Mortgage News Daily

Posted To: MBS Commentary

I was going to leave Tennyson out of the headline and bask in the alliterative glory of an unprecedented 5T title, but I figured you should know there's something wacky and interesting here in case you're into that sort of thing. If you're not, bonds rallied a lot after more crazy trade war drama, but MBS can't hang. The end. For everyone else, read on. If you're not familiar with Charge of the Light Brigade, the memorable opening line is "Half a League, half a league." This was parodied in a Monty Python's Flying Circus episode dedicated to ants (don't overthink it). Ants are smaller than people, so at a poetry reading of Charge of the Ant Brigade, the opening line was "Half an inch, half an inch." If mortgage rates were a light brigade at some...(read more)

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8/23/2019 4:09:09 PM

Posted To: Mortgage Rate Watch

Mortgage rates were noticeably higher through yesterday afternoon as the bond market had generally been bouncing back from the more extreme levels achieved last week. Markets approached today's Jackson Hole symposium with open minds as to the potential outcomes from Fed Chair Powell's much-anticipated speech. But even before that speech, China announced tariffs on US goods. And shortly after Powell's speech, Trump's trade-related tweets rocked the market again. Between China and Trump, Powell didn't stand a chance . This is a market fixated on the long-term potential fallout for the real economy based on an escalating trade war. Traders give the Federal Reserve a tremendous amount of respect as a market mover, but ultimately, the Fed's role only amounts to a fine-tuning adjustment to the core...(read more)

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8/23/2019 3:33:00 PM

Posted To: MND NewsWire

With the huge Millennial generation finally buying houses, the National Association of Home Builders has taken a deep dive into their various preferences for where and how they are going to live. Last year it conducted the fourth in a series of buyer preference surveys, adding to data collected in 2007, 2012, and 2015. A report by Paul Emrath analyzes those choices, how they differ across age groups and changed as those groups have aged. Some of the survey's findings specific to Millennials, which they define as those currently 23 to 39 years of age, is that they prefer to buy new homes built for sale rather than those that are custom built and, while most prefer to buy in the suburbs there is an increasing desire to live in central cities. Their preferences include a set of amenities such...(read more)

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8/23/2019 11:16:19 AM

Posted To: MND NewsWire

The U.S. Census Bureau and the Department of Housing and Urban Development said sales of newly constructed homes fell 12.8 percent in July to a seasonally adjusted annual rate of 635,000 units. Forecasts pinned that number at 645k. While missing the mark by 10,000 units and a 12.8 percent drop sound fairly significant, context is hugely important in this case. The 635k number constitutes a 4.3 percent improvement from the same month last year. But this data is prone to heavy revisions, and that's where the story gets better for the housing market this month. July's 635k may or may not be revised. What we do know is that June's number was revised in rather grand fashion--nearly 14 percent higher than the initial reading. With that, June was 20.9% higher than May, and logged an annual pace of...(read more)

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8/23/2019 8:56:52 AM

Posted To: MBS Commentary

In the day just passed, bond markets weakened in the overnight session and then held mostly steady during the domestic hours. The most notable attempt to change that was seen after the exceptionally weak Markit PMI data which showed the weakest manufacturing and composite numbers since 2009. Bonds don't have a rich history of reacting to Markit PMIs (we've always preferred ISM numbers in the US), but that has been changing in recent years. The volume and momentum behind yesterday's reaction confirmed that (quick, high-volume, logical rally). But the buyers only took yields so far before we found ourselves right back where we started. Ultimately, 1.62% support held (our nearest major ceiling), despite a case to be made for an upwardly-sloped trend channel seen in the chart below...(read more)

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8/23/2019 7:14:35 AM

Posted To: Pipeline Press

Japan's government bonds could soon join Germany's in having negative yields on all maturities. Japanese debt has gone negative out to 15 years, and buyers are turning to 30- and 40-year bonds to get positive yields. Falling bond yields and minimal interest rates are prompting European banks to consider the unprecedented step of offering home loans at negative interest , which would effectively pay customers for taking them while charging more on savings deposits. Denmark's Jyske Bank is offering -0.5% 10-year loans, and others might follow. Fortunately the economy in the United States is stronger, and doing much better, than the economies in other countries . In this country, you know that if Reuters is writing about increased MSAs and joint ventures , and calling them “cozy,”...(read more)

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8/23/2019 7:01:25 AM

Posted To: MBS Commentary

Today's most prominent trade was the reaction to the 9:45am Markit PMI data. Several of the metrics were at their weakest levels since 2009. The composite PMI was the lowest since record keeping began. That means that the services sector is starting to sing a similar tune to the already damaged manufacturing sector--at least if we're to take Markit's word for it. Of course, it would require additional confirmation to become intensely troubling. It's notable then, that bonds only rallied a few bps into positive territory before turning around and heading back to slightly weaker levels on the day. While this is consistent with the "correction" narrative that we've been discussing this week, it wouldn't have been crazy to expect a bit more strength in bonds. The...(read more)

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8/22/2019 2:18:40 PM

Posted To: Mortgage Rate Watch

Mortgage rates managed to hold relatively steady today after moving higher at their fastest pace in over a week yesterday. Incidentally, they also hit their highest levels in more than a week as well. In the bigger picture, the changes have been relatively small. The underlying bond market is catching its breath after an impressive surge toward lower rates throughout August. Some market participants think the next noticeable wave of momentum will begin tomorrow after Fed Chair Powell speaks at the annual Jackson Hole symposium. Like many potentially important communications from the Fed, this one has plenty of POTENTIAL to cause a stir, but is by no means guaranteed to do so. If it does, the risks are tilted toward rising rates as opposed to a quick return to recent lows. Importantly though...(read more)

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8/22/2019 1:57:00 PM

Posted To: MND NewsWire

Sources are telling Bloomberg that a report on the White House's plan to release Fannie Mae and Freddie Mac (the GSEs) from their 11-year long conservatorship has landed on the desks of several agencies and is also in the hands of Lawrence Kudlow, head of the National Economic Council. Bloomberg staff say this is a sign the report is getting closer to being released publicly. The two mortgage giants were placed in conservatorship with the Federal Housing Finance Agency (FHFA) in August 2008 after they incurred large losses through mortgage defaults during the housing crisis. Over the next four years they each drew substantial operating funds from the Treasury, but both returned to profitability in 2013 and have earned billions of dollars since. All of their profits except for a relatively small...(read more)

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8/22/2019 12:42:02 PM

Posted To: Pipeline Press

Thank you to everyone who wrote yesterday correcting me that Hawai’i’s 1959 statehood is 60 years old and not 50. I know it’s not the case, but sometimes it seems like admitting Hawai’i was the last thing Congress agreed on. In these days of gridlock, most members of Congress exhibit a sort of learned helplessness, waiting for someone else to come up with an idea so that they can come out against it. Maybe those in Congress should view their constituents as their customers. In lending, when are we going to reach the point where lenders will bid on giving a customer a mortgage after viewing all the credit and property information on some kind of secure portal? Like, “Here I am, and the property I want to buy. Lenders, give me a rate and price!” Dealing with...(read more)

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8/22/2019 7:01:01 AM

Posted To: MBS Commentary

In the day just passed, bonds digested and reacted to the minutes from the latest Fed meeting (from late July). Given that the Fed cut rates at that meeting and that many speakers have made themselves clear, there wasn't much left to be gleaned from the minutes. Still, there were takeaways for both bond buyers and sellers. Buyers were a bit more keen right out of the gate, but sellers controlled the afternoon as the most notable feature of the minutes was an absence of firm commitment to additional rate cuts. In the day ahead, bonds will get a chance to test their mettle against an important overhead ceiling at 1.62% in 10yr Treasuries. Granted, MBS (which we care about most) haven't been following Treasuries in lock-step, but the latter has been and will continue to be the most relevant...(read more)

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8/22/2019 6:52:09 AM

Posted To: MND NewsWire

There was a dramatic drop in the average note rate for loans originated in July and the refi share of those originations rose significantly. The July Origination Insight Report from Ellie Mae shows a seventh consecutive monthly drop in the 30-year note rate on closed loans from 4.40 percent in June to 4.18 percent in July. Refinancing responded, the share of those loans jumped to 38 percent of all loans from 31 percent the previous month, driving the purchase share to 62 percent from 69 percent. The higher refinance share applied to all product types . The FHA share rose 6 percentage points to 24 percent, refinances accounted for a 42 percent share of conventional loans, up from 32 percent, and refinancing made up 31 percent of VA loans, a 7-point increase. Closing rates continued to rise to...(read more)

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8/22/2019 6:41:56 AM

Posted To: MND NewsWire

Black Knight said on Thursday that the national delinquency rate fell back by 7.27 percent in July , erasing last month's increase that was caused in party by the calendar. The new rate, 3.46 percent of all active mortgages, is the lowest of any July in the company's records that date back to 2000. That information was included in Black Knight's "first look" at July's loan performance metrics most of which show continuing improvement in mortgage loan delinquencies. The number of mortgages that were 30 or more days past due during the month, excluding those in foreclosure, was 1.8 million, a decrease of 143,000 since June. The end of that month fell on a Sunday which Black Knight says typically causes a spike in delinquencies as late arriving payments don't get posted. The number of delinquencies...(read more)

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8/22/2019 6:13:59 AM

Posted To: MBS Commentary

Today brought the (not very) much-anticipated FOMC Minutes--a more detailed account of the conversation that transpired at the end of July when the Fed announced its rate cut. As expected, some at the Fed wanted to cut more. Some wanted to cut less. The consensus was that it was a mid-cycle rate adjustment that left room for the Fed to hike again or cut again depending upon how conditions evolve. This was perhaps somewhat less upbeat than some market participants may have hoped, but not so much so that we should credit the Fed as a market mover today. I'm more inclined to give the Fed some credit for nudging rate expectations microscopically higher and give the consolidation range credit for turning away the post-Fed rally in 10yr yields. To be clear, this is exactly in line with my pre...(read more)

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8/21/2019 3:33:50 PM

Posted To: Mortgage Rate Watch

Mortgage rates moved higher today, and it had nothing to do with any of the day's events or news headlines. Quite simply put, the bond market (which dictates the rates that can offered by lenders) had already begun to weaken as of yesterday afternoon. Weakness continued overnight as global financial markets dialed back their demand for safe havens. In market terms, a safe haven is generally a lower rate of return with a higher guarantee of the return remaining stable. Fixed rate government bonds from financially solvent countries are a classic safe haven. And no matter what you've heard in the news, the US mortgage market is also squarely in the safe haven camp. The only major risk associated with mortgages as far as investors are concerned is how long the mortgage will last. That uncertainty...(read more)

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8/21/2019 2:58:00 PM

Posted To: MND NewsWire

Existing home sales returned to an upward track in July after dipping 1.7 percent in June. The National Association of Realtors® (NAR) said pre-owned single-family homes, townhomes, condominiums, and cooperative apartments sold at a seasonally adjusted annual rate of 5.42 million units during the month, a 2.5 percent increase from the 5.270-million-unit rate in June. The July sales were 0.6 percent higher than the 5.39 million pace set in July 2018, the first time this year that 2019 sales exceeded those a year earlier. Sales were toward the high end of the range of estimates from analysts polled by Econoday , 5.25 million to 5.50 million and beat the consensus estimate of 5.39 million units. Single-family homes sold at a seasonally adjusted rate of 4.84 million, a 2.8 percent increase...(read more)

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8/21/2019 9:19:49 AM

Posted To: MBS Commentary

In the day just passed, a modest uptrend in yields was "defeated" from a technical standpoint. Yields broke below a trend-line marking "higher lows" that began last Thursday afternoon and spent the rest of the day moving mostly sideways at stronger levels. Stocks were weaker but that didn't necessarily have a bearing on bond market strength. If there was cause for concern, it's that bonds didn't rally below the lows from August 16th (which in turn represented higher lows versus the previous day). In the day ahead, bonds will likely continue feeling out a consolidative range heading into this afternoon's FOMC Minutes. Keep in mind that the Minutes do not represent a new policy decision from the Fed, simply a more detailed account of the meeting that occurred...(read more)

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8/21/2019 8:14:44 AM

Posted To: Pipeline Press

Congratulations to Hawaii which became a state fifty years ago today. We’ve had plenty of economic cycles, small and large, in fifty years, although in general rates have been coming down since 1981. And we’ve had a flat or inverted U.S. yield curve for several months. Inverted yield curves don’t cause a recession: Two consecutive quarters of negative growth is the technical definition of a recession. Nine major economies have entered a recession or are on the verge of one, adding to fears the U.S. could see a downturn. The nine economies are Argentina, Brazil, Germany, Italy, Mexico, Russia, Singapore, South Korea and the UK. Bank of America CEO Brian Moynihan says recession risks in the US are low despite warning signals from bond markets, which he contends are mostly driven...(read more)

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8/21/2019 6:43:24 AM

Posted To: MND NewsWire

Residential construction has been famously slow for several years and some new analysis of Census data by the National Association of Home Builders (NAHB) shows that the lack of robustness is shared in the custom home sector. In an Eye-on-Housing blog article, Robert Dietz, NAHB Senior Vice President and Chief Economist says custom home building has been effectively flat over recent quarters. In the second quarter of this year the Census Bureau recorded a total of 49,000 custom home starts, a tiny decline from 50,000 in the second quarter of 2018. Dietz says the last four quarters, custom housing starts totaled 169,000, down 1.7 percent compared to the prior four quarters (172,000). Note that this definition of custom home building does not include homes intended for sale, so the analysis uses...(read more)

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8/21/2019 6:16:36 AM

Posted To: MND NewsWire

The volume of mortgage applications continued to be shored up by refinancing during the week ended August 16, but overall activity was down. The Mortgage Bankers Association (MBA) said its Market Composite Index slipped 0.9 percent on a seasonally adjusted basis, perhaps not surprising after it soared 21.7 percent the previous week. On an unadjusted basis the Index fell by 2.0 percent following a 27 percent gain during the week ended August 9. The Refinance Index managed a slight 0.4 percent gain from the previous week and was 180 percent higher than the same week one year ago . That index had increased by a cumulative 42 percent over the previous two weeks. The refinance share of mortgage activity increased to 62.7 percent of total applications from 61.4 percent a week earlier. The seasonally...(read more)

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8/21/2019 6:11:54 AM