The community development financial institution was the nation’s top non-qualified mortgage lender last year, according to one ranking.

But still-elevated interest rates contributed to a “deteriorating outlook” for independent mortgage banks this year, Fitch Ratings said.

The Congressional Budget Office put an estimate on the net government subsidy provided to the Federal Home Loan Bank System, including the so-called “implied guarantee,” on bonds priced and sold to investors.

The nearly 50% homeownership rate in 2023 marked the most significant increase since the Great Recession, according to NAHREP.

Calmer Day of Losses. Data Resumes on Thursday

Without any notable econ data on tap, bonds were left to their own devices on Wednesday.  This initially involved moderate overnight weakness  and mostly sideways trading during domestic hours.  From a calendar standpoint, the 30yr bond auction was the lone tradable event.  While it helped a bit at first, bonds were soon right back where they started.  In hindsight, it was a forgettable, holding pattern type of day ahead of more relevant data on Thursday morning.

Market Movement Recap

09:50 AM Moderately weaker overnight as rate cut odds decrease.  10yr up 2.7bps at 4.178.  MBS down an eighth.

01:04 PM Stronger after 30yr bond auction.  MBS down only 3 ticks (.09) and 10yr yield up 3bps at 4.182

03:08 PM Treasuries back near weakest levels with 10yr up 3.9bps at 4.19.  MBS down an eighth.

Mortgage rates are nowhere near their highs from a few short weeks ago, let alone the much higher highs from late 2023, but they are at the highest levels this week after rising for the past 3 days. Monday’s increase was small, forgettable, and random.  Tuesday’s rates were driven higher by the market’s reaction to the inflation data that came out this morning.  Markets were arguably still reacting to the implications of that data today, but less forcefully.  In fact, many lenders are essentially right in line with yesterday’s latest levels. More importantly, the overall increase of the past 3 days is rather small compared to past examples of the market reacting to unexpectedly high inflation readings.  This could be a sign that investors increasingly expect economic data to shift in a rate-friendly manner.  At the risk of stating the obvious, data would actually need to make that shift in order for broad-based rate improvements. Inflation and labor market data is the most important in that regard, but tomorrow’s Retail Sales report has frequently had an impact when it has come in far from the median forecast.  The Producer Price Index has also had an impact a few times recently and it will be released at the same time as Retail Sales (8:30am ET).

Bonds are off to a weaker start today, but not in a major way and not due to any interesting developments.  In general, there was some optimism heading into yesterday’s CPI and while it briefly seemed to have been justified (in the first few minutes after the data), traders concluded that the Fed would only be more “on hold” when we heard from them next week.  Fed Funds Futures agreed:

This week’s Treasury auction cycle also helped explain some of yesterday morning’s weakness as traders positioned for the 10yr auction.  Today’s only relevant calendar item is the 30yr bond auction at 1pm.  It doesn’t have quite the pedigree of the 10yr auction, but being the last auction of the cycle, it could give way to a shift in tone after 1pm.  In general though, bonds have rejected the move toward 4% 10yr yields and are now waiting for Thursday’s econ data as well as next week’s Fed announcement. 

To the best of my knowledge my cat Myrtle, despite being at the top of the food chain, has never hunted eagle… But who can resist a good live bald eagle cam from California? Anyone who has looked at a map knows that Lake Tahoe and Reno are west of Los Angeles. (Repurchase concerns stretch coast to coast, and are the focus of today’s L1 interview with attorney James Brody.) That Maine is south of Paris. That the majority of Canadians live south of Seattle. If the world’s population wanted to live with the density of New York City, all 8 billion could fit in Texas. (And Texas is less than half as big as Alaska!) Geography and demographics fascinate many. The National Zoning Atlas wants to compile all of America’s zoning rules into one database. Why does this matter? Some will tell you that zoning rules are a piece of the nation’s housing affordability problem, and getting more transparency might help provide a solution. (Found here, this week’s podcast is sponsored by Lender Toolkit. With Lender Toolkit’s AI-powered AI Underwriter and Prism borrower income automation tools, you’ll be able to get loans approved in under two minutes. Hear an interview with Mike McAuley and Brett Brumley on the current mortgage industry’s woes and solutions.) Lender and Broker Services, Products, and Software “Mortgage brokers work their magic in front of borrowers. At wemlo®, our processors work their magic behind the scenes. It’s simple: brokers quickly onboard with wemlo and then start passing loans off to processors who hustle to get loans cleared-to-close as quickly as possible. Think of wemlo as a vanishing act that delivers real results. In addition to offering award-winning support, wemlo offers processing support in 47 states plus Washington D.C. for dozens of loan products and lenders. Ready to say presto to efficient processing? Book your demo today. NMLS ID 1853218.”

A surge in refinance applications drove mortgage application volume higher for the second straight time last week. The Mortgage Bankers Association said its Market Composite Index, a measure of that volume, increased 7.1 percent on a seasonally adjusted basis, 8.0 percent before adjustment.   Refinancing was 12.0 percent higher than the previous week and surpassed the Refinancing Index level during the same week in 2024 by 5.0 percent. Refinancing accounted for 31.6 percent of applications, up from 30.2 percent the previous week. [refiappschart] The seasonally adjusted Purchase Index rose 5.0 percent from one week earlier and was 6.0 percent higher unadjusted, remaining 11 percent lower than the same week one year ago.   [purchaseappschart] “Mortgage rates dropped below 7 percent last week for most loan types because of incoming economic data showing a weaker service sector and a less robust job market, with an increase in the unemployment rate and downward revisions to job growth in prior months,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Purchase application volume increased for the week but remains about 11 percent below last year’s level. By contrast, refinance volume picked up by 12 percent, with a larger, 24 percent increase in the government refinance index. While these percentage increases are large, the level of refinance activity remains quite low, and we expect that most of this activity reflects borrowers who took out a loan at or near the peak of rates in the past two years .”

In an address on Tuesday, economic advisor Lael Brainard also discussed the controversy surrounding the president’s proposed title waiver program.