Mortgage News Daily

Posted To: MBS Commentary

Things have been bright and sunny for the bond market without any troubling exceptions since mid-April. During that time we've only seen 10yr yields rise more than 6bps (close-to-close) 3 times. Today was one of them. We could say something like "the sun also sets," but that would be ignoring the fact that yields hit their lowest closing levels since Nov 2016 yesterday. And as it happens, the other 2 days with 6bps+ losses also followed strong trading days near long-term low yields. So the worst thing we can say for now is that the sun went behind a cloud. If things remain dark tomorrow, we'll ratchet up the level of concern accordingly. As far as underlying motivations for the weakness, there's no doubt that US/China trade headlines moved the needle in the overnight session...(read more)

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6/26/2019 3:22:18 PM

Posted To: Mortgage Rate Watch

Mortgage rates hadn't moved much since last Friday--a good thing considering those levels were in line with the lowest levels in a long time. The ground-holding gave way today, however, as the underlying bond market weakened for the first time this week. In turn, mortgage rates quickly find themselves at this week's highs . But whether or not that means anything too troubling will depend on the lender in question. Most are still able to quote the same interest rate quoted yesterday with only minor differences in upfront costs. Both stocks and bonds (which dictate rates) lost ground today. Considering they've both been gaining ground recently (not surprising due to the expectations for friendlier Fed policy--a rising tide that helps stocks move higher and rates move lower), this could be taken...(read more)

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6/26/2019 2:46:00 PM

Posted To: MBS Commentary

In the day just past, bonds extended the gains seen on Monday with 10yr yields hitting 1.98% before encountering resistance. The gains are most readily attributed to an imbalance of short positions (traders betting on rates moving higher) and a smattering of strong buying demand amid low volumes. The net effect was a short squeeze on Monday with a bit of follow-through on Tuesday morning ahead of a Powell speech. Powell ended up being a bit more hawkish than expected. Along with a speech from Bullard, this helped reinforce a floor under yields. In the day ahead, bonds will continue to navigate a consolidation pattern that appears to be intact heading into the important events ahead. The opening act for those important events would be this week's month-end trading process along with any...(read more)

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6/26/2019 7:59:08 AM

Posted To: MND NewsWire

Freddie Mac reported this week that its total mortgage portfolio increased at an annualized rate of 7.5 percent in May , increasing from 6.2 percent the previous month. The portfolio balance at the end of the period was $2.230 trillion compared to $2.216 trillion at the end of April and $2.120 trillion a year earlier. Purchases and Issuances totaled $46.082 billion and Sales were ($4.436) billion. The April numbers were $36.071 billion and ($1.204) billion respectively. The annualized growth rate for the year-to-date is 5.2 percent. Single-family refinance loan purchase and guarantee volume was $13.3 billion in April, up from 11.2 billion in April and representing the same share of total single-family mortgage portfolio purchases and issuances as the previous month, 37 percent. Purchases in...(read more)

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6/26/2019 7:44:45 AM

Posted To: Pipeline Press

When I grow up, I want to own… 16,000 single family homes? Yes, here’s an article about how artificial intelligence has helped a landlord, and fund, accumulate that portfolio of rentals. It is a safe bet that a) the fund won’t be coming to you for a loan, and b) those are 16,000 homes that first-time home buyers won’t be viewing in an open house. And this is only one real estate investment firm. What about the size of those homes? From 1980 to 2009, the size of the largest 10 percent of houses increased 1.4 times as fast as the size of the median house. In 1973, newly built houses had an average of 507 square feet per resident, which by 2013 rose to an estimated 971 square feet per resident. Some of this, the paper contends, is because while Americans are pursuing larger...(read more)

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6/26/2019 6:35:42 AM

Posted To: MND NewsWire

The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of loan application volume, managed a seasonally adjusted 1.3 percent increase during the week ended June 21st as mortgage interest rates continue to drift lower. The index was up 1 percent from the previous week on an unadjusted basis. Refinancing remained strong, accounting for 51.5 percent of total applications compared to 50.2 during the week ended June 14. The Refinance Index increased 3 percent. The seasonally adjusted Purchase Index lost 1 percent from its previous level and the unadjusted index was down 2 percent. It remained 9 percent higher than during the same week in 2018. Refi Index vs 30yr Fixed Purchase Index vs 30yr Fixed "Markets last week reacted to a more dovish FOMC statement and forecast,...(read more)

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6/26/2019 6:08:02 AM

Posted To: MBS Commentary

Bonds were roughly unchanged overnight but soon began to improve at the CME and NYSE opening bells. Weak economic data at 10am didn't hurt the rally, but it didn't help as much as more important data would have. In the afternoon hours, speeches from the Fed's Bullard and Powell put some upward pressure on rates as they reminded markets that it's not all gloom and doom when it comes to considering reasons that the Fed may (or may not) cut rates in July. Ultimately, however, the presence of the risks combined with Powell's reminder that it made more sense to stay well in front of any potential downturn was enough to preserve most of the gains from the morning hours. All of the above is well and good, but the "gains from the morning hours" is a phrase best applied...(read more)

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6/25/2019 3:38:35 PM

Posted To: Mortgage Rate Watch

Mortgage rates were little-changed again today, despite moderate improvement in the broader bond market. Although it's MBS (the mortgage-backed securities that underlie mortgage loans) that have a direct effect on mortgage rates, the broader bond market--especially the 10yr Treasury yield--tends to move at the same time and by the same amount. With 10yr yields down 0.03% and mortgage rates unchanged, that clearly wasn't the case today. So what gives? Again, mortgage rate movement is up to MBS. Sometimes MBS have better or worse days compared to Treasuries. Today was worse . The reasons are a bit complex, but suffice it to say that market volatility (and uncertainty about where rates may be in the coming weeks and months) is the ultimate culprit. Volatility has a much bigger effect on a mortgage...(read more)

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6/25/2019 3:11:00 PM

Posted To: MND NewsWire

It was another disappointing month for new home sales , but due entirely to a sharp decline in those sales in the West. The U.S. Census Bureau and the Department of Housing and Urban Development said sales of newly constructed homes in May were at a seasonally adjusted annual rate of 626,000 units. This is 7.8 percent below the revised (from 673,000) April rate of 679,000 and 3.7 percent lower than the rate in May 2018 of 650,000 Expectations were for a rebound from April sales after a 6.9 percent downturn from March. Analysts polled by Econoday were looking for results in a range from 649,000 to 710,000 with a consensus of 680,000. On a non-adjusted basis there were 60,000 newly constructed homes sold in May compared to 67,000 in April. On a year-to-date basis, sales are up 4.0 percent at...(read more)

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6/25/2019 8:51:12 AM

Posted To: MND NewsWire

The two sets of price indices released on Tuesday diverged again. The S&P CoreLogic Case-Shiller Indices continue to show declining appreciation while the Federal Housing Finance Agency's (FHFA's) House Price Index (HPI) indicates that price increases, while lower than at the peak, are still maintaining a strong pace. The Case-Shiller U.S. National Home Price non-seasonally adjusted (NSA) Index which covers all nine U.S. census divisions, increased by 3.5 percent on an annual basis in April compared to year-over-year growth of 3.7 percent in March. The index posted a gain of 0.9 percent on an unadjusted basis from the previous month and 0.3 percent appreciation after adjustment. The 10-City Composite Index increased 2.3 percent on an annual basis compared to 2.2 percent the previous month...(read more)

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6/25/2019 8:48:50 AM

Posted To: MBS Commentary

In the day just past, bonds returned from the weekend with an unexpected fervor--at least in terms of outright improvement in yields. Looking beneath the gains, we saw limited volume and no fundamental justification for the move. Rather, it was driven by the very same absence of volume which allowed an imbalance of short positions to be exploited in a short squeeze . The last anticlimactic detail was the fact that MBS noticeably under-performed vs Treasuries. In the day ahead, bonds will continue to sort out their approach to the first week of July (which we expect will be a big jumping-off-point for the next big leg of momentum in an already momentous year). There are several economic reports on tap today, but none of them are in the "big-ticket" category in terms of market movement...(read more)

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6/25/2019 7:25:33 AM

Posted To: Pipeline Press

Guys with an eyepatch and three fingers sell the best fireworks. Who does the best job selling mortgage products to consumers? Regulators, Agencies, and investors have seen the percentage of bank fundings drop and non-bank originations move higher over time, and by some estimates now account for 60% of residential volume. In the conferences that I have attended over the last several weeks this, and the increase in broker business, is a big topic of conversation. Here’s a piece on the STRATMOR site about banks, non-banks, and market share. (Switching from mortgages to deposits, the nine biggest banks today hold almost 50% of all deposits vs. 6% for the more than 4,000 banks with <$1B in assets. Back in 1994, those same smaller banks held 25% of banking assets.) S&P Global Market...(read more)

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6/25/2019 7:08:40 AM

Posted To: MND NewsWire

The annual State of the Nation's Housing report from the Joint Center for Housing Studies (JCHS) at Harvard University is the latest vehicle for sounding the alarm about the country's diminishing housing stock and the resulting decline in affordability. Although the economy has recovered from the Great Recession and household growth has returned, housing production has not. The report says, "the shortfall in new homes is keeping the pressure on house prices and rents, eroding affordability-particularly for modest-income households in high-cost markets." Since reaching bottom in 2011 at 633,000, additions to the housing stock have grown at an average annual rate of 10 percent, but in seven years reached only 1.2 million units. When the last ten years are excluded, 2018 was the lowest annual...(read more)

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6/25/2019 6:21:18 AM

Posted To: MBS Commentary

Friday was tense for the bond market, with selling pressure that was just big enough to cause concern about a bigger correction, and buying support that was consistent enough to suggest we still had a chance. Today's trading quickly proved it was buyers who had better control of the momentum--or did it? Today's trading certainly proved that yields were willing to go back down , but that may not have as much to do with buying demand as it does with the structure of the market and the exceptionally low volume. Simply put, it made strong, logical sense to be short bonds on Friday. After all, yields had rejected a post-Fed rally by failing to close below 2.02% for 2 straight days despite making it as low as 2.972% on Thursday. Friday quickly brought 10yr Treasuries back to the 2.06% technical...(read more)

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6/24/2019 2:59:12 PM

Posted To: Mortgage Rate Watch

Mortgage rates were generally flat today, depending on the lender. Some were noticeably better while others were a hair worse. In both cases, rates are very close to the lowest levels since late 2016. Changes from Friday would most likely be measured in terms of upfront costs as opposed to differences in the quoted "note rate" itself (the rate most people are talking about when they talk about mortgage rates). Upfront costs simply allow for smaller fine-tuning adjustments when the market doesn't move enough for lenders to change rate quotes by the customary 0.125%. Holding steady today is a major victory given the landscape at the end of last week. At the time, the underlying bond market (which dictates rates) was in the process of bouncing back into weaker territory following a stronger reaction...(read more)

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6/24/2019 1:39:00 PM

Posted To: MND NewsWire

Mortgage prepayment rates have continued to rise as interest rates move lower. Black Knight says prepayments increased by 24.31 percent in May compared to April and 32.17 percent on an annual basis. The company, in its "first look" at loan performance data for May, says the Single Monthly Mortality (SMM) rate, 1.23 percent, has more than doubled over the past four months and is at its highest level in more than two years. The national delinquency rate fell for the third consecutive month in May. There were 1.76 million loans that were at least 30 days past due but not in foreclosure, 3.36 percent of all mortgaged properties. This was the lowest level in Black Knight's records that date back to January 2000. Delinquencies fell by 3.03 percent or 52,000 loans compared to April and were down 107...(read more)

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6/24/2019 9:27:39 AM

Posted To: Pipeline Press

I start the last week of June in Park City, Utah at a STRATMOR meeting and with a correction. In discussing tax laws in Saturday’s commentary I wrote, “The new law limits the deductibility of mortgage interest payments to $10,000, thereby reducing tax incentives for ownership of higher priced homes.” Several readers astutely wrote that this was incorrect, and that mortgage interest isn’t capped at $10,000. It is the State And Local Taxes (SALT) that are limited to $10,000. The tax law limits the amount of mortgage interest to whatever interest you pay on loans up to $750,000. Thank you! While we’re geography, much of the nation’s recent population growth is still “out West.” Cities in the West that have seen the largest population increases recently...(read more)

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6/24/2019 7:32:00 AM

Posted To: MBS Commentary

In the week just past, bonds were preoccupied with central bank communications. Wednesday's Fed announcement was going to be the only game in town, but Draghi's speech at the SINTRA conference (which promised rate cuts and additional easing) set a positive tone for bonds on Tuesday morning. The Fed struck a similar tone. While they didn't promise more easing, they said enough to convince markets that they would play ball with the recent shift in rate cut expectations as long as the economy warranted it. In the week ahead, we'll be counting down the days until we get to the data most likely to suggest whether or not the economy warrants Fed rate cuts! Specifically, the first week of July has been and continues to be of the utmost importance as it not only contains several of...(read more)

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6/24/2019 7:19:26 AM

Posted To: MBS Commentary

The bond market took an entire day to reiterate what it told us yesterday afternoon. Simply put: it's not interested in rallying much more than it already had before Wednesday's Fed announcement. Underlying data and events have been a nonissue throughout this bounce. Bonds have moved higher in yield at their own pace and for their own reasons. The only question is whether we're just witnessing a quick correction of an overdone response to the Fed or a bigger-picture correction after the Fed response got yields to "trigger levels" for traders to re-set positions. It wouldn't be a surprise to see a bit more corrective momentum in June as the first week of July is an insane hotbed of potential volatility. The results of the late June G20 meeting combined with the important...(read more)

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6/21/2019 4:46:54 PM

Posted To: Mortgage Rate Watch

Mortgage rates have had an impressive run --the best since 2011, in fact, when it comes to total peak to trough movement. That winning streak might not even be over, but every time rates bounce recently--even if only slightly--it's cause for concern. For one of a few potential reasons, these big moves in rates only last so long. This one is big enough and long enough that it makes sense to keep an eye out for the big shift. In fact, if you're in the process of buying or refinancing (or if you work in the mortgage/housing market) it makes sense to keep an eye out for temporary shifts! That's the area of greatest concern currently. Following this week's Fed meeting, rates extended their fall to the lowest levels since November 2016. But since then, the underlying bond market has bounced in such...(read more)

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6/21/2019 4:46:00 PM