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MBS Week Ahead: Who Knows Where We’d Be Without Stock Market Weakness

September 20,2020
by admin

One of my favorite pastimes is debunking the notion that stock prices and bonds yields ‘always’ correlate. Years of indoctrination from the conventional wisdom of money managers have done us no favors as market watchers. Even if you don’t invest or actively make decisions about your 401k allocation, you’re still likely familiar with the notion of moving out of stocks/bonds and into the other.

The net effect of such asset allocation strategy is simple. If you’re selling stocks to buy bonds, then charted lines of stock prices and bond yields would move lower together (because buying bonds = higher prices and lower yields). This line of thinking makes the following stock/bond movement in early September very logical.

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Indeed, looking at the chart above, it’s easy to conclude that the conventional wisdom is right and that what I’m about to tell you is wrong. But let’s zoom that chart out a bit.

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Striking, no? As usual, the truth is somewhere in the middle. We do indeed see strong correlation at times–usually over short time horizons (but even over longer time horizons in 1999-2009). But the more we zoom out, the more that correlation breaks down. The modified approach is to lean on the short term correlation when it’s clearly setting the tone. Additionally, we also have to consider that the correlation won’t necessarily look perfect, even if one side of the market is definitely influencing the other.

While it’s harder to see with the naked eye, one of the best examples we have of this modified analytical approach is that of a burgeoning stock sell off making a case for bonds to abandon a gradually weaker trend. The second half of last week is the most recent example.

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If we zoom out to a wider frame of reference, the correlation is harder to see, but the scope of weakness in stocks becomes more clear. This is now the biggest sell-off for stocks since the post-covid recovery began. Bonds certainly aren’t eager to follow suit, but they are nonetheless forced to absorb at least some of the dollars fleeing the stock market.


If this is enough to prevent yields from breaking their current ceilings (0.73 and .79, most immediately), so be it. That said, it would probably take a fairly massive stock sell-off to help bond yields get through their bigger picture floors at .63, .57, and 0.50. On the other side of the coin, we also have to wonder how much of a recovery in stocks would be needed in order for bonds to get back to their previous business of pushing toward higher yields. With a fairly light economic calendar, that’s actually one of our first orders of business this week: watching for a bond weakness in the event of stock market stability.

MLO, Ops Jobs; Retention, Co-op Products; USDA Rural Conditional Commitments

September 20,2020
by admin

If you watch the news long enough, you see all kinds of interesting things. Cracker Barrel is adding alcohol to its menu? Yup! And you must watch this clip with Stephen Colbert working out with, and interviewing, the Notorious RBG (“Is a hot dog a sandwich?”) a few years back. We watched Lee Farkas be released from prisonafter only 9 years. What are small independent mortgage bankers, and every other lender for that matter, watching? How about concerns and questions about loans with Agencies’ indemnification/recourse, that are now in forbearance, hitting the 120-day delinquency repurchase trigger? My guess is that details are under review and you should ask your Agency rep for details, but if your net worth is $4 million, and in the next month you receive buyback requests for five loans at $400,000 each, it doesn’t take an HP-12C to calculate what does that does to your net worth. Oh, there’s help: Miller High Life is giving away a backyard dive bar. Let the good times roll!

Broker and Lender Services and Products

For all of you sports fanatics out there, give me a virtual high five that football is back! We all know that a fundamental principal in any successful sport’s team is roster depth. Computershare Loan Services (CLS) is embracing this fundamental by adding two more seasoned industry professionals to its team. Tracey Dace brings 30 years of experience to CLS’ Fulfillment team and joins as the VP of National Sales. Contact Tracey to learn how CLS can help originators increase capacity and drive down costs. Lining up as the VP of Capital Markets Cooperative’s Vendor Management is Mark Litzel. Launched in 2003, CMC is a highly diversified cooperative with solutions for lenders of all sizes. Mark is focused on adding vendors and investors that round out CMC’s robust Preferred Partner network. Reach out to Mark and learn about the benefits of becoming a CMC partner.

Corey Shelton at Atlantic Coast Mortgage shared how one of his team’s highest-performing LOs nailed down a WHOPPING $2 Million in revenue in 110 seconds. All coming from just 4 alerts he received from Sales Boomerang. Check it out.Sales Boomerang notifies mortgage lenders when someone in their database is ready for a loan. “Look at the opportunity cost you have by not having Sales Boomerang. Last year we closed over $72M in loans that we would have lost from not having Sale Boomerang.” (Stephen Barton, EVP, Eustis Mortgage) The numbers speak for themselves: 20x Avg. ROI, $240 Avg Cost Per Acquired Loan, 10-20% Avg Lift to Loan Volume. Want to see exactly how much you lost this year? Request your report today. We will show you which competitor took your deal, what was the loan amount, what type of loan it was, and much more.

HomeBinder, one of the fastest growing tools in the lending market for post-closing retention, will be starting a capital raise on October 1st to support its expansion. In June, HomeBinder finalized its partnership with Ellie Mae and their integration with Encompass resulting in accelerated adoption of HomeBinder across mortgage companies nationwide as a value-added platform to help increase client retention. Interested parties can contact Pete Paglia(978.618.0835). To learn more about HomeBinder visit or to receive a demo click here.

USDA, All the Way!

We go through this every darned year, and are reminded of it as Fiscal Year 2021 begins October 1. Pretty much the same note goes out every year. Lenders should review the Single-Family Housing Guaranteed Loan Program (SFHGLP) Conditional Commitment process. “Fee Structures: An upfront guarantee fee of 1.00 percent and an annual fee of .35 percent will apply to both purchase and refinance transactions for FY 2021. Issuance of Conditional Commitments: At the beginning of each fiscal year, funding for the guaranteed loan program is not available for a short period of time –approximately two weeks. USDA anticipates this brief lapse in funding to continue for FY 2021. During the temporary lapse in funding, Rural Development-Rural Housing Service (RHS) will issue Conditional Commitments (Form RD 3555-18/18E) ‘subject to the availability of commitment authority’ for purchase and refinance transactions.”

The U.S. Department of Agriculture (USDA) extended the foreclosure and eviction moratorium for Single Family Housing Direct Loan Borrowers through December 31, 2020.

The moratorium applies to: Initiation of foreclosures or completion of foreclosures in process, excluding vacant and abandoned properties and Evictions of borrowers from properties bought with a USDA direct home loan.

Additional FAQs related to the origination of USDA Single Family Housing Guaranteed loans have been added to the previously posted FAQs. The revised document has been posted to the USDA LINC Training and Resource Library. (Questions regarding program policy and this announcement may be emailed to the National Office Division or (202) 720-1452.)

Yes, the USDA Rural Development SFHG Program is providing additional guidance to support borrowers impacted by the Presidentially declared COVID-19 National Emergency. Guidance includes Moratorium Extension, Forbearance Requirements and Post Forbearance Options. Also announced, temporary exceptions in relation to COVID-19 Pandemic have been extended for the Single-Family Housing Guaranteed Loan Program. The temporary exceptions originally issued on March 27, 2020, pertaining to appraisals, repair inspections and income verifications for the Single-Family Housing Guaranteed Loan Program (SFHGLP) due to the COVID-19 pandemic have been extended until November 30, 2020.

There will be no change to the Submission or Underwriting process for Mountain West Financial, Inc. during the 2-week USDA unavailability of Funding for Fiscal Year 2021.

During the interim period, which starts 10/1/2020, while USDA awaits Fiscal Year 2021 funding, AmeriHome will require that the unexpired Conditional Commitment be in the Loan file prior to Loan Purchase by AmeriHome. The Conditional Commitment may be “subject to the availability of commitment authority.” By the way, During recent months, AmeriHome and each of the Agencies, Fannie Mae, Freddie Mac, FHA, VA, and USDA, have published announcements providing temporary measures to address the impacts of COVID-19 (coronavirus). The Agency guides and handbooks, AUS messaging (except as otherwise noted by the respective Agency), and AmeriHome Seller Guide and program guides will not be updated to reflect these temporary policies.

Flagstar Bank will continue to process, underwrite, and fund loans during the USDA lapse in funding submitted under the Guaranteed Rural Housing program, Doc. #5830 and GRH StreamlinedAssist program, Doc. #5831. Read Memo 20093 for details.

As per FHA Mortgagee Letter 2020-28 and the USDA-RD Single-Family Guaranteed Originations Notice, FAMC is announced updated temporary guidance for FHA Products:

Appraisal, VVOE – Wage Earner and USDA-RD Product Appraisal and VVOE.

The PennyMac Correspondent Group posted new announcements: Fannie Mae SEL 2020-05, Freddie Mac Bulletin 2020-36 and FHA Mortgagee Letter 2020-28 and 20-57: Funding for USDA Rural Housing 2021 Fiscal Year (FY).

Trainings and Events

Blend Forward kicks off tomorrow. Learn what it takes to be able to respond to market conditions, regulatory changes, and rising consumer expectations with swift action. Forward, Blend’s virtual summit, brings together industry leaders and Blend executives and partners to unpack tactics lenders can use to master digital agility. Reserve your spot at the September 22-23 summit.

The Zelman and Associates2020 Virtual Housing Summit begins today at 8:15AM.

Join Insellerate on Tuesday, September 22ndfor a free dynamic webinar “Managing The Borrower Journey”. Key Take-A-Ways include The Evolution of CRM & Marketing Automation in the mortgage industry, Data and key borrower touchpoints, Importance of telephony integration to intelligently engage borrowers, Mobile Innovation, and its impact on borrower engagement.

FHA has posted a new pre-recorded webinar on the Single Family Housing Archived Webinars page, providing a detailed overview of the loss mitigation policies for disaster-affected borrowers with FHA-insured mortgages whose property and/or place of employment is in a PDMDA.

Redwood Trust will be participation in Morgan Stanley’s State Of The Housing Market Webcast on September 24th.

Join snapdocs on September 30th for its Leading Lender Forum Webinar. Mike Lyons, EVP of Nexsys, Jaime Kosofsky, Partner at B&K Law, and Thomas Knapp, CIO of Waterstone Mortgage will discuss What RON and investor acceptance has looked like this year, How changes this year will affect lenders in 2021 and What to expect in the mortgage industry in 2021 and beyond.

Capital Markets

Last week rate sheets didn’t change much, and Friday ended with UMBS30 basis roughly unchanged and the Treasury yield curve steepening slightly during a pullback amid the stalemate on more fiscal stimulus (the two sides are currently about $700 billion apart). Stocks hit a six-week low due to tech shares as that move heaped more pressure on risk tolerance across all asset classes.

In terms of news, the Federal Reserve announced it will release the results of its latest stress test by the end of 2020. The Conference Board’s Leading Economic Index (LEI) increased 1.2 percent in August, falling slightly short of expectations though the increase for August represents the fourth straight month the index has been positive after declining 7.4 percent in March and 6.3 percent in April. The index is still 4.7 percent below the level seen in February. The preliminary University of Michigan Index of Consumer Sentiment for September beat expectations and bettered the August reading, though the index is still 15.3 percent below the level registered in the same period a year ago.

This week opens with a very light economic calendar. We’ve had the Chicago Fed National Activity Index for August (down to .79 from last month’s 2.54), and later today, markets will have a chance to digest a couple shorter-duration Fed auctions and remarks from Governor Brainard, New York Fed President Williams and Dallas Fed President Kaplan. The Desk will conduct three MBS purchase operations totaling up to $5.5 billion. That starts with nearly $1 billion UMBS15 1.5 percent and 2 percent, which will be followed by $2.9 billion UMBS30 2 percent and 2.5 percent and $1.7 billion GNII 2 percent and 2.5 percent. With no other economic releases of note today, things pick back up tomorrow with August Existing Home Sales. Wednesday brings the September FHFA Housing Price Index and Thursday sees August New Home Sales before the week closes with August Durable Orders. Monday starts with Agency MBS prices better/up nearly .125 and the 10-year yielding .65 after closing Friday at 0.69 percent.


“In the midst of a turbulent year, NRL Mortgage has not skipped a beat. While shattering previous companywide production volume records for six consecutive months and soon September, NRL has maintained operational excellence in underwriting turn times, upheld service level agreements, and placed a heavy emphasis on agility allowing NRL to avoid an operational slow down. Our turn times from application to clear to close are hovering just over 21 calendar days! Our proven record of high-quality and efficient service has driven rapid company expansion: 10 new branches across nine differed states in two months! Director of Acquisitions, Jeff Mason, attributes the growth to NRL’s committed operations team. “They are incredible,” he said. “When people see that they can get their files underwritten in 48 hours and closed in 21 calendar days during these incredibly busy times, it gets their attention. Pair that with our industry-leading compensation plan and NRL Mortgage is the perfect combination.” We are always looking to grow our team with professionals that share our entrepreneurial spirit and value for customer service. If you are interested in being a part of NRL Mortgage, please contact Jeff Mason.”

Caliber Home Loans is thrilled to announce the launch of our new H2O ClearChoice Automated Underwriting System (AUS). Caliber ClearChoice empowers loan officers and wholesale business partners to make quicker decisions by providing side-by-side comparisons of multiple AUS types. Our AUS is a powerful and intuitive tool that provides the best option every time, drives a better experience and builds confidence with your customer. ClearChoice also offers an intelligent recommendation, and its recommendations have been accepted by 99% of users. Smart, efficient, and clear, just what you need to prepare your sales presentation to customers! If you’re ready to work for an innovative company, Caliber Home Loans is hiring. Connect with Jonathan Stanley or Brian Miller for positions in Operations or Sales respectively. To join as an approved Caliber business partner, email us.”

Recently named among Top 5 Best Mortgage Companies to work for by National Mortgage News, Geneva Financial, Home Loans Powered By Humans has experienced explosive growth and is seeking Operations Professionals nationwide. Competitive pay and benefits. Underwriters, Processors, Closers, and multiple other positions available. Most positions can be remote/home-based. across the United States. Geneva strives to humanize every aspect of its business from the inside-out. With a culture-forward mindset, management focuses on employees to ensure an unbeatable experience for customers. Its Geneva Gives, BE A GOOD HUMAN and Hero of The Year initiatives deemed them a recipient of this year’s AZ Business Magazine’s Excellence in Banking Award for Community Impact. In 2019 Geneva was ranked a nationally fastest growing company in the financial sector, mortgage industry and all industries categories. Apply today!

Churchill Mortgage, who was recently named a “Fast 50” company by Nashville Business Journal, announced two new hires: Randy Starkweather & Martin Ford. “Starkweather joins as Churchill’s CFO. With more than 35 years of executive management experience, his career includes a broad spectrum of industries and company sizes. Bringing more than 30 years of experience in operations, underwriting and credit policies in the financial services industry, Martin Ford, joins as our Vice President of Credit Risk. We’re continuing to quickly grow! We are not only focused on profits, but also on our people, which is one reason why we’ve been voted a Top Workplace for 8 consecutive years! If you would like to join us in our success, we would love to speak with you about opportunities in your area. Learn more about us here.”

Fannie’s Forecast Sees a Brightening Recovery

September 20,2020
by admin

Fannie Mae has upgraded its forecast for the third quarter gross domestic product (GDP). It now expects growth at an annualized pace of 30.4 percent, up from the 27.2 percent the company’s economists predicted in August. They say that growth has clearly slowed from the days soon after the business shutdowns and orders to shelter in place were gradually lifted by states and cities in May and June, but more recent data points to a continued recovery.

It was originally thought that personal consumption expenditures would fall off significantly as expanded unemployment benefits expired, but they rose 1.6 percent in July, and early data for August suggest that growth continued. Auto sales, one component of the PCE, rose 4.5 percent and credit and debit card transactions appear to have increased as well. There are also indications that business and housing investment will grow at a faster pace in the third quarter than previously thought.

However, while prospects appear slightly rosier for this quarter, the economists have downgraded their GDP growth estimate for the fourth quarter to an annualized 6.2 percent from 8.7 percent in their last forecast. This is based on both a smaller remaining recovery gap and the fading prospect for an additional round of stimulus before the election.

Next year’s prospects will probably be limited again by pandemic concerns. Hospitality and travel could take several years to return to normal and “the pace of growth [will] decelerate meaningfully in 2021, as recovery in sectors less harmed by social distancing measures nears completion.”

The housing data that has come in since the last Fannie Mae forecast continues to demonstrate a V-rebound which is helping to drive the broader economy. Existing home sales in July were up month-over-month by 24.7 percent to an annualized pace of 5.86 million units, the highest since 2006. The July blowout will probably not be followed by the predicted pullback in August as pending home sales rose 5.9 percent in July, setting the stage for strong closings in 30 to 45 days and purchase mortgage applications were also as high in August as July. Construction measures were also strong; July housing starts were the highest since February.

Pent-up demand from the spring, historically low mortgage rates, and what appears to be an increased interest in moving to suburban areas in at least some metro areas is fueling strong home purchase demand.

While the July pace of sales was in line with Fannie Mae’s expectations, the continued strength in August has exceeded them. The company, however, says the pace of sales isn’t sustainable given the lack of inventory. New single-family listings have grown modestly on a year-over-year basis, but the growth is much slower than purchase demand. The months’ supply of homes for sale as a ratio of sales fell to 3.1 at the end of July, down 26 percent from a year prior and to the lowest level for the month of July in the history of the series. The forecast for existing home sales has been increased for the remainder of the year, but the fourth quarter will probably be down somewhat from the current quarter.

Extremely limited inventory of existing for-sale homes will likely continue to bolster demand for new homes. Single-family housing starts rose 8.2 percent in July but that was outpaced by new home sales which jumped by 13.9 percent to 901,000 annualized units, the highest level since 2006. Even with a strong recovery in construction, supply is not keeping up with demand. The months’ supply of new homes for sale where construction has been started as a ratio of sales fell to 3.0 in July, tying the lowest level since 2004. Given these conditions the forecast starts has been increased to over one million annualized and for the full-year total to rise 5.1 percent above 2019 levels.

Fannie Mae now forecasts residential fixed investment (RFI) in the third quarter to grow 48.7 percent annualized and has upgraded its forecasts for both new and existing home sales. For 2020, total home sales are now expected to be 1.3 percent higher than in 2019.

The lack of inventory of for-sale homes is putting upward pressure on home prices and threatens to negate the affordability benefits from low mortgage rates. The CoreLogic National House Price Index showed an acceleration in annual house price growth to 5.5 percent in July, up 1.2 percentage points from June and says the median listing price the first week of September was 10.8 percent higher than a year earlier.

Estimates for purchase mortgage originations were increased consistent with recent, robust housing data as well as continued strength in acquisitions and securitizations data. They should grow 8.9 percent in 2020 to $1.4 trillion, $112 billion higher than last month’s forecast. Purchase volumes should grow 3.3 percent in 2021 as decelerating home price growth limits additional volume.

Refinance originations were also revised upward, now totaling $2.4 trillion in 2020, a full $350 billion higher than last month’s forecast. This revision was driven by stronger-than-expected securitization and application activity, though some of this volume are refinance originations being pulled forward so estimates for next year have been lowered modestly. The company still expects that the low-rate environment will support refinance demand over the forecast horizon. At the current interest rate of 2.86 percent, nearly 69 percent of outstanding first-lien loan balances may have at least a half-percentage point incentive to refinance. Total mortgage originations should reach $3.87 trillion, which would be the highest nominal dollar annual total since Fannie Mae began tracking it in 1988.

Most short-term interest rates should remain low for the foreseeable future given the Federal Reserve’s latest Policy Framework update. The largest change included making the two percent inflation target an average objective, meaning that the Fed will now be comfortable allowing inflation to run above the threshold for a longer period of time and will thus be unlikely to raise interest rates to head off inflation. The impact on longer-run rates, like the mortgage rate, will depend in part on the Fed’s future management of inflation expectations.

Fannie Mae says risks to its forecast remain elevated. COVID-19 cases in the U.S. continue to trend downward, although the pattern in Europe suggest they could spike here again as well, and development and distribution of a vaccine will probably determine the path of consumer behavior. Uncertainty surrounding fiscal and other policies remains high as the election approaches.

Further downside risks in the coming quarters include a slowdown in global growth and consumer retrenchment in the face of diminished unemployment benefits and the expiration of the Paycheck Protection Program (PPP) loan program. On the other hand, the pace of consumer spending in July remained historically modest compared to income levels. The personal savings rate stood at 17.8 percent. Even with declining unemployment benefits in August, it is likely that the savings rate will continue to be well above the recent pre-coronavirus range of 6 to 9 percent. Combined with extremely supportive monetary policy and continued pent-up demand, significant upside risk is also present. Many households have the means to further drive a consumption demand recovery if they are willing to do so.

MBS RECAP: Range Trading Settling in For Long(er) Haul

September 17,2020
by admin

With no significant bond market volatility in response to this week’s Fed announcement. The question of “where do we go now” remains. The answer remains as well. Until further notice, it’s “sideways!”

Here’s What The Fed’s 0% Rate Outlook Means For Mortgages and Housing

September 17,2020
by admin

Mortgage rates are most influenced by the bond market and the bond market is most influenced by the Federal Reserve (aka “The Fed”). So when the Fed says it expects rates to be “zero” at least until the end of 2023, does the same go for mortgage rates?

That would be nice, but unfortunately, that’s not how it works. The Fed dropped its policy rate to 0% back in March–the same place it had been for nearly 6 years after the financial crisis. Mortgage rates were in completely different territory during that time and they’ve often moved in the opposite direction since then.

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With this in mind, how can we say the Fed is so important to the bond market and mortgage rates?

First off, there’s a clue in the chart above. Although we can highlight time frames where the two rates moved in opposite directions, it’s not a coincidence that they generally moved higher together in 2017-2018 and decisively lower since then. Correlation is indeed much more reliable over such long time frames, but for those interested in the here and now, the Fed Funds Rate does us little good.

This is actually quite understandable given that the Fed Funds Rates governs overnight transactions between large financial institutions. That’s a very different scenario than a 30yr fixed mortgage and, as we know, different scenarios (and especially different time frames) have a big impact on rates.

Fortunately, the Fed Funds Rate is only one of its policy tools. Far more important to the mortgage market is the Fed’s ongoing purchases of mortgage-backed bonds. This is a key reason mortgage rates have been so low and stable. In fact, the Fed’s bond buying would allow for mortgage rates to be even lower than they already are, but mortgage lenders have had to tap the brakes in order to cope with volume.

In other words, lenders haven’t needed to drop rates any faster because they’re already as busy as they can possibly be. This could change but it doesn’t change quickly. There’s also no guarantee that the mortgage bond market will be as strong in several months. As such, it’s OK to hope for progressively lower rates but not safe to bank on them.

If anything, we’ve seen rates more prone to move HIGHER in the past month–largely surrounding the new adverse market fee for all conventional refinances. There was a big spike after the initial announcement in early August followed by a recovery after the fee was delayed several weeks ago. Now that we’re hitting the time frame where lenders need to reimplement the fee, rates have spiked quickly for those lenders. Others will follow suit shortly. These rate spikes are no surprise to readers of this newsletter.

The saving grace is for those looking to BUY a home instead of REFINANCE one. While the new fee has done damage to rates across the board, it is technically NOT charged on purchases, and purchase rates have indeed fared much better. Even before the fee was announced, some lenders were already offering much better rates on purchases.

Combine the historically low mortgage rates with pent-up demand due to quarantine measures in the spring and the housing market has bounced back with a vengeance. Almost every week brings new data to support that claim. This week’s most impressive example is homebuilder confidence.

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New residential construction numbers from the Census Bureau were also updated. While they are still near their highest levels since 2007, they haven’t surged in the same way as builder confidence.

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This could reflect high material costs, or simply a construction industry operating at capacity.

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This could also be the start of the phenomenon we discussed several weeks ago where pent-up homebuying demand runs its course before cooling off into the end of the year.

No matter what happens in the coming months, much of the recent housing market strength has been made possible by the Federal Reserve’s bond buying programs. Forget the Fed Funds Rate. The Fed’s bond buying programs mean mortgage rates are 0.6 to 1.2% lower than they otherwise would be, and infinitely easier to obtain. The fact is we really don’t know what the mortgage market would look like right now if the Fed hadn’t stepped in back in March. Before that, rates were moving higher at the fastest pace… ever.

And with that, we finally come to the conclusion on what this week’s Fed Announcement means for the mortgage and housing markets. The 0% Fed Funds Rate is just one expression of their commitment to policies intended to help strengthen the economy. While it doesn’t grab evening news headlines as readily as “0% through 2023,” the Fed also reiterated its commitment over the coming months to buy bonds “at least at the current pace.” So even though mortgage rates aren’t 0%, the Fed is keeping them as low as they possibly can be until further notice. Whether that’s months or years will depend on the pace of the economic recovery and the extent to which coronavirus permanently reshapes the global economy.

Refis Increased Slightly in August, FICO Scores Highest This Year

September 17,2020
by admin

The refinance share of loans originated in August rebounded slightly from July levels as interest rates fell to the lowest in Ellie Mae’s history. The company’s Origination Insight Report says the average rate on all loans fell to 3.09 percent during the month, down from 3.24 percent in July. The 30-year note rate VA loans fell below 3 percent to 2.86 percent from 3.02 percent in July. The 30-year note rate on conventional loans dropped to 3.12 percent from 3.26 percent in July. Similarly, the 30-year rate on FHA loans fell from 3.26 percent to 3.10 percent.

As a result of these rates, the refinance share grew to 56 percent of all loans, up from 54 percent in July. The purchase mortgages share dipped to 44 percent from 46 percent.

“Interest rates are at historic lows, driving volume across both purchases and refinances. In August of 2019 we saw 30-year rates just over four percent across all loans, while this month we’re seeing average rates almost one percentage point lower. Not only does this enable homebuyers to get more home for their dollar, it allows new homebuyers who might be waiting for a good deal to enter the market,” said Joe Tyrrell, chief operating officer, Ellie Mae. “As lenders continue to manage high volumes, technology is bridging the gap to add efficiency to manual workflows behind the scenes while freeing up workforces to provide the human interaction that homebuyers demand.”

The distribution of loans across products was unchanged from the previous month. Eleven percent of originations were FHA loans, VA loans accounted for 6 percent, and 79 percent were conventional loans.

The time to close all loans increased to 49 days in August, up from 47 days the month prior with purchase loans taking an average of 45 days, up from 44 days in July. The time to close for refinances increased to 51 days from 50 the previous month.

FICO scores continued to increase to 2020 highs, rising to 752 for all loans from 750 the month prior.

Lenders closed 77.2 percent of loans for which applications were received, up from 77.1 percent in July. The closing rate for refinances declined from 76.1 percent in July to 75.4 percent and the rate for purchase loans rose to 80.1 percent from 79.4 percent. Ellie Mae calculates closing rates from a sample of loan applications initiated 90 days prior-or the May 2020 applications.

The Origination Insight Report mines data from a large sample of approximately 80 percent of all mortgage applications that were initiated on its mortgage management system. The company says its report is a strong proxy of the underwriting standards employed by lenders across the country.

Forbearance Plan Count Continues to Shrink

September 17,2020
by admin

There was a fourth straight decline in the number of mortgage loans in forbearance during the week ended September 15. Black Knight says the total dropped by 26,000 or 0.7 percent to an estimated 3.7 million loans. That is down 22 percent from the peak of over 4.7 million in late May. Volumes have declined in 10 of the last 12 weeks. The remaining forborne loans represent 7 percent of all active mortgages and $781 billion in unpaid principal.

Black Knight says there are 1.7 million plans set to expire in September so there could be significant numbers of plan extensions as well as plans ending over the next few weeks.

The week’s decline was primarily driven by GSE loans, with active forbearance plans dropping by 28,000 (-2 percent). There are now 1.361 million Fannie Mae and Freddie Mac loans in plans, 4.9 percent of those portfolios.

FHA/VA loans had a 3,000 decline during the week and active forbearances among loans held in private label securities (PLS) or banks’ portfolios rose by 5,000. There are now 1.365 million FHA/VA loans in forbearance, 11.3 percent of the total and 966,000 portfolio/PLS loans, 7.4 percent.

Forbearance plans among GSE loans have now fallen by 32 percent from their peak in late May, pushing the number of GSE loans in forbearance below FHA/VA volumes for the first time since the COVID pandemic began. FHA/VA volumes have only fallen 11 percent since peaking in late May, roughly a third of the improvement seen among GSE forbearances.

Black Knight estimates that, even with these declines, principal and interest (P&I) advances on GSE loans still total $1.5 billion monthly with another $600,000 due for taxes and insurance (T&I) payments. FHA/VA advances total $1.2 billion for P&I and $500,000 for T&I and loans serviced for others have potential obligations of $1.7 billion and $500,000, respectively.

Fewer Homes Being Flipped, But Profits Are Up

September 17,2020
by admin

One out of every 15 home sales in the second quarter of the year were defined as “flips” by ATTOM Data Solutions. A flip is any arms-length transaction that occurred in the quarter where a previous arms-length transaction on the same property had occurred within the last 12 months.

ATTOM’s second quarter report on flipping says 53,621 single-family homes and condos were flipped in the second quarter, 6.7 percent of total transactions. This is down slightly from 7.5 percent or one of every 13 transactions in the first quarter, but up from 6.1 percent or one in 17 in the second quarter of last year.

While flipping declined slightly last quarter, both profits and profit margins were up. The median sales price of second quarter flips was $232,402 and the median paid by the investor was $164,500. This resulted in a gross profit on the typical home flip nationwide of $67,902. This 41.3 percent return on investment (ROI) was the highest since a 43.4 percent return in the fourth quarter of 2018. Both the gross profit and in ROI in the quarter were higher than the prior quarter’s $63,000 profit and 38.9 percent ROI and the $61,900 and 40.4 percent netted a year earlier. The second quarter ROI marked the first quarterly increase since the third quarter of 2018 and the first year-over-year gain since the fourth quarter of 2017.

The opposing trends – the flipping rate down but profits up, reflect the situation nationwide as the coronavirus depressed home sales but not prices. As sales fell, those home seekers who were able and willing to take advantage of historically low mortgage rates ventured into the market and competed for a reduced supply of homes for sale.

“Home flipping was a study in contrasts in the second quarter of 2020, as the flipping rate went one way and profits went the other,” said Todd Teta, chief product officer at ATTOM Data Solutions. “Far fewer house hunters were out in the market looking for homes, which probably cut into the pool of potential buyers that investors could tap. But at the same time, home flippers who were able to close deals did better than they had done in a year and a half. That likely flowed in large part from extremely low interest rates that enticed buyers who remained employed and were willing to house-hunt within social distancing requirements.”

The decline in flipping from the first to second quarter was broad based, occurring in 114 of the 151 metropolitan statistical areas analyzed in the report (75.5 percent). (Metro areas were included if they had at a population of 200,000 or more and at least 50 home flips in the second quarter of 2020.) The largest decreases were in Durham, North Carolina at 40.7 percent, Provo Utah, and Boston with declines of 36.6 percent and 35.1 percent, respectively.

There were also areas where flipping increased. The top three in that category were Salisbury, Maryland where the rate was up 45.8 percent, and two Florida metros, Fort Myers (up 20.2 percent) and Tallahassee, (16.8 percent.)

Profit margins increased from the second quarter of 2019 to the second quarter of 2020 in 95 of the 151 metro areas with enough data to analyze (62.9 percent). The biggest gains were in Fort Collins, Colorado, up 167 percent; Johnson City, Tennessee (up 115 percent); and Cedar Rapids, Iowa (up 100 percent).

Nationally, the portion of flipped homes investors purchased with financing increased in the second quarter of 2020 to 43.3 percent, from 42.5 percent in the first quarter of 2020, but still down from 48.5 percent in the second quarter of 2019. Meanwhile, 56.7 percent of homes flipped in the second quarter of 2020 were bought with all cash, down from 57.5 percent in the prior quarter, but still up from 51.5 percent a year earlier.

Home flippers who sold homes in the second quarter of 2020 took an average of 183 days to complete the transactions, up from an average of 174 in the first quarter of 2020 but down from 184 days in the second quarter of last year.

eClosing, Compliance, IRRRL Products; Plethora of Disaster Policy News; Rates Hardly Budging

September 17,2020
by admin

Before the pandemic I used to spin that toilet paper roll like I was on Wheel of Fortune. In March and April I turned it like I was cracking a safe. Now things are back to normal, and the toilet paper area at Costco isn’t the Mecca it became six months ago. Economies have a way of correcting back to normal supply and demand functions. Whale oil was largely replaced by the cost and abundance of petroleum in the 1860s (although it was used in cars in the U.S. as a constituent of automatic transmission fluid until it was banned by 1973). I mention this because softwood lumber prices increased nearly 15% in August, driving the price paid for goods used in residential construction up 0.9% during the month. Housing has been a bright spot for the overall economy in recent months, with U.S. new-home sales jumping to a 14-year high earlier this summer, but there are some unintended consequences. Lumber futures have climbed 57 percent this year, and even after falling from a record high last month, prices are still on pace for the largest gain since 1993 due to pent up demand. The industry has been hit by two disasters this year: first, the idling in mill production from the coronavirus lockdown, and now wildfires eating up the West. And let’s not forget demand from restaurants building outdoor seating. Let’s hope it doesn’t impact toilet paper supplies and prices: we don’t need that again. Will home builders move away from wood?

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Something BIG is happening at QLMS. Social media has been buzzing about it for the last week and, personally, I can’t wait to see what it is. Austin Niemiec, the lender’s EVP, will be making a major QLMS announcement on September 22, at 1 p.m. Eastern Time. The news is sure to affect every one of the 40,000 LOs that currently partner with QLMS. Even if you’re not already working with the lender, Quicken Loans does everything big, so every broker should take some time out of their busy day to tune in and see how QLMS will raise the bar. Click here to set a reminder so you don’t miss the announcement.

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Investors and Lenders React to Disaster Declarations

We are dealing with disasters coast to coast, and FEMA’s declarations trigger lender’s and vendor’s policies.

Built is launching a tool that allows lenders to track construction projects in counties where an open FEMA disaster declaration is in effect or was reported in the last three years. Currently, 2% of loans in Built’s system totaling nearly $300 million in construction projects have been impacted.

Wells Fargo Funding (correspondent) let its clients know that, “In response to the California wildfires, effective immediately, Sellers must follow our disaster policies for all properties located in ZIP codes that Wells Fargo Funding has determined were impacted. Wells Fargo Funding’s identified list of impacted ZIP codes below is a reduced subset of the Federal Emergency Management Agency’s (FEMA’s) declared counties. Disaster policies are effective with the FEMA declaration date or applicable amendment date.”

Regarding Sally, WF said, “At this time, continue to refer to our disaster policies in the Wells Fargo Funding Seller Guide (Seller Guide) and to disaster declarations listed on the FEMA website. Additionally, in the coming days, watch for communications from Wells Fargo Funding and from FEMA with specific details for properties impacted by the storm.”

Effective September 16, Flagstar Bank is suspending funding for properties in counties/parishes affected by Hurricane Sally. Once closing and funding has resumed, Flagstar will provide the re-inspection requirements, as applicable. Read Memo 20092 for detailed information. The Bank addressed the wildfires in Washington and California which have prompted the suspension of property fundings for some counties. Flagstar Bank issued Memo 20091 regarding Washington and Memo 20079 regarding California.

Due to the recent declared disaster in California caused by wildfires on August 14, 2020. Flagstar Bank will now require satisfactory re-inspections in based on effective date. Refer to Natural Disaster Procedures, Doc. #4915, for re-inspection requirements.

Flagstar Bank published two announcements on September 10 regarding the wildfires in California and Oregon.

Mortgage Solutions Financial Correspondent and wholesale posted Announcement 19-20C regarding the Oregon Wildfires and Straight-line Winds, Announcement 14-20C regarding the California Wildfire, Announcement 16-20Cregarding Louisiana Hurricane Laura, and a revision, Announcement 13-20C regarding the Iowa Severe Storms Disaster Alert.

Caliber Home Loans reminded Sellers to review its Seller Guide for disaster inspection requirements. FEMA declared disasters include: For the incident period beginning September 7th and continuing, the Oregon counties of Clackamas, Douglas, Jackson, Klamath, Lane, Lincoln, Linn, and Marion have been declared major disaster areas. Caliber is requiring a standard disaster inspection for several counties in Louisiana to confirm that no damage has occurred to the subject property. Correspondents may utilize inspection options to satisfy the post standard disaster inspection requirement. Consult the Sellers Guide for additional details.

FEMA disaster declarations have been expanded for Iowa and Louisiana. is encouraging Sellers to make contact for disaster inspection requirements.

AmeriHome addressed the fires in Oregon. “Sellers are reminded that they are responsible for determining potential impact to a property located in an area where a disaster is occurring or has occurred. Irrespective of whether a property was included in the area covered by the declaration. If a Seller has reason to believe that a property might have been damaged in a disaster the Seller must take appropriate action to ensure that the property is free from damage and meets AmeriHome requirements at the time of purchase by AmeriHome. Employment Re-Verification Employment re-verification requirements for declared disaster areas are not necessary at this time.”

Louisiana flooding: Review AmeriHome Mortgage’sAnnouncement 20200809-CL inspection requirements.

On September 2nd, AmeriHome is clarified Property Inspection Requirements for Agency transactions without appraisals where the property is located in a Presidentially Declared Disaster Area granted Individual Assistance. For transactions requiring a Property Inspection, please note that Third-Party Inspections and Seller Certifications are acceptable property inspection types. Please see Seller Guide Seller Damage Certification and Third-Party Inspection Requirements for additional requirements. The Seller Guide will be updated shortly to reflect this clarification. For Questions Please contact your AmeriHome sales representative, Operations Account Representative (OAR), or with any questions.

AmeriHome updated FEMA’s September 9th addition of two more Louisiana parishes affected by Hurricane Laura. Federal disaster aid with individual assistance has been made available to both Morehouse and Union parishes. Disaster inspections are required.

Mountain West Financial Wholesale posted re-inspection requirements for properties in FEMA-declared disaster areas are as follows: Conventional, VA and USDA loans require an exterior only disaster inspection report to certify that the property was unaffected by the disaster. Conventional loans with property inspection waivers VA IRRRLs and USDA Streamline loans will require a re-inspection if the property is in a FEMA-declared disaster area.

FHA requires an interior and exterior disaster inspection report and photos. FHA Streamlines do not require re-inspection. VA requires both the lender and the veteran to certify the property is not damaged.

Mountain West Financial Wholesale issued Bulletin 20W-108 Revised August 2020 California Wildfires.

Louisiana flooding was addressed by Sun West.For loans submitted with an appraisal dated on or before the incident period end date or for those submitted without an appraisal,Sun Westwill require an interior and exterior inspection prior-to-funding or purchase of any loans with subject properties that are determined to be at risk. The inspection must verify that the property is sound, habitable and in the same condition as when it was appraised. Partners can access Sun West Seller Guide under HELP section insunsoft. Refer to Sun West Forward Mortgage Seller Guide (Section 404.07) and Sun West Reverse Mortgage Seller Guide (Section 3.23) for more details.

Sun West Mortgage also reminded clients that counties in Puerto Rico have been declared by FEMA as Major Disaster Areas on September 9. Designated Disaster Areas include Aguada, Hormigueros, Mayaguez, and Rincon.

California fires? For loans submitted with an appraisal dated on or before the incident period end date or for those submitted without an appraisal, Sun West will require an interior and exterior inspection prior-to-funding or purchase of any loans with subject properties that are determined to be at risk. The inspection must verify that the property is sound, habitable and in the same condition as when it was appraised.

Capital Markets

With relatively light economic data over the last week, much of the market’s attention remained focused on unemployment. Although people are returning to work and unemployment has decreased significantly from the lows seen in April, many expect the trend to moderate throughout the remainder of the year. Initial state jobless claims were unchanged last week at 884,000 while claims for Pandemic Unemployment Assistance increased to 839,000. For all programs, total continuing claims rose to 29.6 million during the last week of August; signaling that a full recovery is still a way off. The recent job opening report showed 6.6 million job openings and roughly 2.5 workers per opening. As Covid-19 continues to be a cause for concern for consumers, business owners remain optimistic that conditions will continue to gradually improve. Hiring plans over the next three months are back near pre-COVID levels suggesting that employment is poised to maintain its upward trend. As those sidelined employees head back to work there is the potential that they may soon be able to take advantage of the low interest rate environment to purchase a new home or refinance.

Despite a gradually improving economy and labor market, activity remains well below pre-virus levels, and inflation is still being suppressed by weak demand. The path of the economy will depend significantly on the course of the virus, which continues to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. Interestingly, and breaking from the usual unified front, two committee members dissented but were more concerned with the nuanced language related to the inflation target and employment goals rather than the decision to leave rates unchanged. The Fed’s new framework to keep rates low until inflation visibly rises means it will allow the unemployment rate to fall even further than the 50-year low we saw in February.

This week has been welcomed by capital markets folk across the industry. U.S. Treasuries, MBS, and mortgage rates have traded in an extremely narrow range, and volatility has drastically subsided from earlier in the year. If it can remain that way up until the election in November is anybody’s guess (though that never stops people from acting like they know). Yesterday was another day with no real action, with the big news being another disappointing initial jobless claims report, though the number did decrease marginally from the previous week. Surveys show rates holding near the lows: about 2 7/8 percent.

We have just a few releases on the economic calendar to close out this week. We’ve already seen that Q2 Current Account Balance ($170 billion, whatever that means). Black Knight reported that the total number of mortgages in active forbearance declined another 26K (-0.7 percent) this past week, the fourth consecutive week of improvement, and declining volumes for 10 of the last 12 weeks. Later this morning brings August Leading Indicators and the preliminary reading of the September Michigan Consumer Sentiment Survey. Following the FOMC blackout, Fedspeak returns with St. Louis Fed President Bullard and Atlanta Fed President Bostic delivering remarks. The Desk will conduct three operations targeting up to $5.2 billion, starting with $669 million UMBS15 2 percent followed by $2.9 billion UMBS30 2 percent and 2.5 percent and $1.7 billion GNII 2 percent and 2.5 percent. We begin the day with Agency MBS prices better a smidgeon and the 10-year yielding .67 after closing yesterday at 0.68 percent.


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MBS Day Ahead: Running Out of Ways to Say “Sideways”

September 17,2020
by admin

Tossed coconut salad… Fresh coconut milk… New England boiled coconut… There were only so many menu choices for Yosemite Sam working with one ingredient. We’re in a somewhat similar position over the past month with nothing to observe apart from a range-bound bond market. But whereas coconuts might make someone crazy eventually, who’s going to complain about an incredibly narrow trading range just above all-time low bond yields?

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The only thing to complain about in this situation is simply the uncertainty regarding the next big move. Are rates going to break higher or lower? And when will that happen?

For the foreseeable future, we can make strong cases that argue against a big break in either direction. Bonds would have a tough time plummeting to new all-time low yields considering rampant Treasury issuance and an ongoing revenue shortfall, not to mention the hope for an ongoing post-covid economic recovery and reflation from fiscal/monetary stimulus. Conversely, rates would have a hard time surging back up an over 0.95% given some of the post-covid economic changes that are likely to be permanent, not to mention the risk of a resurgence of cases in the winter, vaccine delays, and election uncertainty.

Where does that leave us? Right where we have been! All we can do is watch the range, react if a breakout happens (or if it looks imminent), and periodically ponder the path ahead.

There are no significant market movers on the calendar today, but with the overnight gains, it wouldn’t be a surprise to see some weakness this afternoon as Traders start thinking about next week’s Treasury auctions. Naturally, traders already know what I just told you, so it’s not a guaranteed move–especially not if stocks are doing something interesting enough (aka selling off aggressively).