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11/13/2019 Mortgage Rates Continue Much-Needed Recovery

Posted To: Mortgage Rate Watch

Mortgage rates have been more willing to move higher than lower recently. While that may continue to be the case in the near-term future, there have been pockets of resistance to that trend. The first 2 days of this week seem to be just such a pocket. The direction of the movement is good, but the magnitude may leave a bit to be desired, depending on your standards. The average loan scenario would still be seeing the same "note rate" quote as yesterday, but the effective rate would be slightly better due to lower upfront borrowing costs. In the bigger picture, it makes sense to remain defensive about the possibility that the broader trend toward higher rates can continue. We'd need to see a much more substantial push back toward lower rates in order to abandon that defensive stance. Loan Originator...(read more)

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11/13/2019 MBS Day Ahead: Bonds Fight Back, But This is Still 'Bearish Limbo'

Posted To: MBS Commentary

The most defining moment of the big 2019 bond rally was undoubtedly the August 1st tariff announcement and the resulting massive reaction in both yields and volumes. The 2 weeks that followed represented the market's attempt to price in a scenario where global trade tensions would push the US and other countries toward economic contraction. With the benefit of hindsight, we can look back to mid-August and observe that bonds have essentially been correcting that initial rally ever since then. There was an early opportunity to claim the correction was complete in mid September, but we didn't need hindsight to identify that as a head fake. The past 4-5 weeks, however, have been more serious, with the most troubling developments seen on Thursday and Friday of last week. That's when...(read more)

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11/13/2019 Underwriting, Broker, ECOA, Free LPMI Products; Fire AND Flood Updates

Posted To: Pipeline Press

I continue to see headlines as I head to balmy Kansas today. There was, “A Court Ruling Makes Mortgages Vanish Into Thin Air.” This is a headline no lender wants to see, but apparently this court decision might change how home loans are valued in the secondary market . As if capital markets personnel don’t have enough to worry about in the last few months or so with the FHFA-motivated sudden price movements by Freddie and Fannie, servicing values taking a tumble, and renewed talk of slimmer margins heading into the winter. And what about “Australia launches first EVER digital mortgage you can secure with the touch of a button from your smartphone ”? Recently I was telling a friend on my walkie-talkie that you can’t ignore innovation. Lender Products and Services...(read more)

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11/13/2019 Access to Conventional/Jumbo Credit Increased in October

Posted To: MND NewsWire

Access to government loans continues to decline, but conventional and jumbo loans picked up the slack in October, pushing the Mortgage Credit Availability Index (MCAI) higher. The Mortgage Bankers Association (MBA) said the Index grew by 0.9 percent to 185.1 in October. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. "Mortgage credit availability expanded in October, driven mainly by an increase in conventional loan programs, including more for borrowers with lower credit scores, as well as for investors and second home loans ," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Credit supply for government mortgages continued to lag, declining for the sixth straight month...(read more)

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11/13/2019 Consumers Shaky Again on Whether it's a Good Time to Buy

Posted To: MND NewsWire

Once again the "Good Time to Buy" component of Fannie Mae's Home Purchase Sentiment Index (HPSI) is on the decline. Net positive answers to that question fell by 7 percentage points in October , helping to drag the entire index lower for the second straight month. The HPSI decreased 2.7 points to 88.8 but remains up 3.1 point compared to October 2018. The Index set an all-time high of 93.8 in September. The HPSI is constructed from responses to six questions included in Fannie Mae's monthly National Housing Survey (NHS). Five out of six components declined in October. The Good Time to Buy question elicited net positive responses of 21 percent. Its companion question, whether or not it is a good time to sell, fell 3 percentage points to 41 percent. Another large decline was in the net share...(read more)

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11/13/2019 Mortgage Applications Hit Recent Highs

Posted To: MND NewsWire

The Mortgage Bankers Association (MBA) said application activity during the week ended November 8 was the strongest since late September , with both purchasing and refinancing indices posting gains. MBA's Market Composite Index, a measure of mortgage loan application volume, rose 9.6 percent on a seasonally adjusted basis from the week ended November 1. On an unadjusted basis, it was up 9.0 percent. The Refinance Index increased 13 percent from the previous week and was 188 percent higher than the same week one year ago. The share of total applications that were for refinancing increased to 61.9 percent from 59.5 percent the previous week. The Purchase Index , which had declined in four of the previous five weeks, posted a 5.0 percent increase on a seasonally adjusted basis and added 2.0 percent...(read more)

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11/12/2019 MBS RECAP: Range-Bound Volatility as Bonds Respond to Corporate Issuance

Posted To: MBS Commentary

There are all kinds of bonds out there. We follow the 10yr Treasury even though this is a mortgage-specific site for reasons outlined here . Beyond Treasuries and MBS, there is also a fairly substantial market for corporate bonds. That market is made slightly more relevant by the fact that corporate debt is typically priced based on a Treasury note index and traders consequently use Treasuries as a part of the corporate hedging process (i.e. protecting themselves against rate exposure from the time they know they'll be involved in the deal until the time the deal is 100% complete). The bigger the corporate deal, the longer and more important the hedging process becomes. With that in mind, today saw the launch of the year's biggest corporate bond, by a wide margin. Market were aware...(read more)

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11/12/2019 Mortgage Rates Avoid More Pain, Even if Only For Today

Posted To: Mortgage Rate Watch

Mortgage rates had a bad October . November hasn't exactly been great either, with last Thursday being one of the worst days of the year in terms of day-over-day jumps in rates. In addition to the abrupt move, last week's weakness also brought rates in line with their highest levels in more than 3 months. All of the above could be part of a bigger shift away from the prevailing trend toward lower rates (which had been intact since last November) and into a new trend of rising rates. This newer, unfriendlier trend arguably tried to make an appearance in mid September but was quickly shut down as rates nearly returned to the super-long-term lows seen earlier that month. Notably though, they failed to make it all the way back down to those lows, and that can be an early warning sign of a shift...(read more)

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11/12/2019 NAR Addresses Cybersecurity, Says Take Precautions

Posted To: MND NewsWire

A securities expert told an audience at the National Association of Realtors' (NAR's) annual conference that cybercrimes against real estate agents and companies are increasing at a record-setting pace. Robert Siciliano, CEO of Safr.Me, said those crimes, which include transfer fraud and compromised records in real estate transactions, have increased over the past two years. This year, due to poor security systems and neglectful behaviors, the crimes appear to be growing faster than ever. Agent and companies have to defend information from spyware, malware, ransomware and keyloggers. "Equifax's data breach affected 143 million people," Siciliano, who was once a victim of a cybercrime himself, said "So, the bad guys already have your identity. Maybe you have been affected, maybe not, but it...(read more)

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11/12/2019 MBS Week Ahead: Bonds Staging at 2019's Most Important Crossroads

Posted To: MBS Commentary

1.90% has been the most important, most dangerous ceiling for 10yr Treasury yields ever since a nasty selling spree stalled out there exactly 2 months ago. We'd been able to avoid an outright confrontation until last week's trade deal optimism and bond supply concerns prompted a surge all the way up to 1.973%. When yields are approaching a bigger-picture technical level such as 1.90%, I like to look for another level above that to allow some room for overrun. This is useful in cases where the technical level is treated as a cue for buyers to jump back into the market (because they will often wait until the most obvious technical level is actually broken). In the current case, 1.94% made the most sense due to its role as a floor back in early July. Although we saw slightly higher yields...(read more)

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11/12/2019 Compensation, Sales, Underwriting Tools; Tariffs, Trade, and Rate Primer

Posted To: Pipeline Press

Everyone has a different opinion about the economy. “Nobody’s right, if everybody’s wrong” or “Everybody’s right (eventually), if nobody’s wrong.” How many times do we hear, “Even if interest rates are low, tight lending and high home prices stand as barriers to potential buyers.” Global central banks are taking a wait-and-see attitude toward further interest rate cuts, with rates in Europe and Japan already in negative territory. The slowdown in rate cutting includes emerging market central banks. Fannie Mae is out with its housing forecasts for 2020 expecting 30-year fixed rates will continue to fall, hitting 3.5% by the end of 2020, and home prices will rise about 4%. Fannie expects housing starts to be flat in 2020 compared to...(read more)

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11/8/2019 Mortgage Rates Holding Near 3-Month Highs

Posted To: Mortgage Rate Watch

Mortgage rates launched to their highest levels in more than 3 months yesterday for a variety of reasons. Chief among them was a series of comments from both China and the US about the intent to cancel previously announced tariffs as a part of the phase 1 trade deal. Tariffs and trade have been weighing on the economic outlook in a big way, and that's benefited interest rates. Anything that lessens the weight has the opposite effect. Notably, the bond market failed to improve very much today even after Trump said that there was no agreement to roll back tariffs yet, even though there was a clear reaction. This could be due to the fact that markets expect a deal to be worked out eventually, but bigger-picture momentum is also a consideration. Simply put, rates have been moving so much lower...(read more)

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11/8/2019 Housing Affordability at Best Levels in Three Years

Posted To: MND NewsWire

One year after hitting a ten-year low, housing affordability has risen to its highest level in three years. Rose Quint, writing in the National Association of Home Builders Eye on Housing Blog , says 63.6 percent of new and existing homes sold in the third quarter of this year were affordable to households earning the U.S. median income of $75,500. It was exactly one year ago when Quint wrote that only 56.4 percent homes sold during Q3 of 2018 were affordable to families who were earning the then current median income of $71,000. At that point the prevailing interest rate was 4.72 percent and the median home price was $268,000. The NAHB/Wells Fargo Housing Opportunity Index (HOI) had risen to reflect 60.9 percent affordability by the second quarter of this year. The improved affordability is...(read more)

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11/8/2019 NAR Survey Shows Buyers are Increasingly Older, Less Married

Posted To: MND NewsWire

The share of first-time buyers remains well below historic levels according to the National Association of Realtors' ® (NAR's) 2019 Profile of Home Buyers and Sellers, and those who do buy frequently need financial assistance from their family. The annual report, derived from a 125-question survey that NAR mails to buyers who purchased a home between July 2018 and June 2019, will be unveiled Friday afternoon at NAR's annual convention. First-time buyers account for one-third of sales, a share that hasn't changed much since the financial crisis. Historically those buyers have constituted about 40 percent of the market. Further, one third of first-time buyers use downpayment help from family or friends. "Prerecession, the number of first-time buyers was higher, in part, because buyers had...(read more)

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11/8/2019 MBS Day Ahead: Lowered Expectations

Posted To: MBS Commentary

If you don't expect anything good to happen for the bond market for the next few months, I guarantee you won't be disappointed. If, however, you expect to see a normal amount of resilience and a continued willingness on the part of rates to operate with a 3% handle in the 30yr fixed mortgage world, I cannot make that same guarantee. Grim stuff, I realize, but fortunes wax and wane when it comes to big-picture bond market momentum. Fortunes waxed bigtime throughout 2019 and it increasingly looks like the bill is due. If you're new to my commentary, this narrative has been in place since mid October when rates failed to make it back to September's lows. All of the above having been said, I can't unequivocally guarantee that we've entered a new rising rate trend that will...(read more)

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11/8/2019 Sales, Audit Tools; Vendors Raising Funds; 10-year Yield's 3 month, 50 bp Move

Posted To: Pipeline Press

As rumors swirl about Michael Bloomberg entering the race for president, MLOs are winding down for the year (a few have written to me saying that, after a solid November and 2019, they’ll be coasting during December and try to push closings into 2020 to get a good start on things), and it’s around this time when capital markets crews are answering the yearly, “When are the 2020 conforming loan amounts going to be released, and what are they going to be?” Just to remind you, they are announced around/soon after Thanksgiving. And oddsmakers in Las Vegas are looking for a slight bump. But hey, those jumbo programs, without the 50-basis point or so gfee, are pretty price competitive, so there doesn’t seem to be the big need for higher conforming limits as there was...(read more)

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11/8/2019 Disaster Aftermath Can Make Losses Worse

Posted To: MND NewsWire

The storm is over, the fires are out, but anyone who has survived a natural disaster, and that is more of us every year, knows that the problems are just beginning. A new report by CoreLogic looks at how a demand surge sparked by rebuilding efforts may or may not affect the recovery in a disaster's aftermath. By demand surge they are referring to a sudden increase in the costs of materials, labor, or other services which can ultimately increase reconstruction costs and in some cases, limit the ability of property owners to recover in a timely matter. This is particularly true where the victims are underinsured or not insured at all. They found that the growth of major chains like Lowes and Home Depot has mitigated the effect of a demand surge on materials , both their availability and cost...(read more)

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11/7/2019 MBS RECAP: Big Bad Day; Yes, Trade Headlines Still Matter

Posted To: MBS Commentary

It was a big, bad day for the bond market, although the size of the thing ended up getting pared down just a bit in the afternoon. Chalk that up to a counterpoint headline that pushed back against the narrative created by the day's previous headlines. The narrative in question concerns the US/China trade pact. Most recently, the notion of rolling back previously announced tariffs has taken center stage. Overnight headlines set the tone with China's Commerce Minister saying the two countries had agreed to cancel tariffs in different phases. Similar headlines from the White House added to the same momentum during the AM trading hours. Combine that with a bond market that was already on edge in terms of the technical landscape (you know... all that stuff I've been talking about with...(read more)

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11/7/2019 Mortgage Rates Blasted by Trade Deal Progress

Posted To: Mortgage Rate Watch

Mortgage rates surged higher at a rapid pace for the second time this week. Taken together, the jump is the biggest of its kind since the big rate spike in September, and one of only a handful of weeks in the past 3 years where lenders are quoting rates that are 0.25% higher than the previous week. Progress on the US/China trade deal is the key culprit behind the volatility, but not the only factor. In general, the bond market (which dictates rates) has been doing so well for so long that risks of a bounce have been increasing simply due to doubts as to how long the good times could continue to roll. In market jargon, these motivations are referred to as "technical." Technical motivation can play out differently depending on the market in question. Unlike the stock market, which has proven...(read more)

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11/7/2019 Affordability Improves Even as Appreciation Accelerates

Posted To: MND NewsWire

Are home price increases cranking up again? The quarterly report from the National Association of Realtors® (NAR) on existing home sales and metropolitan home prices seem to indicate that is the case. NAR says that the overwhelming majority of the metro areas they track experienced both price gains and very limited inventory growth in the third quarter of the year. Further, after months of decelerating price gains, the annual increase nationally in the third quarter was 5.1 percent. "Incremental price increases are to be expected, but the housing market has been seeing reacceleration in home prices as more buyers want to take on lower interest rates in the midst of insufficient supply," said Lawrence Yun, NAR chief economist. "Unfortunately, income and wages are not rising as fast and will...(read more)

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