California sellers of older homes in high-risk areas must disclose to potential buyers not only a dwelling’s susceptibility to fire but what they’ve done to address those vulnerabilities.

“When the economy is good, people drink. When the economy is bad, people drink. The moral? Invest in alcohol.” Here in Boise at the PNMLC, the comments about Friday’s jobs data (showing a worsening employment picture) and economy ranged from, “It’s about time we have accurate numbers that we can rely upon” to “The Trump Administration is still blaming the people compiling the numbers as opposed to the actual policies… like if you had an NFL owner who just lost big and instead of changing the quarterback or firing the coach, they axed the scoreboard operator.” “Tech” is also a discussion topic, and I received this note. “We’re a nationwide lender, and grown, and have begun the hunt for a new Point of Sale system. Any suggestions?” It depends on your channels, size, and needs (present and future), but a solid place to start is at this Marketplace, a free centralized hub for vendors and service providers across the mortgage industry to be viewed by lenders. (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 Marty Green on Fed Governor Cook’s timeline for recourse in the courts over her recent firing and various other political happenings as we approach next week’s FOMC meeting.) Company Sponsored Webinars

More Gains Despite Absence of New Motivation

There’s not much to say about Monday other than “we’ll take it!” Despite an absence of new motivations (today’s data wasn’t in the “market mover” category), bonds added to last week’s already brisk rally.  Longer-term yields outperformed as the yield curve continued a correction from the longer-term highs/wides hit last Tue/Wed.  In other words, some of the motivation could be coming from curve traders who are more concerned with how bonds perform against one another than with simple gains/losses.

Market Movement Recap

09:29 AM Fairly flat overnight, but rallying now. MBS up an eighth in 5.5 coupon and almost a quarter in 5.0 coupon. 10yr down 3.1bps at 4.056

11:31 AM Holding near strongest levels after mini bounce at 10:50am.  5.0 MBS up a quarter point and 10yr down just under 4bps at 4.05

02:04 PM Some weakness heading into OM hours, but holding the stronger range for now.  5.0 MBS up 6 ticks (.19) and 10yr down 3.2bps at 4.055

To their credit, most mortgage lenders did an admirable job of aggressively pricing-in the bond market rally after last Friday’s jobs report. Many mortgage market pros repeat the phrase “stairs down, escalator up” when it comes to the pace at which lenders change rates. The idea is that lenders are quicker to raise rates than cut them, but this clearly wasn’t the case this time. Because of that healthy level of aggression, there wasn’t as much room for improvement at the start of the new week compared to other Mondays that follow weak jobs report numbers. Case in point, after the August 1st jobs report, the following Monday accounted for more than a quarter of the 2-day drop in rates.  Compare that to today which only accounted for about 5% of the 2-day drop. But gains are gains, and the small improvement brings the average top tier 30yr fixed rate to another 11-month low. [thirtyyearmortgagerates]

The Consumer Financial Protection Bureau has released a packed agenda centered on rewriting rules ranging from small business lending to open banking while rescinding several rules finalized under the Biden Administration last year.

The Homeowners Privacy Protection Act will go into effect next March 5, after a years’ long effort by the mortgage industry to bar the marketing tactic.

More borrowers who locked their loans with higher financing costs could refinance and buyers may come in at the margin, former Fannie Mae economist said.

Mortgage delinquency rates increased versus the second quarter of 2024, with certain markets, especially in the South, reporting higher levels of difficulty.

The Bureau of Labor Statistics reported that the economy added 22,000 jobs in August, raising the unemployment rate to 4.3% and providing additional cover for the Federal Reserve to lower interest rates in September.

It may seem like today’s bond market movement alone (3/8ths higher in MBS and 0.09% in 10yr yields) doesn’t explain the pace of improvement in mortgage rates. For that, we’d need to consider the arcane underpinnings of the mortgage-backed securities (MBS) market.  These are the bond-like instruments that represent large groups of mortgage debt that can be traded among investors. 
MBS are broken out into coupons in 0.5% increments.  Only certain mortgage rates are allowed in certain MBS coupons (think of them like buckets). The bucket that had been the most active could hold rates up to 6.625% and it is suddenly losing favor to the next lower bucket which holds rates up to 6.125%.
One need not necessarily understand all of that–just the implication that rates can drop more quickly than normal as they approach the upper limits of the next lower bucket. In other words, the recent stint of rates near 6.5% meant that the 6.625% bucket was hanging onto relevance and the 6.125% bucket was still a bit out of reach.  Now today, the 6.125% is vying for higher relevance, thus the slippery slide down toward 6.125%.
NERD ALERT: for those that truly desire the underlying specifics, the upper bucket is a 5.5% UMBS coupon which can accommodate rates from 5.75 to 6.625 and the suddenly more fashionable bucket is the 5.0% UMBS coupon which holds rates from 5.25-6.125. MBS investors desire a certain sense of certainty about how long the underlying loans will last before mortgage borrowers refinance. By exhibiting stronger demand for the 5.0% UMBS coupon (the bucket that tops out at 6.125%), investors are basically saying they’d rather sacrifice a bit of present-day rate of return in exchange for more certainty of collecting that rate of return for a longer period of time in a market where rates are falling. Reason being: if they bought 5.5 UMBS and mortgage borrowers refinanced in the near future, that principal would now need to be reinvested at rates that could be even lower than they are today.  
There’s an even deeper dive in the MBS Live knowledge base HERE.