Mortgage News Daily

  • Posted To: MBS Commentary

    Today would have been Retail Sales day were it not for the government shutdown. This also prevented Business Inventories from reporting (not an insignificant piece of data even if not on par with Retail Sales). Tomorrow will see the New Residential Construction numbers (housing starts and building permits) stay silent due to the shutdown. This isn't an environment where bond traders are eager to make big bets. That much is evident in the general sideways grind of the past week and a half. Some of the only times that we see "big bets" are in response to trading levels being coaxed out of the prevailing range by other factors. That was the case today as 10yr Treasury yields approached their highest levels of the year. Before the ceiling could be challenged, a big trade came through...(read more)

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    Created: 1/16/2019 2:01:04 PM
  • Posted To: Mortgage Rate Watch

    Mortgage rates rose modestly today after spending the past 2 days moving sideways. It was really yesterday's market weakness that caused today's move. Mortgage rates are most directly affected by the trading of mortgage-backed securities (MBS). When MBS are weaker, rates rise. MBS were weaker throughout the day yesterday, but not by quite enough for lenders to go to the trouble of revising their rate sheets for the worse. Instead, lenders simply waited until this morning to make the changes implied by the market. This delayed reaction is common when the market movement on any given day isn't quite enough to justify lender reprices. In the bigger picture, rates have been in a holding pattern, possibly waiting for some indication that the government shutdown will end. When such a thing happens...(read more)

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    Created: 1/16/2019 1:13:00 PM
  • Posted To: Pipeline Press

    As pricing battles rage in the wholesale channel, there has been plenty of news of layoffs in residential lending over the last six months industry-wide, due to reasons like becoming more efficient, lower volumes, or fewer delinquencies, the most recent being BB&T and Mr. Cooper (page 7). What would actually be newsworthy is if a well-known company had no change or layoffs in the last six months! You can bet land use has changed over the decades, and I received this question: “Rob, I have to give a presentation to a bunch of real estate agents. Have you seen anything on how land is used across the nation?” This is the last good piece I saw: Here you go . Lender Products and Services Manufactured home lending has been a challenge for lenders. Chattel lending is only being done...(read more)

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    Created: 1/16/2019 8:12:57 AM
  • Posted To: MND NewsWire

    After falling an aggregate of 12 points in November and December the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) appears to have stabilized. The HMI, a measure of home builders' confidence in the market for newly constructed homes, gained 2 points in January, rising to 58. This one 1-point higher than analysts polled by Econoday had predicted. "The gradual decline in mortgage rates in recent weeks helped to sustain builder sentiment," said NAHB Chairman Randy Noel. "Low unemployment, solid job growth and favorable demographics should support housing demand in the coming months." The HMI is derived from a monthly survey that NAHB has been conducting for 30 years among its builders who specialize in new residential construction. The survey asks builders...(read more)

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    Created: 1/16/2019 7:35:49 AM
  • Posted To: MBS Commentary

    There will be no Retail Sales report this morning due to the government shutdown. This provides a perfect example of the issue the bond market is currently facing. It begins with the state of flux in the economy and in monetary policy. Now more than ever , arguably, the Fed is on the lookout for clues in economic data. They need to know whether it makes any sense to keep hiking rates or if there are some indications that things could be slowing down. To be fair, the Fed has already shared anecdotes about growth concerns, but then something like the last NFP report comes along and compels the Fed to keep rate hikes on the table. Fed policy aside, market participants would also like a read on how the economy is doing, considering the uncharted territory in which we continue to operate (i.e. longest...(read more)

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    Created: 1/16/2019 5:47:55 AM
  • Posted To: MND NewsWire

    Somewhere in this country there are 230 homes with mortgage balances between $10 and $20 million dollars. According to a post written by Arthur Jobe in the CoreLogic Insights blog, 75 percent of them were originated since 2013, and 180 represent refinances. Those refinances were largely originated since 2013 as well. These homes are unlikely to be in your neighborhood (or ours) although you would have the best shot if you live in California, home to 55 percent of the super jumbo refinances. Seventeen percent are located in Florida, and smaller percentages (4 to 6 percent) in Massachusetts, Connecticut, New York, and Texas. Of course, even zillionaires like to save money, and adjustable rate mortgages (ARMs) are particularly popular for loans of this magnitude due to their lower initial rates...(read more)

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    Created: 1/16/2019 5:16:57 AM
  • Posted To: MND NewsWire

    January 11 ended the first full business week in a while and mortgage activity responded accordingly. The Mortgage Bankers Association (MBA) reported a strong rebound when, despite a government shutdown, business returned more or less to normal. MBA's Market Composite Index, a measure of mortgage loan application volume, increased 13.5 percent on a seasonally adjusted basis from the week ended January 4, reaching its highest level since last February. On an unadjusted basis, the Index was up 45 percent. Purchase mortgage applications moved higher for the sixth time in the last eight weeks, resuming the upward trajectory that was interrupted by the Christmas holidays. That index was up 9 percent on a seasonally adjusted basis to its highest level since April 2010. The unadjusted Purchase Index...(read more)

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    Created: 1/16/2019 5:07:17 AM
  • Posted To: MND NewsWire

    Homeownership as an American dream is alive and well according to new data from the National Association of Realtors® (NAR) 2018 Housing Opportunities and Market Experience (HOME) Survey. The survey was conducted across all 12 months of last year. Sixty-four percent of respondents were homeowners, 27 percent were renters, and 9 percent were non-homeowners living with a family member without paying rent. NAR just released Aspiring Home Buyers Profile , which focuses on survey responses from non-homebuyers, both those who rent and those living with a family member. Of the non-owners, 45 percent were 34 years or under, 59 percent make an income of under $50,000, and 43 percent live in suburban areas. Across the quarters of 2018 non-homeowners were consistent in their desire to own a home in...(read more)

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    Created: 1/15/2019 3:40:22 PM
  • Posted To: MBS Commentary

    The S&P had been idling in place with prices between 2560 and 2600 for more than a week. During that week, we've discussed the risks associated with a break above 2600. Simply put, if stocks managed to break above their nearest notable technical ceiling, perhaps bonds would do the same. In that case, we were looking at yields of 2.75% as the correlated ceiling. Now today, the S&P closed at 2610 and 10yr Treasury yields not even above 2.72%. To be fair, when stocks broke that ceiling this morning, bonds definitely came along for the ride . But everything played out on a smaller scale, as if both sides of the market were suppressed by some larger uncertainty. While there were quite a few brexit-related headlines in the news, we'd be far better served by focusing our attention...(read more)

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    Created: 1/15/2019 3:31:33 PM
  • Posted To: Mortgage Rate Watch

    Mortgage rates were unchanged yet again today. Given that rates are based on trading levels in underlying bond markets, it's no surprise to learn that bond investors have been hesitant to take things too far in either direction after pulling up slightly from the long-term lows achieved in early January. The same could be said for the stock market, but replace early January with late December. For either side of the market, the biggest lingering uncertainty is the fate of the government shutdown . The extent to which a shutdown resolution would move markets remains to be seen. But at the very least, there's a risk that a resolution would push stocks and interest rates higher in unison--at least temporarily. From there, it would fall to actual economic data to set the tone. In that regard, bonds...(read more)

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    Created: 1/15/2019 1:44:00 PM
  • Posted To: Pipeline Press

    Are rates too high given where the U.S. economy is? Traders, investors, and the Fed think they’re where they need to be, given the information we have. Others believe they will head lower this year due to a slowing economy. The release of bank big bank earnings today is shedding some light on economic temperature, but recall that the word “patient” appeared in the recent FOMC minutes as well as in several comments by Fed Chairman Jay Powell related to the timing of potential upcoming rate hikes. (The last time we saw “patient” show up in Fed speak then Chairwoman Janet Yellen used it in reference to rate hikes in early 2015.) Would you patiently wait for your paycheck? U.S. government owes an estimated $5.3 billion to federal workers who have not been paid since...(read more)

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    Created: 1/15/2019 5:55:41 AM
  • Posted To: MBS Commentary

    Neither side of the market (debt/bonds or stocks/equity) feels like it has enough information to move out of recent holding patterns. These sideways trends emerged last week after a an apparent "New Year Bounce" toward higher stock prices and bond yields had proven itself to be a false start. Perhaps 2019's early trend could have remained intact were it not for several key sources of uncertainty. There is an important brexit-related vote in UK parliament tonight, but it will only be important for US bond markets if the vote offers a surprising result. Right now, the expectation seems to be that the Prime Minister's brexit plan will be overwhelmingly rejected. But if it's a reasonably close call, that would leave hope alive for brexit to happen on schedule. There are two...(read more)

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    Created: 1/15/2019 5:39:19 AM
  • Posted To: MBS Commentary

    The overnight trading session was thinly-traded due to a holiday closure in Tokyo. Buyers outnumbered sellers until the domestic session. Promptly after the 820am CME Open , sellers showed up in US Treasuries. Bond market weakness radiated out from there. By the end of the day, it would become more clear that some of the selling was related to corporate debt hedging (read more about why that matters HERE ). Bonds were weaker throughout the morning hours, and then leveled off after European markets closed. It's not uncommon to see Treasuries level-off or reverse course right after European bond markets close. This can happen for a variety of reasons although it can be as simple as a sudden drop in market participation that happens when only one of the three continental areas is trading ...(read more)

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    Created: 1/14/2019 1:29:54 PM
  • Posted To: Mortgage Rate Watch

    Mortgage rates held their ground today, keeping them in line with long-term lows achieved over the past 2 weeks. To be fair, it was the previous week that offered the biggest benefits, but last week was no slouch. Factoring out the first few days of January, it would have been the best week for mortgage rates since April 2018. It was a relatively quiet day for financial markets with the bonds that underlie mortgage rates trading in mostly the same territory as last week. It remains to be seen how markets will react to the absence of the typical spread of economic data (much of which is on hold due to the government shutdown ). Beyond that, the shutdown could certainly begin to have an effect on the economy itself although it's hard to say how big of an effect that would be. With this now being...(read more)

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    Created: 1/14/2019 12:50:00 PM
  • Posted To: MND NewsWire

    At least one part of the shutdown is over as the Internal Revenue Service (IRS) announced it has resumed its Income Verification Express Service (IVES.) The service, which provides tax transcripts essential for processing mortgage applications for non-W-2 wage earners, was shut down, along with many federal government services, on December 21 and its workers were furloughed. The Mortgage Bankers Association took credit for the turnaround , saying it was its "successful advocacy" that got the IRS to restart the program. Robert Broeksmit, president and CEO of MBA said he took the appeal directly to Craig Phillips, a counselor to Treasury Secretary Steven Mnuchin. Broeksmit said he told Phillips "Look, this is staring to be a problem for the lending industry," and asked, "Could you make these...(read more)

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    Created: 1/14/2019 6:59:13 AM
  • Posted To: Pipeline Press

    My cat Myrtle has never flown coach. She doesn’t have the same complaint I have of airline workers who don’t seem to realize that “full” means full. For some reason they’ve created “completely full,” “extremely full,” “very full,” and, “full.” How did that change? Our industry is always grappling with change (as in alteration, not pennies and nickels), the latest being lenders having to shift their borrower’s expectations due to government paralysis. STRATMOR discusses this in its latest blog, “Home Financing Despite the Partial Shutdown .” Servicers and MBS investors are following regulators’ plea for financial institutions to work with borrowers affected by the government shutdown, along...(read more)

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    Created: 1/14/2019 6:55:57 AM
  • Posted To: MBS Commentary

    The government shutdown is now the longest ever, and there are a variety of interesting implications. The first is that multiple economic reports will not be released as scheduled. The notable examples in the current week include Retail Sales and the New Residential Construction report ( housing starts and building permits). An absence of econ data naturally increases uncertainty. In and of itself, uncertainty is good for the bond market , but investors will still have access to a few other economic reports that could help form a consensus about what the economy might be doing. Of those, the only reports on this week's calendar with any market-moving history worth mentioning are the Philly Fed Index on Thursday and Consumer Sentiment on Friday. To put their past market-movement potential...(read more)

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    Created: 1/14/2019 5:39:03 AM
  • Posted To: MBS Commentary

    Core CPI came in at 2.2% today. Back in 2016, this was cause for concern, but now bond markets trade like inflation isn't even a remote concern. What's up with this? If 2% is the Fed's target and we're at 2.2% currently, isn't that bad for bonds? We discussed this in greater detail in the Day Ahead ( refresh your memory , if you like) , which essentially argued that inflation doesn't really matter anymore. That's a notion I'd been shouting from the rooftops for 6 or 7 years until inflation abruptly seemed to matter again in 2016. Since today was a slow-ish market day, I thought I'd give you the inflation backstory instead of forcing meaningless analysis on a sideways market that's waiting for economic data, an end to the shutdown, or an indication of...(read more)

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    Created: 1/11/2019 4:12:21 PM
  • Posted To: Mortgage Rate Watch

    Mortgage rates improved today, breaking a 3-day streak with effectively no change. This gets us part of the way back down to the long-term lows achieved at the end of last week. At that time, the average lender was quoting conventional 30yr fixed rates that were roughly 5/8ths of a percentage point (0.625%) lower than the long-term highs seen at the beginning of November. Rates then lurched higher by Tuesday of this week, eroding as much as a quarter of a point from some scenarios. Today's gains restored about half of that weakness for a net improvement of 0.5% from November's highs. At any time before last week, today's rates would be the lowest since April 2018. The swiftness with which those lows were achieved led some investors to worry about a swift bounce back. But it seems that as long...(read more)

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    Created: 1/11/2019 3:11:00 PM
  • Posted To: MND NewsWire

    The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) contains a requirement that the Consumer Financial Protection Bureau (CFPB), author of many of the rules under the act, publish an assessment of its "significant rules and orders" within five years of their effective date. Among the rules that CFPB has determined to fit that category are the Ability-to-Repay/Qualified Mortgage (ATR/QM) Rule and the Real Estate Settlement Procedures Act (RESPA) Mortgage Servicing Rule. Both came into effect in January 2014 and assessment of both were published this week. What follows is a summary of the assessment of the Ability-to-Repay/Qualified Mortgage (ATR/QM) Rule. A summary of the RESPA Servicing rule will follow at a later date. The ATR/QM assessment looks at four broad categories;...(read more)

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    Created: 1/11/2019 10:42:38 AM
  • Posted To: MND NewsWire

    The November Mortgage Monitor from Black Knight focused largely on the shifting of the mortgage market toward purchase originations and the unexpected expansion of the refinancing pool due to recent interest rate drops, but it also had an interesting analysis of the current mortgage prepayment rate (also known as single month mortality or SSM). Mortgage prepayments typically slide along with refinancing , and right on schedule the SSM rate for fixed-rate mortgages hit a 10-year low in November, down 34 percent year-over-year. But this time there are some anomalies in the decline. First, it is concentrated in fixed-rate mortgages. Prepayments of older adjustable rate mortgages (ARMs), those in the 2004-2007 vintages, are up 3 percent on an annual basis, because short term interest rates are...(read more)

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    Created: 1/11/2019 7:11:27 AM
  • Posted To: MBS Commentary

    Today's Consumer Price Index was one of the week's only " important " pieces of economic data. Or perhaps we should say it was one of the week's only 'big-ticket' reports in the sense that it has been one of the bigger market movers among most of its peers in the long run. Does it still deserve its big-ticket status? It depends whom you ask, and perhaps WHEN you ask. The farther back into the past one goes, the more interesting inflation becomes. But since the late 90's, the economy and the Fed's monetary policy framework increasingly seem to be honing in on the 2% goal fairly reliably. Does it matter that inflation is running above 2%? If 2% is the target and we're at 2.2% currently, isn't that bad for bonds? No and no. The Fed has talked repeatedly...(read more)

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    Created: 1/11/2019 7:11:10 AM
  • Posted To: MBS Commentary

    It's hard to fault the bond market for any trading over the past several days. The data and the movement in other markets have both suggested bond market weakness fairly clearly. Despite that, the weakness has been reasonably well contained. For example, 2.75% in 10yr yields has been our best case ceiling --one we began to discuss on the initial bounce last Friday. As of this afternoon, 10yr yields closed at 2.746%. All that having been said, being this close to 2.75% makes it that much easier to break . Whether or not it breaks may be as much a function of the stock market as anything. Bond yields have been quite willing to reconnect with stocks after the late-2018 disconnect. Stocks are staging near a ceiling of the their own--essentially the inflection point between the first and second...(read more)

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    Created: 1/10/2019 2:28:27 PM
  • Posted To: Mortgage Rate Watch

    Mortgage rates were unchanged again today, despite moderate weakness in underlying bond markets. Bonds are the primary ingredient used in determining mortgage rates, but the timing of market movement and lender preferences can result in discrepancies between the two. For instance, if market weakness happens late enough in the trading day, many mortgage lenders will wait until the following day to do anything about it in terms of updating their rate sheet offerings. Additionally, the bonds that dictate mortgage rates can trade slightly better or worse than the mainstream bond market (essentially, US Treasuries). Both of the those factors are in play today. Treasuries weakened more noticeably than mortgage-backed bonds, primarily because Treasuries had strengthened at a faster pace last week...(read more)

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    Created: 1/10/2019 1:50:00 PM
  • Posted To: MND NewsWire

    Credit availability suffered an unusually large decline in December. The Mortgage Bankers Association (MBA) said its Mortgage Credit Availability Index (MCAI) fell 7.3 percent to 175.0 in December (it was 188.8 in November.) A decline in the MCAI indicates that lending standards are tightening. The MCAI has two major components and the loss in availability came entirely from the Conventional Index which decreased by 14.5 percent. The Government MCAI inched up by 0.1 percent. The Conventional MCAI itself has two components and both were down, the Jumbo MCAI by 14.9 percent and the Conforming by 14.0 percent. MBA's Associate Vice President of Economic and Industry Forecasting Joel Kan said. "The supply of credit dropped in December to its lowest since February 2017. The decline was driven by...(read more)

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    Created: 1/10/2019 8:00:31 AM