Referring to the past 3 business days as a “losing streak” for mortgage rates may be a bit harsh.  During that time, the average top tier 30yr fixed rate rose less than an eighth of a percent–the smallest increment typically separating one rate from the next.  This also meant they remained well below the recent highs from late April (another 0.375% higher than yesterday’s levels). In nuts and bolts terms, yesterday’s average was 7.10.  Today’s is 7.05.  And April 30th was 7.51%.  Prefer pictures?  Here you go: [thirtyyearmortgagerates] In terms of the interesting stuff that has an impact on rates from day to day, there really hasn’t been much going on this week.  Yes, rates have moved a bit, but the underlying market movement hasn’t been clearly driven by any data or headlines.  The only exception would be some volatility this morning surrounding comments from several Fed speakers, but trading levels were not much different than before the comments. Tomorrow brings the release of the minutes from the most recent Fed meeting (3 weeks ago).  In this environment of high transparency and frequent speeches from Fed members, it’s hard to imagine that the minutes will cause any drama.  This is a bit of a paradigm shift for some market watchers who have seen the minutes send rates quickly higher or lower in the past.  But that was then, and this is now… probably.  

Ever since the inflation data in Q1 proved to be less rate-friendly than we might have hoped, the Fed has been exactly as unfriendly as we might have expected.  In other words, things have been logical.  The Fed didn’t have enough confidence to talk about rate cuts before and they have even less confidence now.  Still, they had to address the improvement in April’s data (out last week) and they’ve been quick to say they need several more months of the same in order to cut.  Indeed, the conversation has shifted decidedly back in favor of “caution against cutting too soon” as opposed to caution against sabotaging an economic recovery by leaving rates too high for too long.  Apparently, bonds are well-priced for such things. Even as several Fed speakers reiterated hawkish messages this morning, yields moved modestly lower.

Tuesday is 4th day in the 11 day weekend culminating in next Monday’s Memorial Day holiday.  The base case is for broadly sideways movement in the bond market with anything inside a range of 4.34 to 4.50 being completely uninteresting.  Fed speakers were the only game in town on today’s event calendar and at 4.41-ish, yields are safely in the middle of the range. 

The Federal Housing Administration also instituted a new language preference requirement that servicers must observe in transfers.

At an industry conference, Consumer Financial Protection Bureau Director Rohit Chopra said he was open to suggestions on how to increase choice and competition to benefit mortgage lenders and borrowers.

The move may help address nonbank liquidity risks highlighted in a recent FSOC report, Sam Valverde, acting president, told attendees at an industry meeting.

BofA is betting the Federal Reserve will make only one cut to the federal funds rate by the end of this year. MBA says originators are in for a $1.6 to $1.8 trillion year.

The goal of Newrez’s litigation, OneTrust claims, is not to secure a favorable judgment, “but to harm OneTrust’s standing and reputation.”

Mostly Flat After Initial Weakness

There’s a risk that a theme will emerge in the coming days, but a theme that only matters to people who write daily commentary on the bond market.  It involves an absence of new, interesting things to say as well as plenty of repetition. If today was any indication, the bond market’s base case for this week is to play the “11 day weekend” game that we joked about last week.  It looked like we might actually have some volatility earlier in the session.  Bonds sold off modestly at the 8:20am CME open, but the damage was limited to roughly 3bps in 10yr yields and much less than that by the 3pm CME close.

Market Movement Recap

09:46 AM Unchanged overnight, but sellers were lined up for the 8:20am CME open.  10yr now up 2bps and MBS down 2 ticks (.06).

12:43 PM Off the weakest levels and flat.  MBS unchanged and 10yr up 1.6bps at 4.438

03:11 PM Little changed.  MBS down 1 tick (.03) and 10yr up 1.4bps at 4.437

Mortgage rates moved modestly higher on the two days at the end of last week.  This put an end to a decent winning streak that had been in place since the beginning of the month, but it stopped well short of undoing much of the progress.  Technically, today’s average mortgage rates are higher for a third straight business day, but most prospective borrowers won’t even notice. For many lenders, the changes are so small that the average borrower won’t see any change from scenarios quoted on Friday afternoon.  In cases where there is a difference, that difference would be very small.   There were no significant sources of volatility in the bond market today (bonds drive interest rate changes) and that’s a theme that could continue for much of the week–at least as far as scheduled events are concerned.  In other words, there are times when we can point to calendar events that are highly likely to cause rate movement (like last week with the CPI data).  Then there are times like this week where it would not be a surprise to go the entire week without a big reaction to a scheduled event.  If you’re a fairly devout market watcher, you may be thinking “what about the Fed minutes on Wednesday?”  While it’s true that some past examples of Fed minutes have had a big impact on rates, it’s currently hard to imagine what they might contain that would constitute a surprise or new information in the current environment. 

Greetings from the Arch MI meeting room space! Heard in the hallways here at the MBA’s Secondary conference in Manhattan: “Our loan officers are telling their clients, ‘Yeah, the best time to buy a house was five years ago. The second-best time is… now.’” People’s memories are short, no one writes about how our industry helped millions of people during the pandemic, and the mainstream press is always looking for sensationalism. The latest example is “zombie mortgages”: 2nd mortgages taken out during 2008-2010 and that haven’t been paid. And we’re to blame? UWM’s DPA program, purportedly tied to Freddie, has garnered some interest. There’s another saying: the stock market is not the economy. But last week the Dow Jones Industrial Average closed above 40,000 for the first time in history. Apparently, investors have confidence the Federal Reserve will get inflation under control without throwing the country into a recession. Should we attribute this to the policies advanced by President Joe Biden and Secretary of the Treasury Janet Yellen? Some will. On an annualized basis, during the Trump Administration the Dow rose 11.8 percent, Barack Obama (+12.1 percent) and Bill Clinton (+15.9 percent). (Found here, this week’s podcasts are Sponsored by Truv. Truv lets applicants verify income, employment, assets, insurance, and switch direct deposits. Unlock the power of open finance, with Truv. Today’s features an interview with attorney Jay Beitel on the Supreme Court finding the funding of the CFPB constitutional.)