The Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency proposed a rule that would revert the anti-discrimination framework to its 1995 standards.

Supreme Court rulings and provisions in the recently passed budget bill are bolstering the legality of the administration’s effort to fire more than 1,000 employees at the Consumer Financial Protection Bureau.

The VA Home Loan Program Reform Act arrives after the expiration of a previous foreclosure-prevention program sent foreclosure numbers spiking this spring.

Bonds Give Free Preview of Post-Powell Momentum

Everyone loves a good free preview, but not all of the bond market enjoyed today’s version. It involved reports that Trump was considering firing Powell. Forget the nitty gritty details because markets took it very seriously if volume is any indication (highest since tariff announcement week in April). Those who pay close attention were not-at-all-surprised to see longer-term yields RISING in response. After all, a more dovish Fed could only directly control overnight rates.  This is enough to maybe help 2yr Treasuries and under, but from there on up, bonds price in higher inflation and lower global confidence in the dollar and US Treasuries. Trump later said he’s not considering firing Powell, but bonds remained skeptical with 2yr vs 10yr spreads only reversing about half of the mid-day spike.  This shows that traders felt a bit spooked about owning longer term debt in a world where something like this might actually happen, and thus re-allocated toward shorter-term debt for now.  Scary-sounding stuff aside, 10yr yields and MBS both made solid enough gains on the day.  All the drama transpired behind the scenes as far as rates were concerned (apart from a small handful of lenders who repriced for worse before repricing for the better).

Econ Data / Events

Core PPI M/M

0.0 vs 0.2 f’cast
last month revised to 0.4 from 0.1

Core PPI Y/Y

2.6 vs 2.7 f’cast, 3.0 prev

Market Movement Recap

08:32 AM Slightly stronger after PPI.  MBS up 3 ticks (.09) and 10yr down 2.4bps at 4.46

11:42 AM Bonds selling off on headlines regarding Trump considering firing Powell.  MBS now unchanged on the day and 10yr nearly unchanged at 4.48

12:41 PM Headlines retracted, but bonds not retracing the weakness.  10yr still close to unchanged at 4.48.  MBS up 2 ticks (.06) on the day

This morning brought another inflation report. Given the negative reaction to yesterday’s inflation data, there was some cause for concern. Thankfully, today’s data was more unequivocally acceptable for the bond market and–thus–interest rates. Bonds improved fairly well into the late AM hours, but then, the drama! Actually, there wasn’t much drama for mortgage rates, but behind the scenes, lenders came very close to making mid-day adjustments toward higher rates.  Some of them actually did, but most of those lenders later reversed course after the drama faded. So what was it? In a nutshell, Trump discussed firing Fed Chair Powell with some other lawmakers.  Word got out. Markets reacted.  Folks who follow this kind of stuff closely were not surprised to see that neither stocks nor longer term bonds (the stuff that dictates mortgage rates) were happy.  To be clear, 10yr Treasury yields moved HIGHER, not lower, even though the assumption is that Powell’s replacement would be more interested in cutting the Fed Funds Rate. This is just the latest confirmation of something we often repeat: the Fed Funds Rate does not dictate mortgage rates even though the two can generally and broadly correlate over time.  It’s VERY important to note that the broad correlation is due to the fact that mortgage rates and the Fed Funds Rate share common motivations.  If the Fed were to cut rates in a more arbitrary way (one that shows less regard for those motivations), it could actually be bad for longer term rates like mortgages.  And today, it almost was!

JPMorgan told FinTechs that it will charge for access to its customers’ bank information. The fees would bring big bucks to JPMorgan but eat into the profit margin of any lender or credit reporting agency or verification service. Will this become a trend with other depositories? Lenders and their originators, along with MBS investors, carefully watch trends in income and individuals. The gig economy, driven by on-demand work and services like rideshares and food delivery, is a growing part of the U.S. economy and primarily consists of sole proprietorships tracked by the U.S. Census Bureau’s Non-employer Statistics (NES) program. In 2023, the top five gig-related industries by number of individual proprietors were Couriers and Messengers, Taxi and Limousine Services, Janitorial Services, Independent Artists/Writers/Performers, and Child Care Services, all showing notable growth from 2018 figures. While not all non-employer businesses are part of the gig economy, these industries highlight the increasing prevalence and economic significance of gig-based work. Back to JPMorgan, some lenders are doing well, at least in the big bank world. JPMorgan reported that mortgage origination volume increased 26 percent YOY to $13.5 billion. Despite the jump in volume, production income actually fell, from $157 million to $151 million, but this was offset by an increase in servicing income. Wells Fargo clocked in at $7.4 billion in the quarter versus $5.3 billion for the second quarter last year. (Today’s podcast can be found here and this week’s are sponsored by Ocrolus. Ocrolus is transforming the mortgage industry with AI-powered data and analytics, featuring cutting-edge tools for automated indexing, income analysis, and discrepancy insights that empower underwriters to make timely, confident lending decisions. Hear an interview with Curinos’ Ken Flaherty and Rich Martin on key opportunities for lenders to attract, retain, and grow more profitable customer relationships, across both first mortgages and home equity products.)

Tuesday’s CPI reaction was frustrating. Bonds rallied for an hour only to sell off for the rest of the day starting at 9:30am.  Things are off to a different sort of start today. PPI was a bit lower than expected and didn’t immediately suggest a major tariff impact in the same way as some of the categories in yesterday’s CPI. Imports themselves are not included in PPI, but if a domestic producer raises prices on something with tariffed components, tariffs would effectively be responsible for the increase unless the producer had a separate reason to raise prices. Bottom line: it was easy to see tariffs spilling over to several CPI categories yesterday, thus the reversal, but the worst offenders in today’s PPI are distinctly domestic.  This likely the reason we haven’t seen a similar reversal of the initial headline reaction (which was a modest rally).

Government officials confirmed the California Democrat is under scrutiny over a long-held Maryland property he designated as a second home in 2020.

Credit availability declined in June as the job market and rising delinquency figures have some lenders concerned, the leading mortgage trade group said.

The Ocean State is the latest to enact rules prohibiting the agreements that end up tying older homeowners to long-term contracts with real estate brokers.