Skip to content

MBS RECAP: Treasuries Looking Nervous, But MBS Outperform

August 9,2020
by admin

Treasuries losing ground with 10yr now in negative territory on the day. MBS outperforming, still 1 tick (.03) into positive territory, but 1 tick lower from the highs.

Pandemic Reveals Flaws in Loan Reporting

August 9,2020
by admin

New research by dv01, a loan data agent (LDA) providing securitization reporting and analytics on consumer unsecured, mortgage, small business, and student loans, says the pandemic has revealed serious weaknesses in the reporting structure for mortgages. The company found significant numbers of unreported loan modifications and says it was these types of reporting errors during the global financial crisis (GFC) which led to an increase in price volatility when those errors were later corrected.

A new white paper says that, in stark contrast to the GFC, consumer loan performance across asset classes has remained relatively strong. Dv01 has released bi-weekly reports of both loan performance and the relief efforts by issuers and servicers to aid borrowers but has found significant irregularities and inconsistencies across the multiple parties involved in the mortgage process. Even four months into the pandemic there are numerous cases of underreported or entirely omitted modification behavior. Data report quality varies across deals and even between reporting parties within a single deal and there appear to be significant differences between online lending and that of the mortgage industry.

In online lending, issuers primarily service loans in-house and service only its own loans. By its nature online lending is technology driven and the data has fewer intermediaries. In contrast, in mortgage lending issuers and servicers are entirely different entities, so the relationships can be misaligned in terms of investor transparency. Furthermore, servicers generally handing loan portfolios from a multitude of issuers and loan types, thus issuers have less ability to control servicer reporting standards. Additionally, there can be multiple servicers per securitization, each with a different approach to reporting and capturing modifications.

In every securitization, trustees are the ultimate fiduciary and aggregate data from every party involved to create investor reports. There may also be a master servicer that aggregates data in multi-serviced deals, who reports to the trustee and reporting among trustees has been equally inconsistent. There are also third-party data providers that are not directly part of a securitization but communicate with all these entities individually. Thus, there are multiple opportunities for errors or inconsistency in reporting and data quality. Dv01 says, to date it has not observed these communication chains yield cleansed, validated, consistent, and standardized reporting for investors and stakeholders. Even more concerning, because they were so prominent in non-agency securitizations after the GFC, most of these entities may have been reporting or underreporting modifications for over a decade.

The company says that in its review of the initial months of COVID-19 performance across mortgages, they noted low levels of modification or hardship relief in both the standard reporting data from raw data providers and various trustee reports. This seemed at odds with the modifications and relief efforts in online lending markets and those available to GSE borrowers with the same servicers. There were also substantial differences in new modifications between securitizations and within a securitization with different servicers. Even within a particular deal, they observed similar variances across servicers. There was also behavior indicating modifications were occurring but were not properly reported, such as one deal with no modifications reported but with loans where balances were increasing each month.

The irregularities prompted dv01 to look at a single securitization from a prominent non-QM issuer. It engaged four individual servicers, the master servicer, and the trustee to reconcile discrepancies in the July 2020 distribution.

Out of more than 900 active loans, dv01 confirmed that 233 are in some form of active modification, representing nearly 30 percent of the outstanding collateral based on outstanding balances. The trustee reported only 41 modified loans and the Master Servicer reported 74. A supplement provided by the trustee lists 261 loan IDs that are impacted by COVID-19 but makes no distinction as to whether these loans have been modified, or if the borrower has simply indicated hardship. In some instances, counterparties are treating a small population of either completed or cancelled modifications in different ways, resulting in slightly overstated counts.

When consulting other third-party providers, the results are even more troubling. One counterparty reported a single modification as of July’s distribution date. Dv01 observed significant discrepancies between each reporting party in this chain, as well as some inconsistencies across multiple data sources within a single counterparty, resulting in an understatement of over 150 loans that should be classified as active modifications.

The research indicates that this inconsistency increases investor uncertainty and delays sector recovery. Given the differences between those loans with modifications and those with borrowers who simply fall delinquent, it is apparent that modifications indicate a borrower’s successful effort to avoid defaulting. Furthermore, clear modification activity allows stakeholders to reconcile servicer advance behavior and ultimately determine cash collection and distribution activity, as well as potential losses or interruptions related to repaying advances. Lastly, when the remaining reporting platforms eventually properly incorporate these factors and correct the inaccuracies, the impacted securitizations will have substantial moves in pricing and volatility, and the movement will magnify the longer the errors remain outstanding.

Dv01 concludes that the current mortgage reporting architecture is fragmented, outdated, and inefficient, and COVID-19 is further exposing the faulty reporting system. For investors to gain confidence in the health of the mortgage market and the broader economy, the industry needs a more modern and innovative approach to reporting modifications. This will involve alignment, advocacy, and accountability across all industry participants, and an entity overseeing and coordinating these efforts in every securitization.

Live Online Training August 17-21

August 9,2020
by admin

Due to the current social distancing request, HAR has moved the majority of all live classes scheduled through the summer to a LIVE ONLINE virtual classroom using Zoom.

In order to receive TREC CE credit for these classes, you will be required to: check in to class on time using your mobile app, be visible on camera, stay for the duration of the class, and digitally sign out at the end of the class.

Here are some of the upcoming classes:

Monday,August 17

  • 9 a.m. – 4 p.m. – Commercial Leasing Boot Camp
  • 9 a.m. – 4 p.m. – Working with Clients (Part 1) Family Residential Contracts

Tuesday, August 18

  • 8:30 – 11:30 a.m. – Intro to Commercial
  • 10 – 11 a.m. – Webinar: Getting to Know Your Tools – HAR Branded Mobile App & Virtual Office Website
  • 12:30 – 3:30 p.m. – Texas Probate

Wednesday, August 19

  • 8:30 a.m. – 12:30 p.m. – TREC Legal Update I
  • 9 a.m. – 12 p.m. – Platinum Essentials
  • 1 – 4 p.m. – Braving the Video Marketing World
  • 1:30 – 5:30 p.m. – TREC Legal Update II

Thursday, August 20

  • 9 a.m. – 4 p.m. – Working with Clients (Part 2) – Case Studies Involving Residential Contracts
  • 9 a.m. – 12 p.m. – Prospecting for Pennies
  • 10 – 11 a.m. – Webinar: Property Management – Lease Listing
  • 1 – 4 p.m. – ABC’s of CRM

Friday, August 21

  • 9 – 11 a.m. – Commercial Gateway
  • 9 – 11 a.m. – Mobile MLS: Using the HAR App Effectively
  • 1 – 4 p.m. – ZipForm Plus

See the full schedule of classes and register HERE.

Use code SUMMER20 for $20 off any HAR class!

Source: Houston Association of REALTORS®

SRES, Senior Real Estate Specialist

August 9,2020
by admin

This two-day course looks at key differences in housing options, from age-restricted communities to age-in-place design to assisted living; applications of the Housing for Older Persons Act (HOPA); the ins and outs of reverse mortgages; the use of pensions, 401k accounts, and IRAs in real estate transactions; and developing a team of senior specialists, including estate planners, reverse mortgages lenders, clutter and staging specialists, and more.

For more information on how to earn the SRES designation visit the SRES Council website.

Date: August 13 -14

Time: 8:30 a.m. – 5 p.m. (Both Days)

Location: Live Online

Investment: $189

Register HERE today!

Source: Houston Association of REALTORS®

Matrix Overview Part 2- Customization (en español)

August 9,2020
by admin

Este curso de aprendizaje de MLS los estudiantes aprenderan como personalizar varios :

  • Reportes
  • “Hotsheet”
  • Resultados de búsqueda
  • Statistics

Date: August 27

Time: 9 a.m. – 12 p.m.

Location: Live Online

Investment: Free class • $25 charged if there is no cancellation request made.

Register HERE today!

Source: Houston Association of REALTORS®

FHA Jobs; Marketing, Cap. Mkts. Products; Webinars in the Comfort of your Home

August 9,2020
by admin

“Paranoia is out of control: This morning, while reviewing this commentary, I sneezed in front of my laptop and the anti-virus software started a scan of its own!” The nation continues to brabble about health care, coin shortages, opening up and closing down, and politics… it makes my head spin. The political ads are increasing in intensity, with people talking about the Joe Biden ad featuring Lindsey Graham, and President Trump stirringly noting his accomplishments. Did you know that it’s illegal to campaign from government-owned property? That’s difficult for anyone in politics! Despite the political noise, lenders across the nation are off to great starts in August, with longer locks pointing to a good September as well. It is nice to see this industry as helping millions of borrowers! Consumers aren’t complaining. In rising numbers, they’re applying for mortgages. The surge in mortgage lending is partly pent up demand because buyers took a pause in March and April. Additionally, the recent stock market rally is not only boosting buyer confidence but also providing money for their down payments.

Lender and Broker Services and Products

The latest Compass Analytics release has some impressive enhancements to support system integrations. Compass’ CompassBridge solution, which integrates CompassPPE and CompassPoint to other platforms, has expanded its use of stateless processing and microservices, providing greater speed, simplicity, and scale to its users. Additionally, Compass now supports the ability to post ULDD commitment data from CompassPoint to Black Knight’s Empower LOS and Fiserv’s MortgageDirector LOS, automating the data entry process for ULDD commitment extracts. Compass has also enhanced its automation capabilities with Empower allowing users to make smarter and faster hedging decisions. In addition, lenders can configure multiple LOS connections with a CompassPPE instance, enabling a more seamless LOS implementation process. Finally, CompassPPE has enhanced its locking functionality, giving secondary more control with features like guideline rules to disable locking. This release, loaded with new features, demonstrates Compass’ continued focus on innovating the mortgage origination market.

(A conversation happening right now between a lender exec and one of his directs over text.)

Kenneth (Boss): “Chris, what percent of our borrowers do their next loan with us?”

Chris: “I haven’t checked lately, but we’re around 15 percent.”

Kenneth (Boss): “So you’re telling me only 1-2 people out of 10 come back?”

Chis: “Sadly, yes… I think it’s been like that for a while.”

Kenneth (Boss): “That stinks. How much have we spent to acquire those borrowers?”

Chris: “Right around $1,500 each, not counting the hourly cost per processor and underwriter, so, you know…”

Kenneth (Boss): “I need you to get on a call with you first thing tomorrow morning.”

Kenneth…. It’s time to figure out what you’ve been missing… from the experts:

Give me 6 hours to chop down a tree and I will spend the first 4 sharpening the axe.” (Abraham Lincoln) Having a solid process and strategy coupled with your efforts is critical to finding success in our world today. A single cold call and an email isn’t going to get you hires, you need a solid, concrete plan of attack in order to target the right talent and set the right meetings. Build out your strategy with Model Match and communicate your process into actions across your entire footprint. Combined with On-Demand Market Insights, gain access to nationwide origination data and fill your pipeline with high quality targets to set your team up for success. Click here to connect with our team to see how you can create healthy pipelines and create a strategy to help you reach your goals.

Webinars for August and Early September

Volume and lender demand continue to be at an all-time high. To successfully meet your borrowers’ needs and stay ahead of the curve, it’s important to adopt the right technology. In three days, Capacity is teaming up with HousingWire for a webinar titled: How Leaders in Lending Are Driving Results Through New Technology. Capacity’s VP of Marketing, Justin Schmidt, along with Karthik Kumar from TCS, and Scott Roller from Vendor Surf, will dive into the current trends and highlight the technology leading firms are using to drive results. You will learn what technology is driving results in the mortgage industry, what is on the horizon in mortgage tech, and how to get ahead of it. You don’t want to miss this webinar on August 13. Register here. Want a sneak peek? Request a demo to learn more.

I have the honor of speaking this week during the HAMB (Hawaii Association of Mortgage Brokers and Professionals) and MBAH’sfree webinar, sponsored by First Hawaiian Bank, on August 13, from 1-2PM PT. Check it out and say hi!

California MBA and MBA Members are invited to join a free webinar from 10-11 PST today for a presentation of the issues on California’s November Ballot, which will feature California MBA and MBA staff as well as independent experts on each ballot initiative. (California MBA Members use this code to register for free: CAPROP.)

On August 12th at 10:30am, MMBBA and MBA/MW are offering “Tangible Tips for Mortgage Marketing” webinar featuring Matt Muscat, the Author of TAG. This short webinar will cover tangible tips for generating more business for mortgage and real estate professionals. Leveraging Facebook’s algorithm for free, using messenger to your advantage, and bolstering your database will be among many of the topics.

NAMMBA is hosting a special webinar for CEO’s and senior executives called Black Lives Matter Movement: What Does It Mean For Your Company? on Wednesday, August 12, from 2- 3PM ET. This webinar will include findings from a survey NAMMBA conducted on how employees felt their companies responded to this movement and best practices companies can implement to start building a more inclusive and intentional culture in their organization. To register, CLICK HERE (limited seating available).

Arch MI’s upcoming Trainings Schedule is now available for review and registration.

AmeriHome’s underwriting management team is offering a series of webinar meetings covering a selection of recent VA Lender’s Handbook updates and related changes to AmeriHome guidelines and requirements. These meeting will be most useful for VA Loan Processors and Underwriters. Register as soon as possible, space is limited. The August 17th Webinar will cover VA Lender’s Handbook Ch. 10 – Appraisal Process and VA Circular 26-20-25 – Impact of CARES Act Forbearance on VA eligibility. The September 14th Webinar will cover VA Lender’s Handbook Ch. 11 – Appraiser Requirements.

Join Flagstar Bank and Freddie Mac for an Affordable Housing Virtual Summit, August 17th and 18th : Navigating Today’s Evolving Housing Market. If you are unable to attend the virtual summit, recordings of all sessions will be available to those who register.

The MBA is offering free online learning through MBA’s Path to Diversity Scholarship in the month of September.

Don’t Miss the CoAMPWire Fraud and Cyber Crime Virtual Class with Peggy Pingel, Analyst for the Identity Theft and Financial Fraud Unit at the Colorado Bureau of Investigation, on September 2nd beginning at 1:00.

Join your partners across the real estate transaction for the National Settlement Services Summit (NS3) Sept. 1-3. At this year’s event you can learn how recent legislation will affect your business from HUD’s Deputy Secretary Brian Montgomery as well as from state regulators, what to expect from the economy from Fannie Mae’s Chief Economist Doug Duncan and how to stay cybersecure with the FTC and an entire cybersecurity track. Attendees will be able to discuss the adoption and response to trends such as the rise of digital mortgages and iBuyers from those leading the way such as our Keynote Speaker, Zillow’s Ryan Berry.

Zelman & Associates 2020 Virtual Housing Summit – September 21-25! Attend this year’s exclusive housing conference Co-Hosted by top ranked Wall Street housing Analyst, Ivy Zelman. Live panel discussions, industry expert keynotes, rich research content and a comprehensive perspective on the entire housing ecosystem. Grow your business and learn more than your competition. Email for registration information and mention this newsletter for a discount –

Capital Markets

The big economic release to close last week was the July employment report on Friday morning, which showed that America’s job market is losing steam after two months of improvement. The 1.8 million jobs added in July was better than estimates but still a sharp slowdown from the 4.8 million gained in June, as businesses closed again in parts of the country where the virus has surged. The unemployment rate dropped to 10.2 percent in July, down from 11.1 percent in June, but still well above the 3.5 percent low from February. Payrolls remain nearly 13 million, or 8.4 percent, below the February peak before the recession started. Only a little more than 40 percent of the jobs lost since the pandemic hit have been recovered. What does it all mean for mortgage rates? Well, this rate of job growth certainly won’t push mortgage rates higher, which is welcome news for many, though it prevents more buyers from entering into housing markets. It’s expected that the August payrolls figure will show further deterioration.

The other big news affecting mortgage rates was regarding further stimulus talks in Washington. President Trump on Saturday issued executive orders to pay $400 a week in extra jobless benefits, extend the moratorium on evictions, delay payroll tax collections for some workers and give flexibility to Americans who owe student loans. He may not have the power to act on his own in such a matter, given that the Constitution gives Congress “power of the purse.” Legal challenges are expected. His decision to sign the measures comes as White House officials and top congressional Democrats remained bitterly divided on a number of critical issues.

Other economic releases showed consumer credit increased by $9.0 billion in June though it was below expectations and marked the fourth straight monthly contraction in revolving credit, which is something that hasn’t happened in nearly a decade, and demonstrating the more restrictive credit stance adopted by lenders in the wake of the COVID shutdown and spike in unemployment. By Friday’s close, MBS and Treasuries had pulled back slightly.

This week’s economic calendar includes updates on July PPI and CPI, the budget deficit, import/export prices, and the ever-important July Retail Sales. The week’s most likely market moving event comes via a $112 billon record Quarterly Refunding consisting of $48 billion 3-year Treasury notes, $38 billion 10-year Treasury notes and $26 billion 30-year Treasury notes to be auctioned tomorrow through Thursday. Today’s calendar sees only June Job Openings from JOLTS and the July Employment Trends Index, both due out later this morning. With regards to MBS, the Desk will purchase a maximum of $17.2 billion this week. Today, the NY Fed Desk will potentially buy a total $3.5 billion starting with $753 million UMBS15 2 percent and 2.5 percent followed by $2.8 billion UMBS30 2 percent through 3 percent. We start the week with Agency MBS prices better/up a few ticks and the 10-year yielding .55 after closing Friday at 0.56 percent.

Employment and Promotions

Caliber Home Loans is a great place to work! HousingWire’s August issue awarded Caliber’s Ann Thorn and Renee Galitis both as 2020 Women of Influence. Criteria for this recognition is based on professional achievements within their organizations, contributions to the overall industry, community outreach, client impact, and personal success. We nurture professional development while providing innovative technology and rewarding skilled talent with lucrative salaries and bonuses. Are you driven and influential in helping people obtain their dream of home ownership? Do you strive to exceed your personal best every day? Do you want to develop your professional skills with Caliber’s award-winning leadership? If so, we want to talk to you! Interested in one of our posted job opportunities? Please contact Jonathan Stanley for consideration. Interested in a sales opportunity at Caliber? Please contact Brian Miller for immediate consideration. Visit the Caliber Careers website for opportunities across the organization!

Do you know an operations team that might be interested in a new and exciting opportunity? There is a fast-growing regional company with a great track record of employee retention whose sales staff is growing faster than operations can handle. It is willing to pay a $25,000 referral bonus to someone who puts them in contact with the right team of underwriters, closers, and compliance people anywhere in the country who may want to move as a team. Contact Scott Flaherty for more details.

Towne Mortgage Company is growing again, and would like bring on high performing underwriters with at least 3 years of experience. Over the last year our volume has increased by 300% and for nearly 40 years we have provided big name results with a small Towne touch. Being part of our Towne has its perks; We offer industry leading health benefits because we care about your safety and well-being first. Boost your performance with skills training and maintain work/life balance with our alternative work arrangements. Towne is committed to fostering a respectful, inclusive community that is diverse in all aspects, both in and outside of the office. Come for the stability, stay for the culture. Full-time, on-site, 100% REMOTE and flexible/part-time opportunities are available. If interested, please contact Jessie James to learn more.”

“In our ‘relentless pursuit of excellence,’ Trinity Oaks Mortgage is seeking passionate, driven Mortgage Loan Originators and Sr. Loan Processors in the DFW area to join our team. TOM is a full service, independently owned mortgage banker headquartered in Red Oak, TX that puts a great emphasis on providing you with the tools, technology and support you are looking for to be successful. If you’re seeking a position with a growing, innovative company that values family, honest communication, 2nd Mile Service and generous love to our employees, we want to talk to you! Visit our website to learn more about Trinity Oaks, view job description and apply online, or contact Todd Reynolds (Sales) or Kizzy Kehoe (Ops) to learn more.

Attracting Operations talent is big news in the industry lately. “Joining Thrive is absolutely the best career move I have ever made.” This is the most common sentiment expressed by new Ops Team Members after their first few months with the company. After laying an incredible foundation of best-of-breed technology solutions, perfecting their Quality & Efficiency workflow, and building one of the best leadership teams in the industry; Thrive Mortgage is crushing production numbers and is positioned to maintain this growth for years to come. “Our operations staff is unmatched. We simply have the best people across all our teams,” stated Selene Kellam, COO for Thrive. “When you have great leadership, it simply breeds a culture of excellence from the top down.” To inquire about open positions within Thrive, contact Jamal Chubb or Josh Harvith to begin a conversation. You can also visit us at to learn more.

If you are interested in helping make affordable and sustainable housing solutions available to millions of low- to moderate-income individuals and families each year, FHA is hiring for two positions: Deputy Director of the Quality Assurance Division in Washington D.C. and Supervisory Underwriter in Santa Ana, CA.

Blackstone’s Incenter announced the appointment of Tom Piercy as President, Enterprise Business Development. Tom will remain Managing Director of Incenter Mortgage Advisors but also head Incenter’s new National Enterprise Sales Team consisting of Tyler Bohn, Nick Costas, and Steve Ferringer, each serving as EVPs, National Business Development.

MBS Day Ahead: Bonds Sending Same Old Warning

August 9,2020
by admin

August began with bonds pushing several positive boundaries. 10yr yields had just broken a technical floor at .57//58 and 2.0 UMBS were enjoying a surge of momentum after weeks of resistance around a price of 103. To hear MBS tell the story, that positive momentum may have leveled off, but things are still going well for bonds. The closest they came to revisiting the 103 level was on Friday and they were still nearly a half point higher at the time.

Treasuries, on the other hand, are telling a different story as yields were as high as .5788% in early morning trading hours. Before that, they’d take the entirety of last week to begin sending a warning. At best, yields were struggling to move into the 0.4-0.5% range. At worst, we were seeing the early phases of a bigger-picture reversal of the months-long rally.

The move up to .5788 coincides with a bounce at upper limit of that months-long rally trend. It can be seen in the upper yellow line on the following chart.

20200810 open.png

This is the bond market’s way of firing a similar warning shot to that seen last week. Yields are saying “yeah, we’re aware of these upper limits and we’re close enough to move above them if things don’t go our way this week.”

What would need to happen for things to go well for bonds in the coming days?

Successful Navigation of Supply. This is an auction cycle week for Treasuries with record setting levels of 3, 10, and 30yr bonds being auctioned on Tue/Wed/Thu respectively. Traders know about auction times and amounts ahead of time, but there is still something to be learned in the strength (or weakness) of the auction process. Think of all the various traders participating in the auction like the owners of many different trucking companies and think of Treasury supply as a mountain that must be moved. All parties involved know how big the mountain is and they know how many dump trucks they own, but there’s still a lot of variability in the process of getting the mountain from one place to another.

Stimulus Considerations. This is part and parcel of the Treasury supply considerations above. The next round of fiscal stimulus means a new mountain is popping up–one that will also need to be moved (Treasury debt is the key source of funding for fiscal stimulus). As negotiations continue (and as presidential proclamations already roll out), the expected size of the mountain is constantly being tweaked and the threat of it’s arrival is becoming more immediate. If lawmakers can agree on a stimulus plan that seems like it would be effective enough while not being bigger than the market expects, that would be good for bonds. Delays in the process can also help to some extent as they push the “mountain moving date” back.

More Covid and Weaker Data. These are the basic reaction functions for the bond market. If Covid numbers begin surging again (they’re arguably leveling off despite remaining elevated in several states) and if economic data is weaker than expected, that would generally (probably) be helpful for the bond market. That said, as far as this particular week is concerned, econ data is a relatively small concern. Covid numbers are much more important, but much less likely to do anything beneficial for bonds given the leveling trends in the problem states.

Nonetheless, there are a few econ reports that traders will tune into this week. The biggest ticket will be Friday’s Retail Sales report for July. Before that, we’ll get producer and consumer inflation data on Tuesday and Wednesday respectively. Inflation data hasn’t garnered a market reaction recently, but it’s being watched in a general sense for 2 reasons. If it keeps falling, the Fed’s green light for stimulus will shine even brighter. But if inflation unexpectedly begins to increase, it will force a conversation about what the curtailment of Fed policies might look like. We all remember the taper tantrum?

The Rate Also Rises

August 6,2020
by admin

Years from now when scientists examine mortgage rates in July 2020, they’d be forgiven for coming to the conclusion that rates only ever move lower. As we’ve learned in the first week of August, rates also rise.

To be fair, there were a few days in July where more than a few lenders moved slightly higher in rate, but it really wasn’t until this week that we arguably saw a shift in the broader trend–or at least warning signs about a potential shift.

What does that mean, exactly?

It might not mean much at all, depending on where we go from here. Over longer time horizons, it’s entirely possible that rates return to recent record lows. This week’s upward movement serves as more of a warning about complacency and about being ready to lock if you happen to have a loan in process.

In that regard, August is no different than any other month. Lenders all have certain requirements that must be met–certain documentation that must be submitted–before they’ll lock your loan. It’s always a good idea to clear those hurdles ASAP as it leaves you in the most flexible position. If scary things are happening in the rate market, you can lock ASAP! If rates are moving calmly lower, you’re ready to react whenever that changes and can rest easy in the meantime.

So is this one of those scary times?

As of right now, things aren’t too scary. Rates have certainly moved up a bit from recent lows (despite what you may have seen elsewhere), but they remain exceptionally low in the bigger picture. The decision to roll the dice on rates coming back down is a matter of personal preference, but I wouldn’t take it lightly.

We can get a sense of momentum in the broader bond market by looking at 10yr Treasury. These don’t directly dictate rates, but if there’s a decisive shift in 10yr Treasuries, mortgage rates will likely be moving in the same direction.

20200807 nl1

In thinking about the link between coronavirus and rates, it’s easy to conclude that rates will stay low or move lower. A lot of people have made similarly easy conclusions about market movement in the past only to find out that the market doesn’t always behave logically.

To be clear, I’m NOT saying rates are destined to continue higher from here. Instead, the takeaway from this week is that rates CAN move higher even when it looks like such a move isn’t in the playbook. Moreover, we should increasingly be on the lookout for corrections when rates have been doing one thing in a very consistent way for weeks on end. This is one of the key reasons for last week’s discussion on whether or not you should wait for lower rates.

What are the key factors likely to drive that momentum (or the potential reversal)?

Past precedent teaches us that rates consistently respond to the economy. With Friday’s big jobs report–traditionally the most important economic data to the bond market–coming in stronger than expected, it’s tempting to blame it for the upward pressure on rates.

In the current environment, however, traders are far more interested in stimulus negotiations and next week’s Treasury auctions (where the US government sells Treasury notes/bonds to investors). Both of these speak to the SUPPLY of bonds in the market. Simply put, we need a lot of them to pay for stimulus and the ongoing revenue shortfall (due to things like tax cuts and significantly lower economic activity).

Like anything, higher supply means lower prices, and when it comes to bonds, lower prices mean higher rates. Of course this is one of those “all other things being equal” kind of points. Traders already knew about stimulus and supply. Even so, it’s not uncommon to see the bond market get a bit nervous as it waits for clarity. After next week’s record-sized Treasury auctions and additional stimulus negotiations, we’ll have a much better sense of the effects on supply as well as the market’s willingness to buy it!

MBS RECAP: More Defensive After Jobs Report, But Not Necessarily Because of it

August 6,2020
by admin

The jobs report was hard-pressed to live up to its historical market movement potential this morning, but it did its best to surprise markets. Bonds reacted momentarily but quickly traded in the opposite direction. The rest of the day brought other concerns, however, and the resulting market movement has risk-averse clients reconsidering their lock/float stance.

Homebuyer Sentiment Continues Previous Decline

August 6,2020
by admin

Fannie Mae’s Home Purchase Sentiment Index (HPSI) faltered a bit in July as it tried to recover from its 29.5-point aggregate plunge in March and April. The index, derived from six questions on the National Housing Survey (NHS), decreased 2.3 points in July to 74.2. Three of the components deceased from June levels, led by a significantly more pessimistic view of homebuying conditions. The HPSI is down 19.5 points from its July 2019 level.

The percentage of respondents who say it is a good time to buy a home decreased from 61 percent to 53 percent, while the percentage who say it is a bad time to buy increased from 27 percent to 38 percent. As a result, the net share of Americans who say it is a good time to buy decreased 19 percentage points to 15 percent.

That loss was offset slightly by an increase in sentiment about selling. The percentage of respondents said it was a good time to do so rose 4 points to 45 percent. With 48 percent responding that it was a bad time to sell, unchanged from June, the net share of positive responses was -3 percent.

“Following a partial recovery of the HPSI in the previous two months, consumer sentiment toward housing took a slight step back in July amid a rise in coronavirus infections across many parts of the country, including the south and southwest,” said Doug Duncan, Senior Vice President and Chief Economist. “Supply constraints appear to be applying upward pressure to consumers’ home price expectations, which in turn has contributed to both a sharp reversal in optimism about whether it is a good time to buy a home and further improvement in home-selling sentiment. The July survey was conducted as legislators considered the extension of several provisions in the CARES Act to support household incomes during the pandemic. Not surprisingly – more than any other respondent groups – renters, 18-to-34-year olds, and households earning less than $100,000 think it’s a bad time to buy a home, which we believe suggests a less favorable outlook for first-time homebuying activity. In the months ahead, we continue to expect consumer sentiment to be closely linked to the country’s progress in containing the spread of the virus.

The net share of respondents who expect home prices to increase over the next year rose 3 points to 12 percent with 35 percent saying prices will increase, 23 percent expecting a decline and 34 percent saying there will be no change.

A majority of respondents think mortgage rates are as low as they will go. Thirty-five percent think they will increase over the next 12 months and 42 percent expect they will remain about the same. Only 16 percent are looking for even lower rates.

The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 74 percent to 76 percent, while the percentage who say they are concerned decreased from 26 percent to 23 percent. As a result, the net share of Americans who say they are not concerned about losing their job increased 5 percentage points.

The net share of those who say their household income is significantly higher than it was 12 months ago decreased 3 percentage points to 6 percent with 22 percent reporting an increase compared to 25 percent in June.

The National Housing Survey from which the HPSI is constructed, is conducted monthly by telephone among 1,000 consumers, both homeowners and renters. In addition to the six questions that are the framework of the index, respondents are asked questions about the economy, personal finances, attitudes about getting a mortgage, and questions to track attitudinal shifts.