Roof damage can reduce a property’s value and loan security. Lenders must know the warning signs that indicate major structural and financial risks.

Make the right lending decisions by being informed and knowledgeable on the impact of flooring during appraisals, upgrades, and resale evaluations.

Homes for sale inventory reached pre-COVID levels for the first time in years, while contract activity continued to soar last month, HouseCanary said.

The Mortgage Bankers Association leader cited past objections on anti-competitive grounds as Trump administration officials showed signs of progress on reform.

Incidental, Inconsequential Weakness Ahead of Fed Week

Bonds began the day in modestly weaker territory and yields are heading out right where they started.  In fact, yields are also right in line with the opening levels from Monday.  This broadly suggests the market got where it was going after the jobs report and is now waiting for the next big shoe to drop. The other way to view this entire week is as an opportunity to book profits and cover shorts on the recent “steepening” trade (which favored buying 2s over 10s). Indeed, 2yr yields mostly sold off this week relative to 10s and today was the only real exception. Either way, there was no concrete cause and effect in the news or econ calendar, so chalk it up to “position squaring ahead of next week’s Fed day.”

Econ Data / Events

Consumer Sentiment

55.4 vs 58.0 f’cast, 58.2 prev

1yr inflation expectations

unchanged

5yr inflation expectations

3.9 vs 3.5 previously

Market Movement Recap

10:41 AM moderately weaker overnight and holding mostly sideways so far. MBS roughly unchanged and 10yr up 3.8bps at 4.063

02:18 PM Holding sideways all day.  MBS up 1 tick (.03) and 10yr up 3.9bps at 4.065

03:41 PM Heading out with 10s up 3.3bps at 4.059 and MBS still up 1 tick (.03).

“Rob, we’ve said ‘no’ to more expansion possibilities than ever before. Are you hearing other lenders doing deep dives on LOs and branches and also not seeing a profitable path?” Yes indeedy. Here in Jackson, MS, at the Mississippi Mortgage Banker’s Fall Conference, lenders are not only discussing expansion but also early payoff penalties and strategies to avoid them. (Of course, they are explaining to newer entrants why few investors would ever pay 102 or 104 for a loan that may pay off soon at 100.) One topic is why companies service, or sell service, and this month’s STRATMOR piece is titled, “Servicing: What’s All the Fuss About?” Another topic on lenders’ minds are demographics, income, and reasons for moving, and now we have government news that income inequality has dipped and fewer people moved, per the largest survey of U.S. life. Talk to any solid loan originator, and they’ll tell you that the top three attributes of their brethren are focus, leadership, and consistency. (Today’s podcast can be found here and this week’s are sponsored by Indecomm. Streamlining operations with the genius blend of automation, AI, and services. Achieve practical digital transformation and real operational impact with Indecomm’s purpose-built mortgage solutions. Hear an interview with Polunsky Beitel Green’s Peter Idziak on takeaways from the bipartisan Home Buyers Privacy Protection Act (trigger leads bill), which amends the Fair Credit Reporting Act by shifting trigger leads to an opt-in system, mandates a study on text-based solicitations, and raises concerns about its impact on credit bureau revenue and market competition.)

The underlying bond market (which dictates the rates offered by mortgage lenders) weakened moderately overnight.  Weaker bonds equate to higher rates, all else equal.   “Higher rates” is contrary to many media outlets’ coverage this week, but there’s an important reason. Most news organizations that cover mortgage rates rely on Freddie Mac’s weekly rate survey for their once-a-week update. Additionally, when Freddie’s rate raises/falls appreciably, it receives even more attention. This frequently creates problems due to the timing and methodology of Freddie’s survey. Specifically, the survey is an AVERAGE of the rates seen over the 5 days (Thu-Wed) leading up to Freddie’s Thursday release. As such, if rates happen to fall sharply on a Friday (as was the case last week), our DAILY rate tracking will reflect that on Friday while Freddie won’t catch up until the following Thursday (yesterday, in this case). By that time, rates hadn’t moved any lower, and now today, they’re actually a bit higher. All that to say, the rate drop you’re hearing about from Freddie is the same rate drop we told you about last Friday.  There’s been no meaningful improvement since then, and in fact, a modest increase in rates today. Today’s move in bonds/rates wasn’t driven by anything specific  and shifts of this size don’t demand concrete justification in underlying data or events. It could simply be the case that traders were closing out trading positions for the week and the modest uptick in yields/rates was the incidental result. 

Bonds began the week with 10yr at 4.07 before rallying down to 4.04 by Monday’s close.  Now on Friday, we’re opening at 4.06 and we haven’t spent much time trading more than a few bps higher or lower than that for the entire week.  Translation: apart from yesterday’s attempt to challenge the 4.0% floor, it’s been very sideways and uneventful. On the topic of the 4.0% floor, market technicians might be reading some significance into the repeated bounces yesterday amid higher volumes.  But one need not be a technician to reconcile the mixed econ data and broad uncertainty with an unwillingness to push an already well-developed post-NFP rally.  Bonds will wait for the dot plot before considering the possibility of a true range departure (barring unforeseen shocks, as always).

In other news, MBS are outperforming due to dynamics surrounding “the roll” (monthly settlement process that brings a new coupon to the forefront). The chart makes it look like MBS are lower so far today, but when comparing October delivery coupons to themselves, MBS are actually flat instead of weaker (the 2-day chart shows October coupons today and September coupons yesterday).

The Consumer Financial Protection Bureau has notified employees of an upcoming reduction in force after its budget was cut in half by the president’s recently passed tax and budget bill.

Properties with default notices, scheduled auctions and REOs are up by double digits compared to last summer as buyers are mired in a high-cost environment.