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MBS RECAP: Traders Trading Trade (Deal)

  • Posted To: MBS Commentary

    With the exception of the wee hours yesterday morning, the past 2 days have been all about the trade deal. Markets knew Trump and the Chinese vice premier would be meeting this afternoon and they increasingly believed some sort of trade announcement was likely. In fact, both stocks and bonds did such a good job getting ahead of such a thing that they moved in counter-intuitive directions as soon as it was announced. You know... buy the rumor, sell the news, and all that... While you know I'd be the first in line to say too many words about something that happens in financial markets, today was really that simple. In short, it was 2nd day of stocks and bonds pricing in some announcement of progress in US/China trade relations. In that context, the bond losses are reasonable (more than reasonable...(read more)

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    Fri, 11 Oct 2019 22:11:51 GMT

Big Jump in Mortgage Rates This Week

  • Posted To: Mortgage Rate Watch

    Mortgage rates moved higher from Wednesday through the end of the week. Thursday and Friday were especially abrupt as financial markets hurried to get in position for a potential US/China trade announcement. What does trade have to do with the mortgage market? Quite a lot actually! Tariffs and general trade uncertainty have been some of the biggest driving forces behind 2019's huge drop in rates. Downbeat economic data and eroding business confidence led investors to put more money into safer havens like the bond market. When demand for bonds increases, bond prices move higher and bond yields (aka "rates") move lower. The economic uncertainty also played a key role in forcing the Federal Reserve to shift its stance on rates early in the year. While the Fed doesn't control mortgage rates directly...(read more)

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    Fri, 11 Oct 2019 21:27:00 GMT

MBS Day Ahead: Another Correction is Underway. How Long Will It Last?

  • Posted To: MBS Commentary

    Yesterday brought an abrupt confirmation of a bounce in bonds. For 10yr Treasury yields, the scene of the bounce was 1.51% earlier in the week. Multiple attempts to move lower failed, but yields stayed close enough to try for 4 straight days. Things began to change on Wednesday as bonds began to weaken just slightly. Even then, they day's weakest levels weren't any worse than those seen on the previous day. It fell to yesterday, then, to not only break the little sideways range (1.51-1.59), but to crush it. The bounce validates the bigger-picture consolidation trend seen below. There is room to run in terms of momentum/technicals. In other words, bonds were just overbought, so they may shift back to being oversold, and they're not quite there yet--even in terms of fast stochastics...(read more)

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    Fri, 11 Oct 2019 13:00:20 GMT

Vacation Homes Paved the Way to Greater Household Wealth

  • Posted To: MND NewsWire

    While home prices have surged back from their housing crisis lows, a report from the National Association of Realtors® (NAR) says homes purchased as vacation properties have appreciated even more. NAR's 2019 Vacation Home Counties Report says that over the five years that ended in 2018, existing and new home prices gained an aggregate of 31 percent while the median price of a second home rose 36 percent. NAR found the areas with the greatest increases over the five-year span were in Pennsylvania, Wisconsin, and Massachusetts. Lawrence Yun, NAR's chief economist, says the present figures are telling, especially when compared to data from 10 years prior. "As of 2018, household net worth reached an all-time high of $100.3 trillion - that's nearly double from a decade ago when wealth declined...(read more)

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    Fri, 11 Oct 2019 12:31:53 GMT

Corresp. Jobs; Marketing, Pricing, DPA, 2nd Lien Products; New Vendor Offerings

  • Posted To: Pipeline Press

    Fun with HMDA! Compliance folks everywhere know that yesterday the CFPB (“educate through education rather than enforcement”) issued a final rule amending Regulation C to extend the current temporary threshold of 500 open-end lines of credit to January 1, 2022. The final rule also incorporates into Regulation C the interpretations and procedures from the interpretive and procedural rule issued by the Bureau in August 2018, and further implements the amendments made to the Home Mortgage Disclosure Act by the Economic Growth, Regulatory Relief, and Consumer Protection Act. You can access the final rule here. The Bureau has also posted a summary of the final rule and an unofficial, informal redline reflecting changes to Regulation C to assist industry and other stakeholders. Lender...(read more)

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    Fri, 11 Oct 2019 12:22:35 GMT

MBS RECAP: Expected Amount of Volatility But Not For Expected Reasons

  • Posted To: MBS Commentary

    Heading into this week, we looked to today as the biggest potential source of volatility owing to the release of the Consumer Price Index (CPI) and the end of the Treasury auction cycle. The volatility definitely showed up, but those two factors were at the bottom of the list of today's market movers. CPI was mostly ruled out as a market mover after Fed Chair Powell talked about inflation on Tuesday. I talked more about why that was the case in the Day Ahead . Deceptively, yields started spiking a few minutes after CPI. Was I wrong to downplay its significance? I definitely thought so for a moment, even though it wasn't logical, but looking at other markets it was easy to see the move originated in Europe (as discussed in THIS update ). Europe would continue to have an impact through...(read more)

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    Thu, 10 Oct 2019 22:09:21 GMT

Highest Mortgage Rates of the Month or Lowest in a Month?

  • Posted To: Mortgage Rate Watch

    Mortgage rates were sharply higher today as the underlying bond market faced heavy selling pressure for a variety of reasons. When investors are more interested in selling bonds, prices move lower and yields (aka RATES) move higher. By the end of the day multiple lenders had recalled their rate sheets and reissued higher rates. The average lender was easily at the highest rates of the month. Despite all of the above, multiple sources claim rates fell significantly this week and are now at the lowest levels since September 12th. Sadly, that's not true. It's the product of confusion that often happens on Thursdays when Freddie Mac's weekly mortgage rate survey is released. The survey mainly reflects lenders' rate offerings from Monday and Tuesday. Because mortgage rates can also move quite a...(read more)

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    Thu, 10 Oct 2019 22:09:00 GMT

Homebuying Index Pulls Back From Record Highs

  • Posted To: MND NewsWire

    Fannie Mae's Home Purchase Sentiment Index (HPSI) has been relatively volatile in recent months, and September was no exception. The Index set back to back record highs in July and August, reaching 93.8 in the latter month which put it 5.8 points higher than in August 2018. September saw a 2.3-point drop in the index to 91.5 with three of the six components declining on a month-over-month basis. The index remains 3.8 points higher than a year earlier. The index, based on selected responses from Fannie Mae's National Housing Survey (NHS) saw a nearly unprecedented 8-point drop in its net "Confidence About Not Losing Job" component, adding to a 4-point drop the previous month. The net of those who are not concerned about losing their job was 69 percent, the lowest since an 11-point dive in July...(read more)

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    Thu, 10 Oct 2019 19:01:58 GMT

MBS Day Ahead: Bonds At Least Entertaining a Momentum Shift

  • Posted To: MBS Commentary

    Yesterday brought moderate weakness for the bond market. Justifying it doesn't have to be any more complicated than technical resistance combined with an absence of buying demand ahead of the afternoon's 10yr Treasury auction. Yields rose enough for the auction to come in with decent stats, which helped bonds stabilize. The Fed meeting minutes fell on deaf ears for 2 reasons: they didn't say anything that couldn't already have been gleaned from the announcement, and Powell's speech from the previous day already laid out the relevant considerations for the Fed in detail. Today brings the consumer price index (already out, here's the MBS Live update ) as well as the conclusion of the week's Treasury auction cycle. CPI would have been the week's most relevant economic...(read more)

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    Thu, 10 Oct 2019 13:15:56 GMT

DPA, Pricing, Digital Products; Vendor News; Lenders Managing Capacity

  • Posted To: Pipeline Press

    I am in Chicago with the FHLBank Chicago, and, despite the congestion and energy on the streets, the numbers tell us that the local economy is slowing. (In local news, for his work on batteries, University of Chicago alum John Goodenough – try growing up with that one - became the oldest Nobel Prize winner at 97!) Traditionally, U.S. downturns have been homegrown and household-led, sparked by spikes in interest rates and Wall Street run amok, but that’s arguably not the case this time. Instead, what’s driving recessionary fears in investors, and if we keep talking about it, it will happen, is a global, geopolitical shock to business sentiment from President Donald Trump’s trade war on China and Britain’s potential pullout from the European Union. That’s why...(read more)

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    Thu, 10 Oct 2019 13:12:15 GMT

Labor Costs Likely to Push Home Prices Higher

  • Posted To: MND NewsWire

    New home prices have been rising since 2012 according to CoreLogic's chief economist Frank Nothaft. Prices in the spring of 2019 were up 2 percent compared to a year earlier, partially because of rising building costs. In an article in CoreLogic's Insights blog, Nothaft quotes National Association of Home Builder (NAHB) figures that say about 60 percent of a new home's sales price reflects the construction costs of the home. The major components of building costs are those associated with purchasing and preparing a lot, acquiring permits and inspections, hiring labor and buying materials. The last accounts for a large part of the overall structure cost and 2018 was a tough year for builders on that score. There was a significant price run-up in the two major components of framing, lumber and...(read more)

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    Thu, 10 Oct 2019 12:07:31 GMT

MBS RECAP: MBS Make Up For Yesterday's Underperformance

  • Posted To: MBS Commentary

    The same old pattern played out today where MBS weren't able to keep solid pace with Treasury movement. This is one of those "for better or worse" kind of things. MBS tend not to gain as much ground as Treasuries when bonds are rallying (like yesterday), but in return, they usually avoid losing as much ground when bond yields are moving higher. 10yr yields ended the day more than 5bps higher (or half a point lower in terms of price). Fannie 3.0 MBS coupons were only 1 tick (0.03) lower by comparison! Some of the overall bond market weakness was intact right at the start of the day after trade-related headlines did some damage overnight. After a modest recovery during the first few hours of the domestic session, bonds weakened steadily heading into the afternoon hours--perhaps...(read more)

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    Wed, 09 Oct 2019 21:36:21 GMT

Mortgage Rates Almost Hold Ground Despite Volatile Bond Market

  • Posted To: Mortgage Rate Watch

    Mortgage rates moved modestly higher today, but remain very close to the lowest levels in nearly a month. The underlying bond market (which dictates rates) has been somewhat volatile this week on a combination of trade-related headlines and comments from Fed Chair Powell. Traders also have an eye on recent market trends in conjunction with this week's bond market auctions. All of the above have added up to plenty of back and forth movement, but no sustained trend in one direction or the other. Even then, we're not talking about huge swings for the average mortgage lender. Most prospective borrowers would barely see a detectable difference from one day to the next. Eventually, that will start to change when the next bout of momentum sets in. As for the reason that mortgage rates haven't felt...(read more)

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    Wed, 09 Oct 2019 20:52:00 GMT

MBS Day Ahead: Fed Minutes Are Less Interesting After Yesterday's Powell Speech

  • Posted To: MBS Commentary

    In the day just passed, bonds initially tried to erase the weakness seen in Monday's session. They were largely successful in the morning hours, but began to slide in the afternoon. Although trade-related headlines drew the biggest response in terms of volume, most of the focus was on an afternoon speech from Fed Chair Powell , who made balance sheet expansion seem like an imminent decision. To some, "balance sheet expansion" sounds like QE4, but don't be fooled. The was talking about "adequate levels of reserves" all the way back in March 2019 when it phased in its balance sheet normalization principles. Powell also specifically mentioned the Treasury bill market as being a potential target for expansion--a fact that helped shorter-term bonds rally while longer...(read more)

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    Wed, 09 Oct 2019 13:28:04 GMT

Broker, Non-QM, Digital Products; Changes at Freddie; USDA Primer

  • Posted To: Pipeline Press

    What’s your price hit for a non-owner-occupied loan? Currently, there are 12 million single-family homes being rented in the United States, 35 percent of all rental housing around the country, worth $2.3 trillion. Historically, single-family homes were rented out by owners or small real estate companies, but as we know that’s changing as large corporations have increased their ownership share . It is estimated that the homeownership rate decline, from 67% to 63%, from 2007 to 2014 means that about 1.5 million households shifted from owning their home to renting it. That’s $220 billion in housing wealth transferred from once-homeowners directly to larger corporations. Think Invitation Homes, American Homes 4 Rent, Progress Residential, Main Street Renewal, and Tricon American...(read more)

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    Wed, 09 Oct 2019 12:41:24 GMT

Refis up Another 10% as Rates Revisit Recent Lows

  • Posted To: MND NewsWire

    Declining interest rates made for another strong week for mortgage applications . The Mortgage Bankers Association (MBA) said its Market Composite Index rose 5.2 percent on a seasonally adjusted basis during the week ended October 4.. This was on top of an 8.1 percent increase during the week ended September 27. On an unadjusted basis the index gained 5.0 percent. Once again it was refinancing that fueled application activity. The Refinance Index was up 10 percent from the previous week and was 163 percent higher than during the corresponding week in 2018. The share of applications that were for refinancing climbed back above 60 percent for the first time in more than a month, increasing from 58.0 percent of applications to 60.4 percent. Applications for home purchases remain relatively unaffected...(read more)

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    Wed, 09 Oct 2019 12:02:38 GMT

MBS RECAP: Sometimes Balance Sheet Expansion is Just Balance Sheet Expansion

  • Posted To: MBS Commentary

    Bonds were stronger to start the domestic session after European bonds led a rally late in the overnight hours. Trading was flat during the domestic morning hours. A big miss is the producer price data was overlooked because--well.... producer prices are almost always overlooked when it comes to market movement. When Europe closed for the day, US bond yields began to rise, and that's really the truest and most compelling narrative of the day, but things did happen in the afternoon, and the market participants who remained were keen to make much of little. Of the afternoon market movement candidates, a strange tweet about an off-the-beaten path US/China announcement garnered the biggest reaction (something about Visas being revoked for certain Chinese officials), but it was certainly Powell's...(read more)

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    Tue, 08 Oct 2019 21:26:15 GMT

Mortgage Rates Back in Line With Recent Lows

  • Posted To: Mortgage Rate Watch

    Mortgage rates were slightly lower today despite some volatility in the underlying bond market. Rates have generally been moving lower recently, but the trend of improvement looked like it might have been running into some resistance yesterday. While today's drop isn't big enough to suggest complacency, it does make a case for slightly less defensiveness in the short term. In the bigger picture, however, it's good to keep in mind that rates are the lowest they've been in almost a month. Early September was still a bit better, but those were the lowest rates in more than 3 years. Volatility remains a risk as every update regarding a potential trade deal seems to have an easy time pushing the bond market around. When bonds improve or deteriorate enough during any given day, lenders can issue...(read more)

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    Tue, 08 Oct 2019 20:48:00 GMT

Jumbo Credit Access Hits Record High

  • Posted To: MND NewsWire

    Ease of access to jumbo mortgage loans drove the Mortgage Bankers Association's (MBA's) Mortgage Credit Availability Index higher in September. The Index rose 0.9 percent to 183.4. An increase in the Index indicates that lending standards are easing. The index has four components; the Government MCAI which decreased 0.6 percent and the Conventional MCAI which rose 2.4 percent. There are two indices housed within the Conventional MCAI, the Conforming Index which fell 1.1 percent and the Jumbo which jumped by 4.7 percent, hitting a record high. This is a sharp reversal of last month's index report. The August MCAI suffered the largest decline in its history, falling 3.9 percent. Each of the four components dropped by more than 3 percent. "Credit availability increased slightly in September, driven...(read more)

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    Tue, 08 Oct 2019 15:13:38 GMT

FHFA Seeks Help in Recapitalizing GSEs

  • Posted To: MND NewsWire

    Wow, maybe they really mean it this time. The Federal Housing Finance Agency (FHFA) has issued a request for proposals from contractors who would develop a "roadmap" for recapitalizing the government sponsored enterprises (GSEs) as a prelude to releasing them from conservatorship . According to the request's statement of work, the contractor will be expected to "provide financial institutions, capital markets and restructuring expertise, analysis, and advisory services regarding the preparation of the Roadmap for recapitalizing the GSEs (Phase I) and, if necessary, the implementation and on-going monitoring of the Roadmap (Phase II). FHFA, which has acted as conservator of the two GSEs, Fannie Mae and Freddie Mac, since August 2008, says it is issuing the request pursuant to the Housing Finance...(read more)

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    Tue, 08 Oct 2019 14:36:05 GMT

Digital, Correspondent, and Broker Products; HUD, FHA, VA Information

  • Posted To: Pipeline Press

    As Treasury yields head toward the lows of September, and Monday’s bond market holiday, let’s start Tuesday with some “trivia.” Did you know that one of the handful of original Cabinet members who are still in Donald Trump’s Cabinet is Secretary of HUD , Dr. Ben Carson. He has an impressive list of qualifications, and the evidence on his walls to back them up. The United States Department of Housing and Urban Development, with over 8,000 employees, oversees federal programs designed to help Americans meet their housing needs, seeks to increase homeownership, support community development, increase access to affordable housing free from discrimination, and dozens of other functions. It sells houses , oversees Ginnie Mae and the FHA programs, and has Brian Montgomery...(read more)

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    Tue, 08 Oct 2019 12:59:59 GMT

MBS Day Ahead: 1 Day After Suggesting a New Pattern, Bonds Threaten to Break It

  • Posted To: MBS Commentary

    In the day just passed, the bond market sold off in rather underwhelming fashion. There was no overt source of pessimism and the pace of movement lacked a sense of urgency. 10yr yields almost made it back into positive territory in the mid-morning hours before moving steadily higher into the afternoon. Fannie 3.0 MBS were actually positive for most of the day. In the day ahead, bonds will consider the chart-based implications of yesterday's bounce as the econ calendar builds for the week. By bouncing at slightly "higher lows" yesterday, bonds are making a case for a bigger-picture consolidation trend (lower highs and higher lows) as seen in the chart below. At least, they were yesterday! As this trading day begins, yields are already back near yesterday's lowest levels and...(read more)

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    Tue, 08 Oct 2019 12:32:38 GMT

Here's How One City is Fighting Affordability Issues

  • Posted To: MND NewsWire

    One western city has decided to tackle the housing affordability crisis head-on. According to NPR, Reno, Nevada has approved a plan to construct 1,000 new homes in 120 days . In a Saturday broadcast, produced and written by Chris Bentley, NPR newscaster Kathleen McKenna called Reno, self-promoted as "The Biggest Little City in the World," is also one of the least affordable cities in the country relative to household income. The median home price in the city is $420,500. Reno mayor Hillary Schieve told the network that the city has seen many high-tech companies such as Tesla, Google, Apple, and Amazon relocating some of their operations to Reno, escaping the million-dollar plus home prices in the Silicon Valley. She said its current housing market can be partially attributed to the high rate...(read more)

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    Tue, 08 Oct 2019 12:15:04 GMT

MBS RECAP: MBS Lost Ground, Despite Outperforming Treasuries

  • Posted To: MBS Commentary

    Bonds sold off today, but not excessively, and almost not at all if MBS had anything to say about it. Even Treasuries were fairly close to 'unchanged' to start the domestic session and were almost able to regain those levels after a few early hours of weakness. Heading into the PM hours, however, Treasuries were locked in a fairly linear and generally gentle trend toward higher yields. For most of the day (but especially in the AM hours), MBS were more than willing to outperform Treasuries with the latter being only modestly weaker and mostly sideways (fertile ground for MBS outperformance!). As the selling shifted gears from "almost imperceptible" to something a bit more threatening, MBS stopped trying so hard and joined Treasuries in their slide toward negative territory...(read more)

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    Mon, 07 Oct 2019 21:51:16 GMT

Mortgage Rates Might be Hitting Some Resistance

  • Posted To: Mortgage Rate Watch

    Mortgage rates moved lower every week for the past 3 weeks. They covered a respectable amount of ground during that time and ultimately erased most of September's damage by Friday afternoon. In outright terms, September's weakness pushed the average 30yr fixed rate quote roughly 3/8ths of a percentage point (.375%) higher. The past 3 weeks have helped to claw back roughly 0.25% of that. Because of that relatively decent and relatively sustained winning streak, there's a risk that rates will hesitate to make any further improvements this week. Today's modest weakness serves as a softly-worded warning to that effect, but we'd need to see several more days of higher rates in order to confirm that sort of upward momentum. As of today, it's a risk to keep an eye on. Loan Originator Perspective Bond...(read more)

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    Mon, 07 Oct 2019 21:30:00 GMT