Posted To: Mortgage Rate Watch

Years from now when scientists examine mortgage rates in July 2020, they'd be forgiven for coming to the conclusion that rates only ever move lower. As we've learned in the first week of August, rates also rise. To be fair, there were a few days in July where more than a few lenders moved slightly higher in rate, but it really wasn't until this week that we arguably saw a shift in the broader trend--or at least warning signs about a potential shift. What does that mean, exactly? It might not mean much at all, depending on where we go from here. Over longer time horizons, it's entirely possible that rates return to recent record lows. This week's upward movement serves as more of a warning about complacency and about being ready to lock if you happen to have a loan in process. In that regard...(read more)

8/7/2020 5:24:00 PM

Posted To: MBS Commentary

More Defensive After Jobs Report, But Not Necessarily Because of it The jobs report was hard-pressed to live up to its historical market movement potential this morning, but it did its best to surprise markets. Bonds reacted momentarily but quickly traded in the opposite direction. The rest of the day brought other concerns, however, and the resulting market movement has risk-averse clients reconsidering their lock/float stance. Econ Data / Events 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th) Nonfarm Payrolls 1.763m vs 1.6m f'cast , 4.791m prev Unemployment Rate 10.2 vs 10.5 f'cast , 11.1 prev Market Movement Recap 08:45 AM Fairly small but very fast sell-off following strong NFP, but now very contained. Minimal weakness in Treasuries. MBS back into POSITIVE territory...(read more)

8/7/2020 2:01:43 PM

Posted To: MND NewsWire

Fannie Mae's Home Purchase Sentiment Index (HPSI) faltered a bit in July as it tried to recover from its 29.5-point aggregate plunge in March and April. The index, derived from six questions on the National Housing Survey (NHS), decreased 2.3 points in July to 74.2. Three of the components deceased from June levels, led by a significantly more pessimistic view of homebuying conditions. The HPSI is down 19.5 points from its July 2019 level. The percentage of respondents who say it is a good time to buy a home decreased from 61 percent to 53 percent, while the percentage who say it is a bad time to buy increased from 27 percent to 38 percent. As a result, the net share of Americans who say it is a good time to buy decreased 19 percentage points to 15 percent. That loss was offset slightly by...(read more)

8/7/2020 1:38:50 PM

Posted To: Pipeline Press

Let me get this straight. It’ll take a year or two for a cure for a virus that can be killed with hand sanitizer, soap, and hot water? COVID is driving our economy, driving headlines, driving working from home and managing employees working from home , and driving the behavior of residential lenders. Speaking of headlines, two Michigan lenders were in the headlines yesterday for two very different reasons. United Wholesale made news for having 50 confirmed virus cases . Rocket Companies, owner of Quicken Loans , made news for its Initial Public Offering and subsequent one-day price rally of 25 percent. Was the stock underpriced, or was the demand that strong? Time will tell. Lender Products and Services Are you ready for VA IRRRL and FHA Streamline refinance opportunities in this market...(read more)

8/7/2020 8:12:39 AM

Posted To: MND NewsWire

There was a significant decline in the number of active COVID-19 related forbearance plans over the past week, but that decrease did not necessarily mean homeowners were emerging from financial difficulties. Black Knight said its weekly survey found 101,000 fewer loans in forbearance, leaving just over 4 million or 7.5 percent of servicer portfolios in active plans, the smallest share since late April. Those loans represent $852 billion in unpaid principal. The company says that one reason behind the reduced number was the expiration of initial plans. It estimated that about a half million were set to expire at the end of July. An initial wave of 2.5 million expirations hit at the end of June. More than two-thirds of the plans that remain in forbearance have had their plans expanded, most for...(read more)

8/7/2020 7:30:58 AM

Posted To: MBS Commentary

No other piece of scheduled monthly economic data has a better track record of influencing the bond market than nonfarm payrolls. There are stretches of multiple consecutive months where it has arguably been responsible for setting the trading tone for the entire month. It began to lose its potency as a market mover when the labor market got "boring" in 2016-2019. Unemployment was so low and job creation was so steady that traders would have needed to see several successive months of surprising job losses before betting on anything other than a continuation of the bulletproof labor market. Then came covid, and the US economy lost more jobs more quickly than at any other time in history. Suddenly, the jobs report had a chance to be relevant again as it might serve as an indicator of...(read more)

8/7/2020 7:29:35 AM

Posted To: Mortgage Rate Watch

There are quite a few more new stories than normal about mortgage rates today. Most of them are wrong. This one is not, and it's pretty easy to see why. Freddie Mac releases its weekly mortgage rate survey every Thursday morning. The survey accepts responses from Monday through Wednesday, but based on a comparison of day-to-day rates versus the survey numbers, it would appear Monday's rates get most of the weight, Tuesday's slightly less, and Wednesday's almost none. In other words, the survey has historically compared Mon/Tue rates to Mon/Tue rates. That's not a problem if that was made more clear by the throng of journalists that cite the survey as the definitive word in week-over-week rate movement. As it stands, however, we have headlines unequivocally proclaiming mortgage rates are at...(read more)

8/6/2020 4:05:00 PM

Posted To: MBS Commentary

Bonds Generally Consolidating Ahead of Jobs Report MBS were higher today, but for the week as a whole, they've been flat (and right in line with last Friday's levels as of this afternoon). That doesn't seem like a coincidence based on tomorrow's jobs report, but it still might be! We just haven't seen enough evidence of the market's willingness to react to econ data recently. Econ Data / Events 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th) Jobless Claims 1.186m vs 1.415m f'cast, 1.435m prev Market Movement Recap 08:19 AM Modest gains in Asia and slightly better gains in Europe for bonds overnight. The strength generally correlated with stock market weakness. 10yr yields starting almost 3bps lower and 2.0 UMBS starting almost an eighth of a point...(read more)

8/6/2020 3:49:30 PM

Posted To: MND NewsWire

Foreign buyers cut back their investment in U.S. residential properties over the 12 months that ended in March. It was the second year-over-year decline. The National Association of Realtors® (NAR) annual survey among its members about their transactions with international clients found foreign buyers purchased $74 billion in existing U.S. homes from April 2019 through March 2020, a 5 percent decline from the same period a year earlier. The number of properties purchased dropped 16 percent to 154,000. Foreign buyers who were U.S. residents, either as recent immigrants or holding the appropriate visas, purchased $41 billion in residential real estate, down 8 percent from the prior period. Foreign buyers living abroad spent $33 billion, a 1 percent decrease. Those two types of international...(read more)

8/6/2020 10:43:54 AM

Posted To: MBS Commentary

Yesterday's bond market weakness prompted a conversation about the limits of the current rally. It went a little something like this (<----that's a link you can click). For the non-link-clickers out there, here's a recap: Bonds have been in a clearly-defined rally trend since June. Bonds lost ground at a moderately quick pace yesterday after hitting new record levels the previous day The MBS chart was the bigger concern, but the Treasury chart helped to put things in context The conclusion was that weaker days come with the territory and that if the broader trend was under serious threat, we'd need to see significantly more weakness for more than just one day So far today, the outlook described above (the one about yesterday being a nominal bounce in a bigger-picture rally...(read more)

8/6/2020 9:07:07 AM

Posted To: Pipeline Press

Originators and lenders are having a great summer from income and profitability perspectives. The thick margins are making managers look like champs, arguably covering up other issues that would normally be corrected. Rocket, the parent company of largest US mortgage provider, trimmed the amount of stock it is selling from $3.3 billion to $2 billion this morning, which is different than good companies continuing to trim waste and rewarding departments and employees who are focused on that, either financially or with fun. (I know of one successful lender in Michigan who has “Blossom the Unipig,” a mascot that is earned by various departments based on cost efficiency and therefore profitability actions.) One company that knows a thing or two about profitability is Apple Computer,...(read more)

8/6/2020 8:21:28 AM

Posted To: Mortgage Rate Watch

Mortgage rates cooled off today, rising for the first time since July 27th for the average lender. Between now and then we've seen a string of what have mostly been new record lows with top tier 30yr fixed offerings well under 3%. For more on what constitutes a "top tier scenario," check out yesterday's explainer . It's an interesting time for rates. We've seen record lows before, but we haven't seen this combination of staying power at those lows coupled with the expectation for additional improvements in the future. In other words, it was pretty logical for rates to drop quickly in response to covid-related realities and it would be pretty logical for rates to remain in this territory (or better) as long as those realities persist. Be careful with that logic though... While the Fed continues...(read more)

8/5/2020 4:18:00 PM

Posted To: MBS Commentary

Is The Rally Meeting Resistance or Just Consolidation? With modest overnight weakness and a small negative reaction to this morning's headlines (ADP and Treasury issuance), bonds may be encountering some more resistance on their journey toward lower yields and higher prices. Is this a meaningful signal or just incidental consolidation? Econ Data / Events 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th) ADP Employment 167k vs 1.500m f'cast , 4.314m prev ISM Services 58.1 vs 55.0 f'cast , 57.1 prev Market Movement Recap 08:37 AM 10yr yields aren't panicking, but they're up roughly 3.5bps on the day at .546 after a strong ADP revision and big increase to Treasury issuance. As expected, MBS are outperforming amid general bond market weakness with 2.0 coupons down...(read more)

8/5/2020 3:07:10 PM

Posted To: MND NewsWire

Home prices increased in June at the fastest pace in more than seven years. CoreLogic said its Home Price Index (HPI) rose 1.0 percent from May, the largest month-over-month gain since January 2013. The appreciation from April to May was 0.7 percent. Prices rose year-over-year by 4.9 percent compared to 4.1 percent in May. "Home price appreciation continues at a torrid pace reflecting fundamental strength in demand drivers and affordability," said Frank Martell, president and CEO of CoreLogic. "As we move forward, we expect these price increases to moderate over the next twelve months. Given the economic outlook, housing remains a bright spot for the foreseeable future." CoreLogic is still anticipating a COVID-19 induced downturn in prices over the next year, but it has substantially moderated...(read more)

8/5/2020 8:58:15 AM

Posted To: MBS Commentary

With modest overnight weakness and a small negative reaction to this morning's headlines (ADP and Treasury issuance), bonds may be encountering some more resistance on their journey toward lower yields and higher prices. Is this a meaningful signal or just incidental consolidation? Here's the quick answer: although there's never any way to predict the future, there is more evidence for today's weakness being a normal consolidation than a scary reversal signal. Now let's break it down . Bonds have been doing quite well recently with both MBS and Treasuries making steady gains throughout the past 7 business days. By yesterday, MBS had closed at all-time highs on 5 of the past 6 days, and 10yr yields pushed deeper into sustained record lows ("sustained" means I'm...(read more)

8/5/2020 8:31:30 AM

Posted To: Pipeline Press

Since eating inside a restaurant is problematic, now’s the perfect time to eat better at home, get fit, and stay healthy. Never mind: Who are we trying to impress? We have snacks, we have sweatpants, let’s use them! Would you be impressed if the entire U.S. yield curve dropped below 1 percent? It could happen. Traders and investors are betwattled by the prospect of the Federal Reserve holding interest rates close to zero for the rest of the year and beyond. (The 30-year risk-free Treasury yielded about 1.25% Monday.) Is this the “Golden Era” of residential lending, and lenders finance clients into rates with 1 or 2 percent handles? (There is always more risk with a home loan, like default risk or prepayment risk, so those rates will always be above Treasury rates.) Meanwhile...(read more)

8/5/2020 8:23:59 AM

Posted To: MND NewsWire

Mortgage application volume declined during the week ended July 31 even as mortgage interest rates reached another all-time low. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of that volume, decreased 5.1 percent on a seasonally adjusted basis from one week earlier and was down 5 percent unadjusted. Refinancing took the larger hit. That index fell 7 percent from the previous week and accounted for 63.9 percent of all applications, down from 65.1 percent the prior week. Activity was 84 percent greater than the same week one year ago. The Purchase Index decreased 2 percent from one week earlier on both a seasonally adjusted and a non-adjusted basis. It was 22 percent higher on an annual basis. Refi Index vs 30yr Fixed Purchase Index vs 30yr Fixed Joel Kan,...(read more)

8/5/2020 7:20:02 AM

Posted To: Mortgage Rate Watch

Mortgage rates are on a tear, with the average lender easily hitting new all-time lows today. How low is that? At this point it's safe to say that anything over 3% is too high as long as we're talking about a top tier scenario. So let's take a moment to discuss what might separate one scenario from another. 1. Loan-to-Value ratio (LTV) As the name implies, it's the ratio of the proposed new loan amount to the value of the home in question (note that the purchase price is used if it's lower than the appraised value). This one of the two most important considerations that determines the pricing bracket your loan quote would fall into. By the time you get an LTV down under 75%, you're paying almost no additional interest, but there's a very important caveat. 2. Credit Score (FICO) This is the...(read more)

8/4/2020 3:51:00 PM

Posted To: MBS Commentary

Bonds Continue Pushing The Record Pace, But MBS Are Lagging Yesterday we asked what would come next for bonds after breaking through resistance levels (.58 in 10yr yields and 103.00 in 2.0 UMBS), what comes next. Such breakouts can be the cue for a corrective bounce or a quick rush of additional momentum. It looks like we're getting the latter, although it's more apparent in Treasuries. MBS are lagging due to increased supply, but prices nonetheless hit new all-time highs. Econ Data / Events 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th) Market Movement Recap 08:17 AM Bonds stronger overnight, largely during European session. Weaker stocks helped. 10yr starting out just under the .54% technical level. MBS are opening more than an eighth of a point higher. 11:31 AM Bonds...(read more)

8/4/2020 3:11:52 PM

Posted To: Pipeline Press

Sure, you’re making bank now, but are you planning for next year? Is your company doing anything to “team up”? Many lenders, vendors, and real estate companies have strategic partnerships with other companies. There’s strength in numbers, and they are not “against the law”. Here’s a new one. Online real estate company Zillow and D.R. Horton, the nation’s largest builder by sales volume, have announced a new strategic partnership that gives D.R. Horton home buyers the opportunity to sell their existing home through Zillow Offers , providing an easier, more certain move. To start the process, sellers can answer a few questions about their home, upload some photos, and receive a free, no-obligation offer in about 48 hours. There’s lots of things...(read more)

8/4/2020 9:11:59 AM