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Has RESPA’s Servicer Rule Reduced Foreclosures?

January 17,2019
by admin

In accordance with requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau (CFPB) recently conducted five-year assessments of two rules it promulgated under the act. We summarized their assessment of the Ability-to-Repay/Qualified Mortgage rule last week. What follows is a brief summary of the assessment of the Real Estate Settlement Procedures Act’s (RESPA’s) servicing rule.

Many provisions of the rule relate to servicer obligations to review delinquent borrowers for foreclosure avoidance options such as loss mitigation. These include requiring servicers to make certain disclosures, take certain procedural steps, and meet prescribed timelines when borrowers are applying for and being evaluated for these options.

The data showed that loans becoming delinquent were less likely to proceed to a foreclosure sale during the months after the rule was implemented (January 2014) than before that date. The Bureau estimates that if the rule had not gone into effect in 2014, at least 26,000 additional borrowers who became delinquent that year would have experienced foreclosure within three years.

After controlling for certain observable factors, the assessment found that loans were more likely to recover from delinquency following the Rule’s effective date. They estimate that at least 127,000 fewer borrowers would have would have recovered within three years of a 2014 delinquency.

Data from a trade association survey of large mortgage servicers found that the cost of servicing mortgage loans increased substantially between 2008 and 2013, from about $60 per loan per year to about $160 in 2013 and remained between $160 and $180 from 2014 to 2017. The estimated annual cost of servicing a loan in default went from about $480 per loan in 2008 to about $2,410 in 2013 and remained between $2000 and $2,400 from 2014 to 2017.

While most of the increases occurred before the Rule’s effective date, between 2009 and 2012 litigation and investor policies imposed many new servicing requirements similar to those in the Rule. Some of the pre-2014 increases could reflect the costs of complying with those earlier requirements.

In interviews servicers said one-time costs of implementing the Rule (including technology and personnel costs) ranged between $1 and $14 per loan. If this range is applied to the approximately 53 million loans under service in 2014, the one-time costs to industry ranged from $53 to $743 million. As previously noted, some servicers had already been subject to similar servicing standards which may have reduced their cost of compliance.

Some servicers said they had significant ongoing compliance costs. Larger servicers estimated that the Rule had increased annual costs by $3 to $11 per loan. For context, industry estimates of average annual servicing costs since 2014 are $250 to $300 per loan. If estimates of on-going servicing costs are applied to the servicing universe it would result in total additional costs of $156 to $572 million. Smaller servicers generally said they were unable to estimate cost impacts of the Rule but that the Rule’s requirements were consistent with their practices prior to its existence. Servicers identified as cost drivers the need for more robust control functions and higher personal costs to support increased communication with borrowers.

Asked about the Rule’s early intervention provisions, servicer generally said they were consistent with prior practices and did not require substantial changes other than tracking and monitoring compliance. The Bureau did not identify specific costs. There also seemed to be little change in the timing of required borrower notification although the share of borrowers initiating a loss mitigation application within six months of a 60-day delinquency increased from 39 percent in 2012 to 43 percent in 2015.

It did appear that it took borrowers longer post-Rule to go from initiating a loss-mitigation application to completing it. This may be because the Rule required servicers to define a complete application as a more comprehensive package than servicers used pre-Rule. None-the-less, borrowers who submitted complete applications in 2015 did so at a similar stage of delinquency as borrowers in 2012.

Many servicers said the most significant and costly changes they made were to comply with requirement to provide a five-day acknowledgment notice for loss mitigation applications, to evaluate borrowers for all available options at the same time, and provide a decision letter regarding the outcome of those evaluations. These were the requirements that differed most significantly from prior practices.

Both the time from initiation of application to short-sale offer increased post rule, likely due to the additional time required to collect documents necessary for the all-options evaluation. It might also reflect an increase in the length of short-sale marketing periods.

A larger share of borrowers appealed the servicers decision regarding their loss mitigation applications in 2015 than in 2012 but the portion of successful appeals declined.

The provision that prohibited servicers from initiating foreclosure proceedings before the 120th day of delinquency resulted in servicers doing so far less often in 2015 than in 2012. CFPB also found this decrease was not offset by an increase in foreclosure starts within the next several months. This suggests that the Rule prevented rather than delayed foreclosures. Housing counselors interviewed for the assessment said the foreclosure restrictions were the most helpful to their clients of the Rule’s requirements.

Servicers in general said they had to make significant changes to comply with these foreclosure restrictions and that they were among the costlier provisions to implement. While agreeing in general with housing counselors, servicers also suggested that the restrictions may have caused some borrowers to delay initiating loss mitigation requests until they had fallen further into delinquency.

Data indicates that a larger share of borrowers who completed loss mitigation application in 2015 were able to avoid foreclosure than those who completed applications in 2012. While loans had been delinquent longer post-Rule before foreclosures were started, it suggests the foreclosure restrictions did not increase the time it took servicers to complete the process.

The Rule’s force-placed insurance requirements include a prohibition on charging the borrower until the servicer has provided disclosures and met other requirements. Servicers said these requirements were generally consistent with the forced place policies in place before the Rule, so the effects were small. There was however a moderate decrease in the number of force-placed policies, a trend consistent with the requirements but one that could reflect other explanations such as changes in the insurance market which made it easier or cheaper for borrowers to obtain their own coverage.

Mortgage Rates Nominally Higher Despite Bond Market Warning

January 17,2019
by admin

Mortgage rates rose gently today. Most mortgage borrowers (and many mortgage professionals, for that matter) wouldn’t be aware of slightly more alarming risks lurking underneath the surface. Those risks involve the broader bond market from which mortgage-related bonds take their directional cues.

More simply put, if US Treasuries are improving, mortgage-backed bonds tend to improve as well. The level of correlation varies though. For nearly all of 2018, mortgages weren’t improving as quickly as the most widely-used rate benchmark: 10yr Treasury yields. That began to change recently–especially when 10yr yields began moving higher 3 weeks ago. During that time, we’ve seen moderate moves higher in 10yr yields met with modest moves higher in mortgage rates. Today was another one of those days.

The underlying risk is that the moderate moves in Treasuries are adding up and potentially crossing dangerous lines. Mortgage rates aren’t any worse than they were at last week’s highs, but Treasuries are as high as they’ve been in more than 3 weeks. If they go much higher, they’ll be breaking some important ceilings that investors might treat as harbingers of additional momentum. The net effect would be additional increases in mortgage rates. Even if those wouldn’t be keeping pace with the weakness in Treasuries, they still wouldn’t be pleasant.


Loan Originator Perspective

Rates continued their slow rise today, as treasury yields will end the week up .125%, a significant hike. I’m locking loans closing within 45 days, will continue doing so until we get sufficient data/drama to boost bond demand. Happy weekend! –Ted Rood, Senior Originator


Today’s Most Prevalent Rates

  • 30YR FIXED – 4.5%
  • FHA/VA – 4.25%
  • 15 YEAR FIXED – 4.125%
  • 5 YEAR ARMS – 4.25%-4.625% depending on the lender



Ongoing Lock/Float Considerations

  • Headwinds that had plagued rates for most of the past 2 years began to die down in late 2018. A rapid decline in the stock market certainly helped drive investors into bonds (which helps rates) Highest rates in more than 7 years in Oct/Nov. 8-month lows by the end of the year

  • This is a bit of a crossroads. The rising rate environment could flare up again. We may look back at Oct/Nov and see a long-term ceiling, or we may look back at early December and see a temporary correction before more pain.

  • Either way, late 2018 was a sign that rates are willing to take opportunities presented to them. From here, it will be up to economic data, fiscal policies, and the stock market to decide on the next set of opportunities. The rougher the overall outlook, the better interest rates tend to do.
  • 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: One of Three Things is Going on With Bonds

January 17,2019
by admin

Bond markets sold-off today in a slightly more alarming way than we’ve seen so far in 2019. This was accompanied by 11th straight trading session where stocks closed higher than they opened, as well as the best S&P prices in more than a month. One of three things could be going on.

At face value, this is alarming. The first option is that all of the above is cause for concern. After all, we were worried about stocks and bonds reversing course in 2019 after the strong and correlated move in late 2018. This is the worst case scenario, but not necessarily a guaranteed scenario.

The 2nd option is that all of the above is a ‘false alarm.’ Perhaps stocks are overly optimistic about a trade deal. Perhaps markets are too smart for their own good thinking they know what will happen when the government shutdown ends. perhaps they’ve traded this knowledge (stocks and bond yields usually rise after a shutdown or other termination of fiscally-driven uncertainty).

The 3rd option strikes a balance between the first two. Perhaps this is all just as alarming as expected. Perhaps this is the 2019 correction that we were always likely to get and it had just been on hold due to fiscally-driven uncertainty, among other things.

Either way, we’ll be much more equipped to pick one of these options after the next few dominoes begin to fall. The first will simply be making it to other side of the upcoming 3 day weekend (MLK Day on Monday). The next two biggies will be the end of the shutdown and the resolution of US/China trade talks.

2019 Swanepoel Power 200 List Revealed

January 17,2019
by admin

The real estate industry may change, but there’s one thing you can always count on—Bob Hale being included on the Swanepoel Power 200 list, which is the list of the most powerful people in the residential real estate brokerage industry.

Bob is ranked as the 27th most powerful and influential leader in real estate in 2019, which I believe is his highest ranking to date and is up from being ranked 32nd last year. In the words of the theme song from “The Jeffersons,” Bob is moving on up!

Bob is the second highest ranking association/MLS executive behind only NAR CEO Bob Goldberg and ahead of California Association of REALTORS®CEO Joel Singer who is ranked 30th and California Regional MLS CEO Art Carter who is ranked 36th. A couple of other association CEOs of note on the list are Miami Association of REALTORS® CEO Teresa King Kinney ranked at 120th (they may be bigger than us, but who is better?) and TAR CEO Travis Kessler ranked at 150th. We also congratulate HAR brokers Marilyn Eiland and Mark Woodroof who were ranked at 126th. (If I inadvertently missed any other HAR member on the list, I apologize.)

Just as interesting information, Ron Peltier from HomeServices of America; Gary Keller from Keller Williams; and Spencer Rascoff from Zillow are ranked first, second, and third, in that order.

To view the complete list, you may visit www.sp200.com.

Congratulations to Bob and everyone else for continuing to make the real estate industry better for our members and consumers alike.

Source: Houston Association of REALTORS®

New Home Sales Pull Back Amid Global Uncertainty

January 17,2019
by admin

Applications for new home purchases dropped in December, falling 6.8 percent behind those a year earlier. The deficit from November was even larger, a decline of 13 percent. The Mortgage Bankers Association (MBA) estimates that those numbers, which do not include any adjustment for seasonal patterns, translates into new home sales during the month at an annual rate of 552,000 units, a 12 percent decrease from the estimated November pace of 627,000 units. On an unadjusted basis, MBA says there were 37,000 new homes sold during the month, down 17.8 percent from the 45,000 new home sales in November.

“New home sales declined for the second straight month in December, from 627,000 units to 552,000 units, as factors such as a volatile stock market and economic uncertainty, both here and abroad, likely kept some prospective buyers away,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “This pullback in activity was in spite of falling mortgage rates and a robust job market. Looking ahead, if mortgage rates remain low, housing inventory rises, and home-price growth continues to steady, we expect to see a rebound in purchase activity this spring.”

MBA derives its new home sales estimates from its Builder Application Survey (BAS) which it conducts monthly among mortgage subsidiaries of new home builders. It combines the BAS data with assumptions regarding market coverage and other factors.

Conventional loans accounted for 69.5 percent of home purchase loan applications in December, and FHA loans had a 17.3 percent share. VA loan applications made up 12.5 percent and those to RHS/USDA composed 0.7 percent. The average loan size for new home purchase increased from $326,037 in November to $334,944 in December.

Official new home sales estimates are conducted by the Census Bureau and the Department of Housing and Urban Development on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application. The New Home Sales report for November from the two government agencies has been delayed by the partial government shutdown. At present the December report release is schedule for Friday, January 25.

Condo, Sales, and Business Intelligence Products; Freddie and Fannie Program Changes

January 17,2019
by admin

For the first time in history, the six biggest banks — JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs and Morgan Stanley — made $100 billion in profit in a year. Yowzah! There’s a lot going on out there, and Ben Smidt put out his “Mortgage Expert Insights on Business Planning Strategies” that is worth a gander. Every basis point counts, right? With the increase in short-term rates, for non-depository lenders, does your accounting team tell you how much it costs every day to have a funded but unsold on your warehouse? If they haven’t, they should.

Conventional Conforming Changes

For the most part Freddie and Fannie have motored on, regardless of the PUGS (partial U.S. government shutdown). Let’s see what they’ve been up to recently.

During the weekend of Feb. 23, Fannie Mae’s EarlyCheck™ version 5.8 will introduce new and modified edits to align with existing Loan Delivery edits and upcoming Loan Delivery edit changes. EarlyCheck updates include new edits for condo project type, credit score, and MI as well as edit severity changes.

Freddie Mac posted Bulletin 2019-2 that provides temporary guidance to help assist borrowers impacted by the federal government shutdown. This bulletin covers credit reporting requirements and eligible hardships and forbearance plans.

Freddie Mac announced new enhancements to its GreenCHOICE MortgagesSM energy-efficient offerings, including broader financing options to help families with lower-incomes reduce home utility costs through energy-saving home repairs and improvements. GreenCHOICE Mortgages will enable Freddie Mac to better assess mortgage loan performance between homes with energy-efficient enhancements and those without. Additional research by Freddie Mac will help develop and design valuation guidance and uniform data collection mechanisms, as well as underwriting guidelines to account for energy-efficient features.

The Freddie Mac Guide Bulletin 2018-22 Simplifies Requirements and Provides Flexibilities for Servicers. Click here to view the bulletin.

On January 21st, lenders will be able to submit self-reports and interact with the Data Validation Center right in the Fannie Mae Loan Quality Connect™ system without using a separate process or managing mailbox limitations. These are just two of the many ways Loan Quality Connect helps lenders drive loan quality and manage the post-purchase review process.

On Jan. 21 lenders can start using the Fannie Mae Loan Quality Connect™, its new system that drives loan quality and manages the post-purchase review process. It was developed with lenders, for lenders to bring simplified technology, seamless collaboration, and increased certainty. Click here to learn more about Loan Quality Connect™.

Fannie Mae sellers/servicers with a Dec. 31 fiscal year end must submit their annual certification and audited financial statements to us by March 31. Recent enhancements to the Lender Record Information Form 582 platform will simplify the certification process.

Freddie Mac announced enhancements to its Loan Selling Advisor® including a new Purchase Statement data export capability and incorporating new messaging and search functionality for Mandatory Cash Contracts.

New Uniform Loan Delivery Dataset (ULDD) Phase 3 edits with an Informational severity are now available in Fannie Mae Loan Delivery. Additionally, the Social Security Number (SSN) display is masked in both Loan Delivery and in the MISMO XML export files. Review the Loan Delivery Enhancements and visit the Loan Delivery page for more information.


Capital Markets

The U.S. 10-year closed Thursday at the slightly higher yield of 2.75%. The entire yield curve shifted up. The largest news concerning markets over the course of the day was a report that Treasury Secretary Steven Mnuchin proposed lifting some or all tariffs on imports from China in order to calm markets, though that same story in the WSJ noted that U.S. Trade Representative Robert Lighthizer is against making concessions. In good(?) news, the U.S. State Department has instructed its staff to return to work on January 22, as the longest shutdown in U.S. government history continues with no end in sight. There was the usual Brexit (British Exit) chatter across “The Pond.” European officials are reportedly willing to extend the withdrawal date past March 29, but the UK has yet to request such an extension.

It’s a real mix of companies open and closed Monday. Ahead of the long weekend, we have a relatively light economic calendar today. Fedspeak consists of New York Fed President Williams and Philadelphia’s Harker. Coming up, at 9:15AM, is the Industrial Production & Capacity Utilization couplet, both expected to increase slightly. Manufacturing output should increase 0.4% after an unchanged last reading. The University of Michigan Sentiment Index will be released at 10AM ET and is expected to decline slightly. Today begins with Agency MBS down/worse a few ticks and the 10-year yielding 2.77%.


Lender Products and Services

“On the heels of success with the Single Close Construction program in 2018, GSF Mortgage Corp. (GSF) is kicking off the new year strong by attending the NAHB International Builders’ Show in Las Vegas, NV, through February 19-21. Highlights of our Single Close Construction program include, FHA 30 Year Fixed up to 96.5% LTV, VA 30 Year Fixed up to 100% LTV, USDA 30 Year Fixed up to 100% LTV and Conventional 30 year fixed up to 95% LTV. All loans are handled in-house the borrower does not need to requalify after the initial closing and make no interest payments during the build on most products. Eligible home types include: stick built, manufactured, modular. Originators and builders are welcome to stop by GSF’s booth (#SU3048) and discuss the program and partnership opportunities with our attending Construction Division team. Please reach out to VP of Retail Lending, Frank Papaleo.”

In this era of uncertainty, how can Accenture Credit Services help you achieve greater predictability and certainty? “Through supporting your end-to-end or component based residential mortgage needs. As a trusted provider in retail, correspondent and wholesale channels, we help clients accelerate business outcomes and help them grow in today’s unpredictable market. We help transform business operations with lean manufacturing, process automations, data management, operational analytics, and agile global workforce models. Our deep domain expertise and robust processing capabilities help lift significant internal operational challenges for our clients. Accenture’s offshore branch with broad state licensure helps lenders increase their ability to focus on the customer experience and improve customer satisfaction, reduce costs to originate and service loans, improve compliance and management oversight, and enhance their operational efficiencies. Click here to learn more or to let us know if you’re attending the MBA IMB Conference in San Francisco later this month.”

Most of you have hopefully realized the massive opportunity non-QM represents for borrowers that don’t fit neatly into vanilla loan parameters. If you’re craving more options, REMN Wholesale has solutions for you. REMN is hosting a webinar on January 24th that explores the unique options it offers through the Simple Access platform. If you’re looking for ways to continue to grow in the non-QM space, this is a can’t miss event. REMN’s Simple Access program capitalizes on some of the most common scenarios for non-QM borrowers, including investor cash flow and other alternatives to full doc loans. The flexible guidelines REMN Wholesale offers through Simple Access, combined with the industry-leading support REMN is known for nationwide, makes their non-QM platform a win-win for all involved. REMN’s Simple Access non-QM webinar will be hosted by NREP’s Frank Garay. Space is extremely limited, so interested participants should register ASAP here.

“How can you say the words ‘Digital Mortgage’ if your POS requires human intelligence or often results in human error? PerfectLO is the leading POS in the Fin-tech space and has designed a Perfect Loan Application built with intelligence that “digs” in and asks all the questions that ‘live’ inside and outside the ‘1003.’ We all know that a completed “1003” is quite useless even when completed. The real pain in your operation begins is caused from inaccurate 1003’s and not requesting required docs. PerfectLO creates a ‘spot on’ doc checklist based off the answers and offers a secure upload. A customizable milestone sms notification portal to keep your borrowers and agents updated. Sign up for a free trial and demo. PerfectLO’s online questionnaire takes a non- intimidating, logical and systematic approach. Easy to adopt and easy onboard. PerfectLO works in every language and talks to all LOS’s. Visit PerfectLO.com!”

Looking for ways to grow your business? Freddie Mac is collaborating with clients to deliver automation and insights that provide a competitive edge. Cut back on documentation and reduce time to close with Loan Product Advisor® automated income and asset assessment capabilities. Save borrowers time and money with ACE appraisal waivers, now available for certain condo unit loans. Grow your condo business with Freddie Mac’s unit-level condo exception tool, Condo Project AdvisorSM. Get greater efficiency with simpler collateral QC and underwriting in Loan Collateral Advisor® Get The Freddie EdgeSM.

Amazon, JP Morgan Chase, LinkedIn, Uber, and Nest all use Customer and Business Intelligence to give themselves the edge they need to win in their industry. They spend hundreds of millions of dollars on intelligence products and will continue to invest more every year because it works! Sales Boomerang has created the same powerhouse intelligence systems for the lending industry but you don’t have to spend millions to implement it in your business. Management launched a new category in the mortgage industry called Borrower Intelligence and it is an absolute must have product. “If you have a database of more than 15,000 records you will miss out on at least $100M+ and in many cases over $1B in volume this year” says Alex Kutsishin Co-Founder and CEOof Sales Boomerang. Calculate your losses for yourself with this simple Loan Loss calculator. Sales Boomerang is booming so if you want to know how it fits into your strategy go visit its website and schedule a demo.


Jobs and Transitions

Highlands Residential Mortgage is honored to announce that National Mortgage News ranked Highlands as the “Number 1” Mortgage Company on their inaugural 2019 Best Mortgage Companies to Work for List. Using extensive employee surveys and employer reports on benefits, the Awards Program identifies and recognizes the Best Employers in the Industry.

“I’m very proud that Highlands was awarded First Place! From the beginning, our goal was to build a company with an employee focused culture that would attract and retain the best Mortgage Professionals in the industry. Winning this award affirms we are reaching that goal. The mission of valuing people drives everything we do and has resulted in the company growing for five consecutive years” said Ken Hickman CEO. Highlands currently has 31 branches in 11 states with 350 employees. If you are interested in joining the Best Workplace in the industry contact Danny Deaton EVP National Production 469-364-7078.

Caliber Home Loans, Inc. CEO Sanjiv Das was recently quoted by The Wall Street Journal in two recent articles. On January 4th, Das was quoted as saying “I think that family assistance has a higher moral bearing on people when things turn tough in the housing market,” in the article titled “More First-Time Home Buyers are Turning to the Bank of Mom and Dad.” This week he was quoted in the article “How to Make Home Ownership a Reality,” telling readers how “to make the right choices” when it comes to getting a home loan, the leading lender’s CEO said “Speed, certainty and rate are all important—not just the rate.” Caliber is currently the 3rd largest non-bank lender in the country (IMF). Caliber is growing and hiring new Loan Consultants. Consider a new career at Caliber this year! Visit www.joincalibernow.com or email Jeremy DeRosa.

Branch Managers, are you looking for stability for you and your team? It can take time before discipline pays off, but when it does, significant gains can result. Such is the case for PRMG’s position of strength as a company and our attractiveness for those seeking a home they may rely on. Many in our industry are currently unstable. Some offered unsustainable pricing in Q4 in an effort to recruit under what some might call false pretenses, only to worsen their pricing later. At PRMG we’re consistent, transparent and growing. Our pricing, products, fulfillment, marketing, compensation, and technology attract and retain top talent. Our two Founders continue to reinvest into PRMG providing a safe haven for those professionals who recognize the value in stability. PRMG affords you, the LO or BM, a voice. You matter here at PRMG and we treat you like the customer that you are. PRMG is that rare find of culture and performance and those who have taken full advantage of what we have to offer have become million-dollar earners in a few short years. Email Chris Sorensen, SVP-National Director of Retail, if you’re finally ready to build your legacy instead of another’s.”

VantageScore Solutions announced that Dr. Emre Sahingur has joined as SVP, Predictive Analytics, Research, and Product Management. (Dr. Sahingur most recently served as the Chief Risk Officer for Model Risk Management at Fannie Mae.)

MBS Day Ahead: Bonds Break One Ceiling, But The Next One is More Important

January 17,2019
by admin

Ever since bottoming out in early 2019, 10yr Treasury yields faced a pretty clear line in the sand from a technical standpoint. 2.82% stuck out like a sore thumb overhead due to multiple instances where it acted as a floor in 2018. It may have seemed too far away to worry about 3 weeks ago, but with 2.75% being broken yesterday/today, 2.82% is next in line.

2019-1-18 day ahead

Would a break above 2.82% be the end of the world for bonds? Not necessarily. In fact, in the biggest of pictures, as long as yields don’t break above 3.26%, the longer-term outlook could remain positive. It would just be getting off to a rockier start compared to a scenario where yields are instead able to hold fairly steady in the 2.75-2.82 range until finding a reason to rally.

Either way, the longer-term outlook will depend on bonds finding that reason to rally. The list of potential motivations is fairly short:

  1. Massive stock sell-off
  2. Recession (with or without massive stock sell-off)
  3. Some external eventuality (global economic weakness, for example) that precipitates #1 or #2 above

In the short term, risks look a bit lopsided for bonds. Traders assume that a government shutdown resolution will make for a bit of extra weakness. As we saw yesterday, any softening in tariffs or a tough trade stance would also likely hurt bonds and help stocks.

Long-story short, this is the New Year correction that it looked like we might not have to worry about back on January 3rd, when the new year was getting off to a great start for bonds. It just got started a few days late and has been muted by shutdown-related uncertainty. Without the shutdown, we’d likely be breaking that 2.82% ceiling today instead of 2.75%.

Mortgage Rates Holding Ground But Volatility Could Increase

January 17,2019
by admin

Mortgage rates were technically steady today. In fact, as of this writing, most lenders are offering slightly better terms compared to yesterday, but only by barely-detectable amounts. The afternoon brought volatility in financial markets owing to trade-related headline. That volatility isn’t moving in a good direction for mortgage rates at the moment. The takeaway is that, all other things being equal, lenders will be offering slightly weaker terms tomorrow morning, assuming they don’t see quite enough weakness to adjust today’s offerings with only a few hours left in the day.

Combine the volatility risk with the fact that rates are still very close to their lowest levels since last April, and this is still a compelling opportunity for potential homebuyers or owners interested in refinancing to lock a rate. This doesn’t mean lower rates are out of the question in 2019, simply that a few risk factors have stacked up without having done much damage to the long-term low rates from early January. We need to see how markets react to those events (eventual end of the government shutdown, return of economic reports, progress on a trade deal) before getting a clear sense of longer-term lock/float risks.


Loan Originator Perspective

Rates continued creeping upward today, and we’re going to need serious political drama or economic strife to post further gains. That is certainly possible, but until then I’m locking new applications closing within 45 days. –Ted Rood, Senior Originator

With rates hovering at or near 9 month lows I think you need to consider locking. Government closure, Brexit (yes it’s still a thing), and political battles all pose risk to low rates. I think it’s easier for rates to go UP from here not down. –Jason Anker – Sr. Loan Officer


Today’s Most Prevalent Rates

  • 30YR FIXED – 4.5%
  • FHA/VA – 4.25%
  • 15 YEAR FIXED – 4.125%
  • 5 YEAR ARMS – 4.25%-4.625% depending on the lender



Ongoing Lock/Float Considerations

  • Headwinds that had plagued rates for most of the past 2 years are slowly dying down. The rising rate environment could flare up again, and some headwinds remain in effect, but the broader tone has taken a more optimistic shift.

  • Highest rates in more than 7 years in Oct/Nov. Lowest rates 8 months by the end of the year.

  • This is a bit of a crossroads. We may look back at Oct/Nov and see a long-term ceiling, or we may look back at early December and see a temporary correction before more pain. Either way, it’s one of the more hopeful positions we’ve been in for several years.
  • 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: Trade Headlines Provide Sneak Peak for Bond Market Vulnerability

January 17,2019
by admin

The Wall St Journal ran a story this afternoon suggesting Treasury Secretary Mnuchin was pushing for a compromise deal to ease Tariffs on China in order to grease the skids for trade talks. As a result, stocks and bonds lost their cool–relatively. Case in point, in the 30 minutes following the headline, nearly 350k 10yr Treasury futures contracts traded. To put that in perspective, the 30 minutes following the January 4th jobs report saw just over 250k.

To be fair to the jobs report, it created lasting volume throughout the day whereas the trade-related headlines made for a much more condensed dose. Even so, the reaction speaks to importance of trade-related updates as the US works on hammering out a deal with China. We could also argue that it speaks the deprivation that markets have been experiencing with respect to economic data and other actionable developments.

In fact, this morning’s economic data was notable for just that reason. Jobless Claims the the Philly Fed Index haven’t been big market movers over the past few years. Today, however, they prompted a noticeable reaction. The easiest way to account for that is to say they represent a few of the reports that aren’t affected by the shutdown.

By the end of the day, bonds were only moderately weaker with 10yr yields up a few bps, holding near the important 2.75% level. Fannie 4.0 MBS fared better by comparison, falling on 2/32nds (0.06) in price to 101-27 (101.84).

MBS Day Ahead: There Are Only So Many Ways To Say It

January 16,2019
by admin

Unless you’ve missed the past few days of commentary, you’ve heard me say something about the sideways uncertainty in markets as investors wait for a government shutdown resolution. There are only so many ways to say it. So I’ll let someone else say it this morning. The following is from the head of US Rates Strategy at BMO Capital Markets, Ian Lyngen:

“Treasuries are in a classic holding pattern as we await further clarity on a variety of fronts. The government shutdown remains front and center, if for no other reason than the dearth of economic data the closure has created and mounting concerns the stalemate will impact the real economy.”

It can’t be said with much more clarity. Even if we want to argue the shutdown, itself, isn’t a major market mover, it’s nonetheless playing a huge role in keeping bond markets range-bound. That range is becoming painfully obvious by the day.

2019-1-17 open

These consolidative lines might have to be bumped back out if the shutdown continues into next week, but it wouldn’t change the fact that overall momentum is best thought of as sideways until further notice.

Housing Starts data will not report today due to the shutdown, leaving us with only Jobless Claims and Philly Fed to set any sort of data-driven tone. Beyond that, keep in mind that bond markets are closed on Monday, so trading could get much slower as we approach the weekend. The approach to a 3-day weekend tends to be sideways by default, but with increased sensitivity to imbalances between buyers and sellers. In other words, if a bunch of corporate deals hit the market, it could have a more negative effect on bonds than it otherwise might.