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Supportive Start And a Closer Look at 2.91%

  • Summertime trading is detectably different from the rest of the year.  Volume and liquidity are a bit lighter.  Counterintuitive moves are more common.  And there's a risk of a bit more volatility than events justify.  Thursday was arguably one of those days, but Mondays and Fridays are the habitual worst offenders.  There's no way to tell when we're about to see one of the bigger, more random summertime moves, but in today's case, at least we have a convenient technical backdrop to help gauge significance. 2.85% and 2.91% have been the most relevant overhead technical levels for 10yr yields over the past 24 hours. 2.85% has already been challenged due to an upbeat Consumer Sentiment reading, but 2.91% may be the more relevant level anyway. It definitely saw more action as a floor in July and it's closer to the intersection of the current, short-term consolidation pattern.   As always, there's no predictive value to be gleaned from technical breaks, but they can confirm general trends.  When it comes to 2.91, a sustained break above would confirm that bonds are increasingly giving up the recent flight of low-rate fancy driven by weaker econ data in late July (see "too cold" below) and are more interested in getting back into the same sideways, volatile range that was taking shape as early as 4 months ago.  Incidentally, 2.91 was fairly central to that range as well.

    Fri, 12 Aug 2022 15:45:06 GMT

DSCR, Credit Union, Subservicer Oversight Products; News From Wholesalers; Home Point Earnings

  • Loan officers who’d like to learn a thing or two about the current prospecting environment are invited to listen in today at 2PM CT/noon PT as Steve Richman discusses how LO’s activities are much more important than near-term results, database management is critical, new LOs shouldn’t mind going after traditional lower-level referral partners, and the importance of making calls and working on a Friday afternoon. And while we’re on sales, and marketing, the STRATMOR Group has an upcoming virtual workshop for senior retail sales, marketing executives, and CEOs. The workshop is focused on action items and best practices for sales and marketing leaders, focusing entirely on “what is most important and relevant in today’s changing and challenging market, and along with a panel of STRATMOR experts, you’ll hear from your peers about what is working right now… Three short and interactive power packed sessions are spread over three days (Aug 23-25) so you can keep your schedule on track – plus we’ll deliver an exclusive action plan following the event to all registrants. Email Jim Cameron to learn more. Is the failure to lend in certain neighborhoods the same as avoiding lending in those neighborhoods? The recent fair lending Consent Order and state AG settlements “sticking it” to Berkshire Hathaway affiliate Trident Mortgage in Philadelphia gets a review by attorney and Mortgage Musings blogger Brian Levy. (Available here, this week’s podcast is sponsored by SimpleNexus, an nCino company and award-winning developer of mobile-first technology for the modern mortgage lender. Today’s has an interview with interview with.)

    Fri, 12 Aug 2022 14:43:37 GMT

Rates Are Actually Lower Than Last Week (Despite Moving Higher Today)

  • When it comes to mortgage rates, Thursdays frequently lend themselves to a discussion about fact versus fiction (or "delayed fact" as it may be) in news headlines.  Reasons for this are laid out in detail here.  For those who don't click links, here's the short version: many reporters rely on Freddie Mac's weekly rate survey for one big weekly update on mortgage rates.  The survey is out on Thursday mornings, but most responses are in early in the week.  Bottom line: if rates move much on Tue/Wed/Thu, news headlines may indicate a big move in the opposite direction from reality. The current example isn't quite as bad as last week's, but it's still wrong.  The survey said rates were sharply higher this week, but they're still lower for the average lender.  One reason for the smaller discrepancy is that rates have indeed been moving higher over the past 2 days.  Change hasn't been extreme, but it has lifted the average lender back up from the brink of the "high 4%" range seen last Thursday.  

    Thu, 11 Aug 2022 21:56:19 GMT

Making Sense of Today's Seemingly Senseless Selling

  • Making Sense of Today's Seemingly Senseless Selling Let's refresh our memories regarding 2022's bond trading: a sharp acceleration in inflation concerns led to a big shift from the Fed and heavy selling in the bond market and aggressive flattening of the yield curve.  Now we're tasked with making sense of more heavy selling in the bond market following a big DROP in inflation.  The steepening of the yield curve is one way to begin that process.  Today (and this week in general) it was compounded by Treasury supply in the longer part of the curve and a bounce back from overbought technicals. Econ Data / Events Headline PPI m/m -0.5 vs 0.2 f'cast, 1.0 prev y/y   9.8 vs 10.4 f'cast Core PPI m/m 0.2 vs 0.4 f'cast, 0.4 prev y/y 7.6 vs 7.6 f'cast, 8.4 prev Jobless Claims  262k vs 263k f'cast, 248k prev Market Movement Recap 09:13 AM Sideways to slightly stronger in the overnight session with most of the gains coming between 7:30 and 8:10am ET.  Losing some ground after 8:30am data.  10yr down 2bps at 2.764 and MBS up a quarter point. 01:03 PM Steady selling after 10am and a bit more after the 30yr bond auction just now.  10yr up 6bps at 2.846.  MBS down a quarter point on the day and roughly half a point from the highs.  02:41 PM Selling continues.  New lows for MBS, now down more than 3/8ths on the day and more than 5/8ths from rate sheet print times.  10yr yields are up more than 11bps at 2.897. 04:35 PM Flatter trading for Treasuries over the past 2 hours.  MBS have lost another tick or two.  

    Thu, 11 Aug 2022 21:21:58 GMT

More Tame Inflation; More Bond Losses

  • Up is down, old is new, green is red, etc.  Here we are with a second straight day with inflation data coming in significantly lower than forecast and the second straight day with bonds paradoxically weakening.  Today's version is a bit different.  Yesterday began with a decent, logical head start into positive territory.  Yields were much closer to unchanged this morning and didn't have any sort of rally in response to the PPI miss.  As for rationale, we'll have to talk about things we otherwise wouldn't talk about if bonds were rallying.  In other words, this is one of those times where we have to go hunting for a narrative to fit the trading. Some of these would have applied anyway.  They include things like the Treasury supply environment, corporate issuance, and the technical landscape.  On that note, 2.85% merits some vigilance in terms of 10yr yields even though MBS have been outperforming 10s. Today brings the final Treasury auction of the week at 1pm ET.

    Thu, 11 Aug 2022 16:57:37 GMT

Recruiting, Cap. Mkts., DPA, Lead Conversion, Broker Products; Jumbo, Non-Agency, Non-QM News

  • We began 2022 thinking that this might be the “Year of Non-QM.” The product certainly has its advantages for some borrowers, and lenders & investors. And then First Guaranty and Sprout vanished, and the herd of lenders was spooked, began talking about March of 2020 when some investors backed away from the market, and everyone was reminded to never have only one “take out” for a given loan or product. And then the headline yesterday: “SEC Charges Angel Oak Capital Advisors with Misleading Investors in $90 Million Fix-and-Flip Securitization.” Meanwhile, the industry is watching inflation numbers yesterday and today. One way to fight inflation is for a food supplier to put four tomatoes in a box that held five in the past. And don’t get me started on restaurant portions: higher prices and smaller portions have caught the attention of Consumer Affairs. Know that since the CPI report yesterday, Fed speakers have been quick to temper excitement around the numbers and have been reminding the market that inflation is still a very big issue. (Available here, this week’s podcast is sponsored by SimpleNexus, an nCino company and award-winning developer of mobile-first technology for the modern mortgage lender. Today’s has an interview with Interview with Jason Biegel, COO of Change Lending’s residential lending division, on “Securitization 101” and the capabilities it affords.) Broker and Lender Services, Programs, and Software The Wonder Twins of mortgage lending, Sales Boomerang’s borrower intelligence and Mortgage Coach’s lead conversion capabilities combine to help lenders reach their profit goals in any market. For example, Mortgage Coach’s interactive loan comparisons have helped Churchill Mortgage advisors provide heightened consultative service and boost bottom-line KPIs for years. Just ask Churchill’s Tennessee District Manager Kevin Watson, who credits Mortgage Coach for increasing production pull-through in his region by more than 10% just one year post-implementation: “The uptick in closing ratios we’ve experienced since implementing Mortgage Coach speaks to the way that informing borrowers of their options really increases their confidence in doing business with us.” See how Sales Boomerang and Mortgage Coach’s best-in-class technologies can supercharge your lead conversion.

    Thu, 11 Aug 2022 14:33:14 GMT

Rates Started Lower, But Rose Unexpectedly This Afternoon

  • First thing's first: we deal in extremely granular terms when it comes to mortgage rate movement here.  If you're just looking for an idea of how today's rates are versus yesterday's, they're lower.  The headline is a reference to intraday reprices--the practice of changing rates for better or worse during the business day in response to changes in market conditions.  Reprices are common.  We rarely see a day without at least a few of them.  Today didn't set any records in that regard, but the average lender ended the day with slightly higher rates versus the morning's initial offerings.  The afternoon reprices were counterintuitive considering the day's big event: the release of July's Consumer Price Index (CPI) at 8:30am ET.  As far as scheduled reports are concerned, few have had more market moving potential than CPI over the last few months.   That's because CPI is the more timely of the 2 main inflation indices in the US and inflation has been a big deal for rates in 2022.   The upward pressure on rates was counterintuitive because CPI showed inflation coming in distinctly lower than expected and much lower than last month both for the overall index and the "core" (which excludes more volatile food and energy prices).  Notably, the headline increase for July was 0.0% versus +1.3% in June! If you were a bond trader or rate watcher who had to bet on how bonds/rates would react to such a report, you'd need a really good reason to bet on anything other than rates moving lower.  Indeed, that's exactly what happened in the immediate wake of the data this morning.  Treasury yields dropped and mortgage-backed bonds surged (that's a good thing for mortgage rates).

    Wed, 10 Aug 2022 21:37:01 GMT

How In The World Did Bonds Lose Ground After a Big Drop in Inflation?

  • How In The World Did Bonds Lose Ground After a Big Drop in Inflation? This morning's hotly anticipated CPI data came in well below forecast--a turn of events that should have produced a nice little rally in the bond market.  Bonds did indeed rally initially, but began backtracking almost immediately (MBS managed to hold on to about a quarter point of improvement whereas  Treasuries turned red).  A paradoxical reversal to be sure!  Today's video is devoted almost entirely to discussing the rationale for such a move.  In short, it represented the same concern laid out in yesterday morning's AM commentary, but on an accelerated timeline. Econ Data / Events CPI m/m 0.0 vs 0.2 f'cast, 1.3 prev CPI y/y 8.5 vs 8.7 f'cast, 9.1 prev Core CPI m/m 0.3 vs 0.5 f'cast, 0.7 prev Core CPI y/y 5.9 vs 6.4 f'cast, 5.9 prev Market Movement Recap 08:35 AM The "big turn" in inflation data is in--or so it would seem.  MBS up nearly 5/8ths and 10yr yields down 8.4bps at 2.693.  Stocks up 1.68%.  2yr yields down a whopping 17.3bps (more sensitive to the data's rate hike implications). 11:30 AM Gains ebbing noticeably--especially in the longer end of the yield curve.  10yr down only 2bps now.  MBS still up 3/8ths, but down more than an eighth from the highs. 02:18 PM Not much initial reaction to 10yr auction, but eventual weakness taking yields into negative territory in the 2pm hour.  10yr yo to 2.796.  MBS still up 19bps on the day at 99-28 (99.875).

    Wed, 10 Aug 2022 21:02:41 GMT

CPI Delivers on Volatility Promise And on Paradoxical Potential

  • Reliably predicting the future in terms of directional market movement is tricky if not wholly impossible, but predicting higher odds of volatility is a different story.  When it comes to a report like the Consumer Price Index in the middle of 2022, we can be reasonably sure we'll see some bigger movement, for better or worse.  Today's installment delivered, but not in a completely logical way. To be fair, the first move was entirely logical with bonds rallying sharply due to inflation coming in much lower than forecast across the board.  But since then, the paradox has been kicking in--and much more quickly than we laid out in yesterday's commentary.  Revisit it here if you like, but the short version is that low inflation can't do as much as weak economic data to spur a sustainable rate rally.  The closing line of yesterday's commentary surmised that a weak CPI reading would cause an initial rally, but one that might begin to fade after a few days.  Instead the rally in the long end of the yield curve began to fade after only a few hours!  10yr yields are close enough to 'unchanged' on the day. 2yr yields are logically doing better because they're more receptive to changes in the Fed's rate hike outlook.  But even when we look at rate hike odds, the market is much less flighty in response to inflation data than it was in June and--to a lesser extent--July. MBS are thankfully short enough in terms of duration to be outperforming 10yr Treasuries so far this morning.  UMBS 4.0 coupons initially surged by more than half a point and, although they've also given up some gains, they're still up more than a quarter point on the day.

    Wed, 10 Aug 2022 16:24:57 GMT

Automation, Non-QM products; LD,Notarize,Cypress, and UWM in the News; Disaster Updates; CPI and Rate Volatility

  • Big and small, they aren’t the first and won’t be the last. Residential lenders everywhere are ruminating on Notarize laying off 75 percent of its legal staff, the closure of fledgling correspondent Cypress Mortgage Capital, “powered by Celebrity Home Loans,” and the announced winddown and shutdown of loanDepot’s wholesale channel, effective by Halloween, along with dramatic cuts to its retail division. Frank Martell took LD’s helm in April, and announced the bad Q2 results (fortunately helped by servicing income). loanDepot is not alone. Of course it’s stock, and that of nearly every lender, has not done well after its initial investors cashed out: LDI went public at $14 per share, hit a high that day of nearly $40 per share, and closed yesterday at $1.84. If someone had invested their life savings of $1 million at the high, their life savings would be worth $46,000 now. Thousands have been laid off, not only from loanDepot but from other lenders in their rush to lower expenses. (Those impacted can post their resume for free here and employers can view them for the nominal fee of $75.) United Wholesale Mortgage, however, posted a net income of $215.4 million in the second quarter, a 55% increase from 2021. And a look at the stock prices of Guild, Home Point, Finance of America, UWM, and Rocket all show similar patterns which are also reflected in the net worth of privately held lenders. And the autumn and winter are ahead of us. (Available here, this week’s podcast is sponsored by SimpleNexus, an nCino company and award-winning developer of mobile-first technology for the modern mortgage lender. Today’s has an interview with attorney Peter Idziak on temporary buydowns as a viable solution to affordability issues.)

    Wed, 10 Aug 2022 14:40:49 GMT