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Huge Housing Rebound, All-Time Low Rates, But At What Cost?

July 2,2020
by admin

This week’s economic data included the biggest-ever gain in Pending Home Sales, a leading indicator for the housing market. Meanwhile, mortgage rates pushed down to new all-time lows yet again.

But at what cost?

The most pessimistic way to explain the surge in home sales is to say it was only made possible by the record-setting declines in the past few months.

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That’s mostly true, but it fails to give credit to what the industry and government officials have been doing to help jump start economic activity. Would sales bounce back like this without all-time low mortgage rates and a stock market recovery (both made possible by emergency intervention from the Federal Reserve)? Would consumers be as comfortable spending money without the promise of additional fiscal stimulus and other support programs already in place?

While we can’t say exactly how big the impact would be if we removed those helping hands, we have to assume things would be worse without them, at least in the here and now. Critics contend that the emergency programs could cause issues in the future, but as is always the case with emergency support from the Fed or the US government, the preference is to avoid present day pain even if it simply delays the inevitable.

It’s also important to keep in mind that we’re really only talking about the early stages of an economic recovery. Many other economic indicators suggest we’ve only taken a small bite out of the broader damage caused by coronavirus.

For instance, consumer confidence jumped much higher, but it’s nowhere near pre-coronavirus levels.

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The unemployment rate fell much more than economists expected, but it remains at levels that would be considered borderline catastrophic relative to recent precedent.

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The true test for an economic rebound will be HOW MUCH of the recent precedent can be recovered. The jury is very much out on that one, and it’s going to take plenty of time for that to change.

Financial markets know this. They’ve settled into the role of spectators in the battle between coronavirus numbers and economic progress. Several states have been in the spotlight recently, serving as a warning that it may not be a simple task to reopen local economies without risking an unacceptable increase in case counts.

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And yes, we should all be cognizant of the nuances created by increased testing capacity. That’s why the focus has shifted from case counts to include positive test rates and hospitalizations. In some cases, increased testing explains most of the surge. But in general, the states with troubling increases in numbers are seeing hospitalizations ramp up as well.

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As the correlation between economic reopening and these covid numbers came to the forefront in June, both sides of the financial market (equities/stocks and debt/bonds/rates) halted their prevailing momentum and circled the wagons. In other words, stocks were surging, but since early June, they’ve been sideways in a narrower range. The bond market is also consolidating, but with slight bias toward lower rates.

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10yr Treasury yields are historically an excellent indicator for mortgage rates. They still are to some extent, but it’s important to remember that mortgage rates did so much worse than Treasuries in March that they’ve had some extra room to improve recently. That’s why mortgage rates were able to hit all-time lows yet again this week even as 10yr yields remain well above their recent lows.

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One word of caution on the chart above. It may look like mortgage rates (orange line) are destined to rejoin the blue line, but there are several reasons that they’ll have a hard time doing that. At the very least, it would take months and months. Simply put, the chart does not guarantee additional improvements in mortgage rates or that they would be immune to rising Treasury yields.

Financial markets closed early on Thursday in observance of Independence Day and will be fully closed on Friday. When trading resumes next week, we can expect stocks and bonds to continue taking cues from each other as they both watch the debate between economic performance and coronavirus numbers. The following chart shows the correlation between stocks and bonds that we tend to see on most days.

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Loan Originator Perspective

Bonds are rallying nicely on this shortened trading today. With markets closed tomorrow, lenders will be reluctant to pass along the gains ahead of the 3 day weekend. So, i favor floating over this weekend and evaluate pricing on Monday. – Victor Burek

Bonds shrugged off today’s relatively strong NFP, as covid concerns continued to inform markets. It’s a long holiday weekend, pricing is as strong as I’ve seen, seems like locking is the safe route for folks happy with their current pricing. –Ted Rood

MBS RECAP: Record-Breaking Job Gains, But Bonds Ultimately Improve

July 2,2020
by admin

Last month’s jobs report shattered records, both for the outright level of job creation and for the gap between job growth and forecasts. While today’s job count was even bigger (+4.8 million versus 2.699m last month), it wasn’t as far above the forecast consensus (1.8m gap versus 10.5m last month). But even that doesn’t fully explain why bonds were able to get back to stronger levels a few hours later. Waiting on covid news!

MBS Day Ahead: Early Close and Another (Potentially) Record-Breaking Jobs Report

July 1,2020
by admin

Last month’s jobs report shattered records, both for the outright level of job creation (2.509m) and for the gap between job growth and forecasts. In fact, we won’t likely see a gap that big, ever.

We may, however, see a bigger month of job creation, and if economic forecasters are right, we’ll see it this morning. The consensus calls for a payroll increase of 3.0 million.

Even if that happens, it remains to be seen how willing the market is to react to such things. Last month’s labor market numbers arrived at time when the market was more susceptible to second guessing the current ultra-low rate environment. Covid cases hadn’t really begun their recently troublesome spikes in several states. And other economic data that week made it look like the economy may indeed have been able to pull off a V-shaped recovery.

This month is different. Even a strong jobs number would likely be tempered by lingering concerns about “the 2nd wave.” In any event, there’s probably not any number that has the power to nudge bond yields outside of the broader sideways range marked by 10yr yield boundaries at .57 and .79.

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In addition to the jobs data, we’ll also get Jobless Claims (weekly), factory orders, ISM New York, and the trade deficit. None of the above are of much consequence compared to NFP although Jobless Claims data is the clear runner-up. Bond markets close at 2pm ET for the Independence Day holiday and will be fully closed tomorrow.

Anti-fraud, DPA, HMDA Products; Non-QM News in Primary and Secondary Markets

July 1,2020
by admin

Lenders continue to count the piles of doubloons they booked during another record-breaking month; will July be another? M&A deals are still simmering out there, but when profits are “en fuego” and July is looking strong with full pipelines, it can be tough for a fortunate owner to sell. Think of all of those unfortunate folks who bought fancy/expensive dresses or suits in February or early March: They probably won’t need them in 2020 due to the pandemic crisis. Now all one needs is a Zoom blouse or shirt. Speaking of a crisis, TBD Marketing put together a Crisis Flowchart that is easily downloadable. I hope none of you will ever need it, but we know that someone will from a PR perspective. When the health crisis began 3 ½ months ago, since no one was on vacation, the daily “out of office” replies that I received after sending out my commentary plummeted. They’ve ramped back up again, which means that some are taking some much-deserved time off, and hopefully wearing masks & washing hands. Seen outside a bar: “When this is all over, we’re throwing the biggest St. Pats Easter de Mayo Bash of July End of Summer Halloween party ever!”


Lender and Broker Services and Products

“In case you missed it, Richey May’s 2019 HMDA Market Share Dashboards are out! We’ve organized the raw data into easy-to-use dashboards to help mortgage leaders and industry service providers find insights. See the dashboards on our new website! If you have any questions or would like to discuss the data please reach out to us.

“Overlays” & shuttered programs are reactive; exclude solid, underserved borrowers; overweight the past & credit scores; and weren’t a magic bullet in the GFC. Overstated (and understated) scores, forbearances & defaults will increase with such a volatile socio-economic backdrop, regardless. Get “proactive” with the actionable Mortgage Risk & Fairness Score, a predictive, data-driven “intelligence” tool to understand borrowers, holistically.Then, use that deep insight to originate, underwrite, fulfill, buy, sell, and monitor more inclusively & efficiently. It’s plug-n-play and enables quick deployment of advanced risk & behavioral/attitudinal analytics (propensity, segmentation, ability, and “willingness” to pay) that are validated (top 10 bank) & vetted (CFPB, OCC, Fed). “The Score” doesn’t require change to existing tech or processes. But, used up-front, and as an adjunct to underwriting, secondary, and servicing, it will increase volume, inclusion, confidence, margins, efficiency, and capacity, while decreasing risk. Click for info.

Chenoa Fund demonstrates how responsibly run national DPA programs benefit the consumer. Innovative financial solutions, such as our CRA Note Exchange, have allowed us to offer the Rate Advantage program, which offers rates competitive with standard FHA loans, even with DPA included. Also, by running mortgage banking in-house vs. outsourcing operations through large bankers, we have brought costs down to consumers, while helping lenders avoid losses on DPA. Additionally, through careful monitoring of our loan defaults, we added overlays to mitigate risk without eliminating offerings to underserved populations. Independent financial/operational audits are conducted throughout the year to assure partners our compliance with all industry requirements. We constantly strive to improve our offerings, pricing, and service. These measures allow us to serve significantly more minority homebuyers than any other DPA program (54% of borrowers are minorities). We sincerely thank each of our amazing correspondent lenders, making our program available where most needed.”

FundingShield’s services have processed $110Bn+ YTD 2020 in transaction value, an increase of 700%+ compared to YTD 2019 due to client growth in addition to a surge in product interest due to WFH (Work-from-home). The industry continues to seek cost reductions, efficiencies in automation (utilizing cognitive AI/ML) to free up critical middle & back office resources while eliminating wire & title fraud and losses. Lenders are now able to very quickly get comfortable with new closing agents that can execute with the realities on the ground using RON, digital and e-closings where FundingShield’s transaction level vetting, verification and validation facilitates lenders to adapt, adopt and in result be protected. Ike Suri, Chairman & CEO shared, “The industry is embracing cloud-based, single-click, secure and malleable technology to improve customer experience, eliminate the risk of the growing epidemic in wire, title & synthetic fraud while driving higher asset quality to investors who demand further validation through the origination process.” Contact Sales@Fundingshield.com.


News About the Non-QM Sector

Last week the CFPB put out a proposed extension and new definition of non-QM, much of which goes along with industry thinking. Given that it would appear that non-QM loans will account for somewhere between 1 to 5 percent of overall production, and the huge majority come from three states (CA, FL, and NY), plenty of lenders either don’t care about the product or aren’t even licensed in those states. And a large percentage of non-QM loans flow directly into the portfolios of credit unions and banks who often price it very competitively and like owning the asset. But it is still a good idea to see who is doing what, and what the trends look like.

First, a look at existing securities. S&P Global reports, in its Assessing the Credit Effects of COVID-19 on U.S. RMBS, that the non-QM sector was “expected to show relatively increased credit pressure given the greater presence of lower FICO borrowers and the higher proportion of self-employed borrowers. As expected, the reported delinquency levels rose the most (on an absolute basis) for non-QM compared to other sectors, such as credit risk transfer (CRT) and prime jumbo.”

“The nonqualified mortgage (non-QM) RMBS sector may be particularly sensitive to the economic freeze that has gripped the country because it is characterized by (1) lower relative FICO scores, (2) the use of alternative income documentation, (3) self-employed borrowers, and (4) concentration within three states (California, New York, and Florida). Examining non-QM pool concentrations by metropolitan statistical area (MSA), we found that roughly two-thirds of non-QM loans are to borrowers in the top-15 MSAs (of which there are 399 in the U.S.), and 12 of these are located in either California, Florida, or New York.”

S&P continued. “Self-employed borrowers may face business cash flow strains arising from mandatory lockdowns. We find that loans to borrowers in California make up 50% of the closing principal balance in the S&P Global Ratings-rated non-QM RMBS universe, with 28% underwritten to self-employed borrowers. California has the largest share of self-employed borrowers at 56%. The state’s non-QM loans, however, exhibit FICO scores and loan-to-value (LTV) ratios that are stronger than the respective national averages. Florida’s non-QM loans stand out as having the lowest average FICO score and the highest average LTV ratio. New York and Florida both have greater exposure to debt service coverage ratio (DSCR) loans (i.e., investor property loans underwritten to rental cash flows) than California. New York has the highest FICO and lowest LTV ratio among these three states.

“At this early stage in the economic downturn, we have seen DSCR loans exhibit about the same credit performance as self-employed borrowers, except in New York where they have performed worse. The higher degree of COVID-19 exposure in New York may be having an impact on the residential rental market to a greater extent. DSCR borrowers, however, tend to have substantial equity in their properties and might therefore be disinclined to default strategically. In addition, they tend to also have cash flow diversification via multiple rental cash flow streams, which could also be a factor supporting DSCR loan performance.”

Sprout Mortgage has announced enhancements to its recently unveiled suite of non-QM programs that are designed to provide additional home finance options to creditworthy borrowers. The new enhancements include: A new Max 85% LTV on most loan programs. Reduced rates across the entire program offering. Increased maximum Loan Amounts at lower Loan-to-Value levels on the Select program series. Sprout’s loan programs are accessible through many widely used mortgage product and pricing engines including Optimal Blue, Loan Sifter, EPPS LoanNex and Mortech. Full details are available to mortgage professionals through the Sprout Client Portal, while Sprout’s easy-to-use iQualifi app provides scenario eligibility and pricing.

Luxury Mortgage has announced that it has resumed funding on its entire suite of Simple Access non-QM products (full doc, alt doc, and investor/DSCR) through all origination channels: retail, wholesale, and correspondent. Luxury Mortgage was the 2nd largest contributor into Starwood’s recent non-QM securitization, which was the largest post pandemic issue. Luxury Mortgage also noted that, in anticipation of the relaunch, it has maintained the entire TPO workforce through the pandemic. If you are interested, click here to inquire about becoming an approved broker or correspondent seller with Luxury Mortgage.

Angel Oak Mortgage Solutions informed its clients that lender paid compensation is back, and highlighted its Bank Statement Program with lower rates and expanded LTVs: 85% down to a 720 score, personal bank statements are now available, 100% of deposits on our Personal Bank Statement loan (call AE for details).

LoanStream posted an article titled, “Lenders Broaden Non-QM Offerings, Loosen Credit as the Market Stabilizes.” And LoanStream posted various updates including FNMA & HomeReady Product Guideline Updates, Matrices for Government and Non-QM, and Communications Related to COVID-19.

Mortgage Solutions of Colorado is offering products such as hobby farms on 20 acres, homes on 100 acres, or other unique specialized products for Ag land loans, farms, and ranches. “In addition, as many borrowers struggle with impacted credit from the pandemic, we also still offer our unchanged FHA and VA products with the same Agency driven guidelines. See what is available that you may be missing with the Ag and Rural Residential products that we offer, as well as our still popular government guideline driven FHA and VA products. (Questions can be directed to Richard Eampietro.)

Redwood’s Select QM and Choice QM Program Eligibility Guides have been updated; effective dates are specific to each change.

PRMG announced the release of the Choice Non-Agency Product Suite offering two non-QM first trust deed products with loan amounts ranging from $100,000 to $2,000,000 or $3,000,000 (depending on the product). The Choice Conforming and Jumbo product is more like a traditional jumbo product and the Choice Plus Conforming and Jumbo is a near-miss jumbo. They both allow for non-warrantable condos and LTVs to 95%. The near-miss option also allows reduced seasoning and credit scores down to 600. PRMG offers live webinar training on this new product suite option.


Capital Markets

Liquidity continues to be the name of the game! Chris Bennett from Vice Capital sent, “GNMA 2.0s have struggled from a liquidity standpoint without any support from the Fed like UMBS 2.0s or GNMA 2.5s have, but there is real end-buyer interest there. We recently put out a larger pool of GNMA 2.0s and got bids that ranged from 24/32 below Tradeweb screens to 10/32 above them – in the end they traded well into the 104s. Seems a little crazy to think you can offer 2.25% on a 30yr FHA loan and get 4 points in cash plus keep the servicing for free, but if you’re an issuer that’s where things have evolved to. Wild times.”

It was a bit of a volatile session for MBS and U.S. Treasuries yesterday, though the latter ended the day only pulling back a couple bps across the yield curve, moved by an opening rally in stocks, no positive coronavirus news as more states were forced to delay re-openings, and reminders of a worsening relationship with China (this time over sanctions for the Communist Party’s abuse of Muslim minorities in Xinjiang).

Data from the day showed construction spending declined 2.1 percent month-over-month in May when it was expected to increase 1.1 percent. That comes on the heels of a downwardly revised 3.5 percent decline in April and shows total construction spending has decelerated to only be up just 0.3 percent from a year ago. The ISM Manufacturing Index for June rose to 52.6 percent, indicating expansion in the sector, which comes as a welcome surprise as it was still expected to contract for the fifth straight month. The figure also represents the largest month-over-month increase since August 1980 and reflects a clear bounce back from the super depressed conditions seen in April and May… but how sustainable is the bounce back?

Today’s early close calendar has already had a whole slew of releases. June Nonfarm Payrolls (+4.8 million, better than expected), Unemployment Rate (13.3 percent down to 11.1 percent!), Hourly Earnings fell, May Trade deficit ($54.6 billion), weekly Initial Claims for the week ending June 27 (-55k), and Continuing Claims for the week ending June 20 (+59k). There are only two other scheduled releases (ISM New York business conditions and May Factory Orders) before the early 1PM ET bond market close. After the payroll data we begin the day with Agency MBS prices worse/down nearly .125 and the 10-year yielding .70 after closing yesterday at 0.68 percent.

Employment and New Hires

Caliber Home Loans and our employees show our patriotism in numerous ways, one of which is through active support of our Military Veteran Employee Resource Group (MVRG). ERG members have raised funds and volunteered countless hours with several military support organizations such as Wreaths Across America and Patriot PAWS, as well as assembled hundreds of Caliber Cares Packages for active-duty service members. Caliber and the MVRG recognize the contributions and sacrifice of military and veteran communities annually through military t-shirt sales, support of the USO, and participation in the Carry the Load campaign. We celebrate and honor National Military Appreciation Month each May though these efforts and with a special place in our hearts at Caliber. If you have an interest in one of our posted job opportunities, please contact Jonathan Stanley for consideration. If you are interested in a sales opportunity at Caliber, please contact Brian Miller for immediate consideration. Visit the Caliber Careers website for opportunities across the organization!”

Amazing opportunity with unlimited career potential for the right accounting/finance leader who would report directly to the CFO: A nationally recognized IMB is searching for a Controller to join its legendary team. A company where culture is number one, they consistently prove strong annualized YOY growth with first-to-market innovations, implementing leading technologies, and growth in expanding markets. Teamwork, leadership, and advocacy of the company’s vision are essential to the role. Experience with AMB and Encompass are ideal. Interested candidates should reach out to Chrisman LLC’s Anjelica Nixt to submit a resume and begin the interview process.

“We’d like you to meet RON. No, RON isn’t a new Evergreen Home Loans associate. RON is short for Remote Online Notarization and we’re well acquainted. In fact, Evergreen closed 15 loans in April with RON. Combine that with almost 86% of customers previewing their closing documents before signing, plus 65% of eligible customers eSigning, and we said hello to a record month in April. Next up? Introducing our customers to eNote. Customers in select markets can eSign the Note before meeting with a notary (including RON). And some customers have already closed with eNote and RON! That’s just another way we’re streamlining and improving the closing process. If you’re interested in working for a company that welcomes innovation and creates happy customers, check out our careers page or contact Chuck Iverson. We’d love to meet you.”

Angel Oak Home Loans is excited to announce its expansion in the Western U.S., specifically California, Arizona, Nevada, and Washington. “We are hiring a Regional Sales Manager to be based out of California or Arizona. As well, positions are available for a West Regional Operations Manager and experienced Loan Officers. This is a great time to join Angel Oak Home Loans as we have had stellar mid-year growth and originations. Continued growth for the remainder of 2020 is projected along with plans for expansion. If you are interested in career opportunities with a growing team at Angel Oak Home Loans, please contact Lee Williams, Mac Cregger, or Drew Church.”

Home Point Financial was a start-up in 2015. In just five years, we have grown to be the second largest wholesale lender and the #13 largest correspondent lender. We’ve experienced 400% year-over-year growth in wholesale and expect to fund over $55 billion in 2020. How did we grow so fast? Because we are committed to being true partners to mortgage brokers and correspondent lenders. To meet our continued demand, we’re hiring 75 underwriters at every experience level and 105 fulfillment positions. Visit our website, check us out on social media and learn what being a part of the Home Point family is all about. For immediate consideration please send your resume directly to John Eite.”

The Community Home Lenders Association (CHLA) announced that Craig Thomas would be joining CHLA as its Communications Director after a 30-year stint at Freddie Mac in a number of external relations and public policy roles (most recently as part of its Congressional relations team and as supervisor of Freddie’s state relations function).

MBS RECAP: Limited Reaction to Headlines and Fed Minutes

July 1,2020
by admin

After a quiet trading day yesterday, today proved to be even quieter. That said, bonds were still willing to react to covid headlines and the Fed meeting minutes, albeit just barely enough to notice.

Rates at All-Time Lows Ahead of Important Jobs Data

July 1,2020
by admin

Mortgage rates were generally unchanged today, thus leaving the average lender at all-time lows for conventional 30yr fixed scenarios. It continues to be the case that loan scenarios with additional risk factors have NOT seen nearly as much improvement as those in the top tier. In general, however, things are starting to improve.

When coronavirus rocked the financial markets in March, mortgage rates were particularly hard hit. This had a lot to do with the anticipated inability of millions of homeowners to make their mortgage payments. While the government and the mortgage industry rushed to put programs in place to help those homeowners, there were/are unavoidable consequences for mortgages in the eyes of investors. Simply put, each additional risk factor that makes forbearance (a temporary non-payment agreement) more likely from a statistical standpoint also made the available rates incrementally higher.

That pain will continue to heal slowly. For now it means that many borrowers may not be seeing rates any lower than they did in mid 2019, mid 2016, or late 2012. In fact, many more will be surprised to learn rates are actually higher today, despite the average 30yr fixed being at all time lows for borrowers with no additional risk factors.

Rates (and markets in general) continue paying most of their attention to coronavirus headlines. Investors want to know if the economy can heal without unacceptably high impacts on public health. The measurements of economic health come in the form of various economic reports. Tomorrow brings the most important economic report of any given month in the form of the Employment Situation (the big jobs report that conveys new job creation and the unemployment rate). If it suggests more people are getting back to work than expected, the normal implication would be for upward pressure on interest rates. That said, any troubling developments in terms of covid case counts could easily offset a strong jobs number.



Loan Originator Perspective

Rates continue near all time lows, and lender pipelines are swelling quickly. It’s a mad rush to refinance for many folks, with good reason. This won’t last forever, if you haven’t examined your options, should certainly do so. I am locking most loans early, to ensure borrowers get current great rates.Ted Rood, Mortgage Banker

Fed Meeting Minute Bullet Points: What’s Yield Curve Control?

June 30,2020
by admin

The minutes from the most recent Fed meeting were released today. While there’s not much left to be said when they’ve already been so clear about keeping rates low for a long time, we did get a few new thoughts about “yield curve control.” That would basically entail the Fed buying whatever it takes to keep longer term rates within a certain range compared to the short-term rates it already effectively controls through the Fed Funds Rate.

To be clear, the Fed doesn’t control 2yr Treasury yields, but by keeping the Fed Funds Rate at zero, it greatly limits the extent to which 2yr yields can rise. Case in point, after trading in the 1-2% range in the 2nd half of 2019, 2yr yields have been under 0.30% since the end of March, and generally trading a very flat range.

10yr yields, on the other hand, have seen quite a bit more volatility during that time. Yield curve control would help limit that volatility and it would help keep a lid on longer-term rates. The goal would be to prevent deflation. Indeed, in the laundry list of bullet points below, there are several references to the Fed’s inflation thoughts, but also several references to the risks associated with yield curve control. If there was a slight amount of weakness in the bond market after the Minutes were released, it could be due to the voicing of those concerns.

Long story short, the jury is out on yield curve control and in any event, it isn’t happening any time soon. The jury is in on Treasury and MBS purchases. They’re good. They’ll continue. Low policy rates will also continue for “years” unless something miraculously changes.

Here’s the laundry list of bullet points from Thomson Reuters (my own emphasis added):

  • FEDERAL RESERVE RELEASES MINUTES FROM JUNE 9-10 POLICY MEETING
  • MEMBERS AGREED FED WAS COMMITTED TO USING ITS FULL RANGE OF TOOLS TO SUPPORT THE U.S. ECONOMY
  • DISCUSSED WHETHER YIELD CURVE CAPS OR TARGETS COULD SUPPORT FORWARD GUIDANCE AND “COMPLEMENT” ASSET PURCHASES
  • PARTICIPANTS AGREED THAT THE DATA FOR THE SECOND QUARTER WOULD LIKELY SHOW THE LARGEST DECLINE IN ECONOMIC ACTIVITY IN POST–WORLD WAR II HISTORY
  • STAFF ECONOMIC SIMULATIONS SUGGESTED THAT FINANCIAL CONDITIONS WOULD NEED TO BE HIGHLY ACCOMMODATIVE “FOR MANY YEARS” TO MEANINGFULLY QUICKEN THE RECOVERY
  • MOST FED POLICYMAKERS THOUGHT FED SHOULD GIVE MORE EXPLICIT FORWARD GUIDANCE ON RATES, MORE CLARITY ON BOND-BUYING, ONCE ECONOMIC TRAJECTORY CLEARER
  • FED STAFF PRESENTATION SAID LIQUIDITY CONDITIONS CONTINUED TO IMPROVE IN GENERAL, BUT SOME STRESS WAS STILL EVIDENT IN SEVERAL FINANCIAL MARKETS
  • STAFF REVIEW OF YIELD CURVE TARGETS INCLUDED REVIEW OF U.S. EXPERIENCE IN WORLD WAR II, CURRENT POLICIES USED IN JAPAN AND AUSTRALIA
  • A NUMBER OF PARTICIPANTS JUDGED FORWARD GUIDANCE ON RATES AND BOND-BUYING SHOULD AIM TO SUPPORT RAPID ECONOMIC RECOVERY, FOSTER ‘DURABLE’ RETURN TO 2% INFLATION
  • PARTICIPANTS EXPECTED SOCIAL DISTANCING, SAVING AND LOWER LEVELS OF EMPLOYMENT AND INCOME TO RESTRAIN THE PACE OF EXPANSION OVER THE MEDIUM TERM
  • PARTICIPANTS AGREED THAT FORWARD GUIDANCE AND ASSET PURCHASES HAVE “IMPORTANT ROLES” IN MEETING EMPLOYMENT AND INFLATION GOALS
  • PARTICIPANTS “GENERALLY INDICATED” SUPPORT FOR FORWARD GUIDANCE BASED ON ECONOMIC OUTCOMES
  • A “NUMBER OF PARTICIPANTS” SPOKE IN FAVOR OF TYING FORWARD GUIDANCE TO INFLATION GOALS ALLOWING A “MODEST TEMPORARY” OVERSHOOT OF 2% TARGET
  • PARTICIPANTS STRESSED THAT HEALTH-CARE, FISCAL POLICY MEASURES, AND ACTIONS BY HOUSEHOLDS AND BUSINESSES, WOULD SHAPE RECOVERY’S PROSPECTS
  • A “COUPLE” FAVORED GUIDANCE BASED ON THE UNEMPLOYMENT RATE SINCE IT HAD BEEN KEPT LOW IN THE PAST AND COULD SIGNAL AN “EXTENDED PERIOD” OF SUPPORT FOR THE ECONOMY
  • PARTICIPANTS EXPECTED THAT A FULL RECOVERY IN EMPLOYMENT WOULD TAKE SOME TIME
  • A “FEW” PARTICIPANTS FAVORED FORWARD GUIDANCE BASED ON CALENDAR PROMISES, GIVEN UNCERTAINTY ABOUT HOW FAST THE ECONOMY MIGHT RECOVER
  • FED STAFF SAID A SECOND WAVE OF THE CORONAVIRUS OUTBREAK WAS NO LESS PLAUSIBLE THAN THEIR BASELINE FORECAST SCENARIO AND IF IT OCCURRED, ECONOMIC DISRUPTION WOULD BE MORE SEVERE AND PROTRACTED
  • A “COUPLE” OF PARTICIPANTS SAID PROMISES OF AN EXTENDED PERIOD OF LOW RATES COULD POSE RISKS TO FINANCIAL STABILITY
  • A FEW PARTICIPANTS NOTED THAT CURRENT LOW RATES OF INTEREST MIGHT LIMIT EFFECTIVENESS OF FURTHER ASSET PURCHASES BEYOND THOSE NEEDED FOR MARKET FUNCTION; A FEW WORRIED ABOUT IMPACT ON FINANCIAL STABILITY
  • IN DISCUSSION OF YIELD CURVE TARGETS, “NEARLY ALL PARTICIPANTS” HAD “MANY QUESTIONS” ABOUT THE COSTS AND BENEFITS OF SUCH AN APPROACH
  • VARIOUS PARTICIPANTS NOTED THE U.S. CENTRAL BANK SHOULD COMPLETE ITS POLICY FRAMEWORK REVIEW IN THE NEAR TERM
  • PARTICIPANTS “GENERALLY SAW” AUSTRALIA’S EXPERIENCE AS MOST RELEVANT TO THE U.S.
  • “MANY PARTICIPANTS” SAID THAT AS LONG AS THE FED’S FORWARD GUIDANCE “REMAINED CREDIBLE ON ITS OWN,” IT WAS NOT CLEAR THAT A YIELD CURVE TARGET WOULD BE NEEDED TO REINFORCE IT
  • PARTICIPANTS RAISED “A NUMBER OF CONCERNS” OVER WHETHER THE FED COULD KEEP CONTROL OVER THE SIZE AND COMPOSITION OF ITS BALANCE SHEET WHILE ALSO SETTING A YIELD CURVE TARGET
  • OTHER CONCERNS INCLUDED DIFFICULT OF EXITING A YIELD CURVE TARGET, POSSIBLE RISKS TO CENTRAL BANK INDEPENDENCE, AND IMPACT ON PRIVATE MARKETS
  • “A COUPLE OF PARTICIPANTS” DEFENDED AN “APPROPRIATELY DESIGNED” YIELD CURVE TARGET AS A “POWERFUL COMMITMENT DEVICE”
  • ALL PARTICIPANTS AGREED TO CONTINUE STUDYING YIELD CURVE TARGET POLICIES
  • CONTINUING TO INCREASE HOLDINGS AT A MONTHLY PACE OF $80 BLN IN TREASURY SECURITIES AND $40 BLN IN AGENCY MBS WOULD HELP KEEP MARKET FUNCTIONING ROUGHLY IN LINE WITH MARKET EXPECTATIONS

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

MBS
UMBS 2.0
102-10 : +0-00
Treasuries
10 YR
0.6820 : +0.0290
Pricing as of 7/1/20 3:30PMEST

EXPAND HOME OWNERSHIP OPPORTUNITIES FOR ALL Earn the At Home with Diversity Certification

June 30,2020
by admin

Every year for at least the last five, HAR has offered an important course, the “At Home with Diversity Certification” course. This one-day class covers training and tools agents need to grow their business in a diverse setting, like Houston. Learn about the people that make up your local market, along with their customs, values, real estate needs and most importantly, what expectations they have of you, their REALTOR®.

This course specifically addresses development of cross-cultural communication skills, fair housing issues and business planning. It also teaches you to transact business in culturally competent ways.

“Never before has this class, At Home With Diversity, been so relevant to the current events. We Realtors are in a leadership position to use Fair Housing laws and NAR’s Code of Ethics to help eliminate the underlying racism that unfortunately still exists in this country. Sign up today for this class and let us do our part.” HAR Course instructor: Richard P. Miranda, MBA, CIPS, ABR, CNE, SMP, SRS

It is approved for 8 TREC credit hours, the investment is $49 (normally $99) and will be offered online in July and in September. Visit www.har.com/edu to register.

JUL 14 • 8:30 a.m. – 5 p.m. • Online Course •REGISTER HERE

Information from the NAR website:

HOW TO EARN THE AT HOME WITH DIVERSITY CERTIFICATION:

  • Be a member in good standing of the National Association of REALTORS®
  • Complete NAR’s At Home with Diversity course
  • Upon course completion, receive email with link to submit the application fee. Pay one-time application fee in the amount of $75 to become certified.

ADDITIONAL DETAILS:

  • No annual certification dues (except for maintained membership in NAR).
  • International REALTORS® must maintain membership in NAR as an International REALTOR® Member by paying annual dues of $75

Source: Houston Association of REALTORS®

Get to Know HAR’s Recommended Candidates in the July Primary Runoff Election

June 30,2020
by admin

Primary Runoff ElectionJuly 14

Early votingbegan June 29 and ends July 10.

For more information visit www.harrisvotes.com

Harold V. Dutton, Jr.

for Texas House District 142

  • Has served in the Texas House for 36 years
  • Senior, Respected Legislator
  • Chairman of the Committee on Juvenile Justice and Family Issues
  • Member of the Public Education Committee
  • Legislative achievements include passing legislation for Texas’ annual sales tax holiday and revamping the juvenile justice system

Anna Eastman

for Texas House District 148

  • Resident of the Houston Heights for more than 20 years
  • Co-founder of the 11 ½ Street Foundation – a nonprofit that works to recognize outstanding veteran teachers and award college scholarships to at-risk high school graduates
  • Served two four-year terms on the Houston Independent School District Board of Trustees
  • While serving as HISD Board President, the district put a laptop computer in the hands of every high school student

Source: Houston Association of REALTORS®

Purchase Apps Retreat Again as Inventory Dries Up

June 30,2020
by admin

Applications for both refinancing and purchase mortgages retreated last week, pulling the Mortgage Bankers Associations (MBA’s) Market Composite Index lower for the second time in as many weeks. MBA said the index, a measure of application volume, declined by 1.8 percent on a seasonally adjusted basis during the week ended June 26 and was down 2.0 percent on an unadjusted basis.

While the Refinance Index ticked down 2 percent from the week ended June 19, low interest rates kept the refinancing volume 74 percent higher than the same week one year ago. The refinance share of mortgage activity decreased to 61.2 percent of total applications from 61.3 percent the previous week.

The seasonally adjusted Purchase Index dipped 1 percent and the unadjusted version was down 2 percent compared with the previous week. Volume was still 15 percent higher than the same week one year ago.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

“Mortgage applications fell last week despite mortgage rates hitting another record low in MBA’s survey. Investors are contemplating the risks of the recent resurgence of COVID-19 cases to the labor market and economy, and Treasury rates and mortgage rates are moving lower as a result,” said Joel Kan, MBA’s Associative Vice President of Economic and Industry Forecasting. “After two months of strong growth, purchase applications declined for the second week in a row. The weakening in activity is potentially a signal that pent-up demand is starting to wane and that low housing supply is limiting prospective buyers’ options. The average purchase application loan size increased to a record high in our survey – more proof that tight inventory conditions are leading to faster price growth.”

Added Kan, “Refinance applications also decreased but remained 74 percent higher than a year ago. The 30-year fixed rate has been below the 3.5 percent mark since late March. It is possible that many borrowers have already refinanced or are waiting for rates to go even lower.”

The FHA share of total applications increased to 11.7 percent from 11.4 percent the prior week and the VA share dipped to 10.8 percent from 11.0 percent. The USDA share was 0.6 percent, down 0.1 point. The origination balance of mortgages averaged $322,200, compared to $326,300 the previous week and purchase mortgages averaged $360,300, a slight increase from $359,200 the week before.

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with origination balances at or below the conforming limit of $510,400 decreased to 3.29 percent from 3.30 percent, with points increasing to 0.36 from 0.32. The effective rate was unchanged from last week.

The average rate for jumbo 30-year FRM, loans with balances exceeding the conforming limit, declined 3 basis points to 3.59 percent. Points increased to 0.31 from 0.29 and the effective rate was down.

The rate for 30-year FRM backed by the FHA increased to 3.43 percent from 3.35 percent,with points increasing to 0.36 from 0.22. The effective rate also increased.

The contract rate for 15-year FRM was unchanged at 2.81 percent while points increased to 0.40 from 0.30. The effective rate increased from last week.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) decreased to 3.04 percent from 3.09 percent and points declined to -0.03 from 0.01. The effective rate was lower than the prior week. The adjustable-rate mortgage (ARM) share of activity increased to 3.2 percent of total applications from 3.1 percent a week earlier.

MBA’s Weekly Mortgage Applications Survey been conducted since 1990 and covers over 75 percent of all U.S. retail residential applications Respondents include mortgage bankers, commercial banks, and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rate information is based on loans with an 80 percent loan-to-value ratio and points that include the origination fee.

MBA also released data from its Forbearance and Call Volume Survey for the week ended June 21 and noted that the number of loans in forbearance declined for the second consecutive week. There was a total of 4.2 million active plans at the end of the reporting period, down from 4.3 million a week earlier and the percentage of all loans in COVID-19 forbearance declined from 8.55 percent to 8.48 percent.

After a 19-basis point drop a week earlier, the percentage of loans serviced for portfolio lenders and private label security investors that were in forbearance jumped up 8 basis points to 10.07 percent. The Ginnie Mae (FHA and VA loans) share was at 11.83 percent for the third week, and the GSE share dropped for the third straight week to 6.26 percent, a 5-basis point decline. The percentage of depository servicer loans in forbearance had its second straight decline landing at 9.09 percent, while the percentage of loans in forbearance for independent mortgage bank (IMB) servicers increased to 8.42 percent.

“The overall share of loans in forbearance declined for the second week in a row, led by the third straight drop in GSE loans,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Many borrowers initially received a three-month forbearance term, and as of June 21, 17 percent of loans in forbearance have now been extended, with the largest share of those being Ginnie Mae loans.”

Added Fratantoni, “The level of forbearance requests remains quite low as of mid-June. The rebound in the housing market is likely one of the factors that is providing confidence to both potential homebuyers and existing homeowners during these troubled times.”

Forbearance requests as a percent of servicing portfolio volume (#) decreased across all investor types: from 0.15 percent to 0.14 percent. although the percentage of calls regarding forbearance increased from 7.7 to 7.8 percent.

MBA’s latest Forbearance and Call Survey covers the period from June 15 through June 21, 2020 and represents 76 percent of the first-mortgage servicing market (38.2 million loans).