The Chinese curse, “May you live in interesting times” can easily be applied to the residential mortgage business in the last month or so. This week and yesterday was no exception, with some brokers benefitting from both Trump’s tariffs (fully expected to slow the economy, driving rates lower) and United Wholesale trying to keep its market share while Rocket Companies is spending about $11 billion to cement its place in real estate transactions and be in touch with a potential borrower from shopping for a home all the way to servicing it. (More below.) Meanwhile, just in time for the MBA’s Advocacy event next week in Washington, DC, House Republicans, led by Rep. French Hill, R-Ark., have sent letters to top US financial regulators urging them to reverse several Biden-era banking rules. Their priorities include rescinding the revamped Community Reinvestment Act (CRA), rolling back CFPB rules on overdraft fees and medical debt, and pausing Basel III reforms. The lawmakers said recent regulations have hurt innovation and access to financial services, especially for families and small businesses. (Today’s podcast can be found here and this week’s is sponsored by Calque. Calque provides a binding backup offer on your borrower’s departing residence to clear the existing mortgage balance and closing costs in 48 business hours or less. Today’s features an interview with Waymaker Mortgage’s Scottie Campbell and Revest Loans’ Jim Black on how buy-before-you-sell loan products are helping drive up origination volumes.)

While plenty of uncertainty remains over the finer points of Wednesday afternoon’s tariff announcement, markets have heard enough to brace for impact on global trade. That “bracing” is being traded in the form of a flight to safety (sell stocks, buy bonds) that began yesterday and continued overnight. 10yr yields were already close to 4.0% before this morning’s weaker ISM Services data, and have been inching closer since then. 
That said, the additional “inching” isn’t really in response to ISM. Almost all of today’s trading looks like an afterthought compared to yesterday’s initial tariff reaction and the early overnight trading. 

Steel, aluminum, and automobiles already subject to Trump’s duties will not face reciprocal tariffs. Lumber products expected to soon be hit with a tariff investigation will also be exempt.

Some members of the Senate, where the GOP majority is thinner, also are asking the Federal Housing Finance Agency to reveal more about planned mortgage reforms.

The housing regulator has been mum on details about its reshuffling, but Secretary Scott Turner has emphasized mission-critical functions would persist.

Regulators should approve the deal because post-merger, the servicing market remains fragmented and the mortgage origination business is even more dispersed.

Publicly traded lenders, including UWM, Rocket Mortgage and Guild Mortgage, saw personnel expenses increase significantly throughout last year.

Late Day Volatility on Tariff Speech

The long-awaited tariff speech took markets for a ride in both directions this afternoon. After the dust settled, the net effect was “buy bonds, sell stocks.” Notably, that was a sharp departure from the initial net effect during the early part of Trump’s speech. The ultimately friendly result was enough to get Treasuries back into positive territory and for MBS to get sorta close.  In the bigger picture, the volatility didn’t really matter as both stocks and bonds remained in the same old ranges. 

Econ Data / Events

ADP Employment

155k vs 105k f’cast, 77k prev

Market Movement Recap

08:23 AM Stronger overnight and no major reaction to ADP data.  MBS up an eighth of a point and 10yr down 3.6bps at 4.127

11:50 AM Losing ground as stocks rally.  10yr up 1.7bps at 4.179 and MBS unchanged.

12:29 PM More weakness.  MBS down an eighth of a point now and 10yr up 4.8 bps at 4.21

04:19 PM 10yr yields are up 6.7bps at 4.23 and MBS are down 6 ticks (.19) on the day and more than a quarter point from rate sheet print times.

Mortgage rates didn’t move much today, which is pretty crazy considering the volatility present in financial markets in the afternoon.  That’s when the long awaited tariff announcement speech took place.  There was always a decent chance of a whipsaw in response and a whipsaw is what we got. Fortunately, the net effect for the bond market (bonds dictate interest rates) was positive. In other words, interest rates received good news while stocks received bad news.  The catch is that bond had been having a somewhat downbeat day until then.  As such, the favorable reaction to the tariff news merely got the bond market back to suggesting fairly flat interest rates compared to yesterday’s latest levels.  Most lenders will wait until tomorrow to make any friendly adjustments, and that assumes bonds hold at the same levels overnight.   Bottom line: plenty of market volatility in the afternoon, but ultimately implying very little change in mortgage rates.

This morning’s ADP Employment data was the only potential market mover for bonds, at least as far as scheduled data is concerned.  Despite coming out a bit higher than expected, bonds opted to maintain the rally trend that had been intact since the start of European trading overnight. That resulted in moderate gains at the start of the 9:30am NYSE open, but things changed from there.  Stocks bounced higher and brough bond yields along for the ride.  The net effect is modest weakness, and no major change to the sideways grind in the bigger picture.  Things could change for better or worse this afternoon after the tariff announcement expected at 4pm ET.