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MBS RECAP: Bonds Erase Losses as Trade Deal Underwhelms

  • Posted To: MBS Commentary

    Bonds were leading off in a slightly friendly direction during the overnight session, largely because we hadn't really heard from China with respect to yesterday's trade deal drama. Nonetheless, it seemed like more concrete steps were being taken, so markets were willing to move in a risk-on direction (better for stocks, worse for bonds) in general. The whole "not hearing from China" thing was validated right out of the gate with headlines suggesting China had concerns about US agricultural purchase requirements. Shortly thereafter, Trump tweeted harsh criticism for a WSJ article. Almost everyone assumed he was referring to yesterday's article that blew the lid off the trade deal agreement. With those two updates, suddenly, the deal didn't look like a sure thing and...(read more)

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    Fri, 13 Dec 2019 22:10:41 GMT

Mortgage Rates Bounce After Trade Deal Update

  • Posted To: Mortgage Rate Watch

    Mortgage rates were somewhat distressed , to say the least, after yesterday's various news stories pertaining to the US/China trade deal. For a variety of reasons, that's the biggest consideration for financial markets at the moment, and interest rates are no exception. Rates were pushed to the upper edge of their recent range as the signing of the first phase of the trade deal looked increasingly likely by the end of the week. While both sides basically acknowledged the progress on the deal (and even the probability that it will be signed), it was not, in fact, actually signed. Additionally, several details still need to be cleared up before that happens. The absence of a more concrete trade deal conclusion proved beneficial for rates. As far as underlying bond markets are concerned, much...(read more)

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    Fri, 13 Dec 2019 21:34:00 GMT

Lender Survey: Has the Refi Boom Run Out of Steam?

  • Posted To: MND NewsWire

    Lenders responding to Fannie Mae's Q4 2019 Mortgage Lender Sentiment Survey ® didn't have as bright an outlook for their future profit margins as in the previous survey when their expectations were at a high for the survey which dates back to 2014. However, 44 percent of the 188 senior lending executives completing the survey believe their profit margins will remain about the same compared to the prior quarter, while the remainder are almost evenly divided among those who expect profits will fall (28 percent) and those who expect them to rise, 27 percent. Fannie Mae cites the Mortgage Bankers Association's (MBA's) recent Quarterly Mortgage Bankers Performance Report which showed lender's per loan net production income has been on the rise over the first three quarters of 2019. Lenders reported...(read more)

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    Fri, 13 Dec 2019 16:57:03 GMT

So Much Trade War Drama, But Bonds in a Range

  • Posted To: MBS Commentary

    The litany of updates/alerts listed below effectively serves to frame the launch sequence for today's trading. If you don't care to wade through the minutia, just read the most recent update or simply allow me to paraphrase: There was some confusion earlier as a Trump tweet apparently pushed back on the WSJ article from yesterday which spelled out changes in US/China tariffs. But it turns out Trump was referencing a more recent WSJ article from this morning. Bonds moved back and forth on those headlines, but ultimately began to lead off in a positive direction simply because the finality of yesterday's trade related news seemed to be in doubt as the day began. Rumors surfaced and were then confirmed of a major Chinese press conference to address the trade deal. China basically confirmed...(read more)

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    Fri, 13 Dec 2019 16:05:51 GMT

Correspondent, Processing, Broker Products; Deep Capital Markets Dive

  • Posted To: Pipeline Press

    While the markets are talking about Boris Johnson’s victory in the U.K. (“get Brexit done”), here’s your trivia of the day: Every month that starts on a Sunday has a Friday the 13th. And did you know that research on humans shows that in the short term, we tend to regret actions more than inactions. But in the long term, we’re more likely to regret the things we didn’t do. For lenders… Didn’t merge? Didn’t add that branch? Didn’t hire that great underwriter? (Psychologists suspect that this is because the consequences of inaction are uncertain and take much longer to make an impact.) I’ve been telling folks for quite some time that I hope they’re happy with rates where they since they’ll probably be here for a while...(read more)

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    Fri, 13 Dec 2019 13:57:38 GMT

Only 2 Million U.S. Homes Remain Underwater

  • Posted To: MND NewsWire

    According to Dr. Frank Nothaft, chief economist for CoreLogic, "Ten years ago, during the depths of the Great Recession, more than 11 million homeowners had negative equity." This was a quarter of mortgaged homes, he said. Times have certainly changed. The third quarter report from CoreLogic on the equity in U.S. residential property shows only about 2 million homes to be underwater , with a higher balance on the mortgage or mortgages than the homes' value. This is 3.7 percent of all mortgaged properties. The national aggregate value of negative equity was approximately $301 billion at the end of the third quarter of 2019. This is down quarter over quarter by approximately $2.4 billion, from $303.4 billion in the second quarter of 2019 and the number of homes affected was 220,000 fewer than...(read more)

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    Fri, 13 Dec 2019 13:14:29 GMT

Mortgage Rates Hard-Hit by Trade Headlines

  • Posted To: Mortgage Rate Watch

    Mortgage rates jumped quickly higher today following a series of headlines/tweets regarding the probability of a US/China trade deal ahead of Sunday's tariff deadline. What does all that mean? Let's break it down. The status of the US/China trade relationship is a big deal for financial markets, including the bond market that dictates interest rates like those for mortgages. The more robust and more certain a trade deal seems, the worse it is for rates in general. This Sunday is a deadline for the implementation of a new round of tariffs. As such, risks are/were high that we would see some sort of announcement to cancel or lessen the tariff burden. As of this morning (and again this afternoon), it looks like that is indeed what is happening. At first, a Trump tweet about the likelihood of a...(read more)

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    Thu, 12 Dec 2019 19:58:00 GMT

Sluggish Loan Applications Show Weakness in New Home Sales

  • Posted To: MND NewsWire

    While the Mortgage Bankers Association (MBA) is predicting newly constructed homes sold at a much higher rate in November than they did a year earlier, sales are expected to be down significantly from this past October. MBA's Builder Application Survey (BAS) data for November 2019 shows mortgage applications for new home purchases increased 27.1 percent compared to November 2018 but were down 17 percent from the prior month. This change does not include any adjustment for typical seasonal patterns. Based on the application data and information about market coverage and other data, the association estimates new single-family home sales were running at a seasonally adjusted annual rate of 688,000 units during the month. This estimate is a decrease of 13 percent from the October pace of 791,000...(read more)

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    Thu, 12 Dec 2019 15:06:09 GMT

MBS Day Ahead: A New Way to Look at The Range

  • Posted To: MBS Commentary

    Yesterday brought a nice little rally in response to a surprisingly rate-friendly press conference with Fed Chair Powell. The counterpoint to that conclusion is seen in the chart I posted in yesterday's recap. Specifically, bonds began the day rallying and were in the midst of a linear trend toward lower yields when Powell's press conference briefly took yields below that trend. They ultimately returned to the trend by the end of the day. My efforts to de-emphasize the significance of the Fed (and NFP before that) are not without a solid reason. Yes, these events can and will cause reactions on the day of their release--especially when they surprise markets. But unlike the average past example (especially before mid 2019), they haven't been up to the task of creating lasting momentum...(read more)

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    Thu, 12 Dec 2019 14:15:43 GMT

Broker, Back-Office, Non-QM Products; Upcoming Events; The Fed and Rates

  • Posted To: Pipeline Press

    We never see the headline, "Psychic Wins Lottery!" No one has a crystal ball, but originators often ask their capital markets staff about the direction of rates, whether it is, “Should I lock today?” or “Why can’t we guarantee a builder a rate nine months from now?” I bring this up because plenty of lenders around the nation are planning for 2020. On the table are expanding or shrinking, adding or consolidating branches, hiring or firing, rolling out new products, creating strategic co-branding. Some of that is based on residential forecasts from the I bring this up because plenty of lenders around the nation are planning for 2020. On the table are expanding or shrinking, adding or consolidating branches, hiring or firing, rolling out new products, creating strategic...(read more)

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    Thu, 12 Dec 2019 14:06:58 GMT

MBS RECAP: Fed Proves Surprisingly Capable of Intraday Inspiration

  • Posted To: MBS Commentary

    We moved from NFP not mattering (and then causing a surprisingly big intraday stir) to the Fed undergoing quite a similar routine. Granted, in the bigger picture, neither event will be memorable or have a lasting impact on rate momentum, but they both came as close as they could. Today's reaction to the Fed was the opposite of the reaction to last week's NFP (a fact that only reinforces NFP "not mattering" since yields have now traded well below pre-NFP levels). I'd argue that today's reaction to the Fed was also a bigger surprise and based on more interesting underlying details. Specifically , Fed Chair Powell's thoughts on inflation were delivered in a slightly newer and more bond-friendly way. He unequivocally said there wouldn't be any rate hikes unless...(read more)

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    Wed, 11 Dec 2019 21:55:41 GMT

Mortgage Rates Improve After Fed Announcement

  • Posted To: Mortgage Rate Watch

    Mortgage rates improved today following the Federal Reserve's policy announcement and Fed Chair Powell's press conference. The Fed doesn't set mortgage rates (their policy rate applies to 1-day loans between banks whereas mortgages obviously last a lot longer). But the Fed's monetary policy stance can definitely cause volatility in the broader bond market (which DOES impact mortgages). That was the case today and the impact was positive. Markets correctly assumed that the Fed would neither hike nor cut its policy rate. That wasn't the source of inspiration. Rather, it was comments from Fed Chair Powell during his press conference. Simply put, the Fed is prepared to keep rates lower for longer in an attempt to keep inflation slightly higher than they ultimately want it to be. Their reasoning...(read more)

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    Wed, 11 Dec 2019 21:14:00 GMT

Differences Between Previous and Current FOMC Statements

  • Posted To: MBS Commentary

    Information received since the Federal Open Market Committee met in SeptemberOctober indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports remain weak. On a 12-‑month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. InThe light of the implications...(read more)

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    Wed, 11 Dec 2019 19:02:35 GMT

NAR Forecasts on GDP, Rate Cuts, and Probability of Recession

  • Posted To: MND NewsWire

    The National Association of Realtors (NAR) used the occasion of a summit headed by Secretary of Housing and Urban Development Ben Carson to release its forecast for housing and the economy over the next year. The predictions were consensus estimates from 14 leading economists who participated in the summit and were surveyed last week prior to the Wednesday meeting. The forecast was presented by NAR Chief Economist Lawrence Yun during a conference call, but the sound quality of the transmission was extremely poor. In the cause of accuracy, the predictions below are from a very brief press release NAR distributed prior to the call. The release did not cover all of the details which Yun presented. Yun said the most important question being asked about next year is whether there will be a recession...(read more)

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    Wed, 11 Dec 2019 18:26:22 GMT

Servicing Primer and Prepayment Speeds; Retention, Reno, Non-QM Products

  • Posted To: Pipeline Press

    Aloha! As any servicer with borrowers in Hawai’i knows, if you’re going to ask, “Is Ms. Keihanaikukauakahihuliheekahaunaele* home?” or “Do you live on Kaalualu Waiohinu Rd.?”, you’d better be able to pronounce them. In the 1960s, fewer than 2,000 people spoke Hawaiian fluently, just a handful of whom were children. That changed over the next two decades, and now the number of Hawaiian speakers is about 18,000, half of whom are fluent, thanks to the creation of immersion schools dedicated to saving the language from extinction. And customer service-focused functions, like loan servicing & debt collection, hire their share. More on servicing below. (*A real name.) Shifts in servicing A major component of rate sheet pricing is mortgage servicing rights...(read more)

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    Wed, 11 Dec 2019 14:41:30 GMT

Everyone is Still Refinancing; FHA Refis at 3 Year High

  • Posted To: MND NewsWire

    Mortgage applications activity recovered strongly during the week ended December 6 after the usual Thanksgiving week lull. The Mortgage Bankers Association (MBA) said its Market Composite Index, which measures the volume of mortgage applications, increased 3.8 percent on a seasonally adjusted basis from the week ended November 29 and was 47 percent higher on an unadjusted basis. The earlier week's data had been adjusted to account for the holiday. Refinancing continues to drive the market . The share of those applications made up 62.5 percent of the total submitted during the week, up from 59.0 percent the prior week. The Refinance Index rose 9 percent week-over-week and was 146 percent higher than the same week in 2018. The seasonally adjusted Purchase Index decreased 0.4 percent from one...(read more)

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    Wed, 11 Dec 2019 13:41:03 GMT

MBS Day Ahead: Fed Reading From Same Script as Jobs Report

  • Posted To: MBS Commentary

    Last week, I stunned the world by claiming that NFP (the nonfarm payrolls component of the big jobs report) "didn't matter." OK, maybe not the whole world, and maybe people weren't completely stunned, but in the long-term market following context, such claims are risky business. I'll admit, I was tempted to second guess myself when the number crushed expectations and bond yields spiked quickly, but I doubled down in that morning's analysis, essentially saying this too would pass. Simply put, while historically massive market movers will always command some short-term volatility potential, their lasting impact is limited in this particular market environment. The first reason for that--these days anyway--is the trade war. While some pundits may claim that the parts...(read more)

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    Wed, 11 Dec 2019 13:32:16 GMT

MBS RECAP: Trade Headlines Stealing Thunder From Heavy Hitters

  • Posted To: MBS Commentary

    Last week saw an apparently important jobs report ATTEMPT to have a lasting impact on financial markets only for the move to be completely erased by this morning. Labor market data was already a bit of an outcast owing to its consistently strong performance in recent months/years (i.e. labor market strength is the rule, not the exception. Therefore, the strong report is less of a surprise and thus less of a market mover). But if we could only pick one reason for markets to ignore jobs data (or MOST data for that matter), it's the uncertain economic implications of an eventual trade deal. That also helps explain all of today's intraday volatility as bond yields were bumped up early in the domestic session by one batch of headlines and then again about an hour later by another batch of...(read more)

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    Tue, 10 Dec 2019 22:15:12 GMT

Mortgage Rates Slightly Higher Ahead of Fed Announcement

  • Posted To: Mortgage Rate Watch

    Mortgage rates moved up modestly today as bond markets weakened in response to trade headlines. This week's key consideration on the trade front is whether or not the planned December 15th tariff increase is delayed, canceled, or confirmed. In general, a delay or cancelation would be bad for rates, but markets are already expecting a delay to some extent. The bigger deal would be waking up Monday morning of next week to find the tariff hike had been implemented. In that case, rates would likely benefit (i.e. move lower!). Between now and then, we are most likely to see moderate volatility in a fairly narrow range. Several optimistic trade headlines put upward pressure on rates today, but not enough to push them outside their recent range. Tomorrow brings a policy announcement from the Fed ...(read more)

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    Tue, 10 Dec 2019 21:14:00 GMT

Home Purchase Sentiment Rebounds to Near Record Highs

  • Posted To: MND NewsWire

    After a steep dive in October, America's attitude toward buying a home is on the rise again. Positive answers to the question of whether it is a good time to buy on Fannie Mae's November National Housing Survey rose 11 percentage points to a net of 32 percent, 9 points higher than in November 2018 and its highest point since March 2018. That answer helped drive the Home Purchase Sentiment Index (HPSI) up 2.7 points to 91.5. The index had declined the two previous months but is now up 5.3 points year-over-year and is close to returning to the all time high of 93.8 set in August. The HPSI is constructed from responses to six questions included in Fannie Mae's monthly National Housing Survey (NHS). Half of the six index components moved higher in November. Also pushing the overall index higher...(read more)

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    Tue, 10 Dec 2019 15:55:13 GMT

Automation, Marketing Tools; Shift in Evaluating Credit

  • Posted To: Pipeline Press

    If you knew the value of the house was going to decline, or that the borrower has bad credit and would default, would you make the loan? There’s always a debate about how best to determine creditworthiness based on past behavior (more on that below), but regarding housing prices, last month Arch MI released its quarterly Housing and Mortgage Market Review HaMMR ) report and proprietary risk index showing the top cities across the U.S. where it’s actually more affordable to buy than rent. While we all know it’s expensive to buy in cities like San Jose and Los Angeles, you may be surprised to learn than Syracuse, NY is the #1 city to buy a house (and 30% cheaper than renting ). The top five cities where it’s cheaper to buy vs rent are Syracuse, NY; Rochester, NY; Worcester...(read more)

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    Tue, 10 Dec 2019 14:26:23 GMT

MBS Day Ahead: Still Waiting on Bigger Potential Market Movers

  • Posted To: MBS Commentary

    In the grand scheme of things, today will likely be another placeholder of a day unless some unexpected (and fairly significant) trade war update happens to come out. That leaves the afternoon's 10yr auction as the only moderately capable market mover, and even then, we wouldn't want to hold our breath for Treasury auctions to move markets. Being, as we are, in "wait and see" mode, I'd rather take this morning to reflect on a phenomenon from the recent past. Raise your hand if you thought I was a bit crazy to claim "NFP doesn't matter" ahead of last Friday's blowout jobs report, and then if you thought I was even crazier to double down on that claim after stocks and bonds quickly began to respond to the stellar numbers. (My own hand is about halfway up...(read more)

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    Tue, 10 Dec 2019 13:33:49 GMT

Mortgage Rates Snap Back to Lower Levels

  • Posted To: Mortgage Rate Watch

    Mortgage rates reacted somewhat harshly to an incredibly strong jobs report last Friday. At the time, I noted that such a jobs report would typically have done much more damage to rates, but that the current environment mitigates its impact for a few reasons. First off, labor market strength is taken for granted to some extent, because it's been consistently good for about as long as it's even been consistently good! Just as important is the fact that trade war fears are dominating the market's focus. Depending on the outcome of trade negotiations, market watchers expect a fairly wide spectrum of market outcomes. Still, the jobs report has a more consistent track record of causing big market movement than any other piece of economic data. There will always be some obligatory response to a report...(read more)

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    Mon, 09 Dec 2019 19:58:00 GMT

FHA's Mortgage Insurance Fund Improvement Has Come a Long Way

  • Posted To: MND NewsWire

    The Federal Housing Administration (FHA) released its annual Report to Congress several weeks ago, reporting significant improvement in its Mutual Mortgage Insurance (MMI) Fund. Late last week Brian D. Montgomery, FHA Commission and Assistant Secretary of the Department of Housing and Urban Development (HUD), testified regarding the report to a hearing of the House Financial Services Committee. Montgomery said the MMI's capital ratio increased to 4.84 percent in the 2019 fiscal year (FY2019) from 2.76 percent in FY2018, well above the 2.00 percent statutory minimum. Additionally, MMI Capital was $62.38 billion, an increase of more than $27.52 billion from FY 2018, and perhaps the highest ever. While attributing a significant portion of the improvement both to the fund and FHA's financial position...(read more)

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    Mon, 09 Dec 2019 18:11:49 GMT

Lots of Refinancing, So Why Are Servicers Losing Business?

  • Posted To: MND NewsWire

    Black Knight continues to review, in its new Mortgage Monitor , how the effects of nearly a year of lower interest rates have ricocheted throughout the industry. This month's Monitor looks both at loan data from October and from the third quarter of 2019. Prepayments are still running at record high levels , increasing by what the company called "an eye-popping" 132 percent compared to the same time last year. The single month mortality (SMM) rate increased by double digit percentages for every one of the last 15 vintages of loans during September and October with some of the largest gains among loans originated during the housing bubble of 2005 to 2007. By product type, those loans guaranteed through GNMA (VA, FHA, USDA) once again had the highest payoff rate although they increased in October...(read more)

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    Mon, 09 Dec 2019 14:49:54 GMT