There’s broad support for the effort to reduce costs and processes, but the Appraisal Institute warns about reducing property valuation quality control checks.

Fannie Mae’s conservator is supporting the government-sponsored enterprise’s test within certain boundaries, according to a recent social media post.

Foundation had introduced Version 3 of its credit risk model, using the most recent delinquency data, to improve loan performance predictions.

The Senate Banking Committee is slated to consider Christopher Phelen to be the chair of the Council of Economic Advisers on Thursday. Phelen has said in past academic papers that fractional reserve banking is “highly problematic.”

The bureau said the move is intended to remove potentially confusing language with an upcoming revision to the Equal Credit Opportunity Act.

Rate momentum shifted noticeably on Wednesday. The underlying bond market saw heavy buying in pre-market trading–likely a result of large-scale quarter-end rebalancing among the largest money managers (i.e. adjusting balance of stocks vs bonds in investment portfolios). Excess demand for bonds = lower rates, all else equal. It also hasn’t hurt that oil prices continue declining as bond demand has frequently benefited from the lower implied inflation. The average top-tier 30yr fixed rate fell 0.10% to 6.55–just a hair above June 16th levels of 6.54%. Before that, you’d have to go back to May 14th to see anything lower.  [thirtyyearmortgagerates]

What’s Up With Today’s Big Rally? (Spoiler Alert: Quarter-End Rebalancing)

Stocks went on a tear in Q2 with the S&P up 20% as recently at June 16th. AI-adjacent stocks were up over 50%. Bonds lost ground over the same time. That means the 60/40 stock/bond portfolio targets were thrown way out of whack, at times approaching a 70/30 balance. Gigantic money managers (insurance/pension funds and foreign investment funds) take the last few weeks of a quarter to get that balance back to 60/40. This is accomplished via selling stocks, buying bonds, or both. In today’s case it was both, but primarily the “buying bonds” part. If the math is so cut and dried, why can’t the market accurately price it in ahead of time (after all, it was being talked about)? Ultimately, rebalancing flows are only a small fraction of trading volume. For instance, the stock selling in early June was viewed as early rebalancing tradeflows. This stuff doesn’t adhere to a set schedule, so it’s only truly obvious in hindsight. Unfortunately, it doesn’t speak to a material shift in bond buying demand going forward–just an accounting adjustment in response to the past.

Econ Data / Events

New Home Sales (May)

0.58M vs 0.64M f’cast, 0.622M prev

Market Movement Recap

09:20 AM MBS up nearly 3/8ths and 10yr down 6.6bps at 4.432

11:33 AM MBS up nearly half a point and 10yr down 9.1bps at 4.407

02:43 PM MBS up half a point and 10yr down almost 10bps at 4.401

Bonds spend most of the night trading sideways to slightly stronger. Oil prices fell sharply, making it tempting to conclude that’s the reason that 10yr yields were almost 7bps lower at 9am. But more than half of the oil rally was over before Treasuries began rallying. There was an obvious and uncommonly large volume spike in Treasuries around 7:50am ET. Oil was still falling at the time. It likely contributed to the bond buying, but not enough that we’d give it primary credit. The nature of the Treasury rally is highly suggestive of massive accounts partaking in quarter-end rebalancing (just a bigger version of month-end trading).

Despite the surge, yields are only now getting back to the same old 4.42% technical resistance level that’s blocked further progress since late May.

“Why did the Dalai Lama go to Las Vegas? Because he loves Tibet.” It’s 107 F here in Las Vegas. Some would say, “It’s summer, what do you expect?” (No one expected 40 people to die in France trying to escape the heat.) Lenders and servicers are wondering, if push comes to shove about A/C in homes or supplying a local data center with electricity, who will win. My bet is whoever has the money. Your company, and family, has money, and criminals want it. (The term “bad actors” seems weak.) SIFMA’s 26th Annual AML Conference focused on the most pressing issues in financial crimes compliance, something no company can afford to do without. In a different type of affordability, a link for the new JPMorganChase policy brief (on practical steps states and cities can take to increase housing supply and bring down costs) in yesterday’s Commentary is included above for those who would like to read it. (Using examples from across the country, the brief shows how different places are testing new models to support innovations in homebuilding.) (Today’s podcast can be found here and this week’s ‘casts are sponsored by Equifax, a global data, analytics, and technology company, helps mortgage lenders gain the borrower and market insights they need to improve efficiency and make accurate decisions. Access differentiated consumer credit data, powerful consumer and market insights, and income and employment data from The Work Number. Today’s has an interview with Spring EQ’s Reno Heine on differentiating oneself in the increasingly competitive home equity and non-QM markets, how technology and AI are shaping growth, and practical advice for brokers seeking new business opportunities.)

Tech companies may be the biggest winners of a custodial deposit provision tucked away in a much-touted bipartisan housing bill set to become law this week.