HELOC Products; Bank Builder JV; Customer Service and Compliance; Employment Data

Tomorrow is the 4th of July, the only time of the year Americans say the day and month in the correct order. We find ourselves in the traditional “dog days of summer” which refer to the hottest and most uncomfortable days typically occurring from July 3 to August 11 in the Northern Hemisphere. Did someone say “dog”? Thank you to David I. who sent along a story about how inflation shows up in the price of hot dogs at the yearly Coney Island display of gluttony. While President Trump continues to publicly berate Fed Chair Powell (but can’t fire him), it is important for lenders to remember that though the economic data is all backward looking, the economy is currently too strong to justify Fed rate cuts, given the inflation risk, or at least the volatility of tariff decisions. So, we sit. Besides, the bond market will move before the Fed. (Today’s podcast can be found here and this week’s is sponsored by Figure, which is shaking up the lending world with their five-day HELOC, offering borrower approvals in as little as five minutes and funding in five days. Figure has hundreds of partners in the banking, CU, home improvement, and (of course) IMB space embedding their technology, giving borrowers an experience they will rave about. Today’s has an interview with Optimal Blue’s Jeff McCarty on the growing importance of integrated, data-driven tools in secondary marketing to improve pricing precision, risk management, and efficiency, particularly as market volatility, product diversity, and AI adoption reshape the hedging and trading landscape.)

Mortgage Rates Rose Less Than Expected After Employment Data

Today brought the hotly anticipated jobs report.  This is the “official” job count and unemployment rate data for the U.S. and no other report has as much consistent power to cause volatility in the rate market.  Today’s was particularly important because a perpetually decent labor market is the main justification for the Fed to wait and see if tariffs have an impact on inflation before proceeding with additional rate cuts. In other words, if unemployment were rising, the Fed would be cutting rates.  Not only did today’s report show no rise in unemployment, there was actually a decline from 4.2 to 4.1%, falling well short of an expectation for an increase to 4.3%. In addition, the job count rose to 147k–a notable difference from the forecast consensus of 110k. With that, the underlying bond market surged toward higher yields.  When yields are surging higher, it implies upward pressure on mortgage rates, but the latter didn’t take as much damage as the bond market suggested. The average lender was only slightly higher compared to yesterday, thus suggesting lenders were already getting in position for today’s data earlier in the week. This isn’t to say lenders knew what was going to happen. Rather, rates had fallen to the lowest levels in several months as of Monday. Lenders could have dropped them even more, but with important data on the way and an extended holiday weekend ahead, they left themselves a bit of a cushion. That cushion helped absorb most of today’s bond market movement without the need for big mortgage rate changes.

Big Market Reaction but Mortgages Outperform

Big Market Reaction but Mortgages Outperform

Today’s jobs report would have been bad for rates if it was even in line with expectations.  After it came out stronger than expected (especially in terms of the unemployment rate at 4.1 vs 4.3 f’cast), it was off to the races for bond sellers.  The short end of the yield curve has the most in common with Fed rate expectations, so it took the most damage, but MBS fared far better.  Perhaps that has something to do with the government not issuing MBS to fund the just-passed spending bill or perhaps it is a nod to next week’s uncertain levels of demand for the scheduled Treasury auctions. Either way, we won’t complain. Friday is closed for the holiday, and next week may as well be a holiday because everyone’s waiting for July 15th CPI.

Econ Data / Events

Nonfarm Payrolls

147k vs 110k f’cast, 139k prev

Unemployment rate

4.1 vs 4.3 f’cast, 4.2 prev

ISM Services

50.8 vs 50.5 f’cast, 49.9 prev
prices: 67.5 vs 67.7 prev
employment: 47.2 vs 50.7 prev

Market Movement Recap

09:14 AM Sharply weaker after jobs data, but recovering somewhat.  MBS down an eighth of a point and 10yr up 5bps at 4.33

02:24 PM Very flat after AM sell-off, and now closed for the day.  MBS down 6 ticks (.19) and 10yr up 6.7bps at 4.347

Jobs Report Comes in Stronger. Bonds React Logically

Apart from the fact that this morning’s jobs report contrasted starkly from the slew of anecdotal evidence suggesting a weaker labor market in June, the morning has proceeded almost exactly as expected. We assumed that even an on-target result was worth a bit of bond market weakness given the apparent “lead-off” induced by preceding data. The moderately stronger result (147k vs 110k f’cast) was more than enough to add some emphasis to the sell-off.  Add the 0.2% drop in unemployment and it was game over.  Are there some “yeah buts” in the data?  Sure, but none so striking as to suggest yields should be lower instead of higher today.

One potential saving grace for the bond market (maybe not today, but in the next few months) is that revisions have been much more aligned with the consensus.

Refis Pick Up Steam as Rate Relief Returns

Mortgage application activity moved higher last week as rates declined to the lowest levels since April, according to the Mortgage Bankers Association’s (MBA) latest survey. The Composite Index rose 2.7% on a seasonally adjusted basis for the week ending June 27. Results were not adjusted for holidays this time around, but the previous week had included a Juneteenth adjustment. “Mortgage rates were lower across all loan types last week, with the 30-year fixed rate declining to its lowest level since April at 6.79 percent,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “This decline prompted an increase in refinance applications, driven by a 10 percent increase in conventional applications and a 22 percent increase in VA refinance applications.” Refinance applications rose 7% from the prior week and are now 40% higher than the same week last year. Purchase applications were flat, rising just 0.1% on a seasonally adjusted basis. However, the unadjusted index rose 10% week-over-week and remains 16% higher than 2024 levels, continuing a trend of modest year-over-year gains despite short-term stagnation. The average 30-year fixed rate declined to 6.79%—the lowest since April—while points moved slightly lower across most loan types. Mortgage Rate Summary:

Loan Type
Rate
Change
Points
Change

30yr Fixed
6.79%
−0.09
0.62
−0.01

15yr Fixed
6.06%
−0.05
0.67
−0.07

Jumbo 30yr
6.78%
−0.10
0.40
−0.20

FHA
6.53%
−0.06
0.76
−0.09

5/1 ARM
5.99%
−0.17
0.60
+0.06