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MBS RECAP: Bond Markets Cry Wolf, This Time For Real?

Fri, 02 Dec 2016 22:17:18 GMT

Posted To: MBS Commentary

Let's change up the old fairy tale. Bond markets have been cried wolf on a few recent occasions. In my version of the fairy tale, "crying wolf" is equivalent to saying "hey guys, there are no wolves around, so it's safe to come out and play." Anyone who listened to that wolf cry (Nov 16, 22, or 29) was promptly eaten by the wolves (i.e. rates snapped brutally higher just when it looked like they might be calming down). With the blood still on the ground from the last feasting of the wolves (yesterday's big sell-off), we're once again hearing bond markets cry wolf. This time, we have a rejection of a fairly epic long-term ceiling at 2.50% in 10yr yields as well as a rally below the next relevant ceiling of 2.42% today--all against the backdrop of a jobs report...(read more)

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Mortgage Rates Bounce Lower Despite Jobs Report

Fri, 02 Dec 2016 21:19:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates erased yesterday's losses after today's jobs report, though not necessarily because of it. The Employment Situation (affectionately referred to as "the jobs") is traditionally one of the biggest sources of market movement. So when rates make a big move following the jobs report, it's only natural to assume a cause and effect relationship. That said, most of the credit for today's move goes other places. First of all, there's the simple fact that rates have been trending so decisively higher in general. Just yesterday, I noted that we were increasingly likely to see a rebound as rates continued to push the boundaries of past precedent. In other words, rates have risen about as quickly as they ever have, and it's common for any financial instrument to blow off some steam in such...(read more)

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FHA Loan Limits Increased

Fri, 02 Dec 2016 14:27:52 GMT

Posted To: MND NewsWire

The Federal Housing Administration (FHA) has now joined the Federal Housing Finance Agency in raising the dollar limits for loans that qualify for FHA guarantees. Last week FHFA raised limits for Fannie Mae and Freddie Mac loans to 424.100, a number which forms a basis for some of the FHA changes . The new limits, which will be effective for loans with case numbers assigned on or after January 1 , will constitute a slight increase in 2,948 U.S. counties; limits will remain at 2016 levels in 286 counties . In so-called high cost areas, the national " ceiling " will increase to $636,150 from $625,000. The " floor " will increase to $275,665 from $271,050. The loan limit ceiling is 150 percent of the national conforming limit ($424,100) while the floor is set at 65 percent. The floor applies to...(read more)

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Agency's Future up For Grabs; Loan Amount Changes - FHA's 2017 Levels

Fri, 02 Dec 2016 14:24:08 GMT

Posted To: Pipeline Press

Plenty of people are on the roads in December, traveling for the holidays. Ever curious about the basic differences between a road, a street, a boulevard, etc.? Well, here is a short, easy description . With 2018 a mere 13 months away, and the new Administration coming in, talk has resurfaced concerning the two geese laying the golden eggs: Freddie Mac and Fannie Mae . Employees from neither company officially comment on their future, but that certainly hasn't stopped tongues wagging and opinions being given. For example, Treasury Secretary nominee Steve Mnuchin said that Fannie Mae and Freddie Mac should exit government control , which puts him at odds with several Republicans like Jeb Hensarling who want to see the GSEs wound down. "We will make sure that when they are restructured, they...(read more)

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MBS Day Ahead: Can NFP Help Bond Buyers Catch The Falling Knife?

Fri, 02 Dec 2016 13:12:02 GMT

Posted To: MBS Commentary

Have you heard the one about the falling knife? And how no one wants to catch it? That's one of the market's favorite analogies for the fear experienced by potential buyers of an asset whose price has fallen so rapidly that it " surely must entice demand soon." It's true enough that analysts, traders, and casual observers can all look at the current pace of bond market weakness and conclude that buyers "have to" be ready to pounce some time soon. But it's one thing to conclude and another to put money on the table--especially when putting money on the table could get very expensive very quickly if your timing is off. Mistiming the catching of falling knives results in mutilated hands and fingers. That's why no one wants to catch them. Historically, things...(read more)

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MBS RECAP: Bonds Lose Enough to Wake Up Buyers. Then They Went Back to Bed

Thu, 01 Dec 2016 22:44:59 GMT

Posted To: MBS Commentary

Bonds began the day in the throes of yesterday's ongoing momentum. There was a bit of a pause during Asian market hours, but European trading quickly pushed US rates to new 2016 highs . Unlike most of the recent selling spree, European rates actually rose more than US rates today. This ties in to one of today's key market movers --a Reuters story on next week's ECB announcement that was too detailed to not have some foundation in reality. The gist is not far out of line with what we've been worrying about for months--essentially that the ECB is indeed actively thinking of ways to break the bad news of tapering in 2017. For whatever it's worth, most of the ECB's alleged options include maintaining accommodation in some form (i.e. no abrupt end to QE in 2017), but for...(read more)

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Mortgage Rates Surge Above 2-Year Highs

Thu, 01 Dec 2016 21:02:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates spiked abruptly today, bringing them to the highest levels in well over 2 years . The average lender is now quoting conventional 30yr fixed rates of 4.25% on top tier scenarios with more than a few already up to 4.375%. You'd have to go back to the summer of 2014 to see a similar mortgage rate landscape. (NOTE: Freddie Mac's widely-cited primary mortgage market survey, released today, showed a 0.05% increase week-over-week. That increase is actually fairly close to the true week-over-week increase, but only if you're using last Wednesday or Friday as your baseline. Freddie's baseline was Mon/Tue--shorter than normal due to the holiday week. Additionally, Freddie's survey doesn't capture today's rate spike, which was roughly 0.10%. The bottom line is that many borrowers will be...(read more)

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Residential Spending Leads Lackluster Construction Report

Thu, 01 Dec 2016 16:43:19 GMT

Posted To: MND NewsWire

Construction spending rose only slightly in October, with residential construction coming in stronger than most other sectors. The Census Bureau said overall spending during the month was at a seasonally adjusted annual rate of $1.172 trillion, up 0.5 percent from September. The September total, originally reported as down by 0.4 percent was revised upward and is now unchanged from August at $1.167 trillion. Spending was higher than in October 2015 by 3.4 percent. Analysts polled by Econoday were expecting an increase of 0.6%. Estimates ranged from 0.4 to 0.8 percent. Private sector spending was at a seasonally adjusted rate of $885.9 billion, a 0.2 percent increase and up 4.7 percent from a year earlier. Most private sector construction categories fell in August, only residential, transportation...(read more)

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UDAAP and Title Webinars; Allied Found Guilty; Lender Rankings

Thu, 01 Dec 2016 15:00:19 GMT

Posted To: Pipeline Press

Numbers can be deceiving. U.S. Housing and Urban Development (HUD) Secretary Julián Castro announced that public housing developments in the U.S. will now be required to provide a smoke-free environment f or their residents. Secretary Castro said HUD’s new rule will provide resources and support to more than 3,100 Public Housing Agencies (PHAs) to implement required smoke-free policies over the next 18 months. In legal news du jour, since this often helps shape the public's opinion of our industry, a jury found Allied Home Mortgage and CEO Jim C. Hodge liable for civil mortgage fraud, and awarded the United States over $92 million in damages . They are, "liable for violating the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 in connection...(read more)

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MBS Day Ahead: Bonds Flirt With Highest Yields Since July 2015

Thu, 01 Dec 2016 13:32:14 GMT

Posted To: MBS Commentary

Bond markets begin the day still reeling from yesterday's OPEC-driven rout. We noted in yesterday's closing commentary that yields bounced on an ominous floor at at 2.35% (10yr yield). That was ominous because it has been a relevant pivot point , as seen in the chart below. The implication of a failure to break 2.35% was that we risked moving to the next higher pivot point today. Indeed, yields have been banging their heads against 2.42% since 4am this morning. While yesterday's drama was clearly a product of inflation concerns driven by the OPEC deal, today's weakness is getting more motivation from the non-inflation-related components of bond yields. This can be seen in the following chart where the the non-inflation-related components actually moved lower yesterday (blue...(read more)

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MBS RECAP: OPEC Deal Blasts Bonds

Wed, 30 Nov 2016 22:18:13 GMT

Posted To: MBS Commentary

Today brought the long-awaited and hotly-anticipated conclusion of a deal among OPEC countries to limit oil production. Constricted supply has one intention: higher prices. For now, petroleum still fuels trade for the foreseeable future. So a widespread agreement to limit supply (read: raise prices) among OPEC countries has an immediate, quantitative impact on prices. But perhaps more insidiously , it has long-term, qualitative implications for future inflation pressures. This surely wouldn't have been as big a deal were it not for the fact that markets are already pretty stressed out over the long-term qualitative inflation implications from the inbound Trump administration. Simply put, markets were already relatively freaked out about what fiscal policies might do to inflation, so the...(read more)

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Mortgage Rates Moderately Higher

Wed, 30 Nov 2016 21:07:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates rose moderately today, bringing them roughly back in line with Monday's levels. For the record, that leaves us in slightly better shape than last week, which saw the highest rates in more than a year. Today's bond market weakness was driven primarily by the much-anticipated OPEC deal. What is the OPEC deal and why is it impacting mortgage rates? The OPEC deal essentially serves as an agreement among OPEC countries to limit oil production. The goal is to push oil prices higher. Higher oil prices imply higher inflation, and inflation is an enemy to low interest rates. With this logic, it would be easy to assume that rates would move higher any time oil prices moved higher, but that's definitely not the case. Today's OPEC deal did more damage by influencing long-term inflation fears...(read more)

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Mortgage Activity Will Be Crushed By Rising Rates -Freddie Mac

Wed, 30 Nov 2016 18:35:40 GMT

Posted To: MND NewsWire

Interest rates are, quite naturally, the focus of Freddie Mac's November Outlook. The company's Economic & Housing Research Group looked at the potential impact of the interest rate surge since the election and what it called "the near certainty" that the Federal Reserve's Open Market Committee (FOMC) will raise the fed funds rate at its December meeting. Over two weeks post-election the 10 -year Treasury note surged by over 50 basis points , closing at 2.35 percent on November 18. The increase was driven by higher than expected inflation and anticipation of the FOMC move -the probability of which the futures market was putting at 92 percent. Not only has the likelihood of a December rate hike increased, but expectations for future rate increases have shifted as well. At their last press...(read more)

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Will Trump's New Appointee End GSE Conservatorship?

Wed, 30 Nov 2016 18:25:59 GMT

Posted To: MND NewsWire

President-elect Donald J. Trump may have just handed Freddie Mac and Fannie Mae a "get out of jail free" card. Trump has picked Steven Mnuchin to be Secretary of the Treasury. Among his first pronouncements to the press was that the two government sponsored enterprises (GSEs), which have been in federal conservatorship since 2008, should no longer be owned by the government . Stock in the two companies immediately soared (although that is a relative term for assets that have been virtually worthless for over eight years). Within hours Fannie Mae's stock rose 32 percent and Freddie Mac's by 31 percent to $4.04 and $3.99 respectively. The stock prices had already been moving slowly higher in recent months, first because of lawsuits filed against the government by several hedge funds which bought...(read more)

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Pending Home Sales Rise (Sort of) to 4-Month Highs

Wed, 30 Nov 2016 15:37:59 GMT

Posted To: MND NewsWire

Pending home Sales eked out a 0.1 percent gain in October. The National Association of Realtors® said its Pending Home Sales Index (PHSI) barely managed a second straight month of gains , rising to 110.0 from a downwardly revised 109.9 in September (the previous reading was 110.0, which would have made today's reading "unchanged," officially). Even though NAR's chief economist Lawrence Yun called the increase "minuscule," it still pushed the index to its highest level since last July. The index was also 1.8 percent higher than In October 2015 when it stood at 108.1. The PHSI is a forward-looking indicator based on contracts for home purchases. Those signed contracts are generally expected to become closed transactions within two months. Yun said, "Most of the country last month saw at least...(read more)

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CFPB Appraisal News; Non-Agency MBS Update

Wed, 30 Nov 2016 15:07:37 GMT

Posted To: Pipeline Press

Underwriters’ hands are tied in using income from something the Federal Government considers illegal. For example, Washington State had nearly $212 million in marijuana sales in the second quarter of 2016, approaching the $249 million sold in alcoholic spirits. Some argue that someone in the weed business with an 800 FICO is a better credit risk than someone in any occupation with a 580 FICO score for a taxpayer-supported mortgage program like FHA. I love it when the press sneers at making money. One financial reporter wrote, " Steven Mnuchin , the frontrunner for Treasury secretary in the Trump administration, made millions turning around a lender that collapsed after the subprime mortgage frenzy..." What's bad, making millions? Turning around a company? Being involved, even remotely...(read more)

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MBS Day Ahead: Oil Adding Fuel to Bonds' Inflationary Fire Fears

Wed, 30 Nov 2016 14:48:14 GMT

Posted To: MBS Commentary

Yesterday we discussed the positive impact of month-end bond buying . The only problem with month-end buying that occurs on the day before month-end is that it can leave an imbalance of sellers on the last day of the month. This is a bit counterintuitive because there's a tendency to view month end buying as the overall bond market needing to hold certain levels to meet month-end index values ( read the link if you're not sure what I'm talking about). In practice, that's not how it works at all. Month-end index extensions provide cues for a certain subset of traders to hold a certain mix of bonds. Once they've bought enough bonds to achieve that mix, they're out. They no longer need to buy or sell for month-end purposes. So if most of those traders get most of their...(read more)

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No Surprise: Rate Spike Torpedos Refi Apps

Wed, 30 Nov 2016 13:29:38 GMT

Posted To: MND NewsWire

Thanksgiving wreaked the usual holiday-related damage on the Mortgage Bankers Association's report of mortgage activity during the week ended November 25. The company's Market Composite Index, a measure of application volume, fell by 9.4 percent on a seasonally adjusted basis compared to results for the week ended November 18. On an unadjusted basis, the Index was down 38 percent. The week's results included an adjustment to account for the holiday. The Refinance Index fell 16 percent and only 55.1 percent of all applications were for refinancing. That was a decline from 58.2 percent during the previous week, and the lowest share since June. There was a decline of 0.2 percent in the seasonally adjusted Purchase Index compared to the previous week and the unadjusted index was down 34 percent...(read more)

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MBS RECAP: Bonds Win Despite Healthy Opposition. Time to Celebrate?

Tue, 29 Nov 2016 22:33:03 GMT

Posted To: MBS Commentary

How many ways could bond market weakness have been justified today? Shall I count the ways? GDP +3.2 vs +3.0 forecast and +2.9 previously Business Inventories only added 0.49% to the GDP total (a higher amount could serve as a counterpoint to the strong GDP reading. Consumer Confidence +107.1 vs +101.2 (a big beat). Other components of Confidence numbers were strong Stocks, European bond markets, and the prevailing trend all argued for weakness Corporate bond issuance has ramped up (adds pressure to Treasuries for these reasons ). Yesterday was good, and are we even allowed to have 2 good days in a row anymore?! That laundry list of negative justification had to face off against a seemingly inferior team of positive anecdotes. Investors are fretting over tomorrow's OPEC meeting and oil...(read more)

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Mortgage Rates Lowest in a Week

Tue, 29 Nov 2016 20:53:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rate s continued lower today. While the pace of improvement was slightly slower, it was enough to get the average lender rate sheet back to levels seen last Tuesday. That makes this the first time since before the election that rates haven't been significantly higher week-over-week. It's also the first time in more than a month where rates have moved lower 2 days in a row. Normally, such accomplishments would be no big deal, but when we're backing down from the highest rates in more than a year, every little bit helps. Today's improvements translated to a little more unity among lenders. Whereas more than a few were still quoting conventional 30yr fixed rates of 4.25% on top tier scenarios yesterday, most are now back down to the 4.0%-4.125% range. From a strategy standpoint, there...(read more)

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Freddie Mac Names eNote Vendors

Tue, 29 Nov 2016 18:50:16 GMT

Posted To: MND NewsWire

Freddie Mac has certified six companies as meeting its requirements for creating, signing, and storing eNotes , i.e. electronic promissory notes. The company said it took this step to expedite and streamline the mortgage process by encouraging the use of digital documents. Four companies have completed Freddie Mac's full approval process, meeting the technical requirements to create, sign and / or store eNotes. They are Digital Delivery, eSign Systems, Fiserv, and Pavaso . Two additional companies -- DocMagic and eOriginal -- have provisional approvals as they go through the full review process. Freddie Mac said it has been actively purchasing eMortgages from sellers and servicers since 2005 and regularly accepts many electronic documents used in initial disclosures and electronic closings...(read more)

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Foreclosure Starts at 12-Year Low

Tue, 29 Nov 2016 18:42:10 GMT

Posted To: MND NewsWire

The national foreclosure inventory rate, according to Black Knight Financial Services, fell below 1 percent in October for the first time since July 2007. That rate, which measures the number of mortgaged homes in the process of foreclosure, dropped by 0.95 percent from September and was down 30.24 percent compared to its level in October 2015. Black Knight, in its "first look" at October mortgage performance data, said there are now 504,000 homes in the inventory, a decline of 5,000 in a month and 217,000 year-over-year. That wasn't the only good news in the report. Foreclosure starts declined by 8.3 percent from September and were 22.81 percent lower than in October 2015. At 56,500, the number of October starts was the lowest since January 2005. Delinquencies were up by what Black Knight...(read more)

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Exemption Level for Appraisals Will Remain at 2016 Level

Tue, 29 Nov 2016 15:54:38 GMT

Posted To: MND NewsWire

While it will remain unchanged in 2017, the Consumer Financial Protection Bureau (CFPB), Federal Reserve Board, and Office of the Comptroller of the Currency (OCC) have issued a final rule regarding future adjustments to the threshold for appraisal exceptions for higher-priced mortgage loans. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 amended the Truth in Lending Act, adding a requirement that lenders get a written appraisal based on an interior inspection of a home's interior. Loans for $25,000 or less were exempted from this requirement with a provision that the exemption level be revisited annually and revised to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The calculation method adopted in the final rule will...(read more)

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Case-Shiller National Index at New All-Time High

Tue, 29 Nov 2016 15:16:56 GMT

Posted To: MND NewsWire

It took ten years and change, but national prices as measured by the S&P CoreLogic Case-Shiller National Index have finally surpassed the previous pre-crisis high set in July 2006. The Home Price Index, which covers all nine U.S. census divisions, rose by 5.5 percent year-over-year in September, bringing it 0.1 percent above the earlier peak. The August 2015 to August 2016 gain had been 5.1 percent. The Case-Shiller number was on the low end of home price estimates for September. Black Knight had put the annual increase at 5.4 percent while the National Association of Realtors reported a 5.6 percent change. Both the CoreLogic HPI and that from the Federal Housing Finance Agency (FHFA) were significantly higher, at 6.3 and 6.1 percent respectively. Of the four, the FHFA index was the only...(read more)

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Webinars, Conferences, and Training; Pondering Politics' Effects on Housing/Lending

Tue, 29 Nov 2016 15:11:45 GMT

Posted To: Pipeline Press

From Louisiana comes, “I doubt that HUD will be a high priority for Trump – perhaps it will be like Ronald Reagan’s view. Remember the story that President Reagan was making his way down a line of mayors visiting the White House, shaking hands, when he came to Samuel R. Pierce Jr., his Secretary of Housing and Urban Development. 'Hello, Mr. Mayor,’ Mr. Reagan said to Mr. Pierce.” Speaking of the government, does the average government-guaranteed loan have 150 documents? The person interviewed in this article believes so. Along those lines, ever wonder why non-depository online lenders are attracting the scrutiny of regulators? Research by KPMG finds nonbank online companies arranged about $36B of loans in 2015 vs. about $11B in 2014. In product news, Nations Direct...(read more)

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