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MBS RECAP: Month-End Buying Helps Bonds Hold Ground

Fri, 28 Apr 2017 23:18:08 GMT

Posted To: MBS Commentary

Bond markets began the day in slightly weaker territory, with Treasuries following European yields higher in the overnight session. Domestic hours brought more selling pressure out of the gate with Q1 wage growth coming in higher than expected. There were also some counterpoints in the GDP data that made the 0.7 vs 1.2 result look more palatable. Namely, inventories cut 0.9% from the GDP headline. That means GDP would have come in at 1.6 vs 1.2 with a neutral inventory build. Finally, the PCE and core PCE components of the GDP report were downright unfriendly to bonds. PCE was up 2.4% vs 2.0% previously and core PCE came in at 2.0% vs 1.3% previously. Those are pretty massive swings in inflation metrics--certainly enough to convince a few traders of a faster Fed rate hike timeline. Perhaps...(read more)

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Mortgage Rates Unchanged Heading Into Fed Week

Fri, 28 Apr 2017 18:41:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates were unchanged today, holding onto modest improvements seen yesterday. In many ways, the past 2 days have confirmed that rates are in limbo near the lower end of the post-election range. To be sure, they were definitively lower in mid-April, but they're much closer to recent lows than highs. More importantly, current levels have acted as a line in the sand that divides the year's lowest rates from everything else. In other words, we'd really like to remain in this zone. Whether or not that's possible may depend on next week's Fed Announcement (Wednesday afternoon). While the Fed isn't expected to hike rates this time around, investors will nonetheless attempt to pick up on clues about future policy potential. The average lender continues offering conventional 30yr fixed rates...(read more)

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CoreLogic Sees Signs of Credit Cracks

Fri, 28 Apr 2017 15:32:46 GMT

Posted To: MND NewsWire

Here we go again? Sam Khater, CoreLogic's deputy chief economist, says loan performance is beginning to show some cracks in what has been a near perfect veneer. This might be an early signal of a downturn in the credit cycle. Khater is not issuing a warning, merely alerting those who should be watching such things to pay attention. He writes, in an article in the CoreLogic Insights blog, that a typical economic expansion and recession are strongly driven by loan performance. When times are good, lenders take on more marginal borrowers then tend to become more conservative when loan performance begins to deteriorate. That often exacerbates an economic downturn. Loan performance across the four major types of loans (agricultural, business, personal consumption, and real estate) all improved throughout...(read more)

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Cash Sales Share Remains Stubbornly High

Fri, 28 Apr 2017 15:29:24 GMT

Posted To: MND NewsWire

The share of sales that are all-cash continues at an elevated level. CoreLogic reports cash transactions accounted for 36.5 percent of all home sales in January, unchanged from a year earlier. While the percentage of sales that close without third-party financing has declined from the January 2011 high of 46.6 percent, it remains well above the pre-crisis average of around one-quarter of sales. Sales of bank-owned property (REO) had, as they always do, the largest share of cash transactions, 61.2 percent. Resales had a cash share of 36.5 percent and new homes a 17.7 percent share. Alabama had the largest cash sales share of any state at 52 percent, followed by New York (49.7 percent), Florida (48.3 percent), Indiana (46 percent) and Missouri (45.4 percent). Sales of distressed properties made...(read more)

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MBS Day Ahead: Bonds Sitting on a Big Fence Heading Into Next Week's Fed

Fri, 28 Apr 2017 14:31:00 GMT

Posted To: MBS Commentary

Bond markets are very much on a fence at the moment with respect to short and intermediate trends. There are a few ways we can measure this fence-sitting. The most basic would be to look at "pivot points" that have recently made a name for themselves. 2.31% is a good example as it's been the modal bottom of the post-election range. In this context, "modal" refers to the most frequently recurring example of a particular technical level. In other words, 2.31% has seen more "floor bounces" than any other potential floor level. Another way to look at fence-sitting would be with a technical overlay such as Bollinger Bands (click the link if you really want to dig into them), which plot a 21-day exponential moving average and 2 lines that mirror the moving average...(read more)

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Agency Updates; Another GSE Reform Plan; Bank M&A - Branches Still Popular

Fri, 28 Apr 2017 13:17:19 GMT

Posted To: Pipeline Press

For 2015, retail originators averaged total compensation of $88,415 versus $80,376 for Consumer Direct originators, per a STRATMOR Insights report on the subject. While retail originators averaged higher overall compensation, it was due to higher incentives (commissions). The CD originators were paid a higher base salary and/or draw amount than the traditional retail MLO but their average incentives were smaller even with higher productivity. Bank News Bank earnings season is well underway, with scores of banks reporting so far. Overall, the results seem solid, but not inspiring. Banks have reported improved net interest margins but sluggish and variable loan growth. As always, some beat estimates, others don't, reminding us to ask if the estimate was wrong or the analyst. Banks stocks have...(read more)

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MBS RECAP: Slightly Stronger, but Far From Finding Answers

Thu, 27 Apr 2017 22:20:46 GMT

Posted To: MBS Commentary

Bond markets have a question. Will we or won't we be heading back into the sideways, post-election rate range? for top tier mortgage rates, the range is roughly 4.125-4.25%. For 10yr yields, it's the 2.3-2.6% range that we've been discussing for months. Today's trading was positive for bond markets, but it didn't offer a comment on the aforementioned ranges. 10yr yields ended the day right at 2.2999 (let's call it 2.30%). While that's better than a definitive move back above the 2.3% range boundary, it's certainly not enough of an improvement to suggest a great willingness to remain below the rate boundary. In other words, rates are waiting for the next big move . We had a distinct rally from mid-March to mid-April, then a distinct correction since April 18th...(read more)

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Mortgage Rates Fighting to Stay Near 2017 Lows

Thu, 27 Apr 2017 21:24:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates moved lower today, following a policy announcement from the European Central Bank (ECB). Some investors were concerned the ECB might begin sprinkling in clues about rate hikes or an early end to bond buying programs, but there was no such drama in the announcement or the press conference that followed. If you're not familiar with the ECB, it's essentially Europe's version of the Federal Reserve. Both wield tremendously large balance sheets (used to control supply and demand in rates markets, and thus, rates themselves). While central banks can only truly control the shortest term rates, investors who trade the bonds that drive longer-term rates (like mortgages) are nonetheless paying very close attention . Bottom line: with the ECB not sending any threating messages about shorter...(read more)

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Painfully Low Inventory Saps Pending Home Sales

Thu, 27 Apr 2017 14:28:12 GMT

Posted To: MND NewsWire

Is there mostly good news in the negative number for March pending home sales? The National Association of Realtors says yes. The NAR's Pending Home Sales Index (PHSI) dipped by 0.8 percent to 111.4 in March from 112.3 in February but NAR says, while this was a slight decrease in momentum, "pending home sales maintained their recent high level." The index is remains 0.8 percent higher than a year ago. The PHSI is a forward-looking indicator based on signed contracts to purchase existing homes. Those contracts are generally expected to result in closed sales within 60 days. The downturn was not unexpected. Pending home sales have moved up and down regularly in recent months, pretty accurately predicting, as they are designed to do, the see-saw behavior of existing home sales. Econoday's poll...(read more)

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Vendor Updates; Servicing: Who's Brokering, Buying, Selling, and Why?

Thu, 27 Apr 2017 14:20:25 GMT

Posted To: Pipeline Press

In a recent survey, 97% of millennials said that they were tired of being surveyed. Seriously, well that probably is seriously, according to a new TransUnion survey , 42% of millennials (born 1982-2000) are delaying buying a home because of the December 2016 interest rate hike. Really? How about because not a lot of 26-year-olds have saved up the money for a down payment, or don't know where they'll be living in two years? I'll stop being flippant. Yesterday's tax proposal won't help either. Per NAR, by doubling the standard deduction and repealing the state and local tax deduction, the plan would effectively nullify the current tax benefits of owning a home for the majority of tax filers. Analysts thinks the odds of it passing are nil. Servicing Trends The pace of servicing sales has certainly...(read more)

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MBS Day Ahead: Bond Markets Asks: Should I Stay or Should I Go?

Thu, 27 Apr 2017 13:06:22 GMT

Posted To: MBS Commentary

Another day, another chance for bond markets to assess whether they should re-enter the previous 2017 range (or "post-election" range). This is marked by 10yr yields of roughly 2.3-2.6%, but given that we're so close to one of the range boundaries, it's worth noting that 2.315% has been a more specific pivot point that 2.3%. Studies show that saying "two point three one five" makes one sound too poindexter-ish, so it's best to stick to "two point three" in casual conversation. But I digress... The point is that we're on the edge of the old range we just broke below in mid-April. If we treat 2.3-ish as a ceiling over the next few days, it will bode well for our longer-term prospects. With yesterday's somewhat anticlimactic tax reform announcement...(read more)

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Another Plan Emerges for Fannie/Freddie Reform

Wed, 26 Apr 2017 21:15:41 GMT

Posted To: MND NewsWire

Last week, with considerable fanfare , the Mortgage Bankers Association released its plan for reforming the housing finance system, including a resolution of the nine-year old federal conservatorship of the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. This week ICBA, which represents independent community banks, more quietly released its blueprint for reform. The paper, titled ICBA Principles of GSE Reform and a Way Forward notes that the placement of the GSEs in conservatorship in 2008 was described back then as a "temporary time-out" to allow both companies to stabilize. After eight years, and into a third presidential administration, Fannie and Freddie, although they have returned to profitability , worked through most their defaulted loans, and continued to provide...(read more)

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CoreLogic Expects Reauthorization, Maybe Even Reform, of Flood Insurance Program

Wed, 26 Apr 2017 21:14:45 GMT

Posted To: MND NewsWire

Although it features a rather shameless pitch to play a major role in a reorganized National Flood Insurance Program (NFIP), CoreLogic has published, in its Insights blog, some reassurance for homeowners living in flood-prone areas. Stuart Pratt, Senior Vice President for Government and Industry Relations, addresses the status of NFIP as Congress looks at reauthorizing and perhaps substantially reforming it. NFIP was initially created in 1968 by the National Flood Insurance Act and is administered by the Federal Emergency Management Agency (FEMA). Its aim is to provide affordable flood insurance and mitigate "negative externalities associated with flood disasters." Flood insurance is required to be carried by homeowners with mortgages backed by any federal programs and by many private lenders...(read more)

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MBS RECAP: Bonds Bounce Back Before and After Tax Plan

Wed, 26 Apr 2017 21:14:08 GMT

Posted To: MBS Commentary

Today's main event was the release of the Trump administration's new tax plan. Markets didn't go overboard in their expectations of major revelations and excruciating details. That turned out to be an ideal approach as there weren't any major revelations or excruciating details to be had! Several of the key bullet points (15% corporate tax and reduction in number of brackets, for instance) had already been foreshadowed by previous administration comments. Still, bond markets were holding out for something a bit more terrifying . When the announcement turned out to be mostly anticlimactic, bonds were quickly able to retrace some of their weaker steps from the early afternoon. It's worth noting that the early afternoon weakness was a clear consequence of European bond markets...(read more)

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Mortgage Rates Hold Ground After Tax Plan Release

Wed, 26 Apr 2017 19:59:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates were relatively unchanged today, but only after averaging the disparate changes from various lenders. That means some lenders are in much better shape versus yesterday while others are noticeably worse. This sort of disparate movement isn't typical of mortgage rates across lenders, but it can happen when underlying bond markets experience volatility on back-to-back afternoons. That was indeed the case over the past 48 hours. Bond markets weakened (which pushes rates higher) yesterday afternoon, but only a handful of lenders issued reprices (new, higher rates, in response to intraday market movement). Today's volatility was in our favor resulting in several lenders issuing POSITIVE reprices. Bonds made gains into the afternoon after Trump's tax plan was released. Stock markets...(read more)

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Falling Rates Stoke Refinancing

Wed, 26 Apr 2017 14:04:44 GMT

Posted To: MND NewsWire

Mortgage application volume rose during the week ended April 21, solely from a significant increase in refinancing. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, was up 2.7 percent on a seasonally adjusted basis from the week ended April 14, and rose 3.0 percent on an unadjusted basis. The Refinance Index increased 7 percent from a week earlier while the seasonally adjusted Purchase Index fell by 1 percent . The unadjusted Purchase Index ticked up 0.1 percent compared with the previous week and was 0.4 percent higher than the same week in 2016. Refi Index vs 30yr Fixed Purchase Index vs 30yr Fixed The refinance share of mortgage activity increased to 44.0 percent of total applications from 42.4 percent the previous week. The average...(read more)

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MBS Day Ahead: After Exiting Friendly Trend, Bonds Wait on Tax Plan for Next Cue

Wed, 26 Apr 2017 13:48:24 GMT

Posted To: MBS Commentary

The order of the day and week for domestic bond markets has been and will continue to be the break out from the recently friendly trend toward lower rates that began in mid-March. We've been eyeing this breakout since last Friday when a combination of French election polls and Trumps tax plan pre-announcement caused an intraday break above the yellow lines in the following chart. Deceptively, Friday saw yields move back inside the trend by the close, giving the impression that the breakout was not a done deal. After the election results came out, it became clear that we'd be looking at another challenge of the trend. Monday and Tuesday add up to a definitive break as well as a definitive shift in short-term momentum. Today's big to-do is the tax reform announcement that Trump referenced...(read more)

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Vendor News; AOT Mini-Bulk Execution; Fannie's Student Loan Endeavor

Wed, 26 Apr 2017 12:44:44 GMT

Posted To: Pipeline Press

How about this quote from the tech world? “If you're not paying for the product, you are the product.” If you don't want companies to collect and sell your data, like your e-mail, you can disconnect it from Google's security page . Go to "Connected apps & sites" click " Manage apps ." Products For brokers, Orion Lending announced the release of STAR, a propriety advanced broker portal and pricing engine. STAR utilizes state-of-the-art technology to allow approved brokers access to UW income calculations, real-time disclosure tracking with LE/CD visibility, a live concierge chat function, loan origination system, along with many other advanced features. As the Digital Mortgage landscape continues to evolve at a rapid pace, Orion Lending is committed to exceeding the needs of...(read more)

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MBS RECAP: Bond Weakness Looking More and More Serious

Tue, 25 Apr 2017 20:56:10 GMT

Posted To: MBS Commentary

With a 2nd day of fairly strong selling pressure in bond markets, the recent trend toward lower rates has been forcefully called into question. You can see the potential breakout from that trend in the chart below (I'll mark it up and discuss additional technical implications tomorrow morning). For today, let's recap what's up with all this weakness . First and foremost, the French election was a jumping-off point for the next phase of bond market momentum. If Macron had been shut out of the run-off election, we'd still be rallying . If Le Pen had won outright, we'd be rallying even more sharply. Because neither of those things happened, investors got the proverbial green light to get back into a " risk-on " trade. Last Friday's breaking news on this Wednesday's...(read more)

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Mortgage Rates Highest in 2 Weeks

Tue, 25 Apr 2017 20:21:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates moved moderately higher again higher today, as global financial markets continued reacting to recent geopolitical flashpoints (like the French election, discussed yesterday). Markets are also moving in anticipation of future flashpoints (like tomorrow's tax reform announcement). In general, investors have piled back into riskier assets like stocks because the French election reduces long-term risks to the European Union. Investors previously were more willing to buy bonds--a safe haven asset frequently used to insulate investors from increased risk. The prospects for tax reform have a similar effect in that they encourage investors to favor riskier assets at the expense of bonds . When demand for bonds decreases relative to supply, rates move higher . To be clear, we can't have...(read more)

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Fannie Moves to Accommodate Student Loan Debt

Tue, 25 Apr 2017 18:16:13 GMT

Posted To: MND NewsWire

At $1.4 trillion, student loan debt represents the U.S.'s second largest debt market behind mortgages and, in several recent surveys, younger respondents have said those loans are a large reason they are unable to save up a downpayment to buy a home. The debt won't easily go away, but Fannie Mae now says it would like to make those loans a slightly little less painful presence in borrowers' lives. The company is announcing policies that will assist homeowners and potential homebuyers with student loan obligations to qualify for a mortgage. The company notes the significant increase in that kind of debt over the last decade has created challenges and put up obstacles to homeownership. In acknowledgement that "one size does not fit all." the new policy provides borrowers three options from which...(read more)

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New Home Sales Nearly Match Post-Crisis High

Tue, 25 Apr 2017 14:33:00 GMT

Posted To: MND NewsWire

Sales of newly constructed homes appear to have stopped, at least for the moment, their up-one-month, down-the-next pattern. They rose for the third consecutive month in March, and did so convincingly. The Census Bureau and the Department of Housing and Urban Development say that sales of new homes jumped 5.8 percent in March, to a seasonally adjusted annual rate of 621,000 units. The rate nearly tied that of July 2016, 622,000 units, for the highest sales pace since the housing crisis. March also marked the first time since last July that sales have topped 600,000. March sales were up 15.6 percent compared to the previous March when the annual rate was 537,000. Analysts had expected an increase in sales, but widely undershot the mark. Those polled by Econoday were looking for results in the...(read more)

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Home Price Gains Aren't Cooling Off

Tue, 25 Apr 2017 13:26:00 GMT

Posted To: MND NewsWire

For the fourth consecutive month, the National Home Price Index from S&P CoreLogic Case-Shiller has set a new price peak, rising 5.8 percent in February. It is now a half percentage point above the pre-crisis peak reached in July 2006. The Housing Price Index released by the Federal Housing Finance Agency (FHFA) also accelerated, gaining 0.8 percent in February, compared to 0.2 percent in January. The Case-Shiller National Index, which covers all nine U.S. Census Regions, increased its annual pace, rising 0.1 percent more than it had for the 12-month period ended in January. The resulting 5.8 percent change was the largest in 32 months . The pace did slow on a month-over-month basis. The seasonally adjusted National Index was up 0.2 percent from January, identical to the December-January...(read more)

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Training in Sales, Reverse, HMDA, Cust. Satisfaction; Appraisal News - Illinois vs. AMCs?

Tue, 25 Apr 2017 13:23:44 GMT

Posted To: Pipeline Press

How much do the CEOs of builders make? Turns out they make some decent gravy , certainly good news for them. In other good news, this time for WF, the FDIC and the Federal Reserve Board announced that Wells Fargo had adequately remediated the deficiencies in its 2015 resolution plan. As a result, Wells will no longer be subject to growth restrictions imposed last year. ("Resolution plans, required by the Dodd-Frank Act and commonly known as living wills, must describe the company's strategy for rapid and orderly resolution under bankruptcy in the event of material financial distress or failure of the company.) Appraisal and collateral news Never easy being an appraiser. Recently there was a " shortage " of appraisers, and in many parts of the nation it would take weeks, if not months, for an...(read more)

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MBS Day Ahead: Fight Continues For Bonds; New "Gap" to Watch

Tue, 25 Apr 2017 13:14:47 GMT

Posted To: MBS Commentary

For the past 5+ months, any discussion of "the gap" among bond traders could have only referred to the 2.15-2.17 gap created on Veterans Day weekend in 2016 (Nov 11-13). Yields closed at 2.15 before the weekend and opened at 2.17 when trading resumed the following week. Gaps instantly become significant targets for traders. The first time trading levels re-visit a gap, the result is more often a bounce. That's how it happened with the 2.15-17 gap this time around. Yields made it back early last week, but definitely bounced. If we return, we'll have a better chance of breaking through. For now though, we have another gap to contend with. This one was created by the French election weekend, and it took 10yr yields from closing levels of roughly 2.25 to opening levels of just...(read more)

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