I always wonder, when I see two gas stations near each other in a small town, if the owners agree on pricing and share information. But when you’re dealing with trillions of dollars of mortgages and millions of borrowers, well, that’s a different scale, and the leader and boards of directors should be held responsible if the news is correct. Per the AP, “A confidant of Bill Pulte, the Trump administration’s top housing regulator, provided confidential mortgage pricing data from Fannie Mae to (Freddie Mac), alarming senior officials of the government-backed lending giant who warned it could expose the company to claims that it was colluding with a rival to fix mortgage rates. CEOs report to boards, and some are saying that if Mr. Pulte and the Fannie and Freddie boards want to be relieved of their duties, they should have just resigned. And if nothing of consequence happens, what does that say about the housing finance system in the U.S.? (Today’s podcast can be found here and this week’s are sponsored by TransUnion. Mortgage lenders choose TransUnion for their identity-focused, data-driven mortgage insights and solutions, enabling them to achieve more desirable lending outcomes in a volatile housing market. Hear an interview with Telhio Credit Union’s Allie Hager on independent mortgage banks and credit unions differ in serving today’s borrowers, focusing on borrower sentiment around rates versus payments, strategies for building customer loyalty, and personal insights on professional growth and finding one’s comfort zone.)

Bonds were sideways to slightly weaker in the overnight session.  4am to 7am was exceptionally flat and narrow. This is notable because stocks had done more than half of their overnight selling by 7am, and stocks are one of the only scapegoats. In other words, a “flight to safety” (sell stocks/buy bonds) seems to be the only popular explanation, and it’s entirely unsatisfying when looking at stocks and bonds on a chart.  Our official take is: there’s a secret club and we’re not in it.  There are some straws we could grasp at, but feel less compelled to do so when the magical mystery move is an instant 5bp rally. 

For straw graspers, we can overlay UK bonds (which had some drama this morning) on the same chart and suggest that UK selling was preventing Treasuries from following the stock losses.  And once UK bonds reversed course, TSYs were free to rally.

Origination has picked up but has limits, retention rates are improving and stakeholders are seeking a recapture standard, experts at an industry meeting said.

The hidden costs of homeownership total nearly $16,000, rising 4.7% in the past year.

The lender, which crossed the $1 billion origination mark for the second consecutive quarter, is bullish on several new mortgage partnerships.

A 50-year mortgage would make borrowers susceptible to higher interest rates, significantly more payable interest and slower equity gains, LendingTree analysis showed.

For the second consecutive week, the 30-year fixed rate mortgage increased as investors were still sorting through the lack of information due to the shutdown.

Moderately Weaker With Only The Reopening to Blame

The government reopened on Thursday.  Both stocks and bonds sold off moderately in response. The bond market weakness is in line with our expectations for a confirmed reopening based on the simple logic that a prolonged shutdown would have been increasingly detrimental to economic growth. Comments from a few Fed speakers added fuel to the fire by calling a December rate cut into question.  That said, assuming the big-ticket econ data is back up and running by then, the outcome of those reports will likely add clarity to rate cut expectations (or lack thereof). In case anyone needs the reminder, econ data WILL NOT simply resume on its previous calendar. Releases that were on the schedule will be delayed until further notice and we continue waiting for an updated release schedule from data agencies.

Econ Data / Events

ADP Weekly Payrolls (Tue, 11/11)

-11k 

Market Movement Recap

10:14 AM Weaker overnight and a bit more selling in the past few minutes.  MBS down 5 ticks (.16) on the day and 3 ticks (.09) since rate sheets.  10yr up 4.8bps at 4.113

12:24 PM Best levels of the day in Treasuries with 10yr up only 3bps at 4.096.  MBS down an eighth of a point. 

01:11 PM A bit weaker after 30yr auction.  MBS down 5 ticks (.16) and 10yr up 4.5bps at 4.111

03:23 PM New Lows.  MBS down a quarter point and 10yr up 5bps at 4.114

Mortgage rates rose somewhat sharply following the late October Fed meeting but have been in a relatively narrow range so far in November.  The range is so narrow, in fact, that yesterday’s average rate was at the bottom of that range while today’s rate is closer to the highs. Given the minimal overall movement, there’s no compelling need to account for underlying market motivations. To be sure, there was no new economic data that caused weakness in the underlying bond market. That leaves only the reopening of the government as a scapegoat. Several days ago, when the end of the shutdown came into focus, we cautioned that it was more likely to put slight upward pressure on rates whenever it was confirmed. This is consistent with the movement seen today. More meaningful momentum will depend on the economic data that is once again in the cards now that government agencies are open. The only caveat is that we’re still waiting on updated release schedules for those reports.

In news underwriters will need to know, banks and satirists across the United States are taking Director Bill Pulte’s and President Donald Trump’s 50-year mortgage suggestion are running with it. They (the underwriters) would now require an applicant’s grandkids to co-sign on a 50-year mortgage “just in case” as part of the approval equation. What happens when you leave out a key part of the equation? (Skip ahead to the two-minute mark for another chuckle.) The IT staffs of lenders and vendors are always on guard not to leave out any part of any equation, and they may have some interest in this: ClickFix may be the biggest security threat your family has never heard of, as it is a relatively new technique that can bypass many endpoint protections. (Don’t confuse it with Click n’ Close, a fine company in the correspondent & wholesale space! (Today’s podcast can be found here and this week’s is sponsored by TransUnion. Mortgage lenders choose TransUnion for their identity-focused, data-driven mortgage insights and solutions, enabling them to achieve more desirable lending outcomes in a volatile housing market. Hear an interview with MeridianLink’s JP Kelly on how evolving credit scoring models, real-time analytics, and data integration are reshaping mortgage lending, from improving credit inclusivity and compliance to accelerating decision-making and redefining competition in a data-driven marketplace.) Services, Products, Software, and Tools for Lenders and Brokers