It started in early March when, in the midst of the COVID-19 pandemic, Saudi Arabia and Russia initiated an oil price war – tumbling prices by 34% (down to $31.73 per barrel). Today this price war continues, with crude at only $20.71 per barrel. The pandemic and oil price combination has sent the stock market into a tailspin. With equity investors continuing their flight to safe-haven holdings, the DJIA has dropped almost 30% from the Feb. 12 high of 29,551.

Although 10-Year Treasuries (the rate that typically sets the direction of fixed mortgage rates) have averaged 2.27% over the past 5 years, a record low 0.318% 10-Year yield was recently reached.

But if mortgage rates usually reduce when investors flee the stock market, why did 30-year fixed mortgage rates increase from 3.15% to as high as 4.15% during this commotion???

For several reasons due to huge uncertainty, volatility and panic – all of which increased costs to lenders… which in turn were passed on to borrowers in the form of higher mortgage rates:

• Profits to mortgage servicing companies (who manage borrowers’ monthly payments and escrows for lenders) reduced after many mortgages were repaid/refinanced early – i.e., servicing fees to lenders increased due to uncertainty regarding underlying value and content of their serviced mortgage portfolios
• Pools of residential mortgages (mortgage-backed securities/MBS’s) became difficult to value given the higher probability of default or forbearance – so some investors are paying less to (or have stopped buying from) the lenders who are selling mortgages
• Lenders, who promised rate locks to borrowers and sell their loans to investors after closing, are having to pay higher fees to hedge against rising rates (to protect loan value), and are subjected to margin calls when the value of their collateral reduces from Federal Reserve Treasury Bond purchases

Rotary Club of Vero Beach 2018–19 Officers and Board of Directors: Daniel Fourmont, Past President; Kathryn Barton, Treasurer; Ken Ligon; Michael Kanuka, President; Richard Carlin; Brenda Bradley, Secretary; Stuart Kennedy, President-Elect; Camille Yates, Vice President; Jim Brumbaugh and Larry Parks. (not pictured – Tom Mitchell).

The Rotary Club of Vero Beach (Vero’s 1st Club) recently celebrated its 92nd birthday. Chartered on June 9, 1926, club members through the years have exemplified Rotary’s motto, “Service Above Self,” by donating their time and resources to the local community.

“Rotary is all about connecting and providing service to the community, fellowship with members, and personal and professional development,” says Michael Kanuka, President of the Rotary Club of Vero Beach. “We are the oldest Rotary Club in the area and have proudly helped at least 45 local charitable organizations who serve thousands of people. We have raised money in various ways, and established our Vero Beach Rotary Charities Foundation which has donated more than $100,000 to help local children and adults in need.”

In addition to helping those in need locally, the Rotary Club of Vero Beach works on international projects including ones that bring clean water and dental care to people in the Dominican Republic. They also participate in a Homestay program hosting international Rotarians to give them a perspective of what it’s like to live in Indian River County.

“We are committed to continuously improving our community and our strategic focus is now on the environment,” says Kanuka. “Our recently installed Board of Directors have been brainstorming new civic projects which we will soon be announcing.”

Rotary is an international organization boasting more than 1.2 million members in almost 35,500 clubs around the world. The Rotary Club of Vero Beach meets every Thursday at 11:45 am at the Vero Beach Yacht Club, 3601 Rio Vista Blvd., Vero Beach, FL 32963. For membership information contact President, Michael Kanuka at [email protected] or visit www.rotaryofverobeach.com.