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MBS RECAP: Mortgages Outperform After European Damage Control

Wed, 28 Jun 2017 21:31:19 GMT

Posted To: MBS Commentary

Today began in hilarious and somewhat glorious fashion with unnamed "ECB sources" overtly doing damage control on Draghi's comments that rocked bond markets yesterday. The "sources" said Draghi's comments were merely intended to prepare markets for a decision on stimulus later this year without making a firm commitment. Well guess what, "sources!" We have a bit of experience with "preparing markets for decreased stimulus" here in the US. The Fed crossed this same bridge in May 2013 (Bernanke actually tried to cross it in March 2013, as I discussed in way too much detail here ) and there was really no way around the fact that it was going to cause markets to freak out. We and the ECB are very lucky that the Fed paved the way for these growing pains...(read more)

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Mortgage Rates Highest in More Than 2 Weeks

Wed, 28 Jun 2017 20:39:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates moved moderately higher again today, as investors continued digesting the possibility of a "taper tantrum" in Europe. The US version of the taper tantrum occurred in 2013 when the Fed began signaling its intention to buy fewer bonds. Fed bond buying was a key motivation for the all-time low rates seen in 2012. Early yesterday morning, the head of the European Central Bank (ECB) made comments that led some investors to believe Europe was nearing its own showdown with tapering. The ECB responded this morning by telling markets they've got it all wrong and that the original comments were intended to be "balanced." While that did help bond markets recover somewhat, it wasn't enough for mortgage rates to move appreciably lower. The average lender is once again quoting 4.0% on top...(read more)

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"Lopsided Conditions" Dragging Down Pending Home Sales

Wed, 28 Jun 2017 14:39:00 GMT

Posted To: MND NewsWire

Pending home sales failed to rise as expected in May, the third straight month that measure has declined. The National Association of Realtors'® (NAR's) Pending Home Sale Index (PHSI) dipped 0.8 percent compared to April, on top of a 1.3 percent downturn that month. The index is now 1.7 percent below its level in May 2016, the second consecutive month annual sales have been down. The PHSI is a leading indicator of existing home sales based on signed home purchase contracts. The Index lever was 108.5 in May, and the April index was revised down from the 109.8 originally reported to 109.4. Analysts polled by Econoday had expected the PHSI to increase from 0.4 to 0.8 percent. The consensus was for a one-half point gain. NAR said the decline was the result of ongoing supply shortages and resulting...(read more)

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Waivers Granted for Early Compliance with Servicing Rules

Wed, 28 Jun 2017 14:01:41 GMT

Posted To: MND NewsWire

The Consumer Financial Protection Bureau (CFPB) says it has learned that some servicers anticipate some calendar-related problems in complying with the final rule amending mortgage servicing regulations that were issued by the Bureau last August. Some of the changes to Regulations X and Z are schedule to go into effect on October 19, 2017 and the remainder on April 19, 2018. Both effective dates fall on a Thursday. This leaves servicers less than a full day in each case, from the close of business on the preceding Wednesday to the start of the day on Thursday, to update and test systems to assure compliance on the effective day of the changes. CFPB said it understood that, if servicers do not have sufficient time to complete these tasks, their systems may be more likely to produce errors and...(read more)

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The Economy and Rates; Originator Training; Freedom Takes a Bite Out of the Big Apple

Wed, 28 Jun 2017 13:31:41 GMT

Posted To: Pipeline Press

Transitional licensing, where a bank LO can move to being a non-depository LO and still can originate? Yup.Contact your rep in Congress to support it . I imagine non-depository lenders are keenly interested in this, although with summer vacations coming up, and plenty already on its plate, the bill may not sail through Congress. Speaking of originators, if you are looking for a good book for training new hires, here is a strong option to help them with their studies: " The Successful Mortgage Broker: Selling Mortgages After the Meltdown ." Company News; What's New Out There? Another day, another piece of substantive news. This time around, New York Community Bancorp, Inc. announced the sale of its mortgage banking business and residential assets covered under the FDIC Loss Share Agreement to...(read more)

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MBS Day Ahead: Bond Markets Debating Seriousness of ECB Tapering Risk

Wed, 28 Jun 2017 13:19:58 GMT

Posted To: MBS Commentary

Seemingly overnight (in fact, it WAS overnight yesterday), the notion of a European taper tantrum burst on the scene following comments from ECB President Draghi. Those were as follows: All signs now point to strengthening recovery in the EU Deflationary forces replaced by reflationary ones growth will be above trend and well-distributed among nations inflation will still be muted due to temporary factors still need a considerable amount of accommodation to get through those temporary factors ECB will need to be gradual in adjusting parameters Now this morning, the ECB is already trying to do damage control , saying Draghi intended the comments to balanced and that markets took him way out of context. ECB sources further asserted that markets "failed to take note of caveats." We can...(read more)

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Mortgage Application Activity Slows Significantly

Wed, 28 Jun 2017 12:47:15 GMT

Posted To: MND NewsWire

Applications for mortgages plunged during the week ended June 23, even as interest rates remained relatively stable. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, fell 6.2 percent, on a seasonally adjusted basis, from the week ended June 16 and was down 7 percent without an adjustment. The decrease affected applications for both refinancing and for purchase , although refinancing took the larger hit. That index dropped by 9 percent and the refinance share of activity retreated a full percentage point to 45.6 percent. The Purchase index was down from the prior week by 4 percent when seasonally adjusted and 5 percent unadjusted. Compared to the same week in 2016, the unadjusted index maintained an 8 percent edge. Refi Index vs 30yr Fixed...(read more)

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MBS RECAP: On Guard For One Central Banker, Bonds Get Rocked By Another

Tue, 27 Jun 2017 20:59:46 GMT

Posted To: MBS Commentary

Bond markets got sucker-punched today. Traders were on the lookout for Yellen's comments at a conference in London in the afternoon. Instead it was overnight comments at a conference in Portugal from ECB President Mario Draghi that did the damage. In not so many words, Draghi said Things are good in the EU. Recovery is strengthening Deflation being replaced by reflation Still need accommodation, so we'll be gradual in adjusting it Bottom line, this is early-stage taper tantrum talk--EU style. European bonds didn't like it one bit, with German Bunds rising roughly 13bps. Almost every last bit of upward pressure in US bond markets can thank the Europe for the inspiration. Once European markets closed, US bonds went sideways. It was clear there was some hesitation ahead of Yellen's...(read more)

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Mortgage Rates Bounce Higher

Tue, 27 Jun 2017 19:50:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates saw their biggest bounce higher in more than a week today as domestic bond markets (which dictate rates) followed a much bigger move in European bond markets. The European move can be traced to comments from European Central Bank President Mario Draghi depending on the lender. In a nutshell, his comments sounded like the Fed's comments in the early days of the "taper tantrum" in the US (a big jump in rates that occurred when the Fed signaled its intention to buy fewer bonds). Translated into simpler terms , big central banks buy lots of bonds. When they do that, prices of those bonds go up and rates come down. Whatever bonds are being bought are those that react most to changes in central banks' policies. In 2013, it was the US Fed signaling less buying of Treasuries and MBS...(read more)

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Curtain May be Rising on Another GSE Drama

Tue, 27 Jun 2017 17:59:05 GMT

Posted To: MND NewsWire

Bloomberg is reporting there appears to be yet another plan in the long running reality show featuring the government sponsored enterprises or GSEs. Fannie Mae and Freddie Mac, which have been in government conservatorship since 2008, are the perpetual topic of congressional hearings, partisan and non-partisan legislation, shareholder lawsuits, and nearly constant rumors. The latest of the later, for which there appears to be substantiation, is that Senators Bob Corker (R-TN) and Mark Warner (D-VA) are working on a plan that would break each of the two, into several smaller pieces - although it is unclear what form those entities would take. Corker and Warner are both members of the Senate Banking Committee which has a hearing on GSE reform scheduled for later this week. The Bloomberg article...(read more)

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Signs of Deceleration Despite Record High Home Price Index - Case-Shiller

Tue, 27 Jun 2017 14:27:59 GMT

Posted To: MND NewsWire

The S&P CoreLogic Case-Shiller National Home Price Index for April set a record high , on a non-seasonally adjusted (NSA) basis for the fifth consecutive month. Some of the Case-Shiller numbers however, show some deceleration from their record pace. The month-over-month National Index gained 0.9 percent from March on a NSA basis compared to an 0.8 percent increase in March. It was up 0.2 percent after adjustment. The annual index was up 5.5 percent . The year-over-year increase in March was 5.6 percent, and that was revised down from 5.8 percent. The 10-City Composite Index gained 4.9 percent compared to April 2016, down from 5.2 percent the previous month. The 20-City Composite posted a 5.7 percent year-over-year gain, down from 5.9 percent in March. The 10-City index rose 0.8 percent...(read more)

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Investor Updates; Upcoming Training and Events

Tue, 27 Jun 2017 13:31:34 GMT

Posted To: Pipeline Press

Worries about Europe’s economies have, in most part, subsided. But rumors swirl regarding The Land of Lincoln. Illinois, it seems, isn't doing too well financially . Underwriters don't have crystal balls, yet must weigh income from Illinois pensions and government worker income, and the like. Concerns are growing that the US Virgin Islands could slide toward the kind of financial collapse that hit Puerto Rico since the USVI's government has struggled to meet obligations since a refinery closed in 2012, simultaneously doing away with the biggest private-sector employer and a crucial source of tax revenue. Lender news In job-related news, Nationstar Mortgage recently completed the transition to move all its customer service call center operations back to the U.S., "creating 500 new jobs...(read more)

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MBS Day Ahead: Rattled by Draghi, Traders Wait For Yellen

Tue, 27 Jun 2017 13:26:37 GMT

Posted To: MBS Commentary

Members of the FOMC are constantly giving speeches and making appearances at various events. The only exception would be the "blackout period" where Fed speakers refrain from commenting on monetary policy in the week leading up to an official policy announcement. Apart from that, there are typically more than enough Fed sound bytes floating around to sate the desires of Fed prognosticators. Seemingly overnight, several Fed members have either changed their tune or have simply ramped up their dovishness . That's a kitchen-sink term for a set of policy beliefs that's generally bond-friendly. The most recent shift has been for Fed members to acknowledge the stubbornness of inflation and for some to suggest that further policy tightening isn't even justified at the moment...(read more)

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MBS RECAP: Weak Durable Goods Helps Bonds Hold Gains

Mon, 26 Jun 2017 21:35:47 GMT

Posted To: MBS Commentary

Despite a super narrow range throughout the day, last Friday saw 10yr yields close at the 2nd best levels of the year. With that in mind, it wouldn't have been a surprise to see some push back into the center of the recently flat range today. In fact, that may well have been the case were it not for this morning's weak Durable Goods data. The Durables headline came in at -1.1 vs -0.6 forecast. The important "nondefense capital goods orders excluding aircraft" (or " Cap-Ex ") component was -0.2 vs a +0.3 median forecast. Bonds picked up just enough to put them in slightly stronger territory on the day, and there they remained--for the most part. Despite marginal weakness in the afternoon, 10yr yields hit their 2nd lowest closing levels of the year. All that having...(read more)

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Rates Still Flat at 8-Month Lows

Mon, 26 Jun 2017 20:21:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates were steady to slightly lower today, depending on the lender. Underlying financial markets continue moving in a narrow range--something that's not uncommon for the first few weeks of the summer. It's that market movement that can result in mortgage lenders issuing mid-day reprices. The more volatile and the bigger the moves, the more likely lenders are to reprice. Today saw zero reprices. Rates may have risen this morning were it not for weaker economic data . In general, weaker data tends to drive demand for the safe-haven of the bond market (which results in lower rates). This morning's Durable Goods data was noticeably weaker, and bonds improved immediately following its release at 8:30am. Though the improvement in markets was modest, it meant that most lenders were looking...(read more)

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Perceived Sellers' Market Could Lead to Inventory Gains

Mon, 26 Jun 2017 16:25:02 GMT

Posted To: MND NewsWire

Is there relief in sight for those oft cited, much maligned tight housing inventories? The National Association of Realtors® (NAR) sees a glimmer of hope in the responses it received to a recent survey. The Housing Opportunities and Market Experience (HOME) survey for the second quarter found 71 percent of homeowners think now is a good time to sell , which is up from last quarter (69 percent) and considerably more than a year ago (61 percent). Respondents in the Midwest (76 percent) surpassed the West (72 percent) for the first time this quarter to be the most likely to think now is a good time to sell. NAR says if homeowners act on this sentiment, there might eventually be an increase in real estate listings which have declined year-over-year each month for two straight years. However...(read more)

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Falling Demand, Competition, Push Lenders Toward Easing Standards

Mon, 26 Jun 2017 15:23:52 GMT

Posted To: MND NewsWire

As home buying affordability has declined, it has indirectly moved lenders' apparent willingness to loosen credit standards in the opposite direction. Fannie Mae says its second quarter Mortgage Lender Sentiment Survey shows the net share of lenders reporting they have eased credit standards over the prior three months has ticked up gradually since the fourth quarter of 2016. Looking forward over the next three months, the net share saying they plan to ease credit standards has also been growing. The net share of those expecting easing for GSE eligible and government loans reached new survey highs in the second quarter and net responses for non-GSE eligible loans tied a previous survey high reached in the second quarter of 2014. The survey found concerns about economic conditions to be the...(read more)

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Black Knight Home Price Index Hits All-Time High

Mon, 26 Jun 2017 14:11:54 GMT

Posted To: MND NewsWire

The third major home price indicator of the month was released on Monday and again there was no indication that the rate of appreciation is slowing . Black Knight Financial Services said prices, as measured by its National Home Price Index (HPI) increased from March to April by 1.2 percent. The index reading of $275,000, was the highest in the HPI's history. The month-over-month increase in the index has brought prices up 3.6 percent since the first of the year, with the bulk of that growth, an aggregate of 2.5 percent, coming in March and April. On an annual basis, the index gained 6.0 percent in April, compared to of 5.8 percent in March. The average year-over-year increase was 5.6 percent in the first quarter of 2017 and 5.4 percent for all of 2016. Washington State continues to outperform...(read more)

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Freddie Singing a Different Tune on Housing/Mortgage Outlook

Mon, 26 Jun 2017 14:08:00 GMT

Posted To: MND NewsWire

On November 30, 2016 Freddie Mac's economists issued their monthly Outlook which, in light of the sudden surge in interest rates earlier that month, was decidedly gloomy . MND's coverage of the forecast elicited a lot of concern from readers, especially when we quoted Freddie Mac that, under their new rate and housing expectations, "Mortgage originations (will) get crushed." They predicted a decline in originations of 53 percent from 2016 to 2017. Other predictions at the time included a leveling off of home sales, although "2016 will still end up being the best year for home sales in a decade, but 2017 will be hard pressed to match those levels" with a predicted decrease of 220,000 units Home price gains will moderate, finishing 2016 with an average gain of 5.9 percent, falling to 4.7 percent...(read more)

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Bank News: Stress Tests, M&A, Values, Underwriting Changes, New Products

Mon, 26 Jun 2017 14:06:08 GMT

Posted To: Pipeline Press

“Statistics are like bikinis. What they reveal is suggestive but what they conceal is vital.” We’re always watching home sales & construction – but it is debatable whether tearing down a house and building another adds to housing stock. About 10.2% of single-family homes rose from tear-down starts in 2016, up from 7.7% in 2015. Bank news Last week the Fed released the results of its stress tests , and for the third straight year all large banks passed. The tests are designed to measure whether the 34 largest banks will be able to maintain a minimum 3% capital level, even in periods of severe economic downturns. This Wednesday the Fed will announce the results of their qualitative review, which determines whether the banks will be able to move forward with their capital...(read more)

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MBS Week Ahead: Bonds Look to Data and Month-End For Breakout Potential

Mon, 26 Jun 2017 13:37:06 GMT

Posted To: MBS Commentary

Whereas the previous week was generally devoid of significant economic data or market moving events, the current week is more of a contender. On the data front, there are relatively important reports throughout the week including a key inflation report on Friday (PCE). Given the extent to which Fed speakers have increased their focus on inflation specifically (as opposed to "inflation + _____, where the other considerations include job growth, financial conditions, and geopolitical risks), traders will be increasingly focused on inflation data . Friday's PCE is one of the Fed's favorites. Speaking of Fed speakers, there are several on tap again this week, with Yellen herself taking questions at a conference in London tomorrow afternoon just after 1pm ET. Markets are hoping she'll...(read more)

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MBS RECAP: Quietest Day of The Week Despite Several Interesting Tidbits

Fri, 23 Jun 2017 21:32:10 GMT

Posted To: MBS Commentary

We've been watching the intraday trading ranges in bond markets to keep an eye on just how flat things have been in the wake of last Wednesday's big trading day (due to econ data and the Fed). "Inside day" is a term that comes up when things are this flat. It refers to a day's trading range falling "inside" the previous day's range. This week has been notable in that Tuesday and Friday were both inside days. That's particularly striking today as it required a narrow trading range of a mere 2.44bps (2.142 - 2.166). Adding to the intrigue is the fact that there were a few tradeable headlines--especially from Fed speakers who seemed to be singing more dovish tunes on the prospect for inflation to frustrate the policy path. Then again, the grudgingly slow...(read more)

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Rates Cap Impressively Sideways Week Near Long-Term Lows

Fri, 23 Jun 2017 20:59:00 GMT

Posted To: Mortgage Rate Watch

Weeks like this are the reason that some mortgage rate analysis is only done once a week. There haven't been any significant developments in financial markets--at least not as far as bonds (which dictate rates) have been concerned. And there certainly hasn't been any significant movement in mortgage rates themselves. In fact, with the exception of a modest dip last Wednesday, mortgage rates have been essentially flat for the entire month of June . As we've discussed all week, being "flat" at current levels is a good thing considering lenders continue quoting conventional 30yr fixed rates in a range from 3.875% to 4.0% on top tier scenarios. Almost any borrower will have seen the exact same interest rate quote throughout June. Any detectable variation has come in the form of upfront costs. These...(read more)

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Diversity Not Destined to Dampen Homeownership

Fri, 23 Jun 2017 18:09:16 GMT

Posted To: MND NewsWire

The final installment of a series of working papers produced by the University of Southern California (USC), in partnership with Fannie Mae, looks at the decade-spanning 10-point plunge in the homeownership rate of young Americans. Homeownership has declined, starting even before the housing crisis, across nearly all age groups, but has been most notable for those aged 25 to 44. Prior papers in the series have looked at the role two factors play in increasing young-adult homebuying; parental financial support, and receipt of a bachelor's degree. A third paper found that the correlates of homeownership varied under different credit and economic conditions. The study attempted to simulate how future changes in the characteristics of young adults might affect changes in their homeownership rate...(read more)

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New Home Sales Rebound; Prices Crush Previous Record

Fri, 23 Jun 2017 14:46:48 GMT

Posted To: MND NewsWire

The report on May new home sales, released this morning, paints a much brighter picture than last month's release of April data. In that report, the U.S. Census Bureau and the Department of Housing and Urban Development said new home sales had dropped 11.4 percent from their March level, to a seasonally adjusted annual rate of 569,000 units. Today that rate was revised up to 593,000. May sales improved on that report. They were up by 2.9 percent from April to a seasonally adjusted estimate of 610,000, cracking the 600,000 mark for only the fourth time since the housing crisis began. Sales are now 8.9 percent higher than in May 2016 when the estimate was 560,000. On a non-seasonally adjusted basis, sales in May were 1,000 units higher than in April, at 58,000. May's annual rate of sales...(read more)

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