8:23

Yeah, that makes sense. With so much going on right now and a lot of people getting called to the table, it sounds like, on this, it's a timely topic, for sure, and just a good thing. And again, I would love your take so as an agent, as I'm talking to an investor how much do we need to know? Or is it just the laws are always changing or things always changing, so it's just best to get them right over to you to answer these questions?

Speaker 2: 8:49

Yeah, it's best to get them over to me to answer the questions. I mean, it can change a lot, you know as far as what, and it can actually change from underwriter to underwriter. Some underwriters are more conservative and say, yeah, I understand that you think that this is a second home, but I think we really need to look at this as an investment property for X reason Maybe. Like, for example, maybe they have a primary residence in Minnesota, they already have a second home in Arizona and they're wanting to purchase an additional second home in Florida and you're kind of like, are you doing that and you can have multiple second homes? Fyi, just like you can have multiple investment properties. But maybe they claim some rental income on that second home in Arizona last year and you're like they're most likely going to claim rental income.

Speaker 2: 9:29

So a lot of that is just a discussion to be had with me and a discussion to be had with the underwriter in making sure that we are on top of what that occupancy is. The reason it's important. Primary residence loans require lower down payments and have lower interest rates. Second homes require at least 10% down and have higher interest rates. Investment properties have to be at least 15% down and have higher interest rates. So it's really that step up or that minimum down payment requirement that needs to be met.

Speaker 1: 9:54

Yeah, and you said you know Lisa Cook doing her due diligence in reading her paperwork. Doing her due diligence in reading her paperwork, would her lender or her closer, or the people that helped her get to the point of the closing and signing these papers? Do they have any parts in this process as far as just, I guess, responsibility?

Speaker 2: 10:16

Yes, in the extreme, the lender's credibility or the lender's licensing can be brought into question about whether or not they knew that this was not going to be a primary residence and purposefully put it through underwriting with that intention of deceiving the underwriter back, or a mark against their ability to have underwriting opportunities. Whether they knew, whether they questioned it, whether they you know how they justified it, the company, the actual bank or the company that lent that money, can be called into question for their branch licensing, for you know fines that might have become associated with this whole situation and doing loans that are, you know, questioned the occupancy.

Speaker 2: 11:00

Now that's the. That's the. That's what could happen On a smaller scale. This comes into question most of the time when there's a foreclosure situation. So, for example, somebody turning a primary residence into an investment property is not required by law or by any means to redo their mortgage as an investment property loan. They are not required to do so. You are absolutely allowed to change occupancy on any property that you want after you have closed on the mortgage loan, as long as you have fulfilled the original obligation of occupancy. So, in other words, for a primary residence, it is your job to occupy that property, in other words, live there 80% of the time within 60 days of closing. The reason that they say that is because some people want to paint before they move in, they want to do new carpets before they move in, they want to do some updates, et cetera. So you have 60 days to do that and get yourself into that property or say that your reasonable expectation is that it'll be done in 60 days or that you'll be in it in 60 days. After that 60-day mark, it is reasonable for us to expect that you occupy the property for at least six more months as your primary residence before you change occupancy of that property and not have to really put into question what that occupancy is or have it affect the loan. So in other words, let's just say you bought a property in January, you move in by March, you occupy all the way to what would that be? September, and then you put it on the market to rent it out November, december there's nothing much that we can say about that and you want to buy an additional primary residence? That can happen.

Speaker 2: 12:37

I as a lender always recommend that you occupy it for at least a year. But I can't enforce that if that makes sense. So it's a whole kind of like a six payment rule. As long as you are occupying that property and you've made your six payments, you are free to do what you want with that property. But again, I always suggest a year, just to make sure that there is no doubt.

Speaker 2: 12:57

So a lot of my clients who are investors they will move into primary residences and occupy it for a year before they move into their next primary residence. So I have a couple of clients in particular who have done this 30 plus times and just really over the years obviously have built up primary residences or they'll, you know, buy a primary and then they'll buy the one next door as an investment property or whatever that is, knowing that they're going to occupy one for a year and then rent it out. Or I have a lot of clients who will go and buy duplexes or triplexes, live in one of the units for a year before renting that out and moving on to their next property. So you know, we can work through those details on how that works. And if you really want to build up those investment properties, there is ways that you can do it using primary residence loans.

Speaker 1: 13:42

So, like I said, call Nikki. A lot of information.

Speaker 2: 13:44

Yes, A lot of information about occupancy. For sure, nikki, a lot of information, yes, a lot of information about occupancy.

Speaker 1: 13:48

For sure, lots of information, lots of different things, lots of different ways, lots of different again lanes. So as an agent I know enough to be dangerous, but I primarily stay in my lane and that's for you, because you have, you have a lot of lanes in your lane. So very much, so Good, awesome, well, no, that's all amazing information and very timely, as always. So I really appreciate it and I appreciate you showing up week after week so real quick for the people listening on YouTube or on the podcast. Where can they find you?

Speaker 2: 14:22

They can find me on Facebook, instagram and TikTok. My handle is at mortgages from MN2AZ. On Facebook, instagram and TikTok, my handle is at mortgages from MN2AZ.

Speaker 1: 14:31

They can reach me on my cell phone, 952-484-1584, or they can email me at Nikki at KevnickMortgagecom Perfect, and I'm Angie Gerber at gmailcom, so that's pretty easy. So reach out to us if you have any questions at all as an agent helping your clients in any way, we're here and happy to help Awesome.

Speaker 2: 14:49

We'll see you guys next week.

Speaker 1: 14:51

Absolutely have a good one.

Speaker 2: 14:53

Yeah, bye-bye.