As Maui grapples with rebuilding, and parts of the Southeast deal with continued rescue or recovery issues, where would our lives be without some levity? Rich Swerbinsky, Founder of Onward and Upward Consulting, has updated his “40 Greatest Names in the Mortgage Industry list.” (Contributions or comments should be addressed to him, not me.) Speaking of names, “Springfield” has certainly been in the news lately, but that Ohio city’s name is only one of the most popular. Top place names in the U.S. include Franklin, Springfield, Washington, Clinton, and Arlington. If you’d like to find a top rated charity in the United States, one where most of your contribution goes toward victims of a disaster instead of salaries and overhead, here you go. In terms of top rated survival real estate listings, there’s something for everybody out there! For example, “Find your secure and sustainable home. The leading marketplace for rural, remote, and off-grid properties worldwide.” (If you think that you have trouble with your basement flooding, try owning a place 50 feet underground. (Today’s podcast is found here and this week’s is sponsored by Candor. Candor’s authentic Expert System AI has powered more than 2 million flawless, hands off underwrites. Every credit risk decision Candor makes is backed by a Warranty, eliminating repurchase worries. Hear an interview with author Anna DeSimone on hidden biases in mortgage lending and how consumers can properly vet financial institutions.)

It is a very simple day for the bond market.  There was a ton of anticipation for today’s jobs report after the past two iterations raised concerns about flagging labor market conditions.  Indeed, the Fed’s decision to cut by 0.50 vs 0.25 last month had much to do with the fear/expectation that reports like today’s would be in shorter supply going forward.  In other words, a 0.25% cut would have been more likely if they knew that today’s NFP would come in at 254k vs 140k with unemployment ticking down to 4.1%.  The bond market is taking care of it though.  Futures have priced 2024 rate cuts back to levels seen before the last jobs report. Bonds are tanking, as you’d expect.  The only salvation here would be the notion that this is just one jobs report in a recent run that’s been mostly weaker and that perhaps the next one won’t be so damning for bonds. 

Chief capital markets officer William Chang is stepping down “to explore new opportunities within the mortgage banking sector.”

Franklin Credit Management Corp. agreed to pay $300,000 to Massachusetts and not sell its portfolio of state loans to a different servicer.

Buyers aren’t necessarily responding to greater inventory and lower mortgage rates.

The conforming 30-year fixed rate mortgage rose to 6.12% on Oct. 3.

writes the Senior Economist for LendingTree

ISM Makes For Negative NFP Lead-Off

If the bond market has to digest an ISM Services report that is much stronger than expected, it would be best not to have it come out less than 24 hours before the big jobs report.  Otherwise, you get a day like today where the data fueled a pre-NFP (nonfarm payrolls–the headline component of Friday’s jobs report) lead off toward higher rates.  

Econ Data / Events

Jobless Claims

225k vs 220k f’cast, 219k prev

S&P Services PMI

55.2 vs 55.4 f’cast, 55.7 prev

ISM Services

54.9 vs 51.7 f’cast, 51.5 prev

ISM Employment

48.1 vs 50.2 prev

ISM Prices

59.4 vs 56.3 f’cast, 57.3 prev

ISM Activity

59.9 vs 53.3 prev

Market Movement Recap

08:34 AM Weaker overnight and no major reaction to Jobless Claims.  MBS down 3 ticks (.09) and 10yr up 2.6bps at 3.81

10:05 AM Weaker after ISM. 10yr yields are now up 5bps at 3.833 and MBS are down another 3 ticks (.09) for a total of 6 ticks (.19) on the day. 

03:16 PM pre-NFP drift toward weaker levels.  MBS down 9 ticks (.28) and 10yr up 6.3bps at 3.846

05:13 PM bonds closed near weakest levels, and right in line with the previous update.

Depending on how tuned in you’ve been to changes in our daily rate tracking, the news may be getting old at this point.  Rates have done almost nothing but move higher ever since the Fed cut rates on September 18th. While this continues to be a challenge for some folks to comprehend, it was always a risk, which is why we spent several weeks warning about the possibility leading up to Fed Day.  Thankfully, the increases have been small in the bigger picture.  Today was just another day in that regard, although it was one of the bigger bumps in the road if we look at today’s highest rates versus yesterday’s lowest (Wednesday saw higher rates in the morning and lower rates in the afternoon.  Thursday was the opposite pattern).  Lenders increasingly increased rates throughout the day after an important economic report (ISM Services) showed much stronger than expected growth.  As important as ISM data is, it’s nothing compared to Friday’s forthcoming jobs report.  No other piece of scheduled economic data has as much power to cause volatility for rates. At this point the market has done a fairly good job of processing any remorse it might have had about getting too excited for Fed day and/or any anxiety that has been building about the econ data not being weak enough to justify a fast rate cut pace.  This leaves Friday’s data in a good position to either help or hurt in a fairly big way.  The size of the reaction is generally proportional to size of the “beat” (job creation higher than expected) or “miss” (the opposite). There’s no way to know which one we’re going to get ahead of time.  Occasionally, the data leads the bond market to “thread the needle” with rates ending up not far from where they started.  

Tis the time of year when pumpkins have magically appeared in bins outside supermarkets and on porches. Which state grows the most? It’s hard to beat Illinois with its 18,000 acres of pumpkins. 2,100 miles away, in California (with roughly 900,000 acres of grapes), what happens when a family with a vineyard tries to do a tiny bit to help the housing/shelter market? In California, it isn’t pretty: Decent people, not criminals… They should have painted it camouflage. In addition to the terrible personal toll, wide swaths of housing are wiped out by fire (Maui) and now Helene, impacting supply and demand. Whether it is trends in residences, income, or credit analysis, things change. Do the Agency guidelines fit the current trends in income? Arguably not. (Capital markets staffs certainly can’t hedge GSE changes to gfees.) What about non-owner DSCR loans, are you concerned about that credit risk? You can’t hedge that either. Time will tell. For supply, new listings came in recently 8% ahead of a year ago, sending total active inventory 33% higher versus last year, while the median listing price was 1% lower, all encouraging signs for buyers. (Today’s podcast is found here and this week’s is sponsored by Candor. Candor’s authentic Expert System AI has powered more than 2 million flawless, hands off underwrites. Every credit risk decision Candor makes is backed by a Warranty, eliminating repurchase worries. Hear an interview with Nectar’s Derrick Barker on the long-term implications of builders not meeting market demand for homes.)