Mortgage News Daily

  • Posted To: MBS Commentary

    Tiny pockets of gains have come and gone in the vast sea of red that's dominated 2018 so far. Each pocket has attempted to lure optimists into a "bull trap." In other words, originators want to be bullish on rates, so they're more likely to take the best available opportunities to get bullish--especially if no such opportunities have presented themselves recently. Unfortunately, we're in a pervasive uptrend in rates, and what look like tiny pockets of opportunity have actually been periodic consolidations that help the selling-spree catch its breath before rates continue higher. Is it the same story with the past 2 days of stability? In all likelihood. Granted, the bear case for bonds is i ncreasingly being priced-in , discussed, and understood among traders, but in this...(read more)

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    Created: 2/16/2018 1:14:17 PM
  • Posted To: Mortgage Rate Watch

    Financial markets in the US will be closed for President's Day on Monday. Thus, mortgage lenders will not be open, nor will they be accepting locks. Given that mortgage rates took the road less traveled in 2018 and actually moved lower, it's worth having a chat with your mortgage professional if you have a loan in process. Of course, many of you may not be reading this until after the lock window has passed for today, so let's take a look at next week's risks and opportunities . The biggest risk is the same one that's been with us all year. Simply put, rates have been trending higher in a steady but highly convicted fashion, quickly adding a half a percentage point or more to the average 30yr fixed rate quote. As we've been saying all year, it doesn't make sense to bet against that trend until...(read more)

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    Created: 2/16/2018 12:49:00 PM
  • Posted To: MND NewsWire

    Some people are never happy . For most of the ten years following the start of the Great Recession the experts have focused (can we say harped?) on the theme of a slow recovery. Now, after a couple of upticks in the inflation rate, Fannie Mae has headlined its February Economic Developments release "Strong Economic Activity Triggers Overheating Concerns." The company's Economic and Strategic Research Team say economic activity gathered momentum over the last few months and "markets are beginning to appreciate the broader implications of the stronger growth. That realization, along with a change in the direction of monetary policy has introduced some volatility into the economic equation. There were finally some signs that wages were increasing which pushed inflation measures such as 10-year...(read more)

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    Created: 2/16/2018 9:36:33 AM
  • Posted To: MBS Commentary

    While they're extremely important to institutional investors and analysts, the role of trading positions in the bond market is one of the most easily overlooked factors in rate movement over shorter time horizons. "Positions" is just a fancy way to refer to how many dollars are betting for or against bonds. This is particularly relevant at the moment because the only traders doing much betting in favor of Treasuries are those that are using Treasuries to hedge positions elsewhere in the market. We can glean this from the CFTC's weekly position report, which breaks Treasury positions into commercial and non-commercial categories. In other words, non-commercial positions tell us the most about how speculators are betting on Treasuries. To say that they're short would be...(read more)

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    Created: 2/16/2018 7:16:14 AM
  • Posted To: MND NewsWire

    Residential construction got off to a strong start in January, with sizable increases in both permits and housing starts and only a slight downturn in completions. The gains follow a particularly disappointing performance in construction starts in December. Statistics were spotty on a regional basis, and especially weak in the Midwest. The Census Bureau and the Department of Housing and Urban Development said residential construction permits were at an annual rate of 1,396,000 units, a 7.4 percent increase over both December and January 2017. The annual rate clock in both earlier periods was 1,300,000. The December number was a slight revision from the 1,302,000 originally reported. Permitting exceeded even the highest forecasts. Analysts estimates reported by Econoday ranged from 1,260,000...(read more)

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    Created: 2/16/2018 6:59:26 AM
  • Posted To: Pipeline Press

    Mortgage rates are greatly influenced by supply and demand. And if both the U.S. government and individuals need to borrow money, the government usually wins. Total U.S. household debt hit an all-time high of $13.15 trillion at the end of 2017 . That’s up $193 billion from the previous quarter. Mortgage debt is at $8.88 trillion, up $139 billion. The Fed Funds futures are now predicting an 83% chance of a hike at the March meeting. By the end of 2018 the odds are good we’ll have seen 3 hikes this year taking overnight Fed Funds rate to 2.0% - 2.25%. And if the slope of the yield curve remains constant, we can expect the 10-year note to yield in the mid-high 3% area, and IF mortgages tag along, 30-year rates will be in the low 5% area. Ready for all that? Taxes, The Budget, and the...(read more)

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    Created: 2/16/2018 6:11:31 AM
  • Posted To: MBS Commentary

    At face value, today was great! Bonds overlooked all of the morning's economic data (no surprise) and made modest gains that were subsequently held throughout the session. There was very little volatility. The ground-holding came despite gains in stocks. And multiple lenders repriced positively. Indeed, all of the above is "good!" The issue is that all of that ground-holding occurred in the thick of yesterday afternoon's range and yesterday afternoon was the worst afternoon for bond market in more than 4 years! Even more disconcerting is the fact that yields ran into resistance today at a floor around 2.88% which was an important ceiling over the past two weeks. It was only meaningfully broken yesterday, so to return to the scene of that crime and use 2.88% as a floor is not...(read more)

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    Created: 2/15/2018 1:14:17 PM
  • Posted To: Mortgage Rate Watch

    Mortgage rates were roughly unchanged today. Some lenders even offered improved rates in the afternoon as underlying bond markets managed to hold modest gains. All this despite another winning day for stocks (5th in a row now). Much has been made of the interaction between stocks and bonds since last week's stock market flash crash. Unfortunately many of the correlations mentioned in the news are fairly black and white. For instance, many people believe that stock prices and bond yields move higher together because a growing economy not only implies stronger stock performance, but it can also support higher rates. In practice, however, this correlation is hit and miss . It seemed to be hitting in the wake of last week's crash and then again yesterday afternoon. Then today, bond markets (which...(read more)

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    Created: 2/15/2018 12:41:00 PM
  • Posted To: MND NewsWire

    While the prospect of Fannie Mae and Freddie Mac needing taxpayer money conjures up images of a failing mortgage market requiring a government bailout, that's very far from the case this time around. In fact, taxpayers continue to come out way ahead with respect to the GSEs' conservatorship agreement, even after the draws that will be needed to cover 4th quarter losses. At issue are one-time write-downs arising from accounting changes in response to the new tax bill. After this, it should be business as usual (a business that has been returning a significant amount of money to US taxpayers). Both Freddie Mae and Fannie Mae posted strong full-year incomes for 2017 despite that both also suffered fourth quarter losses courtesy of the new tax law. Fannie's comprehensive income was $2.5 billion...(read more)

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    Created: 2/15/2018 11:04:13 AM
  • Posted To: MND NewsWire

    New home builders are looking ahead, and the National Association of Home Builders (NAHB) says this optimism was reflected in its Housing Market Index (HMI) for February. While the total HMI, which is also sponsored by Wells Fargo, was unchanged from January at 72, its most forward-looking component hit a post-recession high. The HMI is derived from a monthly survey NAHB conducts among its new-home builder members. The survey asks builders for their perceptions of current market conditions for newly constructed homes and their expectations for-those conditions over the next six months, ranking each as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for each component are then used to...(read more)

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    Created: 2/15/2018 7:37:15 AM
  • Posted To: MND NewsWire

    Although it has been declared by many in Congress as "dead on arrival" the Trump Administration's proposed 2019 budget appears more predicated on another cliché - "If at first you don't succeed..." The budget again goes after many of the cuts in Housing and Urban Development (HUD) programs it attempted in the FY2018 version. The budget calls for an overall 18.3 percent cut in HUD funding. The $39.2 billion in gross discretionary funding for the Department is $8.8 billion less than the 2017 enacted level. The Community Development Block Grant program and the HOME Investment Partnership Program are not funded under the proposal, a suggestion Congress has previously ignored. The proposal also seeks to end the Choice Neighborhoods program as well as the National Housing Trust Fund. According...(read more)

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    Created: 2/15/2018 7:33:31 AM
  • Posted To: MBS Commentary

    I've mentioned the comparisons between 2013 and the current selling trend several times recently. Most of those have been in response to journalists and analysts claiming some weird connection to high bond yields and stock market weakness. My contention was that a surge to 3% 10yr yields in 2013 didn't cause much of a stir in 2013, so why would 2018 be any different? Moreover, I noted that things happened a lot quicker in 2013 . Well, to be fair, they did and they didn't. I'll revise that last point just a bit and say that things happened at roughly the same speed if we examine the 1.5-month stretch leading up to the official tapering announcement. I'll never forget it. It began with a Wall St Journal article by John Hilsenrath who many believed had secret one-on-one meetings...(read more)

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    Created: 2/15/2018 7:10:06 AM
  • Posted To: Pipeline Press

    If you claim that many areas of the nation have few houses for sale, no one will disagree. (“Rob, when are those big funds that own tens of thousands of rentals going to start selling?” With rents and values going up like they are, don’t hold your breath.) Arguably inventory is at an all-time low . At the end of the fourth quarter, there were 1.48 million existing homes available for sale, which was 10.3% below the 1.65 million homes for sale at the end of the fourth quarter in 2016. On the other hand, based on responses to its Builder Application Survey (BAS), the Mortgage Bankers Association estimates that new home sales will increase dramatically this year. Jumbo and ARM News Note that last week’s residential application data showed that with the steeper yield curve...(read more)

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    Created: 2/15/2018 6:08:36 AM
  • Posted To: MBS Commentary

    Old people who've been endlessly frustrated by the fact that no one seemed to be concerned about inflation for the past 6 or 7 years are finally having their day in the sun. Inflation has actually been back in vogue (or en vogue, if you're pretentious) since at least May of last year. That's when core annual CPI mysteriously began falling from its perch above 2%. It would then spend several months languishing around 1.5% before revisions. Even after revisions, Core CPI was stuck at roughly 1.7% until the November 15th report. Month-over-month Core CPI only made it up to 0.3% for the first time in a long time last month. Today's report was important because it confirmed last month's move up to 0.3% and it once again pushed the annual number up to 1.8%. All of the above builds...(read more)

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    Created: 2/14/2018 3:28:11 PM
  • Posted To: Mortgage Rate Watch

    Mortgage rates surged higher today, moving easily to new 4-year highs. Today's average conventional 30yr fixed rate is roughly one eighth of a percentage point higher than Wednesday of last week and more than half a point higher than the best rates seen in January. A half point increase would cost roughly $90/mo in terms of monthly payments on a $300k loan. In terms of actual "note rates" being quoted, 4.625% is now replacing 4.5% as the most prevalent quote on top tier scenarios. That said, it's worth noting that there's a fair amount of variability from lender-to-lender and day-to-day at the moment. This is typical for market conditions we're currently enduring. As expected, today's specific culprit was the Consumer Price Index report (CPI). This is the most important inflation report in...(read more)

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    Created: 2/14/2018 2:37:00 PM
  • Posted To: MND NewsWire

    Is homeownership still the American Dream? Should it be? An article published in the Journal of Economic Perspectives argues while the former has long been the case, one strongly supported by government policy, that has changed. Now there is a growing school of thought that the focus should shift toward other aspects of upward mobility. As the recent changes in the tax code might indicate, government policy is shifting with it, towards a view that homeownership may not be for everyone. The article, written by Laurie Goodman, Vice President of the Urban Institute's Housing Finance Policy Center, and Christopher Mayer, Paul Milstein Professor of Real Estate, at Columbia University, examines US homeownership from three different perspectives. The international perspective compares rates in this...(read more)

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    Created: 2/14/2018 9:19:19 AM
  • Posted To: MND NewsWire

    The Mortgage Bankers Association (MBA) is forecasting a sizable jump in new home sales in January. Based on responses to its Builder Application Survey (BAS), MBA estimates that applications for the purchase of newly constructed homes rose 18.4 percent compared to those during the previous January and were up 34 percent from December. The change is not adjusted to reflect typical seasonal patterns. Based on the application volume and other market data, MBA estimates sales during the month were at a seasonally adjusted annual rate of 700,000 units. This would mark a gain of 26.4 percent from December's pace of 554,000 units. On an unadjusted basis, the estimated change from December was 35 percent, rising from 40,000 to 54,000 new homes sold. "Mortgage applications for new homes surged in January...(read more)

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    Created: 2/14/2018 6:33:45 AM
  • Posted To: Pipeline Press

    Two men are sitting in a bar when Mark Zuckerberg walks in. One of the men says to his friend, “This is awesome! On average, everyone in this bar is worth $20 billion!” It’s important to remember the difference between “mean” and “average.” Now, apparently, in the most expensive housing markets in the country, a $1 million home is considered average, while homes priced at $5 million and above are considered luxury homes . Flagstar/Ginnie News Last week Ginnie released information about certain lenders allegedly churning borrowers who are veterans . Flagstar Bank, one of those named, sent a note out reaffirming “its commitment to responsible lending and the overall strength of its VA lending program, and addressed recent news articles alleging...(read more)

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    Created: 2/14/2018 6:19:36 AM
  • Posted To: MND NewsWire

    Purchase mortgage applications, after starting out strong at the beginning of the year, stalled for the third straight time last week, bringing overall activity down. The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of the volume of applications received, had its worst performance since mid-December. The index for the week ended February 9 was down 4.1 percent on a seasonally adjusted basis compared to the previous week and declined 2 percent on a non-adjusted basis as the seasonally adjusted index measuring those purchase mortgage applications lost 6 percent compared to the week ended February 2. The unadjusted index was 3 percent lower week-over-week but remained 4 percent higher than during the same period in 2017. The Refinancing Index last 2 percent...(read more)

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    Created: 2/14/2018 6:10:01 AM
  • Posted To: MBS Commentary

    CPI has been a big deal since last May. That's when more than a year of higher, more stable Core CPI first began slipping under 2.0%. Bond markets reacted with a noticeable rally in response. When Core CPI fell further in June, the bond rally was even bigger and more noticeable. From there, we see multiple examples of CPI setting the near term tone for bonds or at least causing one big day of gains or losses. The chart below has 10yr candlesticks with most of the CPI release dates indicated as well as whether inflation came in stronger or weaker than expected. Notice that November is in red. This was one of the few examples of markets moving the opposite direction from the suggestion of the CPI result (i.e. stronger inflation, but bonds rallied). Granted, traders could have been circling...(read more)

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    Created: 2/14/2018 5:32:40 AM
  • Posted To: MBS Commentary

    Today was "nice" in the highly charged sense of the word where it's meant to convey a certain acceptability and a certain absence of excellence . Bonds didn't weaken in any disconcerting way. They even managed to make some gains--both at the open and heading into the last hour of the day--all without any help from the stock market during domestic hours (stocks improved). All that stuff is "nice," but what are the counterpoints? First off, today's closing levels are only an improvement compared to the worst closing levels in years. 10yr y ields ended up right in line with prevailing "mid 2.8's," which have been intact for 5 straight days . Additionally, there was no attempt to break below 2.82%--roughly the same floor of resistance that blocked our...(read more)

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    Created: 2/13/2018 1:29:19 PM
  • Posted To: Mortgage Rate Watch

    Mortgage rates began the day fairly well in line with the past 2 days. While it's nice to see some stability in this environment, it's not so nice that it's occurring at 4-year highs. Do we have a shot at moving much lower or should you brace for more? What warning signs should you look for to help answer that question? Much has been made in the news recently about the correlation between stocks and bonds (which dictate rates). Depending on the day, stocks are said to be falling because rates are too high or rates are said to be rising because stocks are rising. In reality, rates are largely doing their own thing, and that thing just happens to correlate with movement in stocks in general. Last week's stock crash was a different story as it did actually help interest rates catch their collective...(read more)

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    Created: 2/13/2018 12:55:00 PM
  • Posted To: MND NewsWire

    While home price increases softened slightly in the fourth quarter of last year, the National Association of Realtors® (NAR) said, an uptick in existing home sales further exhausted available inventories. NAR's quarterly metropolitan area housing report puts the national median existing single-family home price at $247,800 at the end of 2017, up 5.3 percent from the fourth quarter of 2016. The year-over-year gain in the third quarter of 2017 was a slightly higher 5.6 percent. Single-family home prices grew in 162 or 92 percent of the 177 metropolitan statistical areas (MSAs) tracked by NAR. In 26 of those areas, or 16 percent, the gains were in the double digits compared to in 11 percent the prior quarter. Eighteen MSAs set new price peaks, bringing the number with median prices at record...(read more)

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    Created: 2/13/2018 8:42:00 AM
  • Posted To: MBS Commentary

    A certain reality of the recent rate spike needs to be revisited based on conversations I've had with a few clients. Thankfully, it's pretty simple: short term rates have been pushing all rates higher. In general, short-term rates rise toward long-term rates during economic expansions. When they get close enough (or when short-term rates rise ABOVE long-term rates), it's often a sign that a broader reversal is soon to follow. With that in mind, we're moving in that direction, but still have a ways to go. For the record, the gradual rise in the orange line in the chart above is largely a function of Fed policy expectations. Short term rates are infinitely more vulnerable to the Fed's rate hike outlook , so when markets saw the Fed becoming more and more willing to hike, 2yr...(read more)

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    Created: 2/13/2018 7:26:39 AM
  • Posted To: MND NewsWire

    Last fall's hurricanes again dominate the CoreLogic November Loan Performance Insights Report, although the nature of the storms' influence has changed . The company says that the U.S. mortgage delinquency rate was down 0.1 percent from the previous November, as fewer loans transitioned from current to an early non-current stage, but serious delinquencies spiked in the storm areas. The national delinquency rate was down 0.1 percent from November 2016, to 5.1 percent. That rate includes all loans that were 30 or more days past due, including those in foreclosure. Early delinquencies, those 30 to 59 days past due, represented 2.2 percent of all mortgages, down 0.1 point from October and unchanged from a year earlier. The share of mortgages that were 60-89 days past due in November 2017 was 0...(read more)

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    Created: 2/13/2018 6:53:01 AM