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MBS RECAP: Bonds Bounce Back After Inauguration

Fri, 20 Jan 2017 22:28:44 GMT

Posted To: MBS Commentary

To be fair to today's presidential inauguration, it was never destined to be an exceptionally big market mover. Traders nonetheless had to prepare to move in either direction in the event Trump's speech contained something revelatory. It didn't... at least not when it comes to actionable developments for bond traders. That, in itself, was a moderate motivation for bond buying and stock selling. Reason being: more than a few market participants have been waiting for more details on stimulus specifics , both today and at Trump's most recent press conference, and those details have yet to come. In other words, fiscal stimulus is generally good for stocks and bad for bonds, so an absence of fiscal stimulus details has a mild, opposite effect. After touching the highest yields of...(read more)

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Mortgage Rates Remain at Recent Highs Despite Afternoon Bounce

Fri, 20 Jan 2017 21:40:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates rose slightly today, on average, but performances varied by lender and depending on the time of day. Rates were higher across the board this morning as global bond markets added to yesterday's weakness (weaker bond markets = higher rates, in general). Investors were on edge ahead of Trump's inauguration address as there was speculation that he'd offer more details on specific stimulus plans. When those details never came, markets reacted accordingly. Stocks moved lower and bond markets improved. Several lenders were thus able to offer mid-day rate improvements. This took the average to "just slightly higher" from "decidedly higher" earlier this morning. 4.25% remains the most prevalently-quoted conventional 30yr fixed rate on top tier scenarios. Some lenders are up to 4.375%...(read more)

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FHA Premium Cut Officially Reversed; Mortgagee Letter Already Out

Fri, 20 Jan 2017 20:02:28 GMT

Posted To: MND NewsWire

As was being widely rumored yesterday, the newly installed Trump Administration has indefinitely suspended a scheduled reduction in the annual premium for Federal Housing Administration (FHA) insurance. A 25-basis point reduction in that premium was announced by then Housing and Urban Development (HUD) Secretary Julian Castro on January 9, scheduled to go into effect on January 27. Mortgagee Letter 2017-07 was issued about an hour after Donald Trump took the oath of office as President, counteracting the earlier Mortgagee Letter 2017-01. The new letter says "FHA will issue a subsequent Mortgagee Letter at a later date should this policy change." The Mortgage Bankers Association (MBA) reacted immediately to the shift. David H. Stevens, President and CEO, issued the following statement on behalf...(read more)

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Whether Expansion or Recession in 2017, Housing will Survive

Fri, 20 Jan 2017 19:59:21 GMT

Posted To: MND NewsWire

How will the economic philosophy that was altered by the last election actually evolve into policy? The is the question raised by Fannie Mae's Economic and Strategic Research Group, headed by Doug Duncan, Senior Vice President and Chief Economist say, in their January economic forecast. With limited information available on the economic priorities of the Trump Administration, and those of the House and Senate also uncertain, "establishing reasonable estimates of the nature and sequencing, much less the magnitude, of policy changes [is] unusually challenging." Thus, the company's economic team says its theme for 2017 is "Will Policy Changes Extend the Expansion?" Incoming data supports the company's expectations that the strong growth in the third quarter was unsustainable and the current estimate...(read more)

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Rising Rates Reflected in Increased Purchase Share

Fri, 20 Jan 2017 19:53:02 GMT

Posted To: MND NewsWire

Ellie Mae said its Origination Insight Report for December reflects the first effects of rising interest rates . Loans for refinancing slipped from 47 percent in November to 46 percent as the reciprocal number, purchase loans, rose 1 point to 54 percent. The company says this likely signals an upward trend in purchase mortgages that will continue throughout 2017. Conventional loans made up 66 percent of closed loans during the month, down 2 percentage points from November while FHA and VA lending was unchanged at 20 percent and 9 percent respectively. Closing rates for all loans increased to 73.2 percent in December, the highest rate in 2016. Refinance closing rates increased to 69.6 percent, up from 68.7 percent a month earlier and purchase closing rates increased to 77 percent from 76.1 percent...(read more)

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Appraisal Fails Still Causing Issues Despite Improving Markets

Fri, 20 Jan 2017 19:50:58 GMT

Posted To: MND NewsWire

While it trails well behind credit history and debt-to-income levels, collateral problems are consistently the third most frequent cause of loan denials. CoreLogic said Home Mortgage Disclosure Act (HMDA) data for 2015 show collateral issuers were the reason behind 13.7 percent of the 450,000 first-lien purchase mortgage applications that failed approval. The share of loans turned down for collateral reasons has remained consistently in the 12-13 percent range since home prices began to recover in 2012. But Yanling Mayer, writing in CoreLogic's Insights blog, says there is a wide variation in collateral denials on a geographic basis, ranging from 7 percent in Delaware to 22 percent in Michigan. While lenders don't provide specific causes in their HMDA reports, Mayer says appraisals coming in...(read more)

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Vendor News and New Products; Agency News and Updates--Stocks Slammed by Mnuchin

Fri, 20 Jan 2017 15:31:16 GMT

Posted To: Pipeline Press

How many people find fault seemingly every day with the FHA, Fannie Mae, and Freddie Mac programs or structure? Plenty – see below – they can’t seem to catch a break. What I really meant to ask is how many people live in the United States of America? The Census Bureau projected that the U.S. population was 324,310,011 as of January 1st. This is an increase of 2,245,347 (0.7%) since New Year’s Day 2016. Overall, the U.S. population is expected to increase by 1 person every 16 seconds. (It’s a global phenomenon. Throughout the world, the population increased by 77,849,375 from 2016 New Year’s Day to 2017 New Year’s Day. During January 2017, 4.3 births and 1.8 deaths are expected worldwide every second.) In Agency & government program lending news...(read more)

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MBS Day Ahead: Rates Don't Live in a One Story Building

Fri, 20 Jan 2017 14:24:45 GMT

Posted To: MBS Commentary

10yr yields hit 2.5112 overnight. That's close enough to the important 2.52% pivot point to suggest an expansion of what we consider the current range to be. After all, before the beginning of 2017, 2.52% was actually the most important pivot point on our radar. It had served as a firm ceiling before the mid-December Fed announcement and subsequently served as a firm floor despite several attempts to break it in the 2nd half of the month. It wasn't until yields got an early start on their new year's rally that it was broken. After that, the first major ceiling to take shape was the 2.42% level that was just broken yesterday. What do we do when a ceiling breaks? First of all, we remember that rates don't live in a one story building. This 2.42% business was just the ceiling of...(read more)

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MBS RECAP: Bond Markets Continue Slide

Thu, 19 Jan 2017 22:22:09 GMT

Posted To: MBS Commentary

Pain continued for bond markets today as 10yr yields broke above the upper range boundaries that had been intact since the beginning of the year. Admittedly, at roughly 2.32 to 2.44 (closing levels), the range in question isn't huge, but a break is a break. It adds to the sense of negative momentum in the short term, all things being equal. Bonds began the day only slightly weaker. Indeed, for much of the overnight session it looked like yields were trying to hold under the 2.44% range boundary. Economic data was part of the problem at 8:30am--especially the balmy 23.6 vs 15.8 forecast in the Philly Fed Index. On a broader note, markets weren't quite done fretting over the change in tone underway at the Fed. Yellen's speech from yesterday was mentioned around more than a few campfires...(read more)

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Rates Break Through Important Ceiling

Thu, 19 Jan 2017 20:57:00 GMT

Posted To: Mortgage Rate Watch

Freddie Mac's weekly mortgage rate survey came out this morning showing the lowest rates in 3 weeks (don't get excited). This happens due to the survey's methodology, which unfortunately relies on Monday/Tuesday rates almost exclusively. With lenders closed for business on Monday and with Tuesday legitimately being in line with the lowest rates of the year, Freddie's headline is perfectly defensible--assuming we're not talking about yesterday or today. If we are, then things are much worse. After an abrupt increase yesterday, mortgage rates shot higher again today, bringing them even further into the worst territory of the month. In fact, apart from December 14th through 28th, today's rates are the highest in more than 2 years. Whether this is as dramatic as it sounds depends on your perspective...(read more)

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Probable Delay, Possible Reversal for FHA Premium Cut

Thu, 19 Jan 2017 17:19:59 GMT

Posted To: MND NewsWire

Secretary of Housing and Urban Development (HUD) nominee Ben Carson said at his confirmation hearing, "Certainly, if confirmed, I am going to work with the FHA administrator and other financial experts to really examine that policy." He was talking about an earlier announcement from the current HUD head that FHA insurance rates were going to be cut. On January 12, when Carson made that remark, most everyone viewed it as a throw-away line . Now not so much. As background, on January 9, current HUD Secretary Julian Castro announced a 25-basis point cut in the annual premium charged for FHA insurance. The reduction, scheduled to go into effect on January 27 , would return FHA annual premiums almost back to where they were before a crisis in the FHA insurance fund caused substantial hikes in both...(read more)

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Construction Starts Bounce Back, Permits Remain Constrained

Thu, 19 Jan 2017 15:04:22 GMT

Posted To: MND NewsWire

Housing starts continued their see-saw pattern in December, rising 11.3 percent from November when they had fallen significantly after a sensational October. The increase this time, however, was due solely to a surge in multi-family construction. Meanwhile, housing permits turned in another lackluster performance. The U.S. Census Bureau and the Department of Housing and Urban Development reported that residential housing starts were at a seasonally adjusted annual rate of 1,226,000 in December, up from a revised rate of 1,102,000 in November. The November estimate was originally reported at a rate of 1,090,000. The December estimate put housing starts up 5.7 percent from the level in December 2015. Analysts polled by Econoday had expected starts in the range of 1,100,000 to 1,275,000 with a...(read more)

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Chase Settles Discrimination Issue; FHA Program Roiled by MIP Rumors

Thu, 19 Jan 2017 14:25:02 GMT

Posted To: Pipeline Press

How has housing changed in the last 100 years? It’s easy to see when a “vertical flight” is put together, and Trulia posted current listings that were built in every decade that are pretty interesting to skim through and look at styles & pricing. Another day, another settlement . In this instance JPMorgan Chase has agreed to pay $55 million to settle an investigation into whether it charged thousands of African-American and Hispanic borrowers higher interest rates on mortgages than white customers. The discriminatory loans were originated from at least 2006 to late 2009. The mortgages were made by independent brokers and then funded by JPMorgan, and Chase was charged with violating the U.S. Fair Housing Act and the Equal Credit Opportunity Act JPMorgan released a statement...(read more)

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MBS Day Ahead: Draghi Press Conference and Data Contend With Range Break

Thu, 19 Jan 2017 13:34:31 GMT

Posted To: MBS Commentary

When it comes to defining the recent range, there are several candidates for the upper and lower boundaries. When 10yr yields were under 2.40%, that was the best boundary to watch. A break over 2.40% suggested 2.42% was the next line of defense. And finally, 2.44% serves as the last bastion for 2017's sideways range. We were very close to it by the end of yesterday, and we're currently trading above it as the glut of data and events roll out. In addition to this morning's economic data, markets will perhaps be most keenly focused on the press conference with European Central Bank (ECB) President Mario Draghi. The notion of of ECB tapering is still a hot button for global financial markets and investors are looking for any clues as to how that decision is evolving. MBS Pricing Snapshot...(read more)

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MBS RECAP: From Bottom to Top of 2017 Range in One Fell Swoop

Wed, 18 Jan 2017 22:20:01 GMT

Posted To: MBS Commentary

After flirting with a break of the lower end of 2017's sideways range yesterday, bond traders clearly decided " now's not the time. " There's precious little to hang one's hat on when it comes to justifying overnight weakness any other way. That wasn't too big a deal as it left 10yr yields to start the domestic session around 2.36+. Despite a modest amount of weakness after this morning's first round of economic data, yields continued to hold WELL within the recent range--never even breaking into the 2.38's. It wasn't until the afternoon hours that bonds began to slide in a slightly more disconcerting way. EVEN THEN, we were still able to say the range remained and that traders were likely just making some defensive bets ahead of Yellen's 3pm speech...(read more)

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Rates Rise Abruptly to 3-Week Highs

Wed, 18 Jan 2017 21:42:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates moved sharply higher today , more than erasing yesterday's improvement. In fact, in one fell swoop, rates essentially moved from the bottom of 2017's range to the top! There are a few caveats though. First, 2017's range has been fairly narrow. Beyond that, this is only the 3rd week of the year. As always, the notion of "abruptness" is subjective and relative. In the bigger picture, rates are still in much better shape than late December levels. In the more immediate picture, today's losses would make for a big adjustment to yesterday's quotes. In some cases, borrowers might be looking at the next eighth of a percent higher in rate. Several lenders have moved up to quoting top tier 30yr fixed rates of 4.25% whereas 4.125% had been the norm. Loan Originator Perspective The good...(read more)

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Builder Confidence Slides Off 12-Year High

Wed, 18 Jan 2017 15:39:01 GMT

Posted To: MND NewsWire

The Housing Market Index (HMI) backed down a bit from its post-election surge in January, dropping 2 points to a composite reading of 67. The National Association of Homebuilders (NAHB)/Wells Fargo index, which measures builder confidence in the new home market, had gained 7 points (now revised down to 6) in December to reach its highest level since July 2005. According to NAHB Chairman Granger MacDonald, "Builders begin the year optimistic that a new Congress and administration will help create a better business climate for small businesses, particularly as it relates to streamlining and reforming the regulatory process." "NAHB expects solid 10 percent growth in single-family construction in 2017, adding to the gains of 2016," said NAHB Chief Economist Robert Dietz. "Concerns going into the...(read more)

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Deutsche Settles; Investor Requirement and Underwriting Changes

Wed, 18 Jan 2017 14:07:23 GMT

Posted To: Pipeline Press

The mortgage world is full of acronyms. Some refer to Finance of America as “FOAM,” for example. There are new ones every year, making it hard for old-timers in lending to keep track. Speaking of which, I’m not old, but then again, does anyone ever think they are? Along those lines, if anyone is curious, the current HMDA data (another acronym) doesn't capture any info on the borrower’s age but rest assured it will be gathered for the 2018 HMDA data reporting. Let’s hope it shows a nice range for the folks at the CFPB to see. Deutsche Bank signed a $7.2 billion settlement with the U.S. Department of Justice over its sale of mortgage securities in the run-up to the 2008 financial crisis. What will the government do when it doesn't have this income from settlements...(read more)

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MBS Day Ahead: Active Day for Data; Range Remains Intact

Wed, 18 Jan 2017 13:29:13 GMT

Posted To: MBS Commentary

Although yields were able to close at the lowest levels in more than a month yesterday, bonds continued to trade in the same intraday range (roughly 2.30-2.44% in terms of 10yr yields). Today begins with that range being firmly reinforced as yields are well off the lows (currently up to 2.37%) ahead of this morning's economic data. There are several reports on tap throughout the morning. First up is the Consumer Price Index (CPI) for December. With inflation increasingly back in the spotlight after years of living in the shadows, every major inflation-related report is a potential tape bomb. CPI is definitely one of the more significant inflation metrics. The median forecast calls for steady month-over-month core inflation, and a 0.1% increase in year-over-year core inflation. Industrial...(read more)

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Refi Applications Continue Healing With Help From FHA Fee Cut

Wed, 18 Jan 2017 13:19:36 GMT

Posted To: MND NewsWire

Mortgage applications rose on a seasonally adjusted annual basis during the week ended January 13. The Mortgage Bankers Association said its Market Composite Index, a measure of applications volume, increased by 0.8 percent compared to the week ended January 6. On a non-adjusted basis, the volume was up 29 percent. The previous week's number included an adjustment to account for the New Year's Day holiday. The slight increase in applications volume was driven by refinancing . That index climbed by 7.0 percent from a week earlier. The share of applications which were for refinancing grew from 51.2 percent of the total to 53.0 percent. The seasonally adjusted Purchase Index decreased 5 percent week-over-week while unadjusted it was up 25 percent. Purchase mortgage applications were down 1 percent...(read more)

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MBS RECAP: Best Closing Levels Since Late November

Tue, 17 Jan 2017 22:48:17 GMT

Posted To: MBS Commentary

In some regards, bonds had their best day of the year today. The outright gains weren't quite as big as Jan 5th or 9th, but closing yields were the lowest since Nov 29th! Much of today's bond market positivity owes itself to the 3-day weekend. Specifically, it now looks like much of last week's Thu/Fri weakness was due to traders getting out of the market ahead of the 3-day weekend. Of course that leaves traders to get back into the market today, which was clearly the case based on the 7bp gain in 10yr yields. UK Prime Minister Theresa May's speech was a focal point for overseas markets early this morning . Bonds improved heading into the speech (on the expectation for austere Brexit info) and weakened afterward (May was less austere than expected). Weakness continued through...(read more)

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Mortgage Rates Back Near 2-Month Lows

Tue, 17 Jan 2017 21:53:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates moved lower today , generally recovering the losses seen last Friday. This brings many lenders back in line with the lowest levels since November 17th, although last Wednesday (Jan 11) was slightly better on average. There hasn't been enough volatility to unseat 4.125% as the most prevalent 30yr fixed "note rate" on top tier scenarios. As such, today's improvement is limited to "effective rates" (which take closing costs into consideration). Heading into the 3-day weekend last week, we discussed the risk that the recent trend toward lower mortgage rates may have run its course, but that we'd need to wait until today to confirm. Today's improvements keep hope alive. That's no guarantee that rates will move lower, but at the very least it leaves borrowers with more options . On...(read more)

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Fed's Dudley Wants You to Refi (Safely, of Course)

Tue, 17 Jan 2017 17:51:15 GMT

Posted To: MND NewsWire

Debt finances additional consumption. That could be the summary of a speech given on Tuesday to the National Retail Federation's annual convention by William C. Dudley, President and CEO of the Federal Reserve Bank of New York. Dudley's remarks focused on the connections between housing and retail sales and why changes in the housing and mortgage markets "Have had important consequences for the dynamics of consumption over the last decade." These connections, he said, are among the reasons the recovery and economic expansion have been weaker than desired. The good news however, is that, while the current expansion is quite old in chronological terms, it is still quite young in terms of households' financial health. Household incomes tend to increase as individuals age, but ideally households...(read more)

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Legal and Regulatory Update; Credit Risk Transfers; 2016 Non-Agency Issuance Stats

Tue, 17 Jan 2017 14:17:45 GMT

Posted To: Pipeline Press

Well, we have 24 business days until our next Federal holiday (President’s Day on February 20). Sigh. Much worse is this very, very sad, troubling statistic: News came out that drug overdoses are involved in more deaths than car crashes and guns. U.S. deaths from drug overdoses (driven by heroin and prescription painkillers) were up 11 percent in 2015, claiming 52,404 lives, per the annual statistics compiled by the Centers for Disease Control and Prevention. Terrible. Legal & Regulatory Matters Remember TARP? Last week the GAO announced the release of its report providing an update on the status and condition of Treasury's TARP-funded housing programs as of October 31, 2016. Per the report, Treasury had disbursed nearly 60 percent or $22.6 billion of the $37.51 billion assigned to...(read more)

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MBS Week Ahead: For Bonds, Still About Stocks and "The Range"

Tue, 17 Jan 2017 13:46:39 GMT

Posted To: MBS Commentary

January continues playing host to the same level of stock/bond correlation that we typically see at the end and beginning of any given year. Beyond calendar considerations, we also see this behavior during times of uncertainty where investors huddle together and make similar, broad moves toward and away from "risk." While the resulting correlation is far from perfect (there are definitely noticeable departures from the trend), it has been strong enough to keep stocks in mind when considering the forces acting on bond markets at the moment-- especially on a day to day basis (bigger picture correlations never look as good). And then there's "the range." We've been following a range in 10yr yields between 2.42 and 2.34%. Indeed, those continue to be important technical...(read more)

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