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MBS RECAP: Bonds Surge to Weakest Levels since 2014

Fri, 20 Apr 2018 21:14:06 GMT

Posted To: MBS Commentary

10yr yields hit the highest levels in more than 4 years this afternoon as bigger-picture selling pressure looks to be taking the reigns back from the Springtime consolidation that helped rates hold steady-to-slightly lower in March. There are no big, obvious reasons for the sudden spike in rates. We're left to cobble together a narrative from boring, esoteric stuff like an "imbalance in trading positions," anxiety over the data, earnings, and bond supply next week, and the end of a few days of extra help from tax deadline retirement account funding. Or, if you'd like to go with fewer words , it's no less valid to say that technicals and momentum are the culprits. In other words, bonds were in a consolidation trend. They tested the ceiling, broke the ceiling, and have been...(read more)

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Mortgage Rates Quickly Approaching 4-Year Highs

Fri, 20 Apr 2018 18:18:00 GMT

Posted To: Mortgage Rate Watch

Let's clear one thing up before we begin. Freddie Mac, MBA, and Ellie Mae all noted new 4-year highs in mortgage rates this week. They are all technically wrong. This has to do with the way their data is collected and/or averaged. And while I have no doubt that they are accurately conveying the results of their data collection efforts according to their methodology, there is a more accurate way to do things. Specifically, we can track actual lenders' rate sheets every day. Even if we take an average of that daily data, we still find that rates aren't quite back to 4-year highs just yet. Depending on the lender, these occurred on one of the days near the end of February. In fact, some lenders' rates from March 21st are still higher than today's. Are we talking about very big differences between...(read more)

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Wells Fargo to Face Largest Fine Yet

Fri, 20 Apr 2018 13:27:34 GMT

Posted To: MND NewsWire

Once again Wells Fargo is about to pay dearly for its inability to walk the straight and narrow. The Washington Post , under the byline of Renae Merle, is reporting that the bank is about to be hit with the largest penalty of the Trump administration , perhaps as early as today. A settlement, reported to be in the neighborhood of $1 billion, has been reached between wells and its regulators, the Consumer Financial Protection Bureau (CFPB), and the Office of the Comptroller of the Currency (OCC) over improprieties in both their mortgage and auto lending business. The Bank acknowledged last week that it faced a hefty fine. Neither regulator has commented on the matter to date. Wells Fargo has admitted to charging some customers improper fees to lock in their mortgage interest rates and to forcing...(read more)

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MBS Day Ahead: If Rates Keep Moving Higher, It Could Still Be a Head Fake

Fri, 20 Apr 2018 13:20:58 GMT

Posted To: MBS Commentary

Rates are in the midst of a serious, threatening move higher. Yesterday brought additional confirmation of the end of the friendly Springtime consolidation trend and it took us one step closer to the highest yields in more than 4 years. The specific reasons for yesterday's weakness were covered in the MBS Live Huddle , but even then, the bigger-picture justification for gradual weakness in 2018 is well-documented here and elsewhere (Treasury issuance, Fed policy outlook, upside growth/inflation risks). Rates could very well continue higher today--possibly even enough to break those pesky 4-year highs from back in late February. But even if they do, it might not be the end of the world. In fact, there are at least 2 recent examples of big scary rate spikes consolidating (like we did in March...(read more)

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MBA's Compliance Accreditation; Freddie and Fannie Changes Continue

Fri, 20 Apr 2018 13:18:50 GMT

Posted To: Pipeline Press

Did you know that Wells Fargo gives more assistance and aid to people and communities through its Foundation than any other company in the United States. For example, “the Wells Fargo NeighborhoodLIFT program looks to the future by delivering down payment assistance and financial education to homebuyers.” If only people focused on that, right? Not only did Wells tragically lose an employee in the Southwest Airline accident, but in a smack to the Retail Division the American Federation of Teachers notified Wells that it is dropping the bank as a recommended mortgage lender for the national education union's 1.7 million members. The press continues to talk about a settlement of a potential $1 billion fine, and by some specific measures other lenders have overtaken Wells’ volume...(read more)

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MBS RECAP: Bonds Add Exclamation Point to Yesterday's Breakout

Thu, 19 Apr 2018 21:03:41 GMT

Posted To: MBS Commentary

The break outside what we'll call the "Springtime Consolidation" for bonds started taking shape as early as last week. On Thursday and Friday, yields hugged the upper boundaries of that trend, simultaneously shying away from the sort of positive bounce that would typically suggest the trend's continuation. No matter! Perhaps they just needed to think things over for the weekend and things would look different on Monday. Nope! In fact, bonds weakened on Monday, which just about put the nail in the coffin of the Springtime Trend, but Tuesday's resilience raised doubts. By yesterday, however, we probably had our final answer with the big break above 2.835% and even a modest break above 2.86% in 10yr yields. Today's overnight weakness was plenty to put a period at the...(read more)

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Mortgage Rates Jump to Highest Levels in About a Month

Thu, 19 Apr 2018 20:35:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates jumped higher today as bonds continued a move away from narrow Springtime range seen in March and early April. Bonds dictate rate movement and yesterday saw the bond market make its first convincing attempt to break what had been a friendly, narrow range. This of course coincided with a narrow range for rates in the past few months. It was also "friendly" relative to the trajectory seen in the first part of the year. When these sorts of ranges become established, the boundaries take on a special significance. As soon as the floor or the ceiling is definitively broken, there tends to be some additional momentum in the direction of the break. That's why yesterday's headline mentioned that bonds were suggesting "more trouble ahead." I'd hoped to be wrong about that, but here's the...(read more)

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Weather Cools Remodeling Perceptions

Thu, 19 Apr 2018 18:57:59 GMT

Posted To: MND NewsWire

The Remodeling Market Index (RMI) is to home remodelers as the Housing Market Index (HMI) is to new home builders. Each is constructed by the National Association of Home Builders (NAHB) to reflect builder confidence in their particular share of the market. The quarterly RMI is based on responses to a survey in which professional remodelers are asked to gauge current market conditions in terms of major and minor additions and alterations , maintenance and repairs on both owner- and renter occupied dwellings. NAHB assigns a numerical value to those answers. They are also asked about calls for bids, work commitments over the next three months, work backlogs, and appointments for proposals. Those questions form the basis of the future indicators index. The overall market index retreated to its...(read more)

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MBS Day Ahead: What Stock Lever? Bonds Tanking Without Any Help

Thu, 19 Apr 2018 13:51:09 GMT

Posted To: MBS Commentary

We've been increasingly wary about a potential break of the recent consolidation/rally trend --the one that saw yields move sideways to slightly stronger from late Feb through early April. Yields tiptoed to the top of that range as of Tuesday and then fired a more forceful warning shot with a bigger breakout yesterday. Today looks set to continue the destruction of the trend with sharp losses overnight. Where might this be going? With 2.86% breaking and 2.91% already being tested, there's really only the super-long-term highs at 2.95+ remaining. To see anything higher, we have to go back more than 4 years. If that breaks, there's not much overrun until we're looking at 2011's levels in the low 3's as the supportive ceiling. But let's slow down a bit. We'll cross...(read more)

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Rates on Closed Loans at 4 Year High

Thu, 19 Apr 2018 13:36:00 GMT

Posted To: MND NewsWire

The share of refinancing loans dropped to 38 percent of loans closed in March, down from 43 percent in February. Ellie Mae's Origination Insight Report for the month notes that the 5 percent decline in those loans was consistent across all three loans types, FHA, VA, and conventional. Refinancing slipped as the interest rate on 30-year fixed-rate mortgages rose to their highest level since January 2014. Ellie Mae said that the average rate on closed loans which had been at 4.33 percent in January and 4.48 in February jumped to 4.69 percent in March. The percentage of loans with adjustable rates (ARMs) increased to 6.3 percent from 5.5 percent the previous month. The distribution of loans across loan types was largely unchanged. The FHA share rose 1 percentage point to 20 percent while conventional...(read more)

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Home Price Increases Outpace Income Gains - Again

Thu, 19 Apr 2018 13:32:00 GMT

Posted To: MND NewsWire

Fewer homes on the market are affordable than a year ago, and fewer households can afford them with their current income. The National Association of Realtors® (NAR) and the realtor.com website have released a list of the least and the most affordable locations nationwide based on the area's income and the website's active listings. The maximum affordable home price assumes that 30 percent of a purchaser's income can go to pay for the financing, property tax, homeowner's insurance costs, and a mortgage insurance premium if required. It is also assumed that the purchase will be financed with a vanilla 30-year mortgage at the prevailing rate advertised by lenders on the realtor.com site. A score of one or higher generally suggests a market where homes for sale are more affordable to households...(read more)

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New Lender Products; Freddie and Fannie Updates; Rates Moving Higher

Thu, 19 Apr 2018 13:11:34 GMT

Posted To: Pipeline Press

Rumors continue to swirl about practically every lender out there, and exaggeration is rampant. A company eliminates low producing LOs in Arizona and suddenly the jungle drums are saying it is closing its Southwest division. A middle layer of management is cut, and word on the street has the company shuttering a whole channel. On the flip side, some companies effectively eliminate an entire channel but leave a few personnel in the headquarters for appearance or to close out the pipeline and eventually be jettisoned – to avoid making a formal announcement. Fannie and Freddie Continue to Modify Requirements Remember that the FHFA has a dual role as both regulator and conservator of the GSEs, Fannie Mae and Freddie Mac, and is also regulator of the Federal Home Loan Banks (FHLBanks). The...(read more)

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MBS RECAP: More Warning Shots From Bonds

Wed, 18 Apr 2018 20:49:56 GMT

Posted To: MBS Commentary

Today was a more serious version of the same sort of warning shots seen at the end of last week. At that time, bond yields rose to challenge an intermediate ceiling at 2.835%, but didn't go out of their way to break it. This week began with higher yields on Monday morning, but a nice recovery throughout the day. When yesterday's gains added to that recovery, it was tempting to hit the snooze button and go back to sleep. Today's trading sounded the alarm, at least to some extent. It might not be loud enough to wake the deeper sleepers out there, but it's important to note that yields have quickly moved back up to the highest levels since before the trade war rally (Fed Day, March 21st). There weren't any big, overt motivations for the weakness. As discussed in the Huddle...(read more)

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Mortgage Rates Inch Higher as Bonds Suggest More Trouble Ahead

Wed, 18 Apr 2018 19:25:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates moved higher today as bond markets continued a mildly weaker trend for the month of April. Bonds (which underlie rates) are under pressure for a variety of reasons. The most notable headwinds are longer-term and bigger-picture. Rates responded to these headwinds in a fairly big way in Jan/Feb and have basically been "taking a break" since then. Rates have moved very little during this "break," with most borrowers being quoted the same NOTE rate on any given day in the past 2 months. Upfront costs have been the only way the modulate the EFFECTIVE rate of the average lender's 30yr fixed quote. Today's move in bonds brings 10yr Treasury yields to their highest levels since March 21st. While this, in and of itself, doesn't rekindle the same sort of drama seen in the first 2 months...(read more)

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UI Says Underwriters Should Consider Rent History

Wed, 18 Apr 2018 16:01:59 GMT

Posted To: MND NewsWire

Access to credit remains tight and the Urban Institute (UI) blames in part that lenders are not measuring the credit risk of borrowers appropriately. Laurie Goodman and Jun Zhu, writing in UI's Urban Wire blog say that paying rent is the most significant financial commitment of most renters. Yet, while credit reports often ding renters for missing rent payments, the performance of good tenants doesn't enter into their credit scores. Considering a borrower's rental pay history , this could be done via bank statements, to the mortgage qualification process, they say, would make assessing renters' credit risk easier. It could also expand access to homeownership among a significant portion of the nation's population. The authors analyzed rental payment histories to see how they might impact mortgage...(read more)

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Freddie Mac: Shop Smart, Save Big

Wed, 18 Apr 2018 14:36:29 GMT

Posted To: MND NewsWire

They aren't suggesting you shop 'til you drop, but Freddie Mac says neither should borrowers buy the first mortgage they see. Doug McManus and Elias Yannopoulos, members of the company's Economic and Housing Research Group, write in its Insights Blog that shopping for a better mortgage rate could save a borrower hundreds or thousands of dollars. Yet, a 2015 survey by the Consumer Financial Protection Bureau found that almost half of consumers "seriously considered" only one lender before making a choice. More than three-quarters (77 percent) made application with only one lender and very few considered more than three. The Freddie Mac analysts say many borrowers don't even realize that rates offered by lending institutions can vary widely. Their research indicates that just getting one additional...(read more)

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MBS Day Ahead: Bonds At Mercy of Earnings Ramp-Up, But Curve Could Help

Wed, 18 Apr 2018 13:31:46 GMT

Posted To: MBS Commentary

The term "earnings season" gets thrown around quite a bit in financial news, but what is it, exactly? Simply put, it's a period of several weeks each quarter where a majority of companies release their earnings reports. This is always of interest to the stock market as it's something of a report card for parents wondering how their children are doing in school. The first quarter of 2018 is especially interesting due to tax law changes. It's as if the children are in a new school or using some revolutionary new study aid. All that to say: the number of earnings releases went from the teens to the 40's yesterday as it builds toward more than 200 next Wednesday and more than 300 on the following Wednesday. Bonds don't necessarily care as much as stocks, but they still...(read more)

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TPO and Warehouse Products; Training Events; MBA Shows Decrease in Volume, Profits

Wed, 18 Apr 2018 13:15:24 GMT

Posted To: Pipeline Press

The MBA tells us that both volume and profits were down in 2017. “ Independent mortgage banks and mortgage subsidiaries of chartered banks made an average profit of $711 on each loan they originated in 2017 , down from $1,346 per loan in 2016.” Production expenses grew in all categories: sales, fulfillment, production support and corporate. Keep that in mind the next time anyone questions pricing, asks for a free extension, or wants .250 knocked off the price of that $300k loan to match the guy up the street. Trainings and Events Todd Duncan is hosting his High Trust Sales Academy mortgage training event May 8th-11th in Newport Beach, California. He’s been teaching this event for 26 years and over 12,000 loan officers have successfully completed the training. The event is...(read more)

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Mortgage Application Activity Surges

Wed, 18 Apr 2018 12:31:12 GMT

Posted To: MND NewsWire

The pace of mortgage applications picked up during the week ended April 13, ending a two-week slide. The Mortgage Bankers Association (MBA) reported its indices for both purchase mortgages and refinances improved significantly compared to the week ended April 6. The Market Composite Index a measure of total application volume, increased 4.9 percent on a seasonally adjusted basis and was 6 percent higher without adjustment. The Purchase Index was also up 6 percent seasonally adjusted and rose 7 percent compared to the previous week on an unadjusted basis. The unadjusted index, which had fallen below the level for the same week in 2017 in the prior report, was 10 percent higher than its 2017 counterpart. The Refinance Index was also up, increasing 4 percent compared to the previous week, but...(read more)

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MBS RECAP: Bonds Hold Ground Despite Stronger Data/Stocks

Tue, 17 Apr 2018 20:47:10 GMT

Posted To: MBS Commentary

With elevated stock/bond correlation of late, it's always worth noting when things move in the opposite direction. Today was such a day, with stocks making solid gains while bonds managed to hold their ground near unchanged levels. Corporate bond issuance and stronger economic data also added to ostensible challenges for rates, thus making the ground-holding all the more interesting. But here are the caveats: 1. Not every part of the bond market held its ground. Shorter maturity bonds (like 2yr Treasuries) lost ground. This pushed the yield curve to its narrowest levels since 2007. This is a reflection of the positive economic data having clear implications for the Fed's rate hike path (which would affect 2yr yields) but fewer implications for longer-term growth and inflation (which...(read more)

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Modest Improvements For Mortgage Rates

Tue, 17 Apr 2018 20:07:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates had a calm day. Lenders who had offered improved rate sheets yesterday afternoon didn't see much reason to drop rates any further today. Lenders who took a more conservative route yesterday ended up being a little better off. Although there were several economic reports this morning, bonds (which drive rates) did nothing to respond and have generally been uninspired so far this week. In fact, in a broader sense, bonds haven't exhibited much inspiration for more than a month. Although rates have descended modestly since late February, it's just as fair to label that movement as "flat" in the context of typical rate movement. For example, most borrowers would still be quoted the same "note rate," with the only difference being slight changes in upfront fees/points. Loan Originator...(read more)

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Trade War Risks a Dark Cloud For an Otherwise Bright Economy - Fannie Mae

Tue, 17 Apr 2018 16:27:44 GMT

Posted To: MND NewsWire

Fannie Mae's economists remain upbeat about economic growth in the medium term but said on Monday that they see increasing downside risks. In its March forecast, the company's Economic Research Team had predicted that growth would slow during the first quarter but with a subsequent pickup that would result in growth of 2.8 percent in 2018. In its current edition of Economic Developments, they say growth slowed more in the first quarter of the year, to 1.7 percent rather than the 2.1 percent expected earlier. At the same time, the government revised its fourth quarter 2018 estimate from 2.5 to 2.9 percent. Based on that encouragement, Fannie Mae has held steady, revising its full year estimate down only 0.1 percent. Fundamentals remain strong and fiscal stimulus from the tax cut and new federal...(read more)

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MBS Day Ahead: Technically Under Attack, But is There Hidden Hope?

Tue, 17 Apr 2018 14:16:06 GMT

Posted To: MBS Commentary

Much of the analysis of the past few days has focused on the downwardly sloped trend channel seen in today's first chart. This can be thought of as the "correction trend" that helped bonds settle down after a glut of selling pressure to kick off the new year. From a technical standpoint , that trend has been under attack for the past 3 days. In the strictest sense, it's actually been broken. That said, the technical breakout has been taking the form of a "trickle" so far this week. That begs the question: is there some secret reason to be hopeful about bonds' prospects in the near-term future? Is there some way that rates could get back on track with a moderate rally? Well, anything is technically possible when it comes to the future of rates. There's no...(read more)

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Housing Starts, Permits Stage Spring Recovery

Tue, 17 Apr 2018 13:54:10 GMT

Posted To: MND NewsWire

Both housing permits and housing starts recovered in March from very disappointing performances in February. The New Residential Construction Report , jointly issued by the U.S. Census Bureau and the Department of Housing and Urban Development, has both indicators up for the month, and both beat analysts' expectations. Single family construction however weakened from February rates. Permits for privately-owned residential construction were issued at the seasonally adjusted annual rate of 1,354,000, a 2.5 percent increase from the February rate of 1,321,000. The February number is an upward revision of the 1,298,000 originally reported. Permitting in March was up 7.5 percent compared to the March 2017 rate of 1,260,000 units. Analysts polled by Econoday had made a consensus forecast of 1,315...(read more)

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Annual Mortgage Bank Profits Fall by Nearly Half

Tue, 17 Apr 2018 13:18:48 GMT

Posted To: MND NewsWire

Less than a month after reporting some bad news about mortgage production and profits in the fourth quarter of 2017 the Mortgage Bankers Association (MBA) is back with a roundup of those measures for the entire year. The news didn't get any better. MBA said that per-loan profits for 2017 were $711, only slightly more than half the $1,346 in profits reported in 2016. The full year average for 2016 topped that of any single quarter in 2017. "Production profits dropped by almost half in 2017 as rate-term refinancings diminished and the overall average production volume dropped," said Marina Walsh, MBA's Vice President of Industry Analysis. The year started out with a net gain of only $224 in the first quarter but recovered in the second quarter to $1,122 as a reprieve from rising rates boosted...(read more)

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