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Here’s Why Rates Were Flat This Week (And Why That Should Change)

October 18,2019
by admin

Mortgage rateswere flat today. In fact, they were very close to being flat on the week for that matter! This is a reflection of the bond markets current set of concerns, which really came into focus late last week with Thursday’s Brexit-related news and Friday’s trade deal updates.

Brexit refers to the UK’s attempts to exit the EU. As esoteric of a concern as that may seem, it’s something that the bond market (and hence, interest rates) quite clearly cares about. Last Thursday’s unexpected progress between Boris Johnson and Northern Ireland’s Prime Minister sent rates screaming higher at their fastest pace in months. I could also argue that much of the damage that seemed to have been done by Friday’s US/China trade news was instead follow-through momentum from Thursday’s Brexit-inspired move.

Why did that meeting matter so much? If Northern Ireland and the UK agree on how to do Brexit, the UK gets a “deal” when it breaks from the EU. The deal would hopefully make things easier on all parties involved and preserve as much of the economic benefit of the existing trade/commerce relationship as possible. A stronger global economy is bad for interest rates. It’s that simple. Rates would have continued higher this week if it looked like the newly drafted Brexit deal could garner enough votes to be approved by British parliament, but reports were quick to suggest that’s a long shot.

Either way, we’ll find out how the UK votes tomorrow and we’ll see what the fallout is for mortgage rates on Monday. It may well be the case that the whole process is delayed for another 2 months and we’ll get to open this present again during the holiday season.



Loan Originator Perspective

Bond markets coasted through Friday, posting minimal gains and remaining near their levels since Tuesday afternoon. Saturday may bring Brexit clarification, which could certainly impact next week’s pricing. I’m still locking my November closings early in the process. -Ted Rood, Senior Originator

Locking or floating over this weekend should be based on what you feel the outcome of the UK vote on the Brexit deal. If UK is unable to pass the deal through their house, then i think rates will react positively Monday morning which makes floating a good call. If UK passes the Brexit deal, rates will come under pressure which means locking today is the safe call. -Victor Burek, Churchill Mortgage


Today’s Most Prevalent Rates

  • 30YR FIXED -3.75%
  • FHA/VA – 3.375%
  • 15 YEAR FIXED – 3.375%
  • 5 YEAR ARMS – 3.25-3.75% depending on the lender



Ongoing Lock/Float Considerations

  • 2019 has been the best year for mortgage rates since 2011. Big, long-lasting improvements such as this one are increasingly susceptible to bounces/corrections

  • Fed policy and the US/China trade war have been key players. Major updates on either front could cause a volatile reaction in rates

  • The Fed and the bond market (which dictates rates) will be watching economic data closely, both at home and abroad, as well as trade war updates. The stronger the data and trade relations, the more rates could rise, while weaker data and trade wars will lead to new long-term lows.
  • Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders. The rates generally assume little-to-no origination or discount except as noted when applicable. Rates appearing on this page are “effective rates” that take day-to-day changes in upfront costs into consideration.

MBS RECAP: Quiet Trading Week Leaves Focus on Brexit Weekend

October 18,2019
by admin

Today was a throw-away day for the bond market. Yields matched their narrowest trading range of the week and ended the day at their most ‘unchanged’ levels of the week (i.e. closest to the previous day’s close). In addition, Friday’s close was only 2bps away from last Friday’s close.

Translation: bonds did a GREAT job of QUICKLY getting into position for upcoming risks after LAST WEEK’S Brexit news. You’d be forgiven if you forgot about this one already, but I’m referring to the meeting that took place between Boris Johnson and the Northern Irish PM Varadkar. That meeting introduced the prospect of a last minute Brexit deal. Bonds jumped accordingly (perhaps with some help from the trade deal announcement the following day) and the waiting game began.

As of tomorrow, the waiting game–or at least a major milestone thereof–is over. We’ll find out if British parliament can manage to sign off on the new Brexit deal (the average news story this week suggests they won’t, but we’ve learned not to blindly trust such stories when it comes to how UK politics will go). More likely, we’ll find out that the UK will request a 2 month extension on the existing 10/31/19 Brexit deadline. Happy New Year?

FHA Tops the List for Non-Conventional Purchases

October 17,2019
by admin

More than a quarter of new home purchases in 2018 were financed through non-conventional sources. Data from the Census Bureau’s Survey of Construction shows that, while the new home market was dominated by loans from Fannie and Freddie Mac, other funding accounted for 28.6 percent of new home purchases. Danushka Nanayakkara-Skillington analyzed the data for an entry in the National Association of Home Builders’ Eye on Housing Blog.

FHA-backed loans were the most prevalent form of non-conventional financing in the new home market last year with an 11.0 percent share, followed by all-cash at 10.0 percent. VA-backed loans accounted for 5.6 percent and other financing for 2.1 percent. That latter category included loans from the USDA’s Rural Housing Service, Habitat for Humanity, loans from individuals, and state or local government mortgage-backed bonds.

The reliance on non-conventional forms of financing was highest at 38.7 percent in the West South Central where FHA loans made up 16 percent of all loans. FHA was also the dominant non-conventional source in the South Atlantic and Pacific divisions. Cash financing was highest in the New England division census division at 21.5 percent and lowest in the South Atlantic division at 7.5 percent.

VA loans were relied on the most in the Mountain division where they accounted for 8.8 percent of loans. They represented only 1.1 percent in New England.

After Two Years, Residential Fixed Investment Returns to Positive Territory

October 17,2019
by admin

Even though the pace of home building remains below where the industry would like it to be, Fannie Mae says it helped drive residential fixed investment into the black in the third quarter. The company’s Economic and Strategic Research Macroeconomic Forecast Team says it would be the first time that component will make a positive contribution to the gross domestic product (GDP) since 2017.

The team had previously forecast a positive contribution from residential fixed investment, but data has come in stronger than anticipated and they have revised it upward to 4.2 percent annualized in the third quarter. This strength should carry into the fourth quarter, putting the remainder of the year on a solid footing. “What had been a drag on the economy for almost two years will now likely be a near-term source of strength. While the effect has been somewhat modest relative to historical experience, lower interest rates are now clearly supporting the housing market,” they say. This strength will help to counteract a slowdown in other GDP components, especially business fixed investment and business inventory buildup.

In its October Economic Summary, the company says, despite its optimism about residential investment, it has still revised its GDP forecast for the third quarter down two-tenths of a point to 1.7 percent annualized. They expect inventories and business investment to rebound in the fourth quarter and they remain with their earlier estimate of 2.2 percent growth for the entire year. They also increased their projection for 2020 from 1.6 to 1.7 percent.

That last revision, they say, “means a more positive outlook for housing.” They expect a 1.0 percent increase in home sales this year and about the same for 2020. Housing starts will also increase in both years, although they will remain lower than their historic norms.

Home prices are also showing signs of strength. The CoreLogic National House Price index accelerated year over year in August after decelerating for fifteen of the past sixteen months. The July reading of the Case-Shiller house price index also came in roughly flat on an annual basis after a similar period of deceleration. However, expectations for growth in the Federal Housing Finance Agency’s (FHFA’s) Home Price Index have been revised down for this year as home price growth has been less sensitive to interest rate declines than previously expected. This means there are probably still affordability constraints out there. While appreciation is expected to continue its deceleration, low interest rates may mitigate earlier expectations.

Following a 2.5 percent jump in July, August existing single-family home sales pushed upward by 1.3 percent to 5.49 million annualized units, the strongest pace since March 2018. At the same time, new home sales rose 7.1 percent over the month to the second-highest level since November 2017 and the third-highest of the economic expansion. This recent strength led to Fannie Mae’s upward revision to its third and fourth quarter home sales forecasts. They now expect total home sales in 2019 will be 0.9 percent higher than in 2018.

The August decline in purchase mortgage applications and July’s pending sales index still suggest a pullback in sales for September but the company believes they will regain strength entering the fourth quarter. The August reading of the pending sales index, which leads sales by about 45 days on average, rose 1.6 percent, and purchase mortgage applications in September rebounded, rising 7.3 percent over the month.

Still, they say existing sales are likely near their peak pace for the time being, due to inventory issues. The months’ supply of single-family homes for sale fell back to 4.0 months, the lowest August reading since tracking started in 1982. Lower interest rates may still encourage additional homeowners to put their homes on the market as they no longer feel locked into their current mortgage rate, but so far there is little evidence of this occurring. There will probably be only a modest quarterly increase in fourth-quarter existing home sales, and modest softening moving into 2020 as economic growth is projected to decelerate while supplies remain tight.

While the lack of inventory may hamper home sales, it could stimulate construction. They expect total home sales numbers to increasingly rely on those for the new homes needed to meet demand. Single-family housing starts rose for the third consecutive month in August to the second strongest pace since May 2018 (although they declined by 9.4 percent in September) suggesting an uptrend in new home construction. Permits were also up in August to the highest level since February 2018 and the National Association of Home Builder’s index measuring home builder sentiment has also moved higher. While there are still shortages of labor and land, the industry appears to have the capacity to maintain a comparatively heightened level of production.

Multifamily housing starts also jumped in August, surging 32.8 percent over the month, nearly reversing the declines of the prior two months and permits were also up. Starts will probably fall back over the upcoming quarters, the pace of construction is likely to remain quite strong in light of continued low vacancy rates, growing renter household formation, and low interest rates.

The company has also increased its forecast of purchase mortgage originations in 2019 and 2020 to $1.28 trillion and $1.29 trillion, respectively. Total originations for 2019 are expected to rise 15.4 percent from 2018 to $2.04 trillion. Next year there will be a decline of 9.0 percent in total originations to $1.86 trillion as projected declines in refinance activity outpace essentially flat purchase activity, with the refinance share dropping from 37 percent in 2019 to 31 percent in 2020.

There has been some contention among members of the Federal Open Market Committee (FOMC) over their September rate cut. Seven members see an additional rate cut this year and five members believe the cut in September was a policy error. Despite the growing rifts among the committee, continued trade tensions, weak manufacturing, and the Fed’s unwillingness to disappoint financial markets have led Fannie Mae to move its forecast for the next rate cut forward from the December meeting to the one this month followed by another cut in January. The Fed will then pause for the remainder of next year.

Broker, Fraud, Credit, and Hedging Products; Lenders Adjust to FHA Changes

October 17,2019
by admin

Here’s a little trivia for you. What does San Francisco have six of that Manhattan has none of? Dirt roads! I don’t know if the cost of maintaining a dirt road is more than that of maintaining a paved road, but I do know that the industry is buzzing about Citi being smacked with a $30 million fine by the Office of the Comptroller of the Currency stemming from violations in relation to the holding period of other real estate owned. Yes, apparently there is a two-year limit on banks maintaining possession of a foreclosed property unless the bank applies for an annual exemption for five years. Past five years and the bank is supposed to sell the property back into the market to prevent available housing inventory from being kept away from would-be homebuyers. I received a few notes supporting the fine, saying stalling keeps someone from obtaining a new home, especially if they don’t take the homeowner off the title/deed. (Editor’s note: How about fining states like New York for dragging their feet for years during the foreclosure process?)


Lender Services and Products

How much oversight is enough when it comes to vendor management? That question was asked at the recent MBA Fraud Prevention Forum in Chicago. To help you prepare for the 2020 vendor management lifecycle, Vendorly® is looking for feedback on a brief third-party risk management survey. With your participation, you’ll be entered to win a $100 Amazon gift card! Take the survey here.

Reminder! Freedom Mortgage Wholesale’s FHA Condo Single Unit Approval program allows for approvals of individual condo units meeting certain eligibility requirements even if the condo project is not FHA approved! Freedom Mortgage Wholesale is the right choice for a fast and easy FHA Condo approval. Relax – we coordinate the collection of all condo project information for you. Additionally, Freedom Mortgage will absorb any fees associated with Condo Questionnaire requests. Join us for FHA Condo Single Unit Approval training.

Going to the MBA Annual? Looking for a long-term strategy on reducing costs and scaling your business? Connect with the team at Sutherland to discuss how we are helping our clients scale and reducing costs by combining Automation with BPO solutions. We can deliver anywhere in the world or in the cloud. If you would like to schedule a meeting, please contact Neil Armstrong.

Lending solutions provider Data Facts recently announced they are offering a webinar to examine why you should really be taking a second look at Fannie Mae’s Day 1 Certainty program. They’ll uncover how it’s been changing the game for lenders, and why it’s never been easier to implement D1C for your business. The free webinar is on Thursday, October 24that 9am CT. Click hereto save your seat.

Keep Data Facts in mind as a trusted partner you can rely on for credit reports, fraud products, tax return and social security verifications, flood certs, lead gen products, and more. Talk with a live person and take advantage of their personalized support. By offering a variety of seamless LOS integrations (Encompass, Calyx, Byte, etc.) and a 100% U.S.-based customer support team, they help their lending clients close more loans, faster and easier.

How much oversight is enough when it comes to vendor management? That question was asked at the recent MBA Fraud Prevention Forum in Chicago. To help you prepare for the 2020 vendor management lifecycle, Vendorly® is looking for feedback on a brief third-party risk management survey. With your participation, you’ll be entered to win a $100 Amazon gift card! Take the survey here.

$1.1 billion in a weekend – or basically $1.2 million per minute. WOW, you brokers are amazing! Thanks the grinding you did last weekend, Quicken Loans Mortgage Services had its BIGGEST WEEKEND EVER, with $1.1 billion in home loans across America being placed with QLMS. That’s a fantastic feat! A huge share of QLMS’ 6,000 broker partners tapped into the incredible pricing, process, technology and support QLMS offers. If haven’t run your clients’ numbers with QLMS recently, call your AE today. If you’ve never talked to QLMS, now is the time. Click here to join.


FHA/VA Tweaks for Lenders, Investors, and Vendors

The Department of Veterans Affairs said it has completed processing roughly $400 million in “funding fee” refunds to more than 50,000 veterans, begun after the VA inspector general reported that at least 53,000 disabled veterans were charged funding fees that they were exempt from paying. LOs know that VA loans require no down payment or MI but borrowers often pay a funding fee to reduce the loan’s cost to taxpayers. Some borrowers are exempted, including those receiving compensation for a service-connected disability.

Scott Olson reports that the CHLA sent a letter to HUD opposing components in the Plan to reduce the footprint of FHA and opposing the use of risk-based pricing. In the letter, CHLA supports a number of Plan proposals – better alignment of servicer deadlines and penalties, more flexible pay scales, and addressing risk concerns of PACE loans and the Down Payment Assistance program. The CHLA believes, however, that proposals to curb eligibility for things like FHA repeat borrowers and refinance loans would hurt consumers’ access to mortgage credit.

Turning to lender & investor changes, AmeriHome addressed condominium project approvals. “On August 14, 2019, with FHA INFO 19-41, FHA announced its Condominium Project Approval Final Rule (Project Approval for Single Family Condominiums) and implementation of the Rule with publication of new condominium sections of FHA’s Single Family Housing Policy Handbook 4000.1 (SF Handbook). For individual Condo Units underwritten by the Seller through Delegated underwriting: For Approved Projects: The project appears on the FHA-Approved Condominium Projects List with an unexpired HRAP/DELRAP FHA approval at the time of case number assignment and meets the loan level standards and requirements, or for Unapproved Projects: The project is not on the list of FHA-Approved Condominium Projects at the time of case number assignment and meets the standards and requirements for Single-Unit Approval.

For individual Condo Units underwritten by AmeriHome through the Non-Delegated Underwriting Program: For Approved Projects: The project appears on the FHA-Approved Condominium Projects List with an unexpired HRAP/DELRAP FHA approval at the time of case number assignment and meets the loan level standards and requirements. o AmeriHome will complete the Loan Level Review based on the required documentation provided to AmeriHome by the Seller. Single-Unit Approval is not eligible. See the FHA Standard Program Guide for AmeriHome condominium eligibility overlays that may apply. See the Seller Guide for Seller Representations and Warranties that apply.

Bayview | Lakeview CorrespondentAnnouncement C2019-39 covers the following topics:

FHA and VA updates, USDA Update to Student Loan Payment Calculation, Lakeview No MI with Community Second Enhancements, Training Resources in MRN/Evolve and Home in Five Program Change.

A recent US BankSeller Guide provides information on Rural Development student loan debt, disaster area declaration updates and a new Correspondent overlay for FHA delegated.

In a loanDepot Wholesale/Correspondent Weekly Announcement, information on the Freddie Mac Bulletin 2019-17 and the VA Handbook Chapter 13 Notices of Value is covered.

The ComplianceEase®flagship platform, ComplianceAnalyzer®, is now able to audit Veterans Affairs (VA) loans for unique state charges and fee deviations allowed by the U.S. Department of Veterans Affairs. With this enhancement, lenders that use ComplianceAnalyzer now have the ability to seamlessly test VA loans for allowable state charges and fees that are typically considered unallowable under VA guidelines—ensuring they are compliant when itemizing charges and fees. “Our enhancements to ComplianceAnalyzer allow lenders to not only itemize fees for VA loans to take advantage of allowable state exceptions, but also mitigate risk by ensuring compliance and quality control.”


Capital Markets

MCT has announced that STRATMOR Group’s 2019 Technology Insight Study shows MCT as the industry leader in lender share, overall satisfaction, and Lender Loyalty Score® in the Production Pipeline Hedging category. 75.1% of category respondents use third-party tools and 39.9% chose MCT, giving MCT the highest Lender Share among pipeline hedging providers. MCT again had the highest Lender Loyalty Score®, an impressive 86.4 out of 100 with the average competitor at a distant 37.9. MCT also had the highest Overall Satisfaction of any vendor measured in the study, coming in at 9.3 out of 10. “We are elated to again receive the highest scores in our category, which we see as a direct reflection of how diligently we work to support our clients,” stated Curtis Richins, President at MCT. See how MCT stacks up against the competition, or read the press release for more details.

Traders will tell you that markets, like the bond market, will trade in a certain range only for so long, and then it will head one way or the other. We’re certainly “stuck in a range” and yesterday the 10-year ended the day yielding 1.76%. Brexit, impeachment, Turkey, China/trade, hog inventories. How long can we talk about these issues?

In the U.S. yesterday we did see that total housing starts declined a disappointing 9.4% m/m in September to a seasonally adjusted annual rate of 1.256 million. Building permits declined 2.7% to a seasonally adjusted annual rate of 1.387 million. The month-over-month weakness was a function of downturns for multi-unit dwellings. Jobless Claims indicated that we’ll see another solid increase in October nonfarm payrolls. Industrial production declined, as did Capacity Utilization, but most of that was blamed on the strike at General Motors (GM), which contributed to a 0.7% decline in the manufacturing output for durables.

Today we’ll have the second-tier September Leading Economic Indicators, expected to decline slightly. We do, however, have plenty of speakers from the Federal Reserve, probably heading for three-day weekends wherever they’re speaking. Dallas’s Kaplan, Kansas City’s George, Minneapolis’s Kashkari, Fed Vice Chair Richard Clarida, and… oh, wait? Kaplan is back, speaking for the second time! Friday begins with rates little changed from Thursday: the 10-year is yielding 1.77% and Agency MBS prices are worse/down a tick or two (32nds).

Jobs and Changes

Optimal Blue continues to expand and with growth, comes opportunity! The company is actively searching for a SALES SOLUTIONS SPECIALIST – CAPITAL MARKETS, located on the West coast. What is a Sales Solutions Specialists? They are the product experts responsible for delivering specialized product and market expertise to prospective Optimal Blue clients. The ideal candidate is a sales-minded individual with extensive capital markets experience, a detailed understanding of all aspects of secondary marketing, and experience with multiple hedging platforms. This is a great opportunity for an individual to capitalize on the experience and reputation they have built in the mortgage industry. Visit the corporate careers page to learn more about this opportunity and joining the innovative team at Optimal Blue.

Polygon Mortgage is actively hiring purchase-focused Loan Consultants to work as the exclusive lender for Polygon Northwest Homes, the #1 home builder in Oregon and a top home builder in Washington state. Polygon Mortgage is affiliated with ClosingMark Home Loans™ which is one of the fastest growing mortgage lenders in the United States, and provides a superior platform for Loan Consultants looking to grow their purchase volume. “We have everything a Loan Consultant needs to be wildly successful, and our exclusive relationship with Polygon Northwest makes this an extremely attractive opportunity,” said Heidi Iverson, VP Talent Acquisition & Development. Polygon Northwest is also a proud division of William Lyon Homes, one of the nation’s largest homebuilders. Contact Heidi Iverson, VP Talent Acquisition & Development to learn more about the positions in Bellevue, WA and Kirkland, OR and other open positions available nationwide within the entire ClosingMark Financial Group.

The Wholesale Lending Production opportunity you’ve been looking for has just found you! We are an expanding over twenty-year old East Coast Regional Wholesale lender adding AE’s and Managers from Connecticut down to Florida. We price strong and we write Agency, Government and Non-QM product. We provide one of the Best Fulfillment Platforms in the Country! This is a great opportunity for confident TPO Professionals who know their customers and value working in an entrepreneurial self-managing environment. Yep, no Call Reports, no Micromanaging, your production writes your success! We got the track and we will support your run! No Overlays, No Hassle, No Nonsense! Contact Scott Karch at 908-293-2218 for more details!

Freddie Mac announced that Frank Nazzaro has been named EVP and chief information officer (CIO) of the company. He is a member of the senior operating committee and reports directly to CEO David Brickman. Frank’s been with Freddie for a year as Chief Technology Officer (CTO) and has been Acting CIO since May 2019.

FormFree announced it has appointed 30-year industry vet Christy Moss, CMB as director of partner relationships to “strengthen and grow industry partnerships and cultivate internal talent as leader of the company’s strategic sales team.”

CrossCountry Mortgage, LLC announced the appointment of Chris Knapp to the position of EVP responsible for recruiting as well as setting and achieving sales and production goals across the country.

MBA Predicts Economic and Rate Uncertainty Depressed New Home Sales

October 17,2019
by admin

The Mortgage Bankers Association (MBA) says it expects that new home sales declined in September relative to August based on a drop in mortgage applications to finance their purchase. MBA says its Builder Application Survey showed there were 8 percent fewer applications in September than in August, but those applications were submitted at a rate 34.2 percent higher than a year earlier. The data does not include any adjustment for typical seasonal patterns.

Based on this information and on assumptions regarding other factors such as market coverage, MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 725,000 units in September. This represents a decrease of 7.6 percent from the August pace of 785,000 units. On an unadjusted basis, MBA estimates that there were 56,000 new home sales 8.2 percent fewer than the 61,000 new home sales in August.

“Applications for new home purchases fell in September but remained 34.2 percent higher than a year ago, with our estimate for new home sales following a similar pattern. Last month’s slowdown was likely caused by ongoing economic and interest rate uncertainty, as well as the fact that homebuilders continue to grapple with high building costs and labor shortages,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting. “Purchase applications this year for new and existing homes for sale have consistently outpaced year ago levels. This trend should continue in the final months of the year – especially considering how much higher rates were at the end of 2018.”

Applications for conventional financing made up 69.2 percent of loan applications, those for FHA loans had an 18.4 percent share and VA loans 11.6 percent. RHS/USDA loans comprised 0.9 percent of the total. The average loan size of new homes decreased from $332,497 in August to $330,807 in September.

MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data, as well as data from other sources, MBA is able to provide an early estimate of new home sales volumes at the national, state, and metro level. This data also provides information regarding the types of loans used by new home buyers. Official new home sales estimates are conducted by the Census Bureau on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application. The Census Bureau data for September will be released on October 24.

MBS Day Ahead: Strange Combination of Pre-Brexit Paralysis and Jumpiness

October 17,2019
by admin

Yesterday brought the highest yields in a month as Brexit-related optimism swelled early in the overnight session. At issue: British PM Johnson and EU negotiators reached “a deal.” Great! Right? Brexit is solved? But wait… British parliament would still need to sign off on the deal, and the news was quick to point out the relative impossibility of such a thing. As such, overnight market movement began to reverse course even before US markets opened.

That brings us to today. Traders know that an easy passage of the current deal is unlikely. But they also know that the deal could be adjusted or debated in such a way that passage is not impossible. Adding to the uncertainty is the fact that the EU could respond in one of two ways if there’s no deal by the end of the month (grant an extension that the UK would undoubtedly have requested, or simply pull the trigger on a “no deal” Brexit). Either way, as British law currently sits, Parliament has to decide on “deal or no deal” by tomorrow.

All of the above makes today and the upcoming weekend fraught with uncertainty for traders. Nothing would have more potential to move markets today than a compelling update that adds clarity to this weekend’s probabilities. And nothing will be more actively traded on Monday morning than the outcome of Saturday’s parliamentary session. All bonds can really do today is watch and wait for the aforementioned “compelling updates.” Without them, there’s little incentive to move too far away from the staging area just below the highest yields in a month (and right on the edge of the current consolidation trend).

20191018 open

Mortgage Rates Face Volatility Thanks to an Old Friend

October 16,2019
by admin

Mortgage ratesdidn’t do much today, but risks are increasing that movement will be more brisk in the coming business days. Blame European politics–specifically: Brexit.

This isn’t the mortgage rates’ world first go-round with the U.K.’s lengthy process of exiting the European Union (aka “Brexit”). In fact, Brexit was the single biggest factor that helped drive rates down to the long-term lows seen in 2016. For most lenders, those rates were close enough to the all-time lows seen in 2012. The fact that they were available in the middle of the summer homebuying season only made things better for the housing market. Thanks Brexit!

More than 3 years later and the U.K. is set to run into yet another deadline for its divorce from the EU. This one has been on the radar for months, but it’s been getting more interesting as it approaches. Just this morning, news broke of a compromise deal reached between U.K. leaders and the EU. Such a compromise would sooth investors’ concern about the economic fallout from the alternative “no-deal Brexit.” In general, “soothed investors” = higher rates, all other things being equal.

The deal is far from done, however. As of this afternoon, British parliament is not thought to have enough votes to approve the proposed deal. That sets the country up for another delay of at least 2 months or even for a no-deal scenario. The vote won’t take place until Saturday. There is a wide range of potential reactions to the few available outcomes. Long story short, mortgage rates face a wider range of potential movement depending on the outcome of Saturday’s vote. Even before the vote, interest rates in the US could easily react (or overreact) to any strongly-worded headlines that seem to change the probability for a particular outcome.



Loan Originator Perspective

Bonds flatlined through midday before retreating slightly this afternoon. My pricing was comparable to Wednesday’s, but tomorrow’s may be worse if MBS keep regressing. There’s no clear trend here, but feels like rates want to rise more than drop. I’m locking November closings as early as possible. -Ted Rood, Senior Originator

Continuing to Lock all loans with a 30 day or less closing time frame. Volatility level for rates seems to be playing towards higher rates for at least the near future. -Al Hensling


Today’s Most Prevalent Rates

  • 30YR FIXED -3.75%
  • FHA/VA – 3.375%
  • 15 YEAR FIXED – 3.375%
  • 5 YEAR ARMS – 3.25-3.75% depending on the lender



Ongoing Lock/Float Considerations

  • 2019 has been the best year for mortgage rates since 2011. Big, long-lasting improvements such as this one are increasingly susceptible to bounces/corrections

  • Fed policy and the US/China trade war have been key players. Major updates on either front could cause a volatile reaction in rates

  • The Fed and the bond market (which dictates rates) will be watching economic data closely, both at home and abroad, as well as trade war updates. The stronger the data and trade relations, the more rates could rise, while weaker data and trade wars will lead to new long-term lows.
  • Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders. The rates generally assume little-to-no origination or discount except as noted when applicable. Rates appearing on this page are “effective rates” that take day-to-day changes in upfront costs into consideration.

MBS RECAP: Even if Bonds Weren’t Ignoring Data, They’d Still Be Confused

October 16,2019
by admin

The bond market has a lot on its mind right now. 2019 is proving to be very different from other episodes of big, protracted rate trends. In most past instances, we can point to 1 key theme driving the momentum, with a few occasional supporting actors. Things are more complex and nuanced this time around as the usual suspects for rate inspiration seem to be taking turns in the driver’s seat.

This week (and perhaps last week, to some extent), Brexit is definitely in control. News of a new potential deal hit bonds overnight, but we bounced back after subsequent news that it would have a hard time getting enough votes to make it through Parliament in a special session this Saturday.

Much of the brexit-related volatility was playing out right as this morning’s economic data hit. Was this another instance of Brexit overriding the influence of US econ data (which is what happened yesterday morning)? Not really… This time around, the data wasn’t as important as yesterday’s Retail Sales report. Beyond that, several of the reports had significantly mixed internal components. For example, construction numbers were weaker than forecast, but single-family construction gained ground.

The net effect was a relative absence of movement in the morning hours and bonds traded a range near their recent highs. A progressive bond market rally into the closing hours of the European session helped bonds hit their best yields by mid-day. Stock selling didn’t hurt. After Europe closed, however, US bond yields bounced back to higher levels, right in the middle of the morning’s range.

Today’s overall damage was minimal, but bonds’ willingness to fly a holding pattern at the highest yields in a month makes it look like traders are contemplating a technical breakout to even weaker levels. Based on how the market has been behaving over the past 2 days and what we know of this weekend, the best guess is that it’s up to Saturday’s Brexit-related developments to cast a vote on the bond market’s ability to bounce in a friendly way or to break-out to even higher yields.

MBS Day Ahead: Lots of Data, But All Eyes on Brexit

October 16,2019
by admin

Yesterday saw a swath of Brexit headlines spark unavoidable bond market weakness just as a weaker reading in the important Retail Sales report suggested a rally. Offsetting penalties, back to the line of scrimmage! Bonds ultimately ended green on the day, but that was largely made possible by the heavy losses from Tuesday’s session (brexit-driven as well).

Heading into today, Brexit continued to hog the spotlight as far as global markets and US Treasuries were concerned. News of a NEW and potentially viable deal hit hard overnight with GBP (British Pounds Sterling) and EU bond yields surging higher. Treasury yields were pulled along for the ride in heavy volume. 10yr Treasuries hit their highest yields in just shy of a month (Sept 19th was higher, but just barely). Doubts began to emerge after that, however. Bonds recovered most of those losses by the start of the day. Here’s how it all looks on a chart:

20191017 open

And here are the same indicators over a longer time frame. This shows just how much of an impact Europe and Brexit have had on the US bond market, even as the US/China trade deal ostensibly had control of market momentum.

20191017 open2

From here, the next key development will be Saturday’s parliamentary session in Britain, where lawmakers will vote on whether to pass this new deal or ask for another delay from the EU. Markets are leaning toward the “delay” option. There’s some small chance the EU could take a hard line and deny that request, but they’ll probably cave, based on the appearance of progress in the last 24 hours. Either way, there’s significant risk of big reactions to Brexit-related headlines today, tomorrow, and especially over the weekend.