Posted To: Pipeline Press

Yesterday I decided to put thoughts of SRP values plummeting, and EPO & EPD penalties being enforced, out of my mind and get some exercise. My cat Myrtle had a mix of curiosity and disdain while watching me do my the 90-second yoga class on YouTube, which is about all my body can handle. “Come into the moment! Feel the energy flow from your ‘sit bones’ into the earth. Feel your heartbeat throughout your spine!” After the 90 seconds Myrtle lost interest and had begun to lick “herself” with ease, and I was ready to go back to staring at my computer for 14 hours day like I am now. I figure if I add 10 seconds a day, by the time we’re released from captivity I’ll be up to doing… seven hours of yoga per day. Namaste! Speaking of animals...(read more)

4/2/2020 8:30:57 AM

Posted To: MND NewsWire

Nationwide outlays for construction slipped slightly in February. The Census Bureau said public and private sources spent at a seasonally adjusted annual rate of $1.367 trillion on all forms of construction, down 1.3 percent from the rate in January. This was 6.0 percent more than was expended in February 2019. The total spent during the month on a non-adjusted basis was $96.999 billion, up slightly from the $96.462 billion spent in January. For the year-to-date (YTD) spending totals $193.460 billion, an increase of 8.2 percent from the first two months of 2019. Privately funded projects were funded at a seasonally adjusted annual rate of $1.026 trillion, down from $1.039 trillion in January, a 1.2 percent decline. That spending rate, however, is 5.6 percent higher than the rate in February...(read more)

4/1/2020 10:46:22 AM

Posted To: MBS Commentary

This morning's ADP Employment showed a loss of 27k jobs. Forecasts called for a loss of 150k jobs compared to last month's report that was strongly positive at +183k. Normally, when ADP or NFP job counts beat their forecast by more than 100k jobs, it's enough to prompt at least a little bit of bond market weakness (i.e. higher rates), even in the recent era where jobs counts weren't that big of a deal. And it's a big deal for me to say ADP/NFP are not a big deal because they have historically been very big deals. In fact, there is no bigger deal in the economic data world than NFP (the non-farm payrolls component of the big jobs report). If it hasn't been a big deal for the past however many years, it's because the labor market has been so stable and strong . Almost...(read more)

4/1/2020 8:43:48 AM

Posted To: Pipeline Press

“I hadn’t planned on giving up quite this much for lent.” So true. It is a different world than only a month ago. Of course rates are going to stay at these levels for a long time. But rate sheet prices are disconnected from MBS prices, which are disconnected from Treasury prices. Those of you who have subscribed to my commentary for more than a year know that I truly relish producing my April 1 edition. The April Fool’s Day Commentary has fooled many a senior executive and regulator, and the stories have brought many chuckles to readers. And although I inject some humor into my daily commentary, and will continue to do so, I didn’t have the heart to produce a totally farcical commentary this year, especially after spending 34 minutes of my “work at home”...(read more)

4/1/2020 8:19:41 AM

Posted To: MND NewsWire

In an earlier article , (before more pressing issues shelved the topic) we summarized highlights from a recent New York Times Magazine article about the ownership of a large share of the nation's single-family rental stock by institutional investors. Part 1 recapped how private equity funds moved to purchase distressed single-family homes during the housing crises, turning it into rental stock. Their property management has been uneven, and tenants are suffering from significant financial abuses. The author, Francesca Mari, who tells much of the story through the eyes of Chad who is now renting the home he used to own, says the extent of the financial repercussions from Wall Street's investment are not limited to the rapid rent increases and unfettered fees we pointed to in the first article...(read more)

4/1/2020 7:54:30 AM

Posted To: MND NewsWire

Well this was a surprise. In a week when unemployment claims soared to the highest level in probably ever and several large states went into a COVID-19 induced lockdown, the Mortgage Bankers Association (MBA) announced a significant increase in mortgage application volume. MBA's Market Composite Index, a measure of that volume, which had dropped like a rock (-29.4 percent) during the week ended March 20, bounced back by 15.3 percent on a seasonally adjusted basis and 15.0 percent unadjusted during the week ended March 27. While application volume was up, purchase mortgage applications fell, down 11 percent from the previous week on an adjusted basis and 10 percent before adjustment. The unadjusted index was 24 percent below the same week in 2019. It was the largest drop in the Purchase Index...(read more)

4/1/2020 7:27:42 AM

Posted To: Mortgage Rate Watch

There are too many counter-intuitive and frustrating developments in the mortgage market to comprehend all at one time, let alone discuss. That's not a cop-out as much as it is a favor I'm doing for you. If we tried to cover all of the nonsensical ground right here, this would become yet another wall of text in this era where they're all too common. So I'll try to make this pithy and interesting. The bottom line is that mortgage rates are all over the place, depending on the lender and the loan program. Lender rates on the same program are farther apart than they've ever been. Day-to-day and intraday movements are huge and seemingly random. Whereas mortgage rates typically take a vast majority of their guidance from the trading levels in the mortgage bond market (95%+), the correlation is less...(read more)

3/31/2020 4:30:00 PM

Posted To: MBS Commentary

CURRENT FED MBS BUYING SCHEDULE AND PURCHASE LOOKUP TOOL I'm changing up this Q&A to make it shorter, denser, and better. If it's too pithy for you, revisit the previous version of this commentary HERE and take time to internalize the bigger picture). Bullet points that answer the most common questions I receive: WHAT IS THE FED BUYING? Fannie, Freddie, and Ginnie MBS, 2.5-4.5 coupons WHY? Because you're not (buying MBS), and neither is anyone else (relatively). If no one is buying, no one can lend. Fed is facilitating liquidity in credit markets. Juicing MBS prices is a byproduct, not the primary goal. NOT BUYING: 2.0 coupons START DATE: March 16th, 2020 WHEN: Every biz day since then. They publish a buying schedule ahead of time and results are posted immediately (LINKED AT...(read more)

3/31/2020 1:27:15 PM

Posted To: MND NewsWire

Home prices entered 2020 still on the uptick according to the S&P CoreLogic Case-Shiller indices. The U.S. National Home Price Index, which covers all nine U.S. census divisions, reported a 3.9 percent annual gain in January. The year-over-year increase in December was 3.7 percent. There was no monthly change in the non-seasonally adjusted (NSA) index from December to January, but after adjustment the National Index was up 0.5 percent. The 10-City Composite Index posted a 2.6 percent annual gain, up from 2.3 percent in December and the 20-City Composite rose 3.1 percent, a 0.3-point greater increase than the month before. The 10-City measured eked out 0.1 percent monthly growth while the 20-City was flat on a non-adjusted basis. Both indices moved 0.3 percent higher after adjustment. Ten...(read more)

3/31/2020 9:58:40 AM

Posted To: MBS Commentary

I don't know much about porridge. I'm not even sure I've ever eaten it. I do know one thing about it though: the temperature has to be "just right" from what I've heard. Markets--especially bond markets--are very much like Goldilocks when they're responding to a major shock and quickly adjusting to a new reality. The initial reaction to a a shock often sees a quick investigation of the hottest bowl of porridge. That is to say, the world is ending and people can't buy bonds fast enough. Yields fall precipitously, and MBS prices rise as much as they can in the context of their convexity-related limitations. Then a new reality sets in that places a premium on liquidity and cash positions. It's exacerbated by a technical correction leading back from the just...(read more)

3/31/2020 8:42:55 AM

Posted To: Pipeline Press

Remember when all we had to worry about was Amazon taking over mortgage banking? The sun hits different here in March – see joke at bottom. (Thirty days hath September, April, June, and November. All the rest have thirty-one except March which has 8,000.) Unintended consequences: It’s a fascinating case study, among millions of others, that the Federal Reserve stepped in to buy Agency MBS in an attempt to create price stability but induced a huge rally in MBS (not rate sheets!), causing even more margin calls for lenders as their positions used for hedging increase in price and their mark-to-markets deteriorate. Talk is that the Fed is scaling MBS purchases back, helping lenders reduce renegotiations, increase pull through, and hopefully cause less of a price rally thus reducing...(read more)

3/31/2020 8:03:00 AM

Posted To: MND NewsWire

Among responses to the job losses and reduced income already emerging from the COVID-19 pandemic has been a moratorium on foreclosures and a requirement, coming from many quarters, that servicers offer mortgage borrowers an extended period of forbearance from their mortgage payments. This has raised an issue regarding the liquidity of those servicers. Late last week Treasury Secretary Steven T. Mnuchin announced formation of a task force to focus on mortgage liquidity problems and has given them until March 30 to present their recommendation. The Mortgage Bankers Association (MBA) outlined the servicers' potential forbearance problem in a March 20 letter to Mnuchin and Federal Reserve Chairman Jerome H. Powell. Under contracts with investors who purchase mortgage-backed securities (MBS), servicers...(read more)

3/30/2020 10:29:05 AM

Posted To: MND NewsWire

Pending home sales, which jumped 5.2 percent in January, did not retrench as expected last month. The National Association of Realtors® (NAR) said its Pending Home Sales Index (PHSI) grew 2.4 percent to a reading of 111.5 in February. The PHSI is a forward-looking indicator based on signed contracts for purchase of existing single-family homes, townhomes, condos, and cooperative apartments. The February index level is 9.4 percent higher than a year earlier. After its unusually large gain in January, the index was expected to move lower. Analysts polled by Econoday had a very wide range of forecasts, from -2.5 percent to 5.0 percent with a consensus for a 1.6 percent decline. "February's pending sales figures show the housing market had been very healthy prior to the coronavirus-induced...(read more)

3/30/2020 9:41:53 AM

Posted To: Pipeline Press

After a long time in captivity with the same people, one may become, uh, less than enamored with their pals. “12 th day of self-isolation and it’s like Vegas in my house. We’re losing money by the minute, cocktails are acceptable at any hour, and nobody knows that time it is.” How’d you like to have a huge investment in WeWork? Word has gone out to dedicate your computer’s unused computing capacity to discovering more about the virus . There are still shortages, perceived or real, and I received this note from Rich B. in Salt Lake City: “Our neighbor’s tract home got TP’ed last night and now it’s listed on Zillow for $12.1 million.” One wonders if the U.S. Government, and its related entities, will ever have a shortage of money...(read more)

3/30/2020 7:50:23 AM

Posted To: MBS Commentary

Here is this week's MBS buying calendar . It differs from last week's in that there is now only $40bln of purchases per day rather than $50bln. So does that mean MBS prices are doomed? Not even a little bit. In fact, the number is still so high as to defy logic. After all, if we add up all the Fed's accepted MBS bids this week, the grand total is roughly $183,307,000,000 or about $36.66 bln per day. Given that the Fed just drove the price of UMBS 2.5 coupons up to 104-15 by Friday afternoon--a delta of more than 6 points from the lows seen at in the previous week--one might expect them to modulate the throttle a bit more. But to the Fed's way of thinking, they're doing their job by controlling volatility and making sure every last seller has a buyer. The margin call side...(read more)

3/29/2020 11:19:57 PM

Posted To: MBS Commentary

I devoted years of my life championing the cause of educating mortgage originators on the realities of MBS price movement. The most compelling call to action came during the meltdown where MBS told a story that wasn't being told by Treasuries. Everything changed after the Fed stepped in with a giant syringe full of bond volatility's favorite sedative: QE. The final straw was QE3 which specifically targeted MBS buying in September 2012. At the time, and ever since, I declared that to be proof positive that the Fed "gets it" with respect to mortgage performance vs benchmark rates and that it was proof positive that they wouldn't let spreads slide away into oblivion ever again. The end of 2012 was the last time I would need to go into much detail to explain MBS vs Treasuries...(read more)

3/27/2020 9:50:40 AM

Posted To: Pipeline Press

While in captivity it is important to have good communication . (Early anecdotal chatter indicates that the remote workforce has signs of improved productivity!) In the Northwest, Banner Bank’s mortgage group celebrated working from home with a short YouTube video of everyone’s home office (one is in the garage – bumper to bumper every day!) Thank you to Kris van Beever who sent along these cybersecurity tips for working from home to keep communication safe. Communicating with politicians in this crisis is critical. “Rob, do politicians understand that one year’s worth of forbearance would basically put every lender who services loans out of business?” I dunno. At this point the MBA, state, and industry organizations are working overtime on making sure they...(read more)

3/27/2020 8:33:42 AM

Posted To: MND NewsWire

Freddie Mac reported this week that its total mortgage portfolio increased at an annualized rate of 5.5 percent in February , up from a 4.3 percent gain in January. The portfolio balance at the end of the period was $2.350 trillion compared to $2.339 trillion at the end of January and $2.190 trillion a year earlier. The growth rate for the year to date is 4.9 percent. Purchases and Issuances totaled $46.054 billion and Sales were ($1.041) billion. The January numbers were $47.606 billion and ($.253) billion respectively. Single-family refinance loan purchase and guarantee volume was $23.800 billion in February compared to $25.800 billion in January and representing a 59 percent share of total single-family mortgage portfolio purchases and issuances compared to 57 percent the previous month...(read more)

3/27/2020 8:11:17 AM

Posted To: MBS Commentary

I will do my best to speak to both consumer and mortgage industry people on this topic. It affects everyone. With that in mind, the following is a list of questions that loan originators have been asking. Consumers might not be familiar with all the terms, but the rest of this article will speak to everyone. Why are so many non-QM lenders raising rates or disallowing new apps? Why can't I do cash-out non-QM or Jumbo right now? Or Non-Owner, high LTV, low FICO? Why are my FHA/VA rates suddenly terrible? Why am I suddenly seeing MASSIVE hits for certain FICO/LTV combinations? Why am I suddenly hearing more than I've heard since 2008 about lenders potentially being in trouble? Why are lenders changing rates MASSIVELY from day to day? Why are different lenders so far apart from one another...(read more)

3/26/2020 4:17:45 PM

Posted To: MND NewsWire

Flexibility seems to be the keyword as government agencies try to adjust to a lot of new realities. The Federal Housing Finance agency has already empowered the GSEs (Fannie Mae and Freddie Mac) to be flexible about obtaining appraisals, verifying borrower credit factors, and working with distressed borrowers. Now the Consumer Financial Protection Bureau (CFPB) says it is "providing needed flexibility to enable financial companies to work with customers in need as they respond to the COVID-19 pandemic." "As consumers seek temporary relief from lenders, the pandemic is impacting the operations of financial companies that are eager to help their customers during this unprecedented time," said CFPB Director Kathleen L. Kraninger. "Our actions today are temporary and targeted to support consumers...(read more)

3/26/2020 11:50:00 AM