Following a breach at National Public Data, the National Consumer Law Center recommended consumers consider a credit freeze, but that could also hinder a mortgage applicant’s home purchase depending on where they are in the process, an expert says.

Mortgage professionals interviewed say there should be more focus on increasing housing supply.

Bonds Snooze Through Fed Minutes

At first glance, and based on conventional wisdom, today’s most relevant calendar consideration for the bond market should have been the 2pm release of the Minutes from the most recent Fed meeting.  In reality, however, it would have been hard for bonds to care any less.  This isn’t a surprise considering we already knew the Fed discussed cutting in July and has all but promised to cut in September.  The day’s biggest source of inspiration was the confusion surrounding the scheduled 10am release of the QCEW payroll data as discussed in the AM commentary.

Econ Data / Events

Quarterly Census of Employment and Wages (QECW) for March 2024

Revised down 818k 
expectations ranged from 600k to 1.2m

Market Movement Recap

09:42 AM Flat overnight with small gains early.  MBS up 3 ticks (.09).  10yr down half a bp at 3.802

01:01 PM Plenty of volatility in a narrow range surrounding QCEW.  MBS now up an eighth of a point and 10yr down 2.4bps at 3.783.

02:07 PM Modest additional improvement after Fed Minutes.  MBS up 5 ticks (.16).  10yr down 4bps at 3.766.

03:58 PM Off the best levels, but MBS still up 2 ticks (.06) and 10yr still down 1.4bps at 3.793

Although the day to day changes in mortgage rates have been modest recently, the slow and steady improvement has brought the average top tier 30yr fixed rate back near the lowest levels in more than a year.  Apart from 2 days earlier this month, rates are as low as they’ve been since May, 2023.  There were no significant sources of inspiration for today’s market movement although there was some volatility surrounding the release of updated payroll figures for extremely old labor market data.  The Quarterly Census of Employment and Wages (QCEW) is the closest thing we have to a “final answer” to the questions that are asked every month regarding the number of jobs in the U.S. economy. While it has far more coverage than the monthly jobs report, it sacrifices timeliness.  Today’s revisions covered April 2023 through March 2024–ancient history when it comes to a financial market that is looking for real-time indications of labor market softening. Nonetheless, some market participants would argue that a downward revision–stale though it may be–at least does nothing to hurt the case for lower rates.  That said, it will be the more timely economic data that actually dictates the momentum between now and the Fed meeting in about a month.

Today brought the release of the first benchmark revision to the payroll data through March 2024.  It caused widespread confusion both before and after it came out–partly because it didn’t come out on time, but mostly because it’s esoteric, nuanced, and incredibly stale data.  After all, the time frame in question began in April 2023 and stopped just under 6 months ago. 
In other words, this is mostly data for research economists and not an ideal resource for timely decision making.  Still, some would say that a drop in the average NFP of 68k each month during that time frame means the Fed should be less inclined toward “patience” on the rate cut front due to an impressively resilient labor market.  Unfortunately, it’s far from as simple as it sounds and the confused trading reaction speaks to that complexity. 

This morning, I head from Los Angeles to Orlando, FL for the big NAMMBA Connect event. I received this question. “Rob, in your travels, are you hearing that there might be new thinking when it comes to LO comp issues?” The industry, the MBA, the CFPB, and others know that the firm guidelines for LO compensation need to be reviewed, and hopefully with industry input. If you ask any LO out there, they’d like to see the rules change for bond loans, for competitive reasons (which actually help borrowers), or for mistakes. Oddsmakers in Las Vegas believe that if and when a change in LO comp happens, it will be centered on bond loans since changing LO comp rules would actually help bond borrowers, often low- or moderate-income people, “get on” the home ownership train. (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 Argyle’s John Hardesty on the latest happenings from his company, including the intensive vetting and testing required to earn status as a GSE-approved provider.) Lender and Broker Software and Services Ask yourself this question: when evaluating the current market value of a subject property, are you using the best AVM on the market? We understand that when making critical business decisions, accuracy, and details matter. That’s why we’re highlighting First American Data & Analytics and their Procision AVM to have your back. First American’s Procision AVM updates and tests every residential property in the United States and updates the models’ underlying data on a daily basis. And the best part? Their AVM is designed for your specific business need – so you get the best results and highest satisfaction. But don’t just take our word for it – their data speaks for itself. As a nationwide, single-source data provider, First American Data & Analytics will fuel your biggest ideas so you can focus on growing your bottom line. Learn more about the Procision AVM and receive a free data sample.

Two weeks ago, we saw a sudden surge in refinancing activity. The Mortgage Bankers Association (MBA) reported that, during the week ended August 9, its Refinancing Index soared by almost 35 percent, reaching its highest level in over two years, and refinancing represented nearly half of all mortgage applications that week. A bubble? Perhaps, but a short-lived one. The “bubble” didn’t pop this week, but it did deflate.  Even as mortgage rates eased for the third week, the volume of refinancing applications, as well as mortgage activity in general, retreated. The Market Composite Index, MBA’s measure of m application volume, decreased 10.1 percent on a seasonally adjusted basis.  On an unadjusted basis, the Index was down 11.0 percent compared with the previous week.   The Refinance Index plunged by 15.0 percent compared to the previous week but was still 90 percent higher than the same week one year ago. The refinance share of mortgage activity decreased to 46.3 percent of total applications from 48.6 percent. [refiappschart] The seasonally adjusted Purchase Index was 5.0 percent lower than the prior week and was down 7.0 percent on an unadjusted basis. Purchase applications were 8.0 percent below those in the same week in 2023. [purchaseappschart] “Both mortgage rates and mortgage applications have now stabilized after a few weeks of financial market volatility, which led to a quick drop in mortgage rates. The 30-year fixed mortgage rate declin(ed) for the third consecutive week to 6.5 percent, the lowest since May 2023,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The level of refinance applications remains 23 percent higher than a month ago and the past two weeks have seen the strongest weekly readings since 2022, as borrowers have sought lower rates . FHA refinance applications bucked the trend and increased for the sixth straight week.” 

Without considering the potential of building equity in a property, in 48 of 50 markets renting was better; appreciation flips that to 29 cities in favor of buying, First American said.

A report from the Office of Inspector General disclosed that the Federal Housing Finance Agency issued enforcement actions against two Home Loan banks.

Federal Reserve Gov. Michelle Bowman said she has concerns about an uptick in inflation and will need to see more positive data before supporting an interest rate cut.