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7/16/2019 MBS RECAP: Late Day Reslience But Negative Trend Remains Intact

Posted To: MBS Commentary

Bonds began the day in roughly unchanged territory. On the one hand, that was impressive considering the lack of substance underlying yesterday's rally. On the other hand, that lack of substance meant we were at risk of a bigger reaction to the Retail Sales data. Retail Sales came out stronger than expected and bonds quickly retreated back in line with yesterday's weakest levels. Notably, however, bonds never broke through to any weaker territory. In fact, today's ceiling (2.143% in terms of 10yr yields) was slightly lower than the 2.15% ceiling from the past 3 consecutive sessions). The rest of the morning's economic data was a non-event, clearing the way for an asset allocation trade to benefit bonds in the afternoon (selling stocks and buying bonds). Treasuries ended up clawing...(read more)

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7/16/2019 Mortgage Rates Under Modest Pressure After Retail Sales Data

Posted To: Mortgage Rate Watch

Mortgage rates were flat to slightly higher today, following a stronger-than-expected Retail Sales report. The bond market (which dictates mortgage rates) was eagerly awaiting the week's first major economic data. Even though the Fed will almost certainly cut rates at the end of the month, additional cuts depend heavily on the balance of economic data. To whatever extent the data is strong, the Fed becomes less likely to continue cutting rates and the broader financial market becomes less interested in bonds. When investors are interested in buying bonds, it's good for rates! Fortunately for prospective borrowers, today's movement was minimal. In fact, many lenders are effectively unchanged versus yesterday. Moreover, bonds managed to improve throughout the day with those specifically underlying...(read more)

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7/16/2019 Builder Confidence Holds Steady, Labor Shortages Persist

Posted To: MND NewsWire

Builder confidence rose slightly in July. The National Association of Home Builders (NAHB) said its Housing Market Index (HMI), which it sponsors with Wells Fargo, gained one point, rising to 65. This marks the sixth consecutive month that sentiment levels have held at a steady range in the low- to mid-60s. NAHB Chair Greg Ugalde said, "Builders report solid demand for single-family homes. However, they continue to grapple with labor shortages , a dearth of buildable lots and rising construction costs that are making it increasingly challenging to build homes at affordable price points relative to buyer incomes," The HMI derives from a survey that NAHB has conducted among its new home builder members for over 30 years. In that survey builders are asked to give their perceptions of current single...(read more)

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7/16/2019 U/W, Training, Non-QM, Marketing Products; Ginnie's Growth

Posted To: Pipeline Press

Although lots of small lenders don’t seem interested in being acquired any longer (“Hey, our pipeline is full and we’re making money again! Autumn is a long way off!”), M&A is alive and well. The latest example comes from Southern California where William Lyon Homes (NYSE: WLH) has bought South Pacific Financial Corp., a retail mortgage banking company based in Irvine. South Pacific has been rebranded as ClosingMark Homes Loans Inc., and is part of a new financial services division being launched by the homebuilder. The unit, ClosingMark Financial Group , will include title insurance, settlement and mortgage services. Lender Products and Services As a lending manager, the winding down of home-buying season is the perfect time to re-evaluate your process and determine...(read more)

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7/16/2019 MBS Day Ahead: Week's First Meaningful Data Plus Earnings Season in Swing

Posted To: MBS Commentary

In the day just passed, bonds traversed a sleepy summertime Monday trading session without much volume or liquidity. That dynamic was somewhat exacerbated by the fact that Japanese markets were closed (which means there was no hub for Treasury trading during Asian market hours). This left incidental tradeflows in control with the day's biggest move seen right after the NYSE Open. In the day ahead, bonds will digest the week's first meaningful economic data in the form of Retail Sales at 8:30am. The Fed referred to the consumer segment as one of the parts of the economy it's NOT worried about. That could make for a bigger reaction if the report is weaker than expected. But any big reaction will continue to fight the "summer doldrums" for financial markets. In short, lighter...(read more)

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7/15/2019 MBS RECAP: Sleepy Session, But Tomorrow Could be Different

Posted To: MBS Commentary

Today was one of those unofficial 3-day weekend type of Mondays with light volume, light trader participation, and "drifty" trading momentum. A market holiday in Tokyo (Asian market hours' requisite hub for cash Treasury trading) didn't help start the day off strong for the US bond market. but even after the European session began, volumes remained well shy of recent averages. The onset of domestic trading saw progressively more activity but it was really only the 9:30am NYSE open that brought any appearance of conviction. Even then, it wasn't much conviction (just over 1bp of improvement for 10yr yields). We tend to see opening/closing bells garner the biggest moves of the day when traders are tuned out amid an absence of meaningful data, participation and volume. With...(read more)

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7/15/2019 Mortgage Rates Little-Changed Despite Bond Market Gains

Posted To: Mortgage Rate Watch

Mortgage rates were mostly flat to begin the new week, even though underlying bond markets were in stronger territory. Bonds, more than anything else, dictate the day-to-day direction for mortgage rates. That said, there are different varieties of bonds as well as different levels of willingness to react on the part of mortgage lenders. In today's case, the bonds that specifically govern mortgages aren't doing quite as well as the broader bond market. As of this morning, lenders weren't seeing enough improvement to make any meaningful changes to their rate offerings. Mortgage-backed bonds have improved somewhat throughout the day. At face value, that seems like it should help mortgage rates and indeed it might. The issue is that there hasn't been quite enough improvement for the average lender...(read more)

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7/15/2019 MBS Week Ahead: New Breakout or New Ceiling?

Posted To: MBS Commentary

In the week just passed, the first 4 days (and especially Tue/Thu) served as the scene for a breakout from the previous trend (seen in the yellow lines on today's chart). Investors eagerly awaited Powell's congressional testimony, with bonds leading off toward higher yields in advance (Tuesday). When Powell's prepared speech hit the wires (Wed), bonds took some solace, but Thursday's slightly stronger CPI report and terrible 30yr bond auction prompted heavy selling. By Friday, however, yields were able to maintain the same ceiling for 2 days in a row at 2.15%. In the week ahead, we'll continue assessing the 2.15% ceiling (hit again overnight) for support. After the overnight bounce, we're starting the domestic session roughly 4 bps lower. If 2.15% does end up acting...(read more)

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7/15/2019 Non-QM, Broker, Marketing, Tech Products; Wholesale News; Webinars

Posted To: Pipeline Press

You don’t think your spouse listens to you? What about Google? You bet: “Google Very Angry After Contractor Leaks Over a Thousand Assistant Recordings.” Interesting that many of the “best and brightest” of people in their 20s and 30s want to work for an advertising company. (Yes, 80-90% of Google/Alphabet’s revenue comes from advertising.) Google handles a lot of data that scammers would love to have. The United States Census Bureau has posted information to help consumers who are part of a survey to avoid fraudulent activity and scams . You may be the victim of a scam if someone claiming to be from the Census Bureau asks you for certain information. The Census Bureau never asks for your full Social Security number, money or donations, anything on behalf...(read more)

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7/12/2019 MBS RECAP: After 5 Frantic Days, Bonds Punch Out Early

Posted To: MBS Commentary

Last Friday's jobs report meant business (bad business for low rates). Even though Powell ultimately told us that one jobs report wouldn't fundamentally alter the risks to the economic outlook in Wednesday's congressional testimony, that wasn't enough to get bonds out of the office. Wednesday was their least productive day of the week in terms of selling, but it was right back to business and then some on Thursday. All told, 10yr yields moved up from 1.94 lows last Friday to 2.15 highs yesterday. That was already enough to make this the worst week for rates since at least April, and that is based on Friday's CLOSING levels. If we look at Thursday vs Thursday time frames, we'd have to go back farther. Today's session was in perfect position to dog-pile on the selling...(read more)

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7/12/2019 Highest Mortgage Rates in More Than 3 Weeks

Posted To: Mortgage Rate Watch

Mortgage rates moved decisively higher this week as the underlying bond market finally began shifting gears. After the Fed meeting in June, rates moved to the lowest levels in more than 2 years and had been holding in a narrow range since then. The risks of a breakout were set to increase as the market digested several key events. One of the most important of those events was this week's congressional testimony by Fed Chair Powell. Interestingly enough, Powell's testimony actually helped rates at first. In the 2nd part of the testimony yesterday, there wasn't much of a market reaction. Instead, it was stronger economic data and poorly received Treasury auction that pummeled the bond market. As bonds weaken, rates rise. Not all lenders fully adjusted their rate sheets to reflect yesterday's...(read more)

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7/12/2019 Everything You Need to Know About Housing - and Then Some

Posted To: MND NewsWire

The U.S. Census Bureau recently released a treasure trove of data, its 2018 report on Characteristics of New Housing. The report, based on data collected by the Bureau's Survey of Construction, covers a huge array of stats about new single-family housing on both a national and a regional basis. Much, but not all of the information dates back to 1973 and is presented by way of a series of spreadsheets and is used by researchers, policymakers, builders, and the housing finance industry. The longitudinal data, which is somewhat limited, is useful in identifying trends, and the whole database is actually sort of fun - potentially an enormous time sink for housing info junkies. The Bureau found there were 840,000 single-family homes completed in 2018. While this was the largest number since the...(read more)

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7/12/2019 New Home Buyers Shied Away in June Despite Friendly Rates

Posted To: MND NewsWire

Applications for financing new home purchases slipped in June in spite of the continued easing of mortgage interest rates. The Mortgage Bankers Association (MBA) said its Builder Application Survey (BAS) shows mortgage applications for new home purchases increased 17.9 percent compared from a year ago but were down 14 percent from the previous month. This change does not include any adjustment for typical seasonal patterns. Based on survey data and assumptions regarding market coverage and other factors, MBA estimates that sales of newly constructed homes were at a seasonally adjusted annual rate of 646,000 units in June. This is down 11.1 percent from the May pace of 727,000 units. On an unadjusted basis, MBA estimates that there were 58,000 new home sales, a 5.9 percent fewer than the 69...(read more)

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7/12/2019 U/W Products; LO Training; Fannie, ARMs, and SOFR; Yield Curve News

Posted To: Pipeline Press

Glenn Freezman sent, “I have a step ladder. I never knew my real ladder.” Toddlers, drunk people, and yoga pants don’t lie. What about statistics? Denver’s medical marijuana dispensaries outnumber Starbucks locations 3 to 1. In fact, this source says they outnumber Starbucks and McDonald’s combined. Colorado or elsewhere, who says the economy isn’t changing? What about the real estate market? If someone doesn’t believe scientists about climate change (natural or man-made), why should we believe Redfin about bidding wars? Buyers are now about four times less likely to face a bidding war than they were just a year ago. Lender Products and Services Attending the upcoming Western Secondary Market Conference? We know that you work hard getting loans in the...(read more)

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7/12/2019 MBS Day Ahead: Ducking, Covering, and Waiting For Sell-Off To Run Its Course

Posted To: MBS Commentary

In the day just passed, bonds slipped into a bit of a capitulation sell-off following slightly stronger CPI data and a much weaker 30yr bond auction. In and of themselves, these events might not have justified the amount of selling seen, but timing played an important role. Bonds were ready to make bigger moves by the end of this week after having consolidated heading into last week's jobs report. It already looked like they were breaking out after the stronger jobs data, but yields managed to hold just under the key ceiling of 2.07% after the first day of Powell testimony this week. Could it be that we were seeing another head fake--this time toward weaker levels--only to bounce back into the safety of the range? No... the post-NFP selling has been real, and yesterday did more than any...(read more)

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7/12/2019 VA Churning is Costing All Ginnie Mae Borrowers and Investors

Posted To: MND NewsWire

The Government National Mortgage Association (Ginnie Mae) is the agency, housed under the Department of Housing and Urban Development, that converts government guaranteed mortgages into mortgage-backed securities for investors to purchase. Their originations are 57 percent FHA loans, 40 percent VA loans, and 3 percent loans from other government programs, primarily the Department of Agriculture. For several years, as we have written about here , Ginnie Mae has been concerned about the significantly higher rate of repayments of the VA loans in its portfolio when compared to those originated by its other guarantors and to the government sponsored enterprises (GSEs) Freddie Mac and Fannie Mae. Some of the increased speeds result from the lower costs of refinancing a VA mortgage compared to other...(read more)

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7/11/2019 Digital, Broker, Capital Mkts. Products; FHA and Down Payment News

Posted To: Pipeline Press

In honor of World Population Day today, the Census Bureau tells us that the world’s population will hit 7.58 billion this month. But why believe that? Or anything “experts,” like actuaries or scientists, tell you? There is a lot of real news out there, and a lot of rumors, and the Stearns Chapter 11 has wholesale tongues wagging. Quicken tested the MSR market with a $10 billion servicing sale this year? Ask your rep, could be just a rumor. United Wholesale selling servicing to NewRez on a regular basis? Ask your AE for the scoop – could be another rumor. (Both amounts would be small compared to the $11 trillion of outstanding residential servicing.) And PenFed Credit Union notifying 100+ mortgage employees in the Alexandria Virginia office that they need to move to San...(read more)

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7/11/2019 MBS Day Ahead: Bonds in Process of Deciding on Range Breakout

Posted To: MBS Commentary

In the day just passed, bonds weakened abruptly in the overnight session--mostly due to strong European economic data. Traders were also cautious ahead of Fed Chair Powell's congressional testimony. When the prepared remarks for Powell's appearance were released, however, bonds came roaring back, moving from 2.10+ to 2.04% in short order. They battled the 2.06/2.07 pivot point into the close. In the day ahead, bonds will continue deciding what to do about that important technical level. They've done this one other time before in recent memory (highlighted in the chart below). So far this morning, stronger CPI data is leading yields up and over the 2.07%, but the day is young. We still have another round of Powell Testimony and the 30yr bond auction. The bigger picture technicals...(read more)

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7/10/2019 MBS RECAP: Bonds Successfully Run Gauntlet of Big Ticket Events

Posted To: MBS Commentary

There was a lot that could have gone wrong for the bond market today, given the confluence of big-ticket events (Powell testimony, 10yr auction, Fed minutes, technical momentum shifts). Not only did bonds run that gauntlet with minimal damage, they were able to bounce back from some significant weakness in the overnight session. The losses began primarily during European market hours with a slew of stronger than expected economic reports and weaker bond auctions to blame. Naturally, European bonds bore the brunt of that weakness, but it was more than enough for 10yr yields to move decisively up and out of the recent 1.97-2.07 range. Powell's prepared remarks offered the day's first major salvation . They fully acknowledged a shift in the Fed's perceived risks and likely course of...(read more)

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7/10/2019 Mortgage Rates Mixed Follow Fed Chair Testimony

Posted To: Mortgage Rate Watch

Mortgage rates were mixed today following the much-anticipated congressional testimony by Fed Chair Jerome Powell. Although these testimonies are regularly scheduled events (twice a year), they can offer important insights into the evolution of thought at the Fed. This depends on the timing of various market movements and Fed communications, of course, as well as the questions asked by Congress. In today's case, investors were very interested to hear what Powell thought of the market's expectations for 3 rate cuts in 2019 and whether last week's strong jobs report changed anything. He didn't really get a direct question about the rate cut outlook, but he was unequivocal in saying the jobs report would not have an impact on the outlook. Perhaps more importantly, in the prepared remarks released...(read more)

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