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Mortgage Rates Higher to Begin Holiday-Shortened Week

Mon, 20 Nov 2017 19:46:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates moved slightly higher today against the backdrop of the unique bond market conditions seen on Thanksgiving week. Bond markets underlie mortgage rates, and there's generally a certain level of participation that traders and mortgage lenders can count on. That participation wanes on major holiday weeks and the remaining players tend to behave a bit more conservatively. This is seen in the form of interest rates staying inside recent boundaries and mortgage lenders not getting too aggressive with pricing. Inside those boundaries, however, movement is far less predictable . After all, with fewer players in the game, each trader has a bigger say in the direction rates will move. If there are more bonds being sold than bought, regardless of the motivation, rates will move higher. This...(read more)

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MBS Day Ahead: Thanksgiving Week in The Bond Market

Mon, 20 Nov 2017 14:42:08 GMT

Posted To: MBS Commentary

Compared to stocks, bond markets tend to be more affected by changes in market participation surrounding holidays and other sources of illiquidity. Liquidity is closely related to volume, but is certainly not the same . The shortest definition of liquidity is "volume at price." In other words, if there is a decent volume of buyers and sellers interested in trading at any given price, that's a liquid market. Contrast that to volume which simply counts the size of the trades in question. Volume could be very high if there are a few very large buyers and sellers only interested in certain price levels, but that would not be a liquid market. The worst of both worlds in terms of frustration for market watchers is a low volume, illiquid trading environment. That means it takes fewer...(read more)

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Hurricanes, Timing Issues, Push Delinquencies Higher

Mon, 20 Nov 2017 14:28:11 GMT

Posted To: MND NewsWire

Mortgage delinquencies surged higher in the third quarter of 2017. Most of the increase came in the early stages of non-performance, and much of it appeared to be driven by the late summer hurricanes. The Mortgage Bankers Association (MBA) reported the changes as were gathered in its National Delinquency Survey (NDS). The delinquency rate for mortgages jumped 64 basis points (bps) compared to the second quarter, to 4.88 percent of all outstanding loans. This was an increase of 36 bps from the same quarter in 2016. The delinquency rate includes loans that are at least one payment past due, but not loans for which the foreclosure process has begun. Hurricanes Harvey, Irma and Maria caused a huge amount of damage in Texas, Louisiana, Florida, and Georgia and devastated Puerto Rico. Marina Walsh...(read more)

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Action at CFPB; Capital Markets Product

Mon, 20 Nov 2017 14:14:43 GMT

Posted To: Pipeline Press

Thanksgiving week already! Let’s temporarily shift from residential lending to economics. According to the SalaryforPilot website, Air Force pilots earn an average yearly salary of $107,950, while Naval and Marine aviators earn $70,550 per year. That’s decent, given the benefits. Yet the U.S. Air Force has a 2,000-pilot shortage . With unemployment already low, and commercial airlines offering signing bonuses when existing pilots are up for reenlistment, market forces are impacting employment - just like the mortgage biz. CFPB Here's something to think about. If the CFPB "dials things back," wouldn't the states step in and increase their consumer-focused regulatory levels? Multi-state lenders certainly wouldn't like that. Since the state regulators have been in regular communication...(read more)

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Q3 was "Rough Patch" for Housing; Q4 Indicators Not Positive

Fri, 17 Nov 2017 22:29:18 GMT

Posted To: MND NewsWire

Housing activity in the third quarter of 2017 is described as "continuing its rough patch" in Fannie Mae's latest edition of Economic Developments . The company's economists say that activity pulled back across the board during the quarter. It was also the third in a row in which housing starts fell, although Friday's report on October residential construction signals a possible resurgence. New home sales were also down, despite an impressive 18.9 percent gain in September, a month in which existing home sales also rose for the first time in four months. The increase was not enough to bring the quarter into positive territory. The economists note that, while "the hurricanes disrupted activity in the South, housing weakness was present before the hurricanes and largely stems from the supply...(read more)

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MBS RECAP: Holiday Mode Engaged as Bonds Seek Center of Range

Fri, 17 Nov 2017 22:28:58 GMT

Posted To: MBS Commentary

With today's modest gains, bond markets did exactly what they need to in order to keep the medium term momentum technicals perfectly flat (that flatness was discussed in the Day Ahead , if you'd like to read more about it). That commentary mentioned bonds being "done for the holidays" in the title because the following week tends to be anyone's guess when it comes go market movement. We've seen Thanksgiving weeks that have been awesome, ugly, and perfectly flat. In almost all cases, the motivation for each of those movements is nowhere to be found. It's a random walk based on which traders are trading and whether or not they are actually trying to accomplish something on a week known for it's light liquidity. As for today, it started out with yields and MBS...(read more)

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Mortgage Rates Unchanged Heading Into Holiday Week

Fri, 17 Nov 2017 21:53:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates barely budged today--not too surprising considering today's bond market levels (which underlie rates) were roughly in line with yesterday's. The average lender is quoting conventional 30yr fixed rates of 4.0% or slightly lower for top tier scenarios. Movement has been minimal since October with day-over-day change most frequently occurring at the "cost" level. In other words, bond markets don't move enough every day for lenders to change interest rates by their standard 0.125% increments. Instead, the cost (or rebate) associated with any given rate serves as a fine-tuning adjustment. The cost is typically calculated based on a percentage of the loan amount. It can move by more than half a perfect in some cases ($500 for every $100k borrowed) before it would make sense for some...(read more)

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More Than Half of October Refis Were FHA/VA

Fri, 17 Nov 2017 15:12:20 GMT

Posted To: MND NewsWire

The interest rate for loans originated (closed) in October inched down 1 percentage point to 4.20 percent, the lowest rate thus far in 2017, and the sixth month in a row rates have declined. Ellie Mae also reported that the share of originations that were for refinancing moved up one percentage point to the highest share since February. "We are continuing to see borrowers take advantage of the lower interest rates as the refinance percentage increased to 39 percent of total loans in the month," said Jonathan Corr, president and CEO of Ellie Mae. "We saw increases in October across all loan types with FHA refinances at 23 percent, conventional refinances at 46 percent and VA refinances at 32 percent of all closed loans." According to the company's Origination Insight Report, the distribution...(read more)

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Home Building Surges to Year's Best Levels, Erasing Summertime Sadness

Fri, 17 Nov 2017 14:59:49 GMT

Posted To: MND NewsWire

It has been a while since all three measures covered in the residential construction report were strongly positive. In fact, certain metrics bordered on disconcerting during the summertime months. October's numbers represent a major departure from that previously stagnant theme. The joint report from the U.S. Census Bureau and the Department of Housing and Urban Development contained especially strong numbers for housing starts , which rose 13.7 percent from September to a seasonally adjusted annual rate of 1,290,000. The number represented the fastest pace since October 2016 and fell just 2.9 percent below that year-ago estimate of 1,328,000 units. Starts in September were also higher than originally reported, revised upward from 1,127,000 to 1,135,000. The start rate was well above even the...(read more)

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MBS Day Ahead: Bond Markets May Be Done For The Holidays

Fri, 17 Nov 2017 14:35:38 GMT

Posted To: MBS Commentary

Take a few steps back from the shorter-term charts (we tend to watch at 2-day chart for most lock/float purposes on MBS Live ) and a theme begins to emerge about bond market momentum over the past 2 months. There has been additional reinforcement of that them so far this week as Tuesday's high yields and Wednesday's low yields hit the same trendlines that began to suggest a holiday consolidation. What's a holiday consolidation? Quite simply, warm bodies start disappearing from trade desks (and of course, from Capitol Hill) this time of year. There's one major wave around Thanksgiving, then after a few weeks of work, a much bigger exodus for the Christmas/New Year holidays. When traders start tuning out, it's not uncommon to see trendlines emerge on charts like bowling bumpers...(read more)

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HUD, FHA, VA, and Ginnie News; Wells Fargo Mgt. Upheaval

Fri, 17 Nov 2017 14:22:11 GMT

Posted To: Pipeline Press

Here’s a tidbit for Happy Hour tonight. Currently, about 21 percent of filers take the mortgage deduction, but under the new framework only about 4 percent would, according to recent estimates from the Tax Policy Center. Here's a good summary of how the current proposals, which we'll be hearing about for months and months, impact home owners. More below, but no one (Senate, House of Representatives, White House) have put a firm plan/proposal in front of the public - and heading into the Thanksgiving and Christmas breaks, no single plan has emerged. HUD, VA, and FHA News From the Government, Investors, and Lenders The U.S. Department of Housing and Urban Development (HUD) announced it is charging the owner and landlord of several rental properties in Wichita, Kansas, and his wife, who...(read more)

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MBS RECAP: Bonds Adrift, No Land in Sight

Thu, 16 Nov 2017 22:17:17 GMT

Posted To: MBS Commentary

Bond markets are officially looking for inspiration, motivation, or even just something to pass the time. Today's events didn't seem to do the trick as trading levels drifted aimlessly throughout domestic hours. That's not to say bonds didn't move, however. The overnight session saw 10yr yields rise to the 2.36% pivot point to start the day. From there, they never came close to breaking outside a narrow 2bp range until after the 3pm CME close. This means all of the morning's economic data and the passage of the House tax bill (just the House, not the Senate) were effectively meaningless as far as bond markets were concerned. When we see surges in volatility at (and after) 3pm ET, it's a sign that trading conditions are light and that day traders had been making bets...(read more)

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Mortgage Rates Slightly Higher

Thu, 16 Nov 2017 21:36:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates moved higher today, but the changes were minimal for most lenders. Bond markets (which underlie interest rates) have been searching for inspiration recently and largely coming up short. This morning contained several economic reports and the House passed its tax bill in the afternoon, but none of those events caused much of a stir for bonds. In fact, all of the bond market movement responsible for today's higher rates occurred during Asian and European trading hours. When US traders got in for the day, bonds were almost perfectly sideways through 3pm. With next week bringing the Thanksgiving holiday and with the Senate not even taking up the tax bill debate until the following week (they're out all of next week), it's fair to wonder how much worse the lack of inspiration will...(read more)

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Builder Confidence Nears Post Crash High

Thu, 16 Nov 2017 15:38:34 GMT

Posted To: MND NewsWire

Builder confidence increased for the second consecutive month after taking a hit in September from the late summer hurricanes. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) increased 2 points in November, hitting 70, the highest score since March . It was also the second highest reading for the index which measures NAHB's new home builder members confidence in the new home market since July 2005. "November's builder confidence reading is close to a post-recession high - a strong indicator that the housing market continues to grow steadily," said NAHB Chairman Granger MacDonald. "However, our members still face supply-side constraints, such as lot and labor shortages and ongoing building material price increases." NAHB's monthly survey, which it has...(read more)

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CFPB's Cordray Resigns; Agency Future Uncertain

Thu, 16 Nov 2017 14:50:27 GMT

Posted To: MND NewsWire

Richard Cordray, first Director of the Consumer Financial Protection Bureau (CFPB), will leave the agency at the end of the month. Cordray announced his resignation on Wednesday in a letter to CFPB employees. It has long been rumored that he intends to run for governor of Ohio. Cordray served as acting director for an extended period after the agency was created as Republicans in the Senate announced they would block his confirmation or that of any other nominee to the position. His appointment was only made official after Senate Democrats reversed a long-standing rule allowing a 51-vote majority for confirmation. Bloomberg News says the White House had already begun a search for Cordray's successor (there had been widespread discussion that the President was looking for a way to remove Cordray...(read more)

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Another Lender Acquired; Training Events; Thoughts on Mr. Cordray

Thu, 16 Nov 2017 14:09:36 GMT

Posted To: Pipeline Press

I think the rumors out there about Richard Cordray taking a much deserved break and then, forget that governor stuff, stepping into Dave Stevens' shoes running the MBA are farfetched. Now, forgetting for a moment about comp issues (Cordray is earning about $180k per year ), if Dave were to have a desire to run the CFPB, that would be interesting indeed. Musings aside, law-abiding lenders value the role of the CFPB, and there have been positive contributions. It's the methodology, consumer complaint portal, governing by enforcement action, and the terrible punitive nature of its activities that the industry objects to. In additional personnel news, industry Sherpa David Kittle withdrew his name for nomination as President of Ginnie Mae. Given the lengthy and easily delayed endorsement procedure...(read more)

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MBS Day Ahead: More Econ Data, Plus Tax Bill Vote, But Bonds Might Not Care

Thu, 16 Nov 2017 13:36:22 GMT

Posted To: MBS Commentary

While today will play host to another set of economic reports as well as the House vote on its version of the tax bill, bond markets may continue to let other factors drive trading decisions. The 8:30am economic data includes Jobless Claims, Import Prices, and the Philly Fed Index. None of those are especially heavy hitters--especially Claims (not for the past few years anyway). Industrial Production at 9:15am can occasionally move markets, but not reliably. 10am NAHB Builder Confidence data is more of an industry curiosity than anything. The House is also expected to pass its tax bill, but markets likely won't care too much because the Senate is busy with its own tax bill, and until the two chambers come together on something that looks agreeable, all of the tax reform rhetoric is being...(read more)

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MBS RECAP: Bonds Defy CPI and Retail Sales to With Solid Gains

Wed, 15 Nov 2017 21:38:47 GMT

Posted To: MBS Commentary

As noted in today's MBS Huddle, an absence of any selling pressure in bond markets was a positive result in itself. Selling pressure would have been fairly easy to justify given the slightly stronger CPI data as well as moderately stronger Retail Sales. Bonds not only held their ground but did so at the lowest yields of the week. Things began to look a little shaky heading into the afternoon, but as soon as European markets closed, bond buyers found themselves in control again. Treasuries began drifting back toward lower yields (more so in longer-dated bonds) and MBS approached the morning highs, up more than an eighth of a point. The yield curve (which typically refers to the spread between 2 and 10yr Treasury yields) has certainly been a consideration for traders. The fact that it broke...(read more)

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Mortgage Rates Lower After Inflation Data

Wed, 15 Nov 2017 20:26:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates fell today, largely in response to the past two days of bond market improvement. In other words, lenders had been keeping their guard up ahead of today's key inflation data (The Consumer Price Index, or "CPI"). While it's true that a strong CPI report had the potential to push rates back to the highest levels since this summer, today's data wasn't strong enough. In fact, most of the metrics were roughly in line with forecasts. Still, the strength and resilience in bond markets shouldn't be discounted . Bonds also digested strong Retail Sales data and managed to maintain stronger levels achieved overnight. In general, "strength" in bond markets translates to lower mortgage rates, although there can be some lag between the two. Most lenders continue quoting conventional 30yr fixed...(read more)

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Fannie Mae is Testing New Type of Construction Loan

Wed, 15 Nov 2017 17:24:17 GMT

Posted To: MND NewsWire

With new home building still lagging other measures of the housing recovery, and lean inventories of new homes causing shortages of existing homes as well, Fannie Mae is seeking ways to provide a little help . The company has plans to test market at least one new product for purchasing newly constructed homes before they are built. A pilot program is still in the talking stages and apparently has not yet received approval from Fannie Mae's regulator, the Federal Housing Finance Agency. But according to sources at the company, the first initiative might make it cheaper and simpler to get a loan for new home construction. If a consumer wants to build a home, the present process calls for him or her to hire a builder and obtain a construction loan. When the house is complete, the borrower must...(read more)

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Mortgage Insurance Fund Circling the Drain - Better Loans to Blame?

Wed, 15 Nov 2017 15:29:16 GMT

Posted To: MND NewsWire

FHA's Mortgage Insurance Fund (MIF) lost ground this past year, which is bad news for those hoping for a cut in its fees. The Department of Housing and Urban Development (HUD) released results of the statutorily required independent actuarial analysis of the MIF on Tuesday which showed the balance of the fund declined by $2 billion during the 2017 fiscal year. The analysis, conducted by Pinnacle Actuarial Associates, put the fund's capital reserves at $25.6 billion at the end of September. That equates to 2.09 percent of the $1.23 trillion outstanding balance of the mortgages FHA guarantees. By law, MIF must maintain a minimum of 2.0 percent as a reserve against loans that default. The fund had a balance equal to 2.35 percent of its guaranteed loans at the end of the 2016 fiscal year. The fund...(read more)

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Conventional Conforming Underwriting Updates, New Products

Wed, 15 Nov 2017 14:18:20 GMT

Posted To: Pipeline Press

I remember when being worth a million bucks really meant something, and my parents occasionally pointed out someone who they thought was a millionaire. Now they’re a dime a dozen, especially in the United States where there are over 15 million people who are worth $1 million or more (almost half of the 36 million in the world). The wealthiest 1% of the world's population now owns 50.1% of the world’s wealth versus 45% in 2001. Certainly the gap between the haves and the have nots is widening as the total wealth in the world grew by 6% over the past 12 months to $280 trillion, marking the fastest wealth-creation since 2012, according to a new report from Credit Suisse . More than half of the $16.7 trillion in new wealth was in the U.S. Lender News Fannie Mae and Freddie Mac (the...(read more)

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Refinancing Rallies, Drives Week's Numbers

Wed, 15 Nov 2017 13:56:27 GMT

Posted To: MND NewsWire

The week ended November 10 saw a strong pickup in applications for refinancing but continued weakness in those for home purchases. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of that volume, increased 3.1 percent on a seasonally adjusted basis and 2 percent unadjusted. There was no adjustment to the weeks results to account for the Veterans' Day holiday which was observed on Friday. Applications for financing made up the majority of those received during the week for the first time since September, increasing from a 49.0 share during the week ended November 3 to 51.3 percent . The Refinance Index increased 6 percent. The seasonally adjusted Purchase Index managed an 0.4 percent gain, but the unadjusted version was down 3 percent from the previous week....(read more)

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MBS Day Ahead: Bonds Show Hand Ahead of Key Data

Wed, 15 Nov 2017 13:24:22 GMT

Posted To: MBS Commentary

Bonds begin the day much-improved from yesterday's levels, effectively showing their hand ahead of today's important economic data. In other words, they HAD been fairly equivocal so far this week--perhaps erring on the side of defensiveness as yields prodded the 2.40-2.42% ceiling. Breaking above that would be medium-bad news, and breaking above 2.47% would be the worst shift in more than 6 months. Bottom line , traders are buyers of bonds at these key support levels and now it's up to the econ data to support the traders! If it does, it would confirm positive shifts in the technicals seen in the following chart. As for overnight market movement, it is a product both of a global " risk-off " trade as well as a resurgence of yield curve flattening (green line moving lower...(read more)

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MBS RECAP: More Consolidation, But This Time at Least It's Green

Tue, 14 Nov 2017 21:47:17 GMT

Posted To: MBS Commentary

The past two sessions have been fairly nondescript in the bigger picture. Both have traversed almost exactly the same trading range. Both have exhibited very little direct attachment to news or events. And neither have offered up a meaningful attempt to break out of recently established ranges. Incidentally, the same patterns are playing out in multiple markets beyond the bond market. At least for bonds, today's spinning wheel of indecisiveness stopped on luckier numbers. In other words, the trading range was the same as yesterday, but we closed near the best levels of that range. I'd view this as a factor of random timing before I'd jump to the conclusion that bonds are about to rally. While the latter is certainly possible, there's a lot riding on tomorrow's CPI data as...(read more)

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