The Federal Reserve is far from the only game in town when it comes to exerting influence on interest rates.  That’s a loaded statement, of course, considering we spent last week explaining why mortgage rates often go the  opposite direction from a Fed rate cut/hike.  True to form, rates have generally inched higher since last week’s Fed rate cut. But the Fed will be the first to tell you that their decision-making process is primarily informed by what’s going on in the economy.  On that note, they are on the same footing as the financial markets that determine the day to day changes in rates.  The labor market is a particularly hot topic when it comes to monitoring economic data right now.  The more it looks like it might be weakening, the more keen the Fed will be to keep cutting rates.  Today’s Consumer Confidence report showed the biggest gap in years between respondents who said jobs were plentiful and those who said jobs were hard to get.   After that data came out this morning, the bond market (which dictates rates) began to improve quickly.  Mortgage lenders who began the day by offering slightly higher rates than yesterday were able to issue mid-day changes.  The resulting levels leave the average lender just a hair lower than yesterday.   There will be more potentially important economic data on Thursday and Friday, but the biggest reports hit during the first week of October. 

Today I leave Illinois, with the world’s largest corn maze, and head to Nebraska, with the world’s largest ball of stamps, things that make life interesting. (Nebraska is also the source of CliffsNotes, among many things, invented in 1958.) Regardless of where I travel, regulation and its cost to lenders, and therefore the consumer, is a constant refrain. My cat Myrtle would have agreed wholeheartedly. To that point, I recently received this note from an industry vet: “Rob, I think that with regard to the significant cost of regulation, the industry needs to change its rhetoric from, ‘Things that cost lenders a lot of money and don’t add anything to revenue,’ to ‘Things that increase the cost of a consumer’s loan transaction.’” The title biz is not immune to trends in our biz, and Nuria Rivera, CEO of Novation Title Insurance, joins Kristin Messerli and Robbie Chrisman on this month’s episode of Mortgages with Millennials, today at 10a PT/1p ET, for a discussion on Latino housing, the Hispanic Wealth Project, why reaching the Latino community should be an important part of your business strategy, the purchasing power of the segment, as well as Nuria’s story of immigration and entrepreneurship and the importance of understanding the culture. (Today’s podcast is found here and this week’s is Sponsored by Silk Title Co. Silk is for lenders who have centralized operations, are tech driven, process oriented, focused on the borrower experience, standardized in their approach, and most importantly… collaborative. Listen to an interview with Panorama Mortgage Group’s new President Hector Amendola on the importance of companies growing their Latino book of business.)

Monday’s trading session offered some hope that the post-Fed correction was losing steam, but purely from a technical standpoint.  All we really know at times like this is that bonds were keen to rally heading into last week’s Fed announcement and had generally been selling ever since.  At some point, that selling will run its course, even without the influence of economic data.  Earlier this morning, it looked like selling had not yet run its course!  Losses weren’t extreme, but enough to keep the correction going.  Things are changing after a decisively weaker reading in Consumer Confidence.

While the lock-in effect on existing supply has helped drive consumer interest in new construction, first-time buyers have been taking a greater share of that inventory.

MV Realty has offered real-estate contracts that call for consumers to trade upfront cash for long-term home sale restrictions, potentially hampering mortgages.

Building on a prior initiative, the Federal Home Loan Bank of Atlanta is making available $5 million in grants to support efforts to assist owners of heirs’ property.

In the non-prime pool, owner-occupied properties account for most of the assets, at 55.1%; the amount of investor properties represents 41.6% of the deal.

There is a $446 difference between typical rent payments and typical mortgage payments in New Orleans.

Post Fed Correction Leveling Off?

Based on the weakness in the bond market this morning, it looked as if the post-Fed correction that began last week was set to continue into the new week.  And while that indeed may prove to be the case, there’s some room for doubt after the close.  Bonds rallied nicely in the late AM and early PM hours with both Treasuries and MBS making it back to unchanged levels. They’ve faded a bit after that, but not nearly back to the mid-day lows.  Comments from Fed’s Goolsbee lined up with the reversal, but the volume behind the move suggests that may not have been the primary motivation.  In any event, the milder weakness builds a case for the post-Fed correction potentially leveling off.  Tuesday will be more telling in that regard.

Econ Data / Events

S&P Services PMI

55.4 vs 55.3 f’cast, 55.7 prev

S&P Manufacturing PMI

47.0 vs 48.5 f’cast 47.9 prev

Market Movement Recap

09:55 AM Slightly weaker overnight and additional losses after PMI data.  10yr up 4bps at 3.781.  MBS down 6 ticks (.19).

02:06 PM Back to “unchanged” in MBS and nearly there in 10yr yields, currently up 0.1bps at 3.741.

03:42 PM Sideways for most of the PM hours.  MBS down 1 tick (.03) and 10yr up 0.3bps at 3.744

Mortgage rates rose modestly last week after hitting long term lows before the Fed announced its 0.50% rate cut.  In not so many words, mortgage rates had already gotten in position for that cut and were thus left to undergo a mild correction. The new week threatens to extend that corrective momentum as the average lender moved a bit higher again on Monday.  The counterpoint is that the underlying bond market (bonds dictate day to day rate momentum) ended up recovering in the middle of the day.  A bond market recovery is consistent with downward pressure on rates, but most lenders will wait until the following morning to make changes to their mortgage rate offerings unless the bond market moves more sharply.  Point being: mortgage rates are indeed higher today, but momentum in the bond market suggests there’s at least a possibility that the post-Fed correction is leveling off.