Mortgage News Daily

  • Posted To: MBS Commentary

    Bonds rallied today for the first time all week, and fairly well at that! 10yr yields fell more than 5bps and Fannie 3.5 MBS rose nearly 3/8ths of a point. Not much to be mad about there, right? Indeed, there's nothing to be mad about , but there are all sorts of reasons to remain cautious. The rally was driven by a combination of European political drama and short-covering in US bond markets. Here's an external link that does a better job than I can of explaining the Eurodrama quickly. And here's a homegrown link the goes into greater detail on short-covering. The day's best gains were seen during the 2nd half of the European session (which effectively ends at noon ET), but short-covering kept the positive trend intact through the domestic close. To reiterate what I said earlier...(read more)

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    Created: 5/18/2018 1:43:51 PM
  • Posted To: Mortgage Rate Watch

    Mortgage rates caught some small semblance of a break today. If it's not apparent based on that assessment in conjunction with the headline, the improvements certainly left something to be desired, even though that's to be expected, given the circumstances. Here's what I mean by that: Rates are based on the bond market. Trading levels in the bond market are back in line with (or slightly better than) Tuesday's levels. But mortgage rates are still higher than those seen on Tuesday. It's really that simple. Why is it to be expected? Mortgage rates aren't created automatically based on the bond market. The bond market is merely the primary input. Lenders use bond prices/levels as a baseline for determining rates. If the market has been more volatile, lenders are quicker to raise rates and slower...(read more)

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    Created: 5/18/2018 12:31:00 PM
  • Posted To: MBS Commentary

    The notion of "positions" is extremely important to the bond market (and to any market for that matter). At the most basic level, a LONG position seeks to profit from prices rising (or yields falling) and a SHORT position seeks to profit from prices falling (or yields rising). Quite often, the structure of accumulated positions in the Treasury market acts as its own driver of momentum . The key reason for this is the very logical practice of traders protecting themselves from undue losses with automatic trades unsurprisingly known as "stop losses" or simply "stops." For instance, if the market is overly long, and if a big chunk of longs were set-up around a specific trading level, if yields happen to move higher than that trading level (or something close to it...(read more)

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    Created: 5/18/2018 6:21:24 AM
  • Posted To: Pipeline Press

    Folks heading to the MBA’s Secondary conference should know that there are 329 street-level newsstands in New York City. (The peak was 1,500 in the 1950s.) By law, the maximum price for anything at a newsstand is $10, meaning that newspapers are a significant part of that business. Finance & news about it make the world go ‘round, and thanks to Steve A. for passing along a new essay where Pope Francis calls for intensified regulation of the "sophisticated technologies" of financial markets. Private Mortgage Insurance News “The Community Home Lenders Association (CHLA) writes to ask FHFA to investigate the pricing practices of private mortgage insurers (PMIs) with respect to use of volume discounts and other proxies for this in the offering of mortgage insurance for Fannie...(read more)

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    Created: 5/18/2018 6:18:19 AM
  • Posted To: MND NewsWire

    In the face of continuing inventory shortages, declining consumer sentiment in favor of buying a home, and concern about the homeownership impacts of the 2017 tax cut bill, the National Association of Realtors® (NAR) has revised down, albeit only slightly, its forecast for home sales this year. Chief Economist Lawrence Yun told Realtors attending NAR's Legislative Meetings & Trade Expo that, after accelerating 3.8 percent in 2016, existing home sales rose only 1.1 percent to 5.5 million in 2017. He forecasts they will finish this year around 5.6 million, a gain of 1.8 percent. In his initial 2018 forecast last November Yun said he expected sales to increase by 3.7 percent to 5.67 million units. Looking further into the future, he sees 2019 sales totaling 5.7 million existing homes....(read more)

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    Created: 5/18/2018 6:09:19 AM
  • Posted To: MBS Commentary

    Today was the calmest of the past 3 days of craziness, although the higher-than-average volume suggests things are still happening behind the scenes. Specifically , that volume can be largely attributed to traders cashing in previous bets on higher rates. This is accomplished by buying bonds (to close out a bond transaction that was previously "sold short"). In other words, there was less selling and/or more buying today compared to other days because many of the sellers were cleaning up their positions. The net effect wasn't very beneficial as yields still managed to end the day at new cycle highs (3.115%). MBS did slightly better and managed to end the day unchanged. Economic data looked like it might have been interesting at first with Philly Fed coming in much higher than...(read more)

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    Created: 5/17/2018 2:40:13 PM
  • Posted To: Mortgage Rate Watch

    It's Thursday, which is when Freddie Mac's weekly Mortgage rate survey comes out. The survey is the most widely quoted source material for major media outlets. As such, headlines abound about the "highest mortgage rates in 7 years." Of course, we've already discussed these 7 year highs earlier in the week when they actually occurred. And I even pointed out that Freddie would almost certainly be following suit in yesterday's post . But enough about me. How about those rates?! Well, they're pretty high , but as far as individual days go, today saw the lowest amount of carnage compared to Tuesday and Wednesday. The bad news is that reality is a bit worse than Freddie Mac's weekly numbers. Instead of 4.625% (the nearest common mortgage rate to the Freddie survey), the most prevalent quote for top...(read more)

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    Created: 5/17/2018 1:48:00 PM
  • Posted To: MBS Commentary

    It's been pretty doomy and gloomy around here so far this week, what with the spike to the highest 10yr yields in nearly 7 years and what not. So how about an op-ed counterpoint to all the gloom? I'll go ahead and write it myself, since you have to have mild MPD to be an objective bond market commentator anyway. But in the interest of stay objective, I will bring in an opposing personality to write a quick counterpoint. Here goes: Bond Bullish Matt: Remember a few weeks (or maybe it was more than month?) ago when I talked about the 25 and 50 day moving averages? As you know, I don't much care for moving averages as timely indicators of bond market shifts (largely because they suck for those purposes... seriously, don't use them in a reprice risk forecasting routine). But I do...(read more)

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    Created: 5/17/2018 7:39:22 AM
  • Posted To: Pipeline Press

    I don’t go anywhere without my sugar glider, including most of this week spent in Austin, TX with TMS . No, a sugar glider is not a risqué pet name for a body part, it is pretty much a flying possum. Okay, I don’t have a flying possum, but starting July 1 American Airlines is banning sugar gliders from being allowed onboard as service animals, along with goats, birds of prey, and hedgehogs. What is the world coming to when airports aren’t zoos? Disaster Updates The other night I knocked it out of the park when I came up with this gem during Scrabble: Pneumonoultramicroscopicsilicovolcanoconiosis. It is the longest word in the English language (46 letters). It means the lung disease caused by inhaling volcanic ash. Okay, I didn’t come up with that one, but it is...(read more)

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    Created: 5/17/2018 6:45:26 AM
  • Posted To: MND NewsWire

    Two noted economists seem to be holding little hope that Congress will take up in any way changing the status quo of the government-sponsored enterprises (GSEs) before adjourning next January. However, they say it is an issue on the Trump Administration agenda and they expect the Executive Branch will step into the fray. In a paper published by the Urban Institute titled GSE Reform is Dead - Long Live GSE Reform , Jim Parrott and Mark Zandi ask, if Congress does fail to address GSE reform, what will the executive branch do with the opportunity? Parrot is a nonresident fellow at the Urban Institute. He owns Falling Creek Advisors, a financial institution consulting firm and previously served as White House senior advisor on the National Economic Council. Zandi is chief economist of Moody's Analytics...(read more)

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    Created: 5/17/2018 6:25:05 AM
  • Posted To: MND NewsWire

    The interest rates on loans that closed in April were the highest since Ellie Mae started tracking data in 2011. According to the company's Origination Insight Report for April, the 30-year fixed rate for loans averaged 4.79 percent, up from 4.69 percent in March. Not unrelated to that rapid rise is the increased domination of purchase loans. Their percentage share increased 4 percentage points to 66 percent in April as refinancing shrunk to a 34 percent share. The percentage of Adjustable Rate Mortgages also increased, claiming the highest share of total loans, 6.6 percent, since June 2014. The declining numbers of refinances affected all lenders. FHA refinances fell from 23 percent in March to 22 percent in April. Conventional refinances dropped from 43 percent to 38 percent, and VA refinances...(read more)

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    Created: 5/17/2018 6:06:43 AM
  • Posted To: MBS Commentary

    If you happened to be out of the office yesterday, 10yr yields finally broke out of their most recent consolidation pattern and moved quickly to the highest levels in just under 7 years. Big spikes can sometimes be isolated. That means today could have seen a decent move back in the other direction. For a few fleeting moments this morning, that possibility remained on the table, but by mid-morning, it was gone. Bonds taunted optimists one more time with a bounce right at yesterday's high yields. In other words, it looked like we had a chance to form a 2-day double top at 3.0945%. But the afternoon hours crushed that little dream with a linear move up to 3.1038% by the close. Specific motivations were in short supply. One of the only cogent arguments in the bond trading community was that...(read more)

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    Created: 5/16/2018 3:39:53 PM
  • Posted To: Mortgage Rate Watch

    Mortgage rates spiked to 7-year highs yesterday. While today's move was nowhere near the same size, it was in the same unfriendly direction. That makes it the worst day for mortgage rates since the middle of 2011. Whether "the middle" refers to May or July depends upon whom you ask. In terms of individual days, a few were slightly higher in July on a day or two (depends on the lender). But in terms of weekly rate surveys, we'll need to go back to May 2011, to see Freddie Mac report something higher than 4.58%--the matching highs from 3 weeks ago and August 2013--at least until tomorrow. Even with Freddie's typical margin of error, it's highly likely that 4.58% is a line that will be crossed in tomorrow morning's data. Meanwhile, back in the real world , most prospective mortgage borrowers would...(read more)

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    Created: 5/16/2018 2:26:00 PM
  • Posted To: MND NewsWire

    Improving loan performance doesn't make headlines any longer, but worth noting that the improvement is still good news. The Mortgage Bankers Association (MBA) says the first quarter of 2018 saw even more progress in reducing delinquencies, improvement noted across all categories of distress. The MBA's National Delinquency Survey shows a 54-basis point (bp) reduction in the overall delinquency rate compared to the fourth quarter of 2018 to a seasonally adjusted annual rate of 4.63 percent. It is also an 8-bps decline since the first quarter of last year. Delinquencies were down in all stages on a quarter-over-quarter basis. The 30-day bucket dropped 27 bps while the 60-day and 90-day delinquency buckets retreated 9 and 18 basis points respectively. The delinquency rate does not include loans...(read more)

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    Created: 5/16/2018 9:51:22 AM
  • Posted To: MND NewsWire

    The leading construction indicators performed generally as analysts had predicted in April, stepping back from March's solid increases in both permits and housing starts. Both sectors had been driven that month by surges in multi-family construction. The U.S. Census Bureau and the Department of Housing and Urban Development say that permits for private residential construction dipped by 1.8 percent in April to a seasonally adjusted annual rate of 1,352,000. The March figure, originally estimated at 1,354,000 units, was revised up to 1,377,000. The April estimate was 7.7 percent higher than that of April 2017. The month's results landed mid-range among forecasts from analysts polled by Econoday. They had been looking for numbers ranging from 1,325,000 to 1,370,000 units. Their consensus was...(read more)

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    Created: 5/16/2018 7:52:01 AM
  • Posted To: MBS Commentary

    Today is starting out with just a hint of green on the screens. While that's certainly much better than the alternative (some historical examples see multiple days of yesterday's level of selling), it's still really far from great , and nowhere near the triumphant bounce back that would be in line with our highest hopes. Simply put, without yesterday, the yields at which we are starting the day would still be the worst in nearly 7 years. We're not out of the woods, and we won't even begin to be able to entertain that notion without a break back below the previous highs of 3.04%. From there, 2.95% remains an important line in the sand as far as suggesting a broader recovery. Yields aside, technical indicators aren't incredibly supportive either. Short-term momentum is...(read more)

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    Created: 5/16/2018 6:30:29 AM
  • Posted To: MND NewsWire

    Mortgage activity slowed again last week. The Mortgage Bankers Association said its Market Composite Index, which measures the volume of mortgage loan applications, was down on a seasonally adjusted basis by 2.7 percent during the week ended May 11 compared to a week earlier. It was the fourth consecutive week the composite lost ground. The index was down 3.0 percent on an unadjusted basis. Both the adjusted and unadjusted Purchase Indices fell 2 percent. The unadjusted index remained 4.0 percent higher than during the same week in 2017. Refi Index vs 30yr Fixed Purchase Index vs 30yr Fixed Refinancing volume declined 4.0 percent to its lowest level since August 2008 , while the share of total applications that were for refinancing was 35.9 percent, also the lowest since August 2008. During...(read more)

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    Created: 5/16/2018 6:18:10 AM
  • Posted To: Pipeline Press

    What does a chief operating officer do, and how much do they make? For builders, the role is vague but is often the #2 person at the company. COO comp, however, for publicly-held builders is well documented. And they make some decent coin . MI News For those dealing with private MI (versus FHA & VA insurance), the mortgage insurance buzzword is “granularity.” In general, the companies believe the market would move to a more granular risk-based approach, which allows for better risk-selection and portfolio optimization. Catch the wave! Monoline Mis are Radian, MGIC, Essent, and National MI. Throw in Arch and Genworth and you have the heavy weights. The group that most of the private mortgage insurance companies belong to (USMI) has continuously called for the FHFA to be much...(read more)

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    Created: 5/16/2018 6:10:41 AM
  • Posted To: MBS Commentary

    July 8, 2011. That's how far you'd have to go back to see higher 10yr yields than we saw today. At their worst, they were at 3.0945% . At the close, it doesn't look like they'll be much better (currently trading in the 3.07+ range). Up until today, the high had been 3.04%, both 3 weeks ago and on Jan 2, 2014. When rates spike to the same high level that many years apart, it only reinforces the technical significance of that level. Thus, any break above 3.04% was likely to result in a significant amount of follow-through, and that's really what today was all about. It only took moderate weakness overnight to get bonds within striking distance. From there, an as-expected Retail Sales report did the rest of the trick. But why did we get hurt so bad if Retail Sales was merely...(read more)

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    Created: 5/15/2018 2:06:04 PM
  • Posted To: Mortgage Rate Watch

    Mortgage rates spiked in a big way today, bringing some lenders to the highest levels in nearly 7 years (you'd need to go back to July 2011 to see worse). That heavy-hitting headline is largely due to the fact that rates were already fairly close to 7-year highs, although today did cover quite a bit more distance than other recent "bad days." In fact, today covered more ground BECAUSE we were so close to those highs. This has to do with trading strategies that are based on math and momentum. The high rates from 3 weeks ago were the same as the high rates seen in 2013/2014. That reinforced a magic line in the sand that--if crossed--was likely to result in extra momentum moving through to the other side. True to the formula, today was the first official break of those 2013/2014 highs in terms...(read more)

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    Created: 5/15/2018 1:02:00 PM
  • Posted To: MND NewsWire

    The National Association of Home Builders (NAHB) and Wells Fargo said on Tuesday that builder confidence in the new home market ticked up two points on their Housing Market Index (HMII). The May reading was 70, the fourth time this year the index has been at or above that point. While May's number reversed a three-month decline , the level for April was revised down from. 69 to 68. "The solid May report shows that builders are buoyed by growing consumer demand for single-family homes," said NAHB Chairman Randy Noel. "However, the record-high cost of lumber is hurting builders' bottom lines and making it more difficult to produce competitively priced houses for newcomers to the market." The index is derived from a monthly survey that NAHB conducts among its new home builder members. They are...(read more)

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    Created: 5/15/2018 7:37:35 AM
  • Posted To: MBS Commentary

    I hate clickbait with a passion. Today's title might sound like clickbait. Do I really expect you to believe that there have only been 4 days like today since the 1980's when it comes to bond markets? Actually , yes... But I suppose if you want to be picky, you could say these are really 4 separate "instances" where bonds have revisited this ceiling. Some of them--including this one--aren't perfectly narrowed down to a single day. Even so, if we had to decide which day did the most to cross the upper boundary of the trend, it's definitely today. So what does this all mean and why is it happening? I think the concepts from this commentary post are relevant (and will continue to be: Why This Time is Different . The bottom line is that the writing on the wall has been...(read more)

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    Created: 5/15/2018 6:51:14 AM
  • Posted To: Pipeline Press

    Legal eagles out there are buzzing about PHH deciding not to appeal the U.S. Court of Appeals for D.C.’s January decision in its CFPB challenge. Recall that four months ago the U.S. Court of Appeals for D.C. Circuit ruled en banc in favor of PHH’s RESPA claims, but rejected its CFPB constitutionality claims. With neither PHH nor the CFPB filing a petition for certiorari, the PHH case will not serve as a vehicle for Supreme Court review of the CFPB’s constitutionality. (Assuming that the CFPB is still called the CFPB), it released its regulatory agenda last week. In other legal/regulatory news, Nationstar Mortgage agreed to return of inspection fees in a $1 million settlement with Maryland. Products for LO's and Lenders Mortgage Speaker and New York Times Bestselling Author...(read more)

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    Created: 5/15/2018 6:12:19 AM
  • Posted To: MBS Commentary

    Low volume and lighter-than-normal liquidity left US bond markets more impressionable than normal today. Or perhaps it IS normal given that it's a data-free Monday in the middle of May and the day after Mother's Day. Those details would logically keep a few extra traders out of the office. Fewer traders means each trader accounts for a bigger-than-normal piece of the pie. Thus, light liquidity can increase volatility if said traders are trying to get somewhere in terms of trading levels. That wasn't necessarily the case today, but bonds were nonetheless influenced more than they otherwise might have been by some central banker comments and by bond issuance. The central bank in question is European this time around, as ECB's Villeroy talked hawkishly about how the ECB would ultimately...(read more)

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    Created: 5/14/2018 1:29:53 PM
  • Posted To: Mortgage Rate Watch

    Mortgage rates were sideways to slightly higher today, and that's actually a strong showing considering what transpired in underlying bond markets. In fact, I'd wager tomorrow morning's rate sheets will be noticeably weaker if bonds are anywhere near their current levels. This flow of logic raises a valid question: if bonds drive rates and if bonds say rates should be higher, then why aren't they higher already? The answer is fairly simple: mortgage lenders put out one rate sheet per day unless market conditions force them to change. Friday's rate sheets were arguably a bit worse than they should have been, based on bond levels. This allowed this morning's rate sheets to be a bit better than they otherwise might have been. Finally, bonds' deterioration throughout the day has been gradual enough...(read more)

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    Created: 5/14/2018 1:00:00 PM