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Mortgage Rates Vary Widely–Nothing To Do With The Fed

September 16,2020
by admin

Yesterday’s policy announcement from the Federal Reserve had a chance to cause significant volatility for the bond market and the bond market is the chief ingredient in the mortgage rate equation. But this time around, the Fed didn’t cause a measurable reaction in the mortgage market.

I’m frequently asked whether mortgage rates are 0% since the Fed just kept rates at 0%. People hear a headline on the news or a radio soundbyte mentioning the words “Fed, rate, zero,” and then assume the Fed just made some change that dropped rates to zero percent. After all why would there be so many news headlines about it if the Fed merely kept its policy rate unchanged?!

It’s a fair question in that sense, but understand that the Fed’s rate decision will always make the news, even if the rate is the same as it has been since March (and it is). As such, if mortgage rates weren’t 0% for the past 6 months, they wouldn’t be zero now. And in fact, they’ll never be zero simply because the Fed Funds Rate is zero. These are two entirely different rates that apply to vastly different amounts of time and types of transactions.

The Fed Funds Rates governs overnight transactions between large financial institutions. Mortgage rates govern–well… mortgages! The Fed actually buys mortgage-backed debt at the same price as the rest of the bond market. Those prices are currently yielding rates around 3% in terms of top tier 30yr fixed loans. In that sense, the Fed is indeed setting mortgage rates, just at the same levels as everyone else and without much change from the past few days.

By far and away the biggest factor for recent rate movement has been the recently announced adverse market fee. It caused rates to spike significantly in early August when it was first announced. Rates then recovered when it was delayed several weeks ago. And now that we’ve hit the time frame where lenders need to reimplement the fee, rates have spiked quickly, but only for those lenders. As such, rates are significantly worse for some lenders compared to last Friday while others are slightly better. Ultimately though, any lender making a loan for a conventional 30yr fixed refinance will have to account for this fee, and most of them will be doing that before the end of this month (a majority already have as of this week).

For the sake of comparison with the rates we discuss here, a rate of just over 3% for a lender WITH the adverse market fee is equivalent to a rate of 2.875% for a lender who has yet to reimplement the fee.

MBS RECAP: Still Waiting on Bonds to Attempt a Range Breakout

September 16,2020
by admin

Yesterday’s Fed announcement managed to deliver the bare minimum of the market’s expectations and underdeliver on fairly reasonable hopes. That resulted in a logical protest from both stocks and bonds. This carried over into today, but bonds have yet to even attempt to break their prevailing range.

Pace of Construction Slows after Three Busy Months

September 16,2020
by admin

Residential construction activity took a breather in August. The U.S. Census Bureau and the Department of Housing and Urban Development reported this morning that all three measures, housing permits, starts, and completions, were lower than their unexpectedly high July rates. Permits for residential construction were issued during the month at a seasonally adjusted annual rate of 1,470,000. This is down 0.9 percent from the revised (from 1,495,000) 1,483,000 units in July. It was also fractionally lower (0.1 percent) than the August 2019 rate of 1,471,000. Analysts had expected a continuation of the heavy pace of construction that kicked in after a disastrous plunge in numbers in March due to pandemic related shutdowns. Permitting was at the low end of estimates from those polled by Econoday, 1,450,000 to 1,550,000. Their consensus was 1,530,000 units.

Single family permits were up 6.0 percent from July’s revised estimate of 977,000 (originally reported at 983,000) to 1,036,000. This was 15.6 percent higher than the August 2019 rate. The damage to permitting was due to multifamily activity which fell 17.4 percent for the month and 28.5 percent year-over-year to 381,000 annual units. On a non-adjusted basis there were 125,500 permits issued during the month, 89,600 of which were for single-family houses. The comparable numbers in July were 135,400 and 92,100. For the year-to-date (YTD) there have been 921,500 permits issued compared to 906,200 during the same period last year, an increase of 1.7 percent. Single-family permits YTD total 615,300 compared to 576,700 and multifamily permits are down 8.3 percent to 276,600.

Housing starts declined 5.1 percent to a seasonally adjusted annual rate of 1,416,000 units in August from a downwardly revised 1,492,000 (from 1,496,000) units in July but maintained a 2.8 percent edge over the August 2019 rate. Analysts largely overshot the mark here as well, expecting housing starts to be in the 1,400,000 to 1,600,000 range. The consensus was 1,486,000 units. Multifamily construction drove the decline in starts even more so than permits, not surprising given the 57 percent surge the prior month. The annual rate of 375,000 was down 25.4 percent from July and 16.9 percent from August 2019. The 1,021,000 single-family starts were higher than both earlier periods, up 4.1 percent from July and 12.1 percent on an annual basis. The July number was revised upward from 940,000 to 981,000. Starts were down on an unadjusted basis from 139,100 in July to 127,300. Single family starts were essentially unchanged from July at 93,100. YTD there have been 894,000 starts, up from 850,200 in 2019, an increase of 5.2 percent. Single-family starts are up 3.8 percent to 618,100 and there has been 8.8 percent growth in multifamily starts to 268,100. Residential units were completed at annual rate of 1,233,000 in August, a decrease of 7.5 percent from the upwardly revised (from 110,900,000) 1,333,000 units in August. The rate of completions for single-family units was down 4.4 percent to 912,000 and multifamily completions dropped 15.4 percent to 312,000. Actual completions during the month were estimated at 112,800, 80,300 of which were single-family units. The July estimates were 116,300 and 79,700, respectively. YTD there have been 815,600 housing units completed, including 586,300 single-family and 223,100 multifamily units. This is a -0.6 percent change for total completions, a 1.1 percent increase in single family completions and a multifamily decline of 4.4 percent from 2019 YTD levels.

At the end of the reporting period there were 1,211,000 units under construction, 521,000 of which are single-family houses. There was also a backlog of 172,000 permits, including 99,000 for single-family units. Permitting in the Northeast fell by 13.1 percent from the July level and was down 27.4 percent on an annual basis. Starts also fell significantly, by 33.1 percent and 47.0 percent from the two earlier periods. Completions were down 8.5 percent and 27.6 percent, respectively. The Midwest reported a decline of 16.1 percent in August from the rate of permitting the prior month and 1.1 percent fewer permits than a year earlier. Starts were strong, increasing by 28.4 percent from July and 40.5 percent from the previous August. Completions were up 12.3 percent from July and down by an identical percentage from one year earlier. The South posted a 6.0 percent increase in permitting compared to July and a 2.8 percent gain year-over-year. There were 17.7 percent fewer starts than the prior month and they were 2.6 percent lower on an annual basis. Completions declined 11.3 percent month-over-month but were up 2.1 percent for the year. Permitting in the west was down 1.1 percent for the month but was 7.0 percent higher than in August 2019. Starts rose by 19.5 and 19.9 percent for the month and year. Completions were 7.7 percent lower than in July but 5.4 percent above the rate the prior August.

MBS Day Ahead: Markets Debating Next Move After Fed; Update on Mortgage Spreads

September 16,2020
by admin

Yesterday’s Fed announcement managed to deliver the bare minimum of the market’s expectations and underdeliver on fairly reasonable hopes. That resulted in a logical protest from both stocks and bonds. Each had walked their own cautious path leading up to the Fed. Bonds were definitely sideways. Stocks were gradually improving, but may well have been sideways had they not been bouncing back from the big weakness in August.

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As of this morning, stocks are losing more ground and bond yields have been more willing to follow. Still, that’s no guarantee about the rest of the day/week/month. Both sides of the market are searching for direction in their own way. Stocks are faced with a decision about whether or not to press back up into all-time high territory or take the opportunity for a more serious correction surrounding the presidential election.

Bonds aren’t too terribly far from their all time low yields, but their decision is a bit different from stocks. The upside (or downside in terms of yield) is likely more limited without an obvious double dip recession taking shape. Their downside (or upside in yields) is also probably limited by the expected economic malaise and consistent support from the Fed. After all, the Fed may not have increased bond buying or promised more of it, but they did say they’d continue buying “at least” the current $120 bln per month (80 Treasury + 40 MBS) until their goals were achieved. Given on of those goals is 2.0-2.5% inflation for several years, bond buying isn’t on the chopping block for the foreseeable future.

With all that in mind, Treasury yields and rates are left to bounce around in a moderately narrow, low, sideways range. Just like last week and last month, we continue to wait for a confirmed break above .73 or below .63 to suggest the tone of the next trend.

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Mortgage rates are a bit of a different story as they’ve recently been forced artificially higher by the adverse market fee for conventional refis. Interestingly enough, purchase rates are also generally higher than they were in late August, even though MBS suggests the opposite should be true. Lender capacity continues to be the best explanation for such things as there is definitely room in lender margins for lower rates. More simply put, lenders have more than enough business to efficiently handle at current rates. No reason to move them materially lower until that changes.

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Credit Score, Lead Source, QC Products; Free Western Secondary and Other Events; Agencies React to Disasters

September 16,2020
by admin

Why is it that every time I call some place, I hear the recording, “Wait times to speak to a representative are longer than normal.”? Why can’t I ever figure out a “normal” time to call? I bet that the Federal Emergency Management Agency FEMA) always has operators who pick up the phone. And the Agency needs them, given the rain and floods, wildfires, hurricanes, and windstorms that have hit the United States recently. FEMA’s disaster declarations drive the policies and procedures of lenders and investors, especially in terms of collateral and credit. Lots of disaster news below. And looking ahead, thank you to Carol K. who sent this NYT article titled, “How Climate Migration Will Reshape America.” “Millions will be displaced. Where will they go?” I realize that some will say there is no climate change, or that it is all political blatherskite. But the financial markets are cognizant of a new class of dangerous debt (climate-distressed mortgage loans) that might already be threatening the financial system.


Lender Products and Services

Informative Research is proud to welcome Angela Reeves as its newest Client Success Manager. Previously, Reeves served as a National Account Manager with Factual Data for over a decade, managing credit services for multi-branch national financial institutions. “Angie’s industry connections and history of developing strong relationships with clients is the perfect fit for what we’re trying to achieve at IR,” said Kelly Richards, Head of Client Support. Reeves will connect with key business stakeholders and prepare client business reviews to help them meet and exceed their business goals. Additionally, she’ll coordinate with cross-functional internal teams to continually streamline the customer experience. “Learning and sharing the knowledge I’ve gained to help others is my passion,” Reeves commented. “Within Informative Research, I’ve found that same passion, positive energy, and enthusiasm paired with a focus on innovation. I’m so excited to be on this team.” Read more here.

Monster Lead Group tells us that direct mail continues to be a critical component of originating mortgages and has released a helpful guide on the best practices of direct mail marketing in mortgage. This 12-page guide on the seven essential practices they use in every direct mail campaign explains their techniques for producing high return, high converting direct mail campaigns that led to more than 400,000 unique calls and $10 Billion in loan originations for their mortgage lenders in 2019. View the guide here.

ACES Quality Management Q1 2020 Mortgage QC Trends Report tells us that EPDs are rising, but the critical defect rate hit a three-year low. Overall critical defect rate of 1.56% matched the lowest rate in three years. Defects attributed to the credit and income categories rebounded after climbing higher in Q4 2019. Increases in the share of refinances (5%) and conventional loans (2%) contributed to the improvement in the overall defect rate. Early Payment Defaults are on the rise. “The combination of falling interest rates, employment numbers not yet impacted by COVID-19, and steady property appreciation all contributed to increases in the share of both refinances and conventional loans, which in turn drove the continued decrease in the overall critical defect rate observed in Q1 2020,” said ACES EVP Nick Volpe.

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) “In the first 4 months we took in $180M in applications and we have about 100 LOs. That is a significant impact to our business. My top performing LO attributes 25% of her business to Sales Boomerang alerts.” (Katherine Campbell, CMO, Assurance Financial) 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.

Overstated Credit Scores cause expensive mistakes. Understated Credit Scores exclude many low-risk, high-margin borrowers who need credit the most. The Mortgage Risk & Fairness Score is the most “predictive & prescriptive” alternative assessment of credit risk, behavior, and resiliency. This incremental intelligence tool is delivered top-of-funnel in a simple report that increases visibility, speed, capacity, volume, and margins, while decreasing risk. It can also be pulled by servicing for more informed accommodation; run across servicing port’s for monitoring, mining, and recapture; and appended in bulk for loan and MSR trade due diligence. Bottom Line: ‘The Score’ is an easy and inexpensive way to leverage state-of-the-art AI and ML algorithms, and years of experience to supercharge risk management, streamline sales and op’s, and promote financial inclusion to boot. It’s plug-n-play, validated (top 10 bank) and vetted (CFPB, OCC, Fed).


Virtual Events

With purchase applications up 30% and refinances up 51% year-over-year, there’s no doubt that we are in the middle of a boom market. Now, every loan officer is wondering how much longer it will last. Home Point Financial is here to help with that today at 2:00pm EST! As part of its new Home Point Elevate LIVE series for loan officers, Home Point’s Will Pendleton will be joined by Freddie Mac Deputy Chief Economist Len Kiefer and Shelby Elias, CEO of United Wholesale Lending, to discuss the most likely market scenarios and expert strategies to help loan officers plan for what’s next. To register for today’s live event at 2:00 p.m. EST, click here.

Discover how you can deliver the consumer experiences needed to acquire and retain loyal customers at Blend’s virtual summit on mastering digital agility, September 22-23. Hear actionable advice from industry leaders and gain access to innovations that will allow you to quickly launch new products and stay ahead in today’s rapidly changing landscape. Save your spot.

The California MBA’s Western Secondary Market Conference is just around the corner, being held virtually September 23 and 24. To thank you for being a loyal subscriber, I am offering you a complimentary conference registration! Use this link and enter the promo code Chrisman to get your free registration. Hear from the star of Undercover Billionaire and CEO of Kind Lending, Glenn Stearns, as well as the CEO Panel, mPower Leadership Panel, Capital Markets Update, and a discussion about the latest trends in Mergers and Acquisitions. Plus some fantastic musical entertainment, featuring a live performance from an award-winning star! Look forward to seeing you in the virtual portal next week.

If you are an originator, operations professional or leader in a company, it is not too late to register for NAMMBA’s CONNECT 2020 Virtual Conference. The conference is today and tomorrow. Can’t attend the entire event? Register here and get a copy of the conference sent to your inbox.


Disasters and Agencies

First, recall that several U.S. Government Agencies jointly published proposed Interagency Questions and Answers Regarding Flood Insurance that reorganize, revise, and expand the existing Interagency Questions and Answers Regarding Flood Insurance. The Agencies requested comments on these proposed Interagency Questions and Answers Regarding Flood Insurance (herein “Proposed Q&As”) prior to September 4. The addresses and methods for submitting comments to one or more of the Agencies is set out on pages 40442 and 40443 of the above hyperlinked Federal Register.

To date, the President has declared a major disaster in every state and most territories in connection with COVID-19. The following guidance applies to all areas covered by an additional Presidentially Declared Major Disaster Area (PDMDA) during the COVID-19 pandemic. FHA-insured forward mortgages secured by properties in a PDMDA are subject to a 90-day foreclosure moratorium following the disaster declaration. In PDMDAs, FHA provides mortgagees an automatic 90-day extension from the date of the foreclosure moratorium expiration date to commence or recommence a foreclosure action or evaluate the borrower under HUD’s Loss Mitigation Program.

For borrowers who are already on a COVID-19 Loss Mitigation Option, including a forbearance before the date of the PDMDA, mortgagees must continue to follow the loss mitigation guidance in ML 2020-22: FHA’s COVID-19 Loss Mitigation Options. For any buildings in a PDMDA that are substantially damaged, mortgagees must follow the guidance in Single Family Housing Policy Handbook 4000.1 Section III.A.3.c.iii, Monitoring of Repairs to Substantially Damaged Homes. This requirement applies to all properties covered by an additional non-COVID-19 Presidentially Declared Major Disaster Area during the COVID-19 pandemic, including those already under a COVID-19 Loss Mitigation Option, such as forbearance.

Fannie Mae Servicing Guide Announcement (SVC-2020-04) provides updated information on allowable foreclosure attorney fees in Hawaii. Other miscellaneous revisions include Incorporation of disaster payment deferral with the addition of references to payment deferral throughout the Guide as applicable. Forbearance without achieving QRPC in a disaster event and Master Agreement updates.

USDA Rural Developmentissued a Bulletin providing guidance on servicing relief for borrowers impacted by Presidentially Declared Disaster (PDD) areas during the COVID-19 Pandemic.

Fannie Maeissued a reminder to those impacted by Hurricane Sally and the West Coast Wildfires of available mortgage assistance and disaster relief options. In addition, homeowners currently on a COVID-19-related forbearance plan who are subsequently impacted by the storm or fires should contact their mortgage servicer to discuss options.

Fannie Mae also offers help navigating the broader financial effects of a disaster to homeowners with a Fannie Mae-owned mortgage and renters living in Fannie Mae-financed properties through its Disaster Response Network, including: A needs assessment and personalized recovery plan. Help requesting financial relief from FEMA, insurance, and other sources includes web resources and ongoing guidance from experienced disaster relief advisors. Homeowners and renters can call 877-833-1746 to access Fannie Mae’s Disaster Response Network or other available resources.

Freddie Mac confirmed disaster relief options for homeowners affected by Hurricane Sally and the ongoing wildfires.

(More tomorrow on how investors and lenders have reacted.)


Capital Markets

U.S. Treasuries, and Agency MBS, ended Wednesday pulling back slightly and the UMBS30 basis closed wider following poor retail sales data in the morning and the latest Fed events in the afternoon, which were relatively upbeat. Total retail sales pointed to some slowing in retail spending activity following the expiration of enhanced $600 in unemployment benefits expired in July. Both those August retail sales and the latest industrial production figures indicate that the pace of the economic recovery slowed in August.

The September FOMC Statement indicated that short-term/overnight rates will remain at current levels until maximum employment is achieved and inflation exceeds 2 percent for some time, even if inflation is not expected to exceed 2 percent for at least three more years. The implication is obviously that rates will not be raised anytime soon. Investors were looking to Fed Chairman Powell for more details on how the central bank plans to accelerate the U.S. economic recovery, and he lobbied for more fiscal stimulus during his press conference, though that remains to be seen whether any agreement can be reached in Washington. The Fed could eventually dial up the rate of its asset purchases if inflation does not soon show signs of moving up toward 2 percent.

Following yesterday’s FOMC decision, markets this morning are digesting the latest decisions from the BoJ and BoE. The domestic calendar is also underway with a spate of releases. Initial claims for the week ending September 12 (-33k to 860k, seasonally adjusted), continued claims for the week ending September 5 (-98k but still around 29 million), housing starts and building permits for August (1.416 million, -5.1 percent, and 1.47 million), and the Philadelphia Fed Survey for September (-2.2 to +15.0, as expected). Later this morning brings Freddie Mac’s Primary Mortgage Market Survey for the week ending September 17, and the Treasury selling $12 billion of reopened 10-year TIPS. The NY Fed will conduct two MBS FedTrade operations totaling up to just $3.5 billion starting with $669 million UMBS15 2 percent followed by $2.9 billion UMBS30 2 percent and 2.5 percent. The Desk will then report on MBS purchases for the week ending September 16 later in the afternoon. We begin the day with Agency MBS prices better/up by a solid .125 and the 10-year yielding .65 after closing yesterday at 0.69 percent.

Jobs and Transitions

PHH Mortgage, a subsidiary of Ocwen, is looking to fill Loan Originator, Underwriter and Processor positions as well as management positions in Underwriting, Processing, Marketing and Learning and Development. The Company’s rapidly growing Originations business recently announced that total lending volume for July and August grew by 62% over the same period last quarter and by 16X over the same period last year. In addition to working with a team that is growing, as well as innovative, strategic, and collaborative, our compensation package includes a 401k with company match, medical, dental, vision, paid time off, tuition reimbursement and more! Apply today at our career site or email your resume to Michelle Cisneros.

AmeriHome Mortgage, the 3rd largest correspondent investor and 11th largest mortgage lender in the country, is hiring for several positions! AmeriHome’s Consumer Direct division is hosting a virtual job fair on Wednesday, September 23rd. They are hiring Loan Officers, Processors, Underwriters, Funders, and more! Email Manny Sanchez to set up an interview. AmeriHome’s Correspondent Division is also hiring for several positions, including Underwriters, Operations Account Managers, Loan Review Specialists, and Operations Managers. AmeriHome Correspondent hosts weekly virtual job fairs every Thursday. Email Mitchell Tsai to schedule an interview. AmeriHome has competitive compensation and benefits, and so much more! AmeriHome provides training, career pathing, and mentorship to help their employees further their careers. For example, their Underwriting Career Path Program has helped a significant number of employees move from loan review and client support positions into underwriting positions! AmeriHome is invested in the long-term success of their employees. Visit their careers page to view all open positions!

Churchill Mortgage announced that Randy Starkweather has joined the company as CFO, responsible for overseeing Churchill’s financial operations and performance.

Builder Confidence at All-Time High

September 15,2020
by admin

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) set a new high this month, breaking a record that it set only 30 days earlier. The Index, a measure of builder confidence in the new home market, rose 5 points to 83 in September. A 6-point increase in August had shot the Index to 78, tying it with the previous high set in December 1988.

Historic traffic numbers have builders seeing positive market conditions, but many in the industry are worried about rising costs and delays for building materials, especially lumber,” said NAHB Chairman Chuck Fowke. “More domestic lumber production or tariff relief is needed to avoid a slowdown in the market in the coming months.”

Lumber prices are now up more than 170 percent since mid-April, adding more than $16,000 to the price of a typical new single-family home,” said NAHB Chief Economist Robert Dietz. “That said, the suburban shift for home building is keeping builders busy, supported on the demand side by low interest rates. In another sign of this growing trend, builders in other parts of the country have reported receiving calls from customers in high-density markets asking about relocating.”

Derived from a monthly survey that NAHB has been conducting for 35 years, the Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The components of the Index all established new highs in September. The component gauging current sales conditions rose 4 points to 88, the one measuring sales expectations in the next six months increased 6 points to 84 and the measure charting traffic of prospective buyers posted a 9-point gain to 73.

Regional scores are reported as three-month moving averages. The HMI in the Northeast increased 11 points to 76, the Midwest increased 9 points to 72, the South rose 8 points to 79 and the West increased 7 points to 85.

MBS RECAP: What Did The Fed Actually Change?

September 15,2020
by admin

Here are the most notable changes:

  1. The vague notion of symmetric 2 percent inflation has been replaced with a specific goal of “moderately above 2 percent so that it averages 2 percent over time.”
  2. They now refer to bond buying as fostering “accommodative financial conditions, thereby supporting the flow of credit to households an businesses”
  3. The Fed added that they’re “prepared to adjust the stance of monetary policy as appropriate if risks emerge.”

That’s about it! Heading into the announcement, the list above served as a baseline for almost any prediction–a bare minimum taken “as read” before discussing additional/bigger changes.

The remainder of their potential impact would have to be gleaned from the updated economic projections which will be discussed in the video in greater detail.

Latest Mortgage App Volume Down Over Holiday-Shortened Week

September 15,2020
by admin

The Mortgage Bankers Association (MBA) reports that mortgage applications declined during the week ending September 11, 2020. The week’s results include an adjustment for the Labor Day holiday.

MBA’s Market Composite Index, a measure of all mortgage loan application volume, decreased 2.5 percent on a seasonally adjusted basis from the previous week. It was down 13 percent on an unadjusted basis.

The Refinance Index decreased 4 percent from the previous week and was 30 percent higher than the same week one year ago. The refinance share of mortgage activity was 62.8 percent of total applications compared to 63.1 percent the previous week.

The seasonally adjusted Purchase Index was down 1 percent from one week earlier and 12 percent before adjustment. The index still remained higher than during the same week in 2019, this time by 6 percent.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

“Mortgage rates held steady last week, and the 30-year fixed rate – at 3.07 percent – has now stayed near the 3 percent mark for the past two months. A 5 percent decline in conventional refinances pulled the overall index lower, but activity was still 30 percent higher than last year. With the flurry of refinance activity reported over the past several months, demand may be slowing as remaining borrowers in the all market potentially wait for another sizeable drop in rates,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Applications to buy a home also decreased last week, but the underlying trend remains strong. Purchase activity has outpaced year-ago levels for 17 consecutive weeks, with a stronger growth in loans with higher balances pushing MBA’s average loan size to a new survey high of $370,200.”

The FHA share of total applications decreased to 9.7 percent from 10.2 percent the prior week and the VA share increased to 12.3 percent from 11.2 percent. USDA loans accounted for 0.5 percent of applications compared to 0.6 percent a week earlier.

Contract interest rates ticked down for most types of fixed rate mortgages (FRMs) and the effective rates of all fixed-rate types moved lower. The average rate for the 30-year FMR, loans with balances at or below the conforming limit of $510,400, was unchanged at 3.07 percent. Points decreased to 0.32 from 0.36.

The rate for jumbo 30-year FRM, loans with balances greater than the conforming limit, increased to 3.41 percent from 3.40 percent. Points decreased to 0.27 from 0.31.

The average contract interest rate for 30-year FRM backed by the FHA was unchanged at 3.16 percent,with points decreasing to 0.35 from 0.42.

The average contract interest rate for 15-year FRM decreased to 2.61 percent from 2.62 percent, with points increasing to 0.35 from 0.33. The effective rate decreased from last week.

The average contract interest rate for 5/1 Adjustable rate mortgages (ARMs) increased to 3.20 percent from 2.99 percent,with points remaining unchanged at 0.58. The effective rate increased. The ARM share of activity increased to 2.3 percent of total applications.

MBA’s Weekly Mortgage Applications Survey has 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’s latest Forbearance and Call Volume Survey found another decline in the total number of loans in forbearance, this time a 15-basis point dip to 7.01 percent. According to MBA’s estimate, 3.5 million homeowners are in forbearance plans.

The share of Fannie Mae and Freddie Mac loans in forbearance dropped for the 14th week in a row to 4.65 percent – also a 15-basis-point improvement. The Ginnie Mae share fell 50 basis points to 9.12 percent and the share for portfolio loans and private-label securities (PLS) grew by 28 basis points to 10.71 percent. The percentage of loans in forbearance for depository servicers decreased 19 basis points to 7.21 percent and that for independent mortgage bank (IMB) servicers decreased 8 basis points to 7.33 percent.

By stage, 33.69 percent of total loans in forbearance are in their initial plan while 65.35 percent are in a forbearance extension. The remaining 0.96 percent are plan re-entries. Total weekly forbearance requests as a percent of servicing portfolio volume (#) increased relative to the prior week: from 0.09 percent to 0.11 percent.

“The beginning of September brought another drop in the share of loans in forbearance, with declines in both GSE and Ginnie Mae forbearance shares. However, at least a portion of the decline in the Ginnie Mae share was due to servicers buying delinquent loans out of pools and placing them on their portfolios. As a result of this transfer, the share of portfolio loans in forbearance increased,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Forbearance requests increased over the week, particularly for Ginnie Mae loans. With just under 1 million unemployment insurance claims still being filed every week, the lack of additional fiscal support for the unemployed could lead to even higher increases of those needing forbearance.”

MBA’s latest Forbearance and Call Volume Survey covers the period from August 31 through September 6, 2020 and represents 74 percent of the first-mortgage servicing market (37.1 million loans).

MBS Day Ahead: The Fed Could Help OR Hurt

September 15,2020
by admin

Coronavirus is responsible for many “firsts.” Apart from the obvious impact on daily life there are firsts for the economy and monetary policy as well. Since March, all of the significant policy changes from the Fed have been unscheduled and there have been zero significant policy changes on scheduled Fed announcement days. That’s a record, and it raises a question about what we’ll see today in light of the most recent unscheduled policy change at the end of August.

The late August framework update is a bit different than the other emergency policy changes. It wasn’t responsible for a drastic rate cut, a huge glut of bond buying, or a slew of emergency lending programs. Rather, it’s more like the Fed’s way of updating its playbook to implement what it has learned from previous games. Given the proximity to today’s meeting, one cannot help but wonder–if not assume outright–that the playbook was updated with the intent of running one of the new plays today.

I’ve fallen more in the camp of “assuming outright.” In other words, the framework update 2.5 weeks ago seemed too precipitous to be incidental. I can’t imagine why they felt the need to unveil it 2.5 weeks ago unless it was to pave the way for “something else” today.

When we start imagining what “something else” might look like, there are only so many options–many of them laid out in previous Fed speeches. The most informative speech came 2 weeks ago from Vice Chair Clarida. here are some highlights:

  • NEW FRAMEWORK NOT A JUDGEMENT THAT PREVIOUS STRATEGY WE INEFFECTIVE, BUT THAT LOW UNDERLYING INTEREST RATES, OTHER CHANGES TO ECONOMY REQUIRED NEW APPROACH
  • FED’S CLARIDA SAYS LIKELY THAT DISCUSSION OF OTHER TOOLS WILL NOW RESUME WITH CONCLUSION OF FRAMEWORK REVIEW
  • ASKED ABOUT YIELD CURVE CONTROL, FED’S CLARIDA SAYS IT IS IN THE TOOL KIT BUT NOT SOMETHING WE’RE ABOUT TO DEPLOY
  • CLARIDA SAYS THRESHOLD BASED GUIDANCE IS IN THE TOOL KIT AND POTENTIALLY HAS A ROLE
  • CLARIDA REPEATS NEGATIVE RATES NOT SEEN AS ATTRACTIVE POLICY FOR U.S.
  • CLARIDA: FORWARD GUIDANCE AND LARGE SCALE ASSET PURCHASES “HAVE BEEN AND CONTINUE TO BE” EFFECTIVE WAYS TO SUPPORT THE ECONOMY

This is a treasure trove for those looking for a preview of today’s announcement. Here’s what we know is off the table:

  • Negative rates
  • Yield curve control

Here’s what we know is potentially on the table:

  • Threshold based guidance (i.e. specifically targeting 2.25-2.5% inflation for a time or more clearly defining a symmetrical 2% inflation target)

Here’s what is almost certainly on the table:

  • A change in forward guidance (i.e. what the Fed says it will likely be doing based on the state of inflation and the labor market).
  • Some small-to-big change on bond buying programs (large scale asset purchases).

On the small end of bond buying changes, the Fed could simply change the way they refer to them by dropping the verbiage about liquidity and introducing verbiage about accommodation. In other words, they would stop saying they’re buying bonds because the economy and markets NEED it and instead say bond buying is designed to provide accommodation and help the Fed achieve its inflationary goals.

On large end of the spectrum, they could actually announce quantitative changes to the program (bigger bond buying amounts) or a calendar-based guarantee, likely with the verbiage “at least.” For example, “large scale asset purchases will continue at least through June 2021.”

In the middle ground would be an update to the composition of the Fed’s bond buying portfolio–one that allows them to purchase more long-term debt at the expense of short term debt. The thought is that buying longer-term debt is technically more accommodative. The easiest way to think about this is from a consumer point of view where a 30yr loan is easier to make payments on than a 15yr loan.

In addition to these changes, we also have to consider the Fed was just being “weird” in late August and doesn’t actually have any big bombs to drop today. In fact, the contrary opinion would be that the Fed knows its dot plot (economic projections) is going to show something that needs to be explained. For instance, as I alluded to in yesterday’s Huddle video, the Fed may see it’s framework change resulting in stronger economic forecasts versus the last forecasts in June. Perhaps they wanted to update the framework so that markets wouldn’t “freak out” and assume the Fed was much closer to removing accommodation than it actually is.

This last scenario is what we DON’T want to see today from a short-term bond volatility standpoint. Enough of the market believes the Fed will be doing something accommodative that it would come as a fairly big shock if turns out the Fed was merely gearing up to defuse concerns about stronger economic projections.

The Fed announcement comes out at 2pm along with the economic projections. Powell’s virtual press conference follows 30 minutes later. Mortgage lenders are always quicker to reprice on Fed day with some of them simply closing the lock desk at 2pm while they wait to see where the chips fall.

Either way, it’s ALWAYS good to remember that market participants have exhaustively considered all of the possibilities we can discuss (and more). The market is always positioned for its best guess at the Fed’s likely actions, and thus is ready to move either direction of those actions are more or less friendly than expected.

Production, VP Consumer Direct Jobs; Jumbo, CRM, Anti-Fraud, CD Products; Ginnie Hits $2.1 trillion

September 15,2020
by admin

The Fed Funds futures market sees the Fed holding pat on rates well into 2022. What could cause rates to go up? A vaccine. Until definitive news like that comes along, the financial markets and our home lives steadily move through the calendar. GM is having/allowing most of its salaried employees to work from home until mid-2021. In the most comprehensive survey I’ve seen, this study polled a myriad of companies in the Richmond, Baltimore, and Washington DC area. “Employers are adopting a phased approach to reopening, but many remain uncertain. This fall, about one-third of the region’s workforce is expected to physically return to worksites. Of employers who had long-term reopening plans, on average, those employers expect to have 72% of their employees return to the office by Summer 2021. A third of responding employers, however, are still unsure of their summer 2021 plans.” What is your company doing? Although productivity is solid, and lenders and vendors are having record months, managers and owners continue to struggle with loyalty, corporate culture, and inspiring any passion with their workforce. Speaking of “passion,” this property was making the rounds yesterday – arrow through some of the photos and try not to get dizzy. (At least they spared the bathrooms.)


Broker and Lender Products

Monster Lead Group tells us that direct mail continues to be a critical component of originating mortgages and has released a helpful guide on the best practices of direct mail marketing in mortgage. This 12-page guide on the seven essential practices they use in every direct mail campaign explains their techniques for producing high return, high converting direct mail campaigns that led to more than 400,000 unique calls and $10 Billion in loan originations for their mortgage lenders in 2019. View the guide here.

This isn’t the first time a playbook has been leaked. In the spirit of the season as well as the exponential growth of servicing portfolios, MQMR’s latest free whitepaper “The Anti-Playbook for Servicing Oversight” lays out what to do when you want to get servicing oversight wrong. Unlike sports disinformation of the past, MQMR does provide guidance for avoiding the mistakes laid out in the anti-playbook. Whether it’s a requirement or a best practice, lenders and servicers need to know which plays to call (and which plays to retire) for superb servicing oversight. Make sure your game-winning strategy for servicing oversight is on point by reaching out to info@mqmresearch.com. For the halftime update, contact sales@mqmresearch.com and find out which subservicers are on the roster to be audited in the coming months.

AIME Fuse Virtual is quickly approaching so don’t wait to purchase your tickets! On Friday, September 25th, you’ll learn alongside hundreds of other wholesale mortgage professionals with over 10 hours of live-streamed keynote speakers, spotlight speakers and panel sessions, and you can catch up on anything you missed for 10-days following the event on the virtual platform. Featured on the agenda are top producers sharing their secrets to success, leaders from the most established, well-run brokerages to talk about building a business model that works for you, and hear from some of the most respected leadership coaches in the mortgage space. Find the full agenda here. Time is running out so grab your tickets now to be a part of our third annual AIMEFuse National Conference! Register now here: http://aimegroup.co/Fuse-2020

More and more lenders are choosing the LoanCraft income report to ease the burden on underwriters in the current refi boom. LoanCraft’s streamlined process can be immediately implemented with no set up fees or monthly minimums and training takes a few minutes to complete. The easy to use report provides much needed transparency to loan officers, brokers, and borrowers as well. Within a few hours you get a clear picture of the income supported by the submitted documents and a guide to opportunities for additional income with the documents required for inclusion. You can choose from a variety of calculation models based on your investor and customize the report to match your credit policy. It couldn’t be easier, just upload PDFs through the secure portal or select LoanCraft in Encompass and they do the rest. To learn more about the benefit of having LoanCraft on your team email Dominic Spadafore or visit loancraft.net to get started.

States Title is addressing closing pain points in a new, innovative way. Instant Closing Disclosure automatically inputs, balances, and reconciles fees for lenders in seconds. By leveraging machine intelligence, our solution eliminates the manual, error-prone work performed by traditional title agents. Lenders receive 99% accuracy on fees and payments, and instantly balanced settlement statements, without the need to change their current processes or technology. Learn more about States Title’s Instant Closing Disclosure.”

Vendorly, an innovative SaaS-based vendor oversight platform for financial institutions, has signed a reseller agreement with risk management company Secure Insight which will help protect Vendorly clients against wire fraud, a key risk to the lending and banking industry. The Secure Insights tool integrates seamlessly with the Vendorly platform so that it combats wire fraud by validating closing agent wire instructions. This alliance demonstrates how Vendorly is dedicated to offering a cradle-to-grave solution for the mortgage banking industry to help address all ongoing risks associated with vendor management. To read their press release, click here. To learn more about Vendorly, contact Steven Greenfield CMB, Director of Operations.

Now, in the middle of refi madness, it’s imperative your Realtor relationships remain healthy. Loan Officers must focus their energy on the long game of purchase business. It’s a great time to remind Realtor partners how vital they are to your business and that you have are all in when it comes to providing value. Here’s a Scotsman Guide feature by Usherpa’s CEO Dan Harrington, about ways you can use your CRM to tap data intelligence and multi-channel marketing technology to do more than just the basics. You’ve earned their trust, now remind Realtors of what you bring to the table!

Verus Mortgage Capital, the largest issuer of securitizations backed by non-QM loans, just introduced its new Prime Jumbo Program. This product offers low rates for high valued homes where loan balances exceed agency limits. It’s features include loan amounts up to $3 million, FICO® scores down to 700 and cash-out to $500K and PMI is not required. Primary, second homes and investment properties are all eligible. For more information about Verus’ Prime Jumbo Program, contact Jeff Schaefer, EVP, Correspondent Sales, or call 202-534-1821.


Capital Markets

Ginnie Mae announced that its August MBS Issuance surpassed $77 billion, an agency record that will help provide financing for more than 281,000 homeowners and renters. A breakdown of August issuance includes $73.25 billion of Ginnie Mae II MBS (registered holders receive an aggregate principal and interest payment from a central paying agent) and $4.38 billion of Ginnie Mae I MBS (registered holders receive separate principal and interest payments on each of their certificates), which includes $4.11 billion of loans for multifamily housing. Ginnie Mae’s total outstanding principal balance of $2.121 trillion is an increase from $2.087 trillion in August 2019.

(Over at Fannie, the Trade Desk updated the Pricing & Execution – Whole Loan FAQs to provide clarity for Duplicate Price Adjustments charged on loans recommitted within 30 days of being moved to fallout on best efforts commitments. The Duplicate Price Adjustment will replace worst case pricing on recommitted loans.)

Looking at the news over the last week or two, U.S. economic data remains in flux as the gains immediately following re-openings have been chronicled and have since begun to slow or level off. It is becoming more likely that there will be no additional stimulus from the federal government prior to the election which is beginning to worry some market participants. Small businesses, however, remain optimistic heading into the fall as the NFIB Optimism Index increased to 100.2, slightly above the 46-year index average. Finding qualified labor was the top concern for twenty-one percent of owners; something many mortgage firms can relate to right now. This is of even more concern in construction where a lack of labor is slowing new home production. Mortgage applications continue to increase with purchase apps up 2.6 percent and refi apps up 3.0 percent for the week ending September 4. Last week’s purchase apps are roughly 28 percent higher than a year ago as housing continues to be an economic bright spot. No major policy changes are expected during the Fed meeting currently going on, and the fed funds target is expected to remain near zero.

Yesterday? U.S. Treasuries traded within a narrow range, the UMBS30 basis closed wider amid diminished Fed support, and the day’s $22 billion 20-year bond reopening was met with solid demand.

There was a whole laundry list of economic releases on the day to wade through. Import prices increased 0.9 percent in August while export prices increased 0.5 percent over the same time period. Excluding agriculture, export prices rose 0.8 percent. Separately, industrial production increased 0.4 percent month-over-month in August. The capacity utilization rate increased to 71.4 percent, though that was slightly below expectations. Unfortunately, gains for most manufacturing industries have gradually slowed since June. The Empire State Manufacturing Survey rose well past expectations in September. The MBA Builder Application Survey for August showed continued robust new home demand despite falling 4 percent versus July. That 4 percent decline comes after increasing 26 percent, 20 percent and 1 percent in May, June, and July, respectively. New home sales for August are now estimated at nearly 900k, well above the 785k figure from a year ago.

Today’s market highlight should be the latest FOMC events, with the Statement and SEPs due out this afternoon before Chair Powell’s press conference. Markets have a cohort of releases to get through before the Fed, starting with a 2.5 percent decrease in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending September 11. Also out are the latest August retail sales (+.6 percent, below forecasts, ex-transportation only +.7 percent). Later this morning brings July business inventories and the August NAHB Housing Market Index. The Desk of the New York Fed will conduct three MBS FedTrade operations that will total up to $5.488 billion, starting with $953 million UMBS15 1.5 percent and 2 percent followed by $2.872 billion UMBS30 2 percent and 2.5 percent and $1.663 billion GNII 2 percent and 2.5 percent. We begin the day with Agency MBS prices roughly unchanged despite the 10-year yielding .66 after closing yesterday at 0.68 percent after the poor retail sales figures.

Jobs and Transitions

Citi is strategically positioned for continued growth, and is making significant investments to be a forward-compatible leader in our industry, while being the best for our clients. Our Mortgage Originations channels are hiring sales and operations professionals to join their teams. Whether you are looking for a new place to work, or to take your career to the next level, now is the time to make the move! We are continuing our growth strategy and actively filling Operations positions nationwide, including remote positions, and seeking Direct to Consumer Sales professionals for our St. Louis, Dallas, and Detroit markets. Nationwide opportunities in Operations and Support can be found at https://jobs.citi.com/. They include St. Louis Direct to Consumer Sales Mortgage Representative, Dallas Direct to Consumer Sales Mortgage Representative, Detroit Direct to Consumer Sales Mortgage Representative, Detroit Direct to Consumer Sales Manager. We look forward to your application!”

On Q Financial is proud to be expanding employment opportunities in the mortgage industry and is currently seeking an individual to become our VP of Consumer Direct. The ideal candidate will be a high energy, charismatic, transformational leader with a proven track record of results. We are looking for someone who demonstrates strong communication skills, has experience building high performance teams and is committed to their team members’ growth and success. This candidate will also have ability to cultivate effective relationships at all levels, both internally and externally. The ideal candidate can be located anywhere in the nation. At On Q Financial we are passionate about making the dream of homeownership a reality! We are highly collaborative and extremely innovative – and we move FAST! If you are someone who can lead the charge to elevate, accelerate and propel Consumer Direct to the next level, we want to meet you!

“Want to work with the best in the industry? Ann Thorn, EVP of Production and Servicing Operations for Caliber Home Loans, is the 2020 recipient of the Five Star Lifetime Achievement Award presented by The Five Star Institute. This recognition is awarded to a select number of mortgage professionals who’ve dedicated their careers to promoting the American dream of homeownership. Thorn is an industry leader with a wealth of knowledge and is driving the transformation of operations processes for Caliber’s evolving digital landscape. If you’d like to work for an award-winning leader and learn from the best, contact us at Caliber Home Loans. Our company is growing and currently has open positions in Operations, Production and Sales. Visit Caliber Careers to learn more about our job opportunities. To be immediately considered for a position in Operations or Production, email Jonathan Stanley or Brian Miller for a position in Sales.”

“Computershare Loan Services is a leader in mortgage solutions and part of Computershare, a global financial services company driven by 12,000 talented people in 26 countries. Apply Today! to join our thriving company as an Underwriter, Mortgage Processor, Closing Coordinator, or numerous fantastic careers where we empower people to deliver outstanding results to our clients, the biggest brands on the planet. Join our Being Purple culture where career growth, a comprehensive reward package, fully remote careers and a passionate group of professionals are waiting to welcome you to the team! Interview with us 24/7 using our digital interview process, talk with a member of our talent acquisition team with our flexible scheduling solution designed to meet your needs and meet leaders in our business in a virtual interview. Application to offer has never been faster!”