Hey, there is plenty of competition among lenders and among vendors. But, to the best of my knowledge, vendors and lenders aren’t doing this to one another. “There oughta be a law against it!” At the MBA Secondary Conference last week, MBA CEO Bob Broeksmit railed about the regulatory knots that bind the mortgage industry. Attorney Brian Levy agrees that’s a big problem, but disagrees with Bob’s solution in his Mortgage Musings. (Levy also gives some more thoughts on the CFPB funding case.) Regulations, and complying with them, certainly add to the cost of home loans, which in turn are passed onto borrowers of course. For lenders, cutting costs is a full-time gig. The biggest cost, of course, is personnel and LO comp, usually for several thousand dollars per loan. Of course, business models factor into it… How do you produce a loan? What about orginators who aren’t productive? Paying producers who do one loan a quarter… The money has to come from somewhere. (Found here, this week’s podcasts are sponsored by American Financial Resources, the mortgage lender that’s shaking things up by streamlining processes, bringing on the best humans in the business, and putting the customer experience front and center. Hear an interview with Angel Oak’s Tom Hutchens on how loan originators can navigate a competitive market with the increasing demand for niche products like non-QM loans and bank statement HELOCs.) Training, Products, and Software “In the movie ‘The Matrix,’ Trinity reminded Keanu Reeves’ character, ‘The answer is out there, Neo, and it’s looking for you, and it will find you if you want it to.’ Chances are she was not talking about MSR valuations, but we are. This is your sign to unlock the “MSR Matrix,” and join Optimal Blue on June 5 at 1 p.m. CT for our MSR 101: How to Value the MSR Asset webinar. MSR experts Vimi Vasudeva, Brad Eskridge, and Tony Paciente will discuss the different assumptions that factor into MSR valuations and how MSR assets can help you optimize profitability. Attendees will gain a thorough understanding of the asset from a valuation perspective, along with the differences between various valuation approaches. It’s time to optimize your MSR assets and retain the most profitable loans in your pipeline. Don’t be a glitch: register for the webinar today!”

The Federal Housing Administration’s clarification addresses interpretations of an 8th U.S. Circuit Court of Appeals decision that increased industry costs.

The billion-dollar originators are disputing Waterstone Mortgage’s alleged raiding of 60 employees two years ago, which led three offices to shutter.

The top five lenders have a combined retail home loan volume of more than $20 billion at the end of Q1 2024.

The Federal Deposit Insurance Corp.’s Quarterly Banking Profile for Q1 showed that banks’ net income margins got a boost, but FDIC Chair Martin Gruenberg said concerns around inflation, interest rate volatility and geopolitical uncertainty could mean tougher quarters ahead.

The mortgage veteran will oversee all operational aspects at Kind, a post published by the multichannel lender said.

Concocting a Narrative to Fit The Market Movement

There are certain days and even weeks where the bond market could reasonably do whatever it wants without one outcome being more surprising than the other.  This is one of those weeks.  Yields began on the doorstep of the 4.50% technical level.  If markets treated it as breakout selling cue, the result is today’s closing levels over 4.60%.  But if the market opted to maintain the range, it would be just as reasonable to see yields trading under 4.40%.  Either way, we’re left to examine the bottom shelf market movers and explain how those outcomes fit a higher/lower yield narrative.  In this case, it’s higher, but the point is that nothing has really changed and nothing is really being decided in the bigger picture.

Market Movement Recap

09:48 AM Losing ground after opening flat.  MBS down 5 ticks (.16) and 10yr up 2bps at 4.612

11:13 AM Fairly flat at weaker levels.  MBS down 5 ticks (.16) and 10yr up 3bps at 4.622

01:07 PM More losses after 7yr auction.  10yr yields up 6+bps at 4.654 and MBS down the better part of a quarter point. 

03:18 PM Off the weakest levels and sideways in the PM.  MBS down 5 ticks (.16) and 10yr up 4.1bps at 4.634

Mortgage rates most recently bottomed out on May 15th with the average top tier conventional 30yr fixed scenario being quoted just a hair under 7.0%.  It’s been a fairly consistent march higher since then, slowly at first, but more abruptly in the present week. Between yesterday and today alone, rates rose 0.18% on average.  All told the 6.99% average from May 15th was up to 7.34% at the close of business. The pace of the movement continues to belie the fundamental motivations.  Over the past few years, it’s most common to see the biggest rate volatility in response to key inflation reports, jobs reports, or Fed announcements.  None of the above have been present during the recent uptrend. The bond market (which underlies and ultimately dictates rate momentum) may have been a bit nervous to underwrite the most recent round of U.S. Treasury auctions which finally concluded this afternoon.  Bonds could also be apprehensive about the forthcoming inflation data in Friday’s PCE report.  Last but not least, the final trading days of any given month can always generate some of their own directional influence. Bottom line: the recent pain isn’t necessarily a sign of things to come.  It will ultimately depend on the tone of the new economic data in the coming days.

“I just saw three people jogging outside, and it inspired me to… get up and close the blinds.” Are you inspired to fly somewhere on vacation this summer? Hopefully your ride is smooth, unlike the recent Singapore Airlines flight; here is a riveting interview with one of the passengers about what it was like. In terms of your travel, good luck: Airlines are cutting back on routes across the U.S. even as consumer demand grows due to plane shortages, recalls, and the lack of financial viability for low-cost carriers like Spirit and Frontier Airlines. Atlanta and Orlando saw some of the biggest cuts in the number of seats available: about 860,000 fewer seats are available on routes flying out of Atlanta this summer. Bloomberg reports that Delta cut about 2.3 million total seats from its plans for the summer. Maybe you’ll be traveling to Mt. Everest, as Goldman Sach’s managing director and senior client investment strategist Elizabeth Burton recently did. She is the guest today at 11AM PT for “Mortgage Matters: The Weekly Roundup” presented by L1. (Found here, this week’s podcasts are sponsored by American Financial Resources, the mortgage lender that’s shaking things up by streamlining processes, bringing on the best humans in the business, and putting the customer experience front and center. Register here for a webinar on June 6th with Robert Pieklo and Rob Chrisman, and today’s features an Interview with Mr. Pieklo on the rationale behind private money entering the mortgage space and why the fund managed by Proprietary Capital chose AFR for investment.)

While US bonds were busy holding inside a narrow sideways range through the end of last week, pressure was building in the European bond market.  When US yields merely returned to the top of their range after Thursday’s econ data, EU yields were breaking their comparable highs.  Additionally, EU yields are now easily above their highs from April 25th while US yields still have above 10bps to go.

We would stop well short of making the case that US bonds are fundamentally informed by EU bond momentum in any major way.  Rather, the idea is that US bonds are more open to suggestion during the recent lull in relevant data and events.  One could certainly argue that the path of least resistance has been to follow the market with big-ticket inflation data releases (regional German inflation reports came out this morning).
The following chart has EU and US yields on separate axes, but with an equal range.  In other words, EU yields are moving more, and more directionally so far this morning.