There’s support for Reg X modernization, but both consumer and mortgage groups are concerned about language mandates, and the industry opposes fee restrictions.

The latest violations come as the bank expects to face more than $3 billion in regulatory fines for anti-money-laundering failures.

The latest inflation news is almost sure to result in a 25 basis point cut next week, but some are still hoping for 50 basis points, as well as reductions totaling almost 200 basis points through the end of 2025, Wolters Kluwer found.

The government agency’s new issuances in August totaled over $40 billion, marking a high not seen since late 2022.

Does Today’s Inflation Data Change Anything?

Bonds initially sold off following the higher-than-expected core CPI reading this morning.  Shelter inflation spiked back to troubling territory as well–something that was perhaps an even bigger problem for bonds.  Nonetheless, bonds moved back to stronger territory in short order.  The only lingering damage was to the Fed’s rate cut outlook for next week.  Markets were already squarely in the 25bp camp, but today’s data went a long way toward sealing the deal.  When it comes to the longer term rate outlook, today means nothing.  The Fed and financial markets would be hypocritical if they allowed one inflation report to materially alter the outlook.

Market Movement Recap

09:39 AM Slightly stronger overnight then modestly weaker after CPI.  MBS down 3 ticks (.09) and 10yr up 1.9bps at 3.665

10:41 AM Back into stronger territory now with MBS up 2 ticks (.06) and 10yr down 2.4bps at 3.622

01:03 PM bonds were weaker into the 10yr auction and remain just barely weaker despite stronger results.  10yr up 1bp at 3.655 and MBS down 3 ticks (.09).

03:26 PM Back to ‘unchanged’ now with MBS actually up 1 tick (.03) and 10yr up only 0.3bs at 3.649

Mortgage rates moved lower again today despite a key inflation report coming in higher than expected.  This is counterintuitive for anyone who’s been following rate movement closely over the past few years.   During that time, inflation reports have had a strong, direct connection to mortgage rate volatility with higher inflation begetting higher rates and vice versa.  But as we discussed yesterday, the prominent role of inflation data is fading to that of a supporting actor.  It is now the labor market that is almost always on center stage. It’s not that inflation doesn’t matter or that it couldn’t matter again in the future.  Rather, it’s just that today’s Consumer Price Index (CPI) was only one report.  It would have been unable to undo the net impact from the past 3 CPI reports which all conveyed significant progress toward the Fed’s 2.0% annual inflation target (in fact, if you asked just those 3 reports, we’re already below 2.0% annually). Despite all of the above, the bond market (which dictates rates) still gyrated a bit this morning.  It simply wasn’t enough to derail the mortgage rate improvements.  Many lenders were relieved to see an absence of negative backlash.  Their pricing improvements suggested they had been waiting to see how today’s data would impact the market.  Do note, however, that some lenders improved rates yesterday afternoon and are not much better today.  Also note that due to the structure of the underlying market for mortgage backed securities, there are certain pricing advantages at rates that end in .125% and .625%.  As such, when broad national averages (i.e. “best case scenarios”) approach 6.125%, there can be larger-than-normal swings in that direction that won’t readily apply to loan scenarios at higher rates.

When I board an airplane, it is to go from point A to point B, like today from Denver to San Francisco. As long as it’s on time and somewhat economical, put me in whatever seat in steerage. But others, apparently, want to savor the experience in comfort. Swiss Air has taken this to an extreme, and now must re-balance their jets due to the weight of first class seats! The Federal Reserve’s Open Market Committee is fully expected to “take some weight off” of rates next week. For those of you playing along at home, the FOMC meets three more times in 2024: September 17-18, November 6-7, and December 17-18. So, beware anyone saying that the Fed is going to cut rate five times in 2024. Interest rates are one thing, but everywhere I go originators are doing things to help their clients and stay relevant, like educating them, hosting classes with real estate agents for people in the area and studying up on their company’s products and services. (Today’s podcast is found here and Sponsored by Richey May. Richey May’s consulting, cybersecurity, business intelligence, and automation services are designed by mortgage experts to help you continue to drive growth and increase profitability. Hear an interview with Mace Innovations Chris Mace on the best ways for companies to approach change management.) Lender and Broker Software, Services, and Loan Programs “Yep, we’re seeing it too. App volume, credit report volume… It’s all trending upward, so get ready. At Service 1st, we’re prepping for the fall conference season. That includes the MBA Annual in Denver. We’ve never had more near instant IRS transcript pilots, opportunities with ICE Mortgage, reductions in credit reporting spend, and much more to announce. We’ve been busy during the slowdown, and we’re stoked to show what we’ve been up to. Saddle up, Partner! Let’s get those meetings scheduled now for Denver. Book here.”

Heading into today’s CPI data, there were valid doubts about the data’s role as one of the two biggest market movers (the jobs report being the other).  Those doubts proved to be well founded as far as MBS and Treasuries are concerned with all of the initial reaction being erased in the first two hours of trading.  Specifically, bonds lost ground after the data, but gained it all back.  The only place we see any lasting negative impact is in near-term Fed Funds Futures, where CPI has further tipped the scales in favor of a 25bp rate cut next week.  So why aren’t other bonds suffering?  It all goes back to the thesis that the overall pace of rate cuts matters more than the size of the first one.

To show that this isn’t merely a phenomenon of bonds versus Fed Funds Futures, consider longer term futures contracts.  For example, Even the June 2025 contract is showing a return to pre-data levels.  In other words, it’s all about the pace of rate cuts and not the size of the first one.

Homebuilders that get more than a 10th of their revenue from the U.S. have surged, but concerns over an economic slowdown have cast a shadow on stocks recently.

Issuance of CMBS has been torrid recently, with overall sales this year through Monday of $69.7 billion.