I head to Central Texas today (A53 on Southwest; something about maybe seeing an eclipse); statewide Texas home ownership rate is about 64 percent. This is a shade lower than the 66 percent nationwide. (Home ownership & operational challenges facing lenders are a couple of the topics Mike Metz with Arizona’s V.I.P. Mortgage will discuss today at 2PM CT.) And a huge percentage of those homeowners have low fixed rates. People can be “locked-in” or constrained in their ability to make appropriate financial changes, such as being unable to move homes or sell assets due to tax burdens. In the U.S., nearly all 50 million active mortgages have fixed rates, and most have interest rates far below prevailing market rates, creating a disincentive to sell. These frictions, whether institutional, legislative, personal, or market-driven, are a real problem. The FHFA, Fannie & Freddie’s conservator, has a research piece on this since residential real estate exemplifies this challenge with its physical immobility, high transaction costs, and concentrated wealth. (Found here, this week’s podcasts are sponsored by Loan Vision. With Loan Vision, the mortgage banking industry’s premier mortgage accounting solution, you can take your accounting department from “cost center” to “revenue generator,” operating more efficiently and profitably. Hear an interview with HireAHelper’s Miranda Marquit on a new study that shows that as Millennials age, they’re moving less than ever.) Customer Relationship Management

The jobs number came in at 303k this morning versus a median forecast of 200k.  Previous month revisions added a minimal 22k to the 3 month total and unemployment ticked down to 3.8% from 3.9% last month.  Numbers like this demand a sacrifice from the bond market, and the bond market quickly acquiesced.  That said, if we were forced to guess at the size of the sacrifice, it would probably be bigger than the one we’re actually seeing so far today.  In fact, bonds were almost back to pre-NFP levels by 10:30am and MBS have consistently traded a bit higher than yesterday’s opening levels.  Bottom line: yes we’re weaker, but it could be a lot worse.

Industry stakeholders predict the bombshell allegations around how United Wholesale Mortgage does business will impact customer sentiment and could lead to more regulatory oversight.

Federal Deposit Insurance Corp. Chair Martin Gruenberg said the agency would prioritize urging banks to invest in underserved communities as part of a revised economic inclusion plan unveiled Thursday.

Loan documentation deficiencies are a sign of sloppiness in mortgage lender practices, Aces Quality Management said.

After gaining access to On Q systems via vendor software, unknown parties were able to obtain and remove client personal information, including Social Security numbers.

By imposing this designation, the Federal Housing Finance Agency and the Biden Administration will only drive more industry consolidation and increase systemic risk writes the Chairman of Whalen Global Advisors writes.

Mysterious Afternoon Gains Bring Yields Back Into The Range Just Before Jobs Report

It was a surprisingly and mysteriously decent day for the bond market (and even more decent for mortgage rates).  Unlike other days this week, overnight and early morning weakness was minimal.  Gains began ramping up right after the Jobless Claims data.  The direction of the move is no mystery, considering claims came in at 221k vs 214k, but the pace of the move is harder to explain.  Claims don’t typically have as noticeable an impact.  No matter… yields drifted sideways to slightly higher into 2pm and everything seemed to make sense until another sharp little rally over the following 2 hours.  A big stock sell-off was clearly involved and perhaps some buzz surrounding geopolitical risks.  All told, it was enough to get yields back into the range that was broken on Monday (4.32% key level in 10yr) right before the jobs report flips a coin on another big breakout.  Of course if the coin lands on the other side, rates are more likely to take a friendly lead-off heading into next week’s CPI.

Econ Data / Events

Jobless Claims

221k vs 214k f’cast, 212k prev

Continued Claims

1791k vs 1810k prev

Market Movement Recap

09:40 AM Sideways to slightly weaker overnight. Stronger after data.  MBS up an eighth.  10yr down 3.2bps at 4.318

01:26 PM Off the best levels with MBS up only 1 tick (0.03).  10yr 0.4bps higher at 4.354.

03:40 PM Flight to safety surge in the PM with 10s down 4bps to the lows of the day at 4.31.  MBS up an eighth.

Mortgage rates may have been able to claim some resilience over the past few days, but it hasn’t been a great week in general.  The average lender jumped quickly over 7% for a top tier conventional 30yr fixed rate on Monday.  The next two days were much less interesting. Now today, the not-so-great week is showing some signs of promise.  Without much by way of provocation or justification, rates dipped just a hair under 7%.  The nuts and bolts explanation is that the bond market improved this morning following a somewhat weaker reading in Jobless Claims, but other factors relating to timing and recently defensive pricing strategies among lenders help flesh out the story. More importantly, everything that has happened up until today is of secondary importance to what’s about to happen when it comes to interest rate volatility, or at least to the POTENTIAL for volatility.  That’s because tomorrow morning brings the Employment Situation, otherwise known as “the jobs report.”  Along with the Consumer Price Index (CPI), this is one of two reports with vastly more power to cause drama for rates than any other report. The jobs report will be released at 8:30am tomorrow morning.  There is no way to know if it will be good or bad for rates ahead of time–only that it can do either of those things in grand fashion.  That said, it occasionally threads the needle without much fanfare.  If that were to happen, it would place even more focus on the next CPI report which happens to be coming out next week.  

Thursday is shaping up to be a calmer and less eventful trading day than the two most recent examples.  It’s similar in the sense that there was some weakness to overcome this morning, but pleasantly different in the sense that the weakness was overcome very quickly.  The morning’s economic data played some role in the resilience with both Challenger Job Cuts and Jobless Claims conveying some incremental labor market weakness.  With no other scheduled data today and no fireworks expected from the afternoon’s Fed speakers, the focus is decidedly shifting to Friday morning’s jobs report.