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MBS RECAP: Just When You Thought The Ceiling Was a Ceiling

 

Posted To: MBS Commentary

Undoubtedly, yesterday's bond trading sent a clear message that a technical ceiling near 2.88% was met with strong defense from traders who bought bonds and pushed yields back down into the recent range. Color all of us shocked, then, that today saw yields promptly rise right back up to that ceiling! Perhaps even more frustrating was the fact that it would take no small miracle to make solid sense of the move from a technical or fundamental standpoint. Still, I will try... One of the two explanations I offered for yesterday's strong buying was that it could have been due to traders cashing out short positions. More simply put, traders who bet on rising rates in the short term (at the last bounce at the bottom of the range last week) could have booked their profits and closed out short...(read more)

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Mortgage Rates Behind the Curve For 2nd Straight Day

 

Posted To: Mortgage Rate Watch

Mortgage rates improved today but it was largely a byproduct of yesterday's market movement that didn't make it onto lenders' rate sheets at the time. Mortgage lenders set rates based on trading levels in mortgage backed securities or MBS (the bonds that groups of mortgages turn into when they're traded among financial firms on the secondary market). None of the esoterica above is too important as long as you understand that there's moment to moment trading in the bond market providing the primary consideration for mortgage lenders setting rates. If that market moves enough in the middle of the day, lenders may make mid-day adjustments to rate sheets. Yesterday saw almost enough of an improvement for lenders to offer lower rates. As such, today's morning rate sheets were better than yesterday...(read more)

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NAHB Sees Lopsided Growth in Housing Starts

 

Posted To: MND NewsWire

In another dive into data from the Census Bureau's Survey of Construction (SOC), the National Association of Home Builders (NAHB) found that one third of the nine census divisions and thus 21 states were responsible for 60 percent of single family housing starts last year. The South Atlantic division encompasses the coastal states stretching from Delaware to Florida plus West Virginia and accounted for 260,000 of the 848,000 starts last year. The West South Central division was in second place and the Mountain division third. The number of starts in 2017 was up 9 percent from 2016 and four divisions outpaced the national rate; the Pacific division at 17 percent, West North Central at 11 percent, South Atlantic and Mountain divisions at 10 percent each. Growth decelerated from the 2016 rate...(read more)

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Fannie Sees Growth Slowing, Turns Bearish on Housing

 

Posted To: MND NewsWire

Fannie Mae's economists have upgraded their second quarter economic forecast but say that may be about it for the year . In their July forecast, the company's Economic & Strategic Research (ESR) Group, headed by Doug Duncan, noted that the expansion just celebrated its ninth anniversary "with a bang." Economic growth in the second quarter may have approached the high in that expansion that occurred almost three years ago. The outlook for housing has turned bearish. Single-family construction starts were up in May for the fourth time in five months but still lagged the post-crash high of last November. (Fannie Mae's economists prepared this report before the June data was released wherein housing starts plummeted by more than 12 percent.) Multifamily starts rebounded in May, reversing about...(read more)

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MBS Day Ahead: Back in The Range, But Yield Curve Could Protest

 

Posted To: MBS Commentary

10yr yields attempted to break above their prevailing range yesterday. As we discussed in the Day Ahead, it takes more than just an intraday move above a ceiling in order to confirm such a break is taking place. Ultimately, yesterday's theme evolved into a resounding defense of the 2.88+ yield ceiling. More simply put: yields briefly traded near 2.90% and then bounced lower with solid demand underlying the move. As the top section of the following chart shows, today has seen yields hold right in the middle of the prevailing range. If they remain fairly close to current levels, today will end up being an uneventful "punt" to next week. Bonds will effectively be saying they're putting off bigger decisions for now. In fact, they'd be putting off the comparatively small decision...(read more)

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Flood, Volcano, Hurricane, and Disaster News; Lender Updates

 

Posted To: Pipeline Press

A Small Business Administration analysis found that about 90 percent of the country’s damage costs from natural disasters happen in ZIP codes with less than 20 percent of the country’s population. If you’re in the mood to see what that looks like on a map — or want advice of where not to move — the New York Times has done yeoman’s work in compiling more than a decade of disaster data. Flood and Disaster News Let me be blunt – I’m jaded when it comes to Congress and the Administration doing something permanent when it comes to the flood program. It seems like every year or two the issue is punted. The National Flood Insurance Program is scheduled to expire July 31st. While I am sure Congress cares, is it going to do anything about this? Despite...(read more)

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MBS RECAP: Key Technical Ends Up Providing Support

 

Posted To: MBS Commentary

If you are an MBS Live member, today's recap has already been written in this update and in The Huddle . Non-MBS Live members can get a pretty solid idea from the free mortgage rate article HERE . For those who don't like to click links, suffice it to say that the upper range boundary that we've been paying so much attention to ended up being the key ingredient in today's movement. Technical ceilings in rates can either serve to motivate follow-through selling when broken, or they can serve as a cue for buyers to get back in the market and push rates back into the range. Today saw the former. 10yr yields were as high as 2.897% just after the Philly Fed data (much stronger than expected). But buyers were waiting and had already made their presence known after overnight highs...(read more)

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Mortgage Rates Back to Flat After Starting Higher

 

Posted To: Mortgage Rate Watch

Mortgage rates had a scare today, as they began the day at their highest levels of the month (depending on the lender) only to fall back in line with yesterday (or better!). The reason for the back-and-forth movement has to do with esoteric behind-the-scenes stuff in the bond market. I should be able to make it tangible enough for you, so let's give it a shot. Bonds are the backbone for all interest rates. The bonds that underlie mortgages tend to move almost exactly like 10yr Treasury yields. Treasuries are a great case study to follow when it comes to rates because they are abundant, more actively traded, and essentially risk-free. That risk-free part is important because it means Treasuries can be used as a benchmark to assess the value of other bonds that aren't guaranteed by the full faith...(read more)

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Libor - Not Exactly an Obituary, But...

 

Posted To: MND NewsWire

A group of financial experts is scheduled to meet at on Thursday to make funeral arrangements for Libor . In case you hadn't heard, the London interbank offered rate, the number that indicates how much one bank needs to borrow from another, is not expected to survive much beyond the end of the decade. All good, or even not so good, things must come to an end, and Libor has had moments of each, but Matt Phillips, writing in the New York Times, says the problem is that the financial world, going into the meeting at the Federal Reserve of New York, hasn't figured out what to do if/when Libor breathes its last. While most of this country has no clue about Libor, few are untouched by it. It is the basis for interest rates on huge corporate loans , private student loans, and for resetting rates on...(read more)

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FHFA Ruled Unconstitutional, but Net Sweep Prevails

 

Posted To: MND NewsWire

Yet another federal court has rebuffed shareholders hoping to recover some value from their investments in the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. A three-judge panel for the Fifth Circuit (Texas) Court of Appeals refused to stop the practice of net worth sweeps required of the GSEs, but, the plaintiffs, whether their intention or not, did succeed in getting the structure of the Federal Housing Finance Agency (FHFA) ruled unconstitutional. FHFA v Collins was an appeal of a suit filed by GSE stockholders J. Patrick Collins, Marcus J. Liotta, and William M. Hitchcock in October 2016. It was the latest in a long stream of lawsuits against the government regarding its 2008 seizure of the GSEs. The original suit named FHFA and its current director Melvin H. Watt and...(read more)

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MBS Day Ahead: What Happens If Bonds Break This Ceiling? (Philosophical Discussion on Technicals)

 

Posted To: MBS Commentary

This primer (and this one , and this one ) will be useful for digesting the following, if you haven't read it before. For those paying any sort of attention to trading levels in bond markets over the past few weeks, it's hard to miss the super narrow range between 2.825 and 2.885 in 10yr yields. That's been perfectly intact since June 27th, and was broken for the first time in today's overnight session. In the chart above, there are plenty of causes for concern in terms of the technical implications of recent moves: Mid-Bollinger (middle yellow line) is broken 2.885% was broken overnight short-term momentum hasn't been oversold enough (above upper blue line) to imply support longer-term momentum has plenty of room to run (empty space between current levels and oversold)...(read more)

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LO Training and Conferences; Teams With Different Comp Plans?

 

Posted To: Pipeline Press

“Rob, are you hearing, now that the CFPB is perceived to have lost its teeth, that some lenders are providing their loan officers two different rate sheets?” Unfortunately, yes, I am hearing that, but hopefully it is an untrue rumor. It would certainly fly in the face of fair lending and would give another black eye to our industry. See note below from The Knowledge Coop’s Ken Perry regarding compliance issues on this. (By the way, the Bureau of Consumer Financial Protection has announced the appointment of Paul Watkins to lead the Bureau’s new Office of Innovation, and a confirmation hearing for Kathy Kraninger, President Trump’s pick to lead the CFPB, is scheduled today before the Senate Banking Committee.) Upcoming Events and Training Now is the perfect time...(read more)

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Purchase Share and Interest Rates Creep up, Hit New Ellie Mae Highs

 

Posted To: MND NewsWire

The share of closed loans for home purchases ticked up another point in June, to 71 percent. While Ellie Mae has only tracked data since 2011, this represents a new high for those loans in the company's Origination Insight Report. The purchase share was also up 1 point for FHA loans, at 81 percent and rose 2 points for VA loans and 3 for conventional loans to 77 percent and 69 percent respectively. The allocation of newly originated loans across product types seems cast in amber. Shares have remained essentially unchanged since March at 66 percent conventional, 20 percent FHA, and 10 percent VA loans. In June, the 30-year interest rate rose yet again to 4.9 percent, up from 4.84 in May another new high for the Ellie Mae report. The percentage of Adjustable Rate Mortgages (ARMs) rose to 6.9...(read more)

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MBS RECAP: Bonds Back at Range Boundary

 

Posted To: MBS Commentary

After holding the same sideways range since June 27th, 10yr Treasury yields finally knocked on the 2.88+ ceiling for the 2nd time (the previous attempt being July 3rd). But that's about as exciting as I can make today sound. The overall move higher in yields was less than 2bps, and volume was exceptionally low. If anything, the challenge of the range ceiling (failed challenge, really) was the product of serendipitous afternoon tradeflows amid highly illiquid trading conditions. Today's economic data and Fed Chair testimony did little, if anything, to motivate trade. Whereas the afternoon was an illiquid desert for bonds, the morning hours were only slightly better. Still, the morning at least had a clear source of inspiration in the form of European bond market movement. Treasuries...(read more)

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Mortgage Rates Flat Again, Despite Modest Market Weakness

 

Posted To: Mortgage Rate Watch

Mortgage rates were flat again today, further prolonging a trend that's been in place for weeks. During that time, we've seen modest ups and downs, but no significant changes. To put the narrowness of the range in context, the "ups and downs" are only seen in the upfront costs associated with any given mortgage rate. Rates themselves haven't changed for the average loan scenario. Today's absence of change belies market movement to some extent. The bonds that underlie mortgage rates weakened enough through the course of the day that mortgage lenders were nearly justified in a mid-day rate sheet adjustment (for the worse). When this happens (i.e. when bonds weaken, but not quite by enough to prompt mid-day changes), the implication is that tomorrow starts out at a slight disadvantage . In other...(read more)

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