It’s understandably nerve-wracking for fans of low rates to see a congressional testimony from Fed Chair Powell on the calendar.  Granted, some of those fans may not be familiar with the Humphrey Hawkins speeches, but others will remember times that they resulted in significant movement in rates.  With the lion’s share of rate movement being “lower” in the past 5 days, it would also make sense to worry that Powell might say something to derail that momentum.  But the fact is that the bigger picture momentum remains mostly dependent on what the economy does.  The Fed’s policy response to the economic data is on a fairly tight leash (i.e. their conditions for cutting/holding/hiking are well understood by markets).  With that in mind, today’s only big ticket report is JOLTS at 10am ET.  The ADP data out earlier this morning did no damage, nor would we have expected that based on the 140k vs 150k result.

Whether prompted by a tiny improvement in mortgage rates or the first stirrings of a spring market, mortgage activity reversed course last week. The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of application volume, increased 9.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 12.0 percent. The Refinance Index gained 8.0 percent during the week ended March 1, trailing the same week in 2023 by 2.0 percent. The refinance share of mortgage activity decreased to 30.2 percent from 31.2 percent the previous week. [refiappschart] The index measuring purchase applications jumped 11,0 percent higher on a seasonally adjusted basis and 13.0 percent before adjustment. The index was 8.0 percent lower than the same week one year ago. [purchaseappschart] “The latest data on inflation was not markedly better nor worse than expected, which was enough to bring mortgage rates down a bit, with the 30-year fixed mortgage rate declining slightly last week to 7.02 percent,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Mortgage applications were up considerably relative to the prior week, which included the President’s Day holiday. Of note, purchase volume – particularly for FHA loans – was up strongly, again showing how sensitive the first-time homebuyer segment is to relatively small changes in the direction of rates. Other sources of housing data are showing increases in new listings, which is a real positive for the spring buying season given the lack of for-sale inventory. “

Many other organizations have turned to sales of this asset class in order to enhance cash flow or liquidity.

Top banking regulators reaffirmed their commitment to bolstering the Community Reinvestment Act despite a court challenge, emphasizing their personal dedication to seeing the rule implemented.

Non-mortgage interest payments climbed to an annual rate of $573.4 billion in January. That’s the highest on record even after adjusting for inflation — and within a hair’s breadth of the $578.3 billion in annual mortgage interest that households were shelling out as of the last quarter of 2023.

Continued failure to bring Fannie Mae and Freddie Mac out of conservatorship will lead to see-saw mortgage policy every time the White House changes hands, which is against the intent of the GSE statutes that indicate a desire for stable secondary markets, writes the Principal at public affairs firm TVDC.

The top five lenders have a combined retail home loan volume of more than $21 billion at the end of Q4 2023.

Gains Before and After Data

Today’s big to-do was the ISM Non-Manufacturing data at 10am ET.  Of the two ISM reports, this is typically the bigger market mover, but that wasn’t the case this time around.  One potential reason for that is the fact that markets had already gone on a fairly good run even before the data was released.  Rationale is multifaceted and debatable for that initial rally.  It includes things like European econ data, risk-off trading surrounding NYCB issues, and corrective momentum in equities.  To be sure, ISM packed the biggest punch among TODAY’s events, both in terms of volume and bond market momentum, even though it only accounted for about a quarter of the overall movement.  Still… it’s a strong showing considering bonds are making gains when yields are already at 3 week lows.

Econ Data / Events

ISM Non Manufacturing

52.6 vs 53.0 f’cast, 53.4 prev

ISM Prices Paid

58.6 vs 64.0 prev

ISM employment

48.0 vs 50.5 prev

Market Movement Recap

09:36 AM Slightly stronger overnight with additional buying at the open.  10yr down 6.3bps at 4.154 and MBS up 7 ticks (.23)

10:39 AM Stronger after ISM data, but at a tempered pace.  MBS up 9 ticks (.28) and 10yr down 7.4bps at 4.143

02:30 PM Sideways to slightly weaker into mid-day, but back near the highs now.  MBS up 11 ticks (.34) and 10yr down 8.2bps at 4.135

Mortgage rates are driven by movement in the bond market.  Bonds can move for several reasons at any given moment, but a key consideration these days is the tone of the regularly scheduled economic data.  When it comes to data, some reports are more important than others.  We witnessed this last week when Thursday and Friday’s reports provided the only exciting moments of the week.  Fortunately, both were in favor of lower rates. This week’s economic data is incrementally more meaningful than last week’s, and that’s especially true of Friday’s big jobs report.  But today’s report on the strength of the services sector is a reliable supporting actor when it comes to data having an impact on rates.  Here too, data was friendly Not only did the report show slightly more weakness than expected in the services sector, but it highlighted an even faster downshift in the pace of price increases.  It also suggested contraction in the services sector labor market–a point worth considering as Friday’s jobs report approaches. Bonds had already found other reasons to improve ahead of the data, but the gains continued afterward.  Bond market improvement  equates to downward pressure on rates, all other things being equal.  With that, the average lender was able to drop 30yr fixed rates to their lowest level since February 12th.  If there’s a catch, it’s that the range has been fairly narrow between now and then, and day-to-day movement has been modest.

Conference season is cranking back up, and some believe that apple orchards are in danger of extinction give the amount of “applewood smoked” bacon in every buffet line. Whether it is Brussels sprouts or beets, there is someone out there re-thinking things. Here in Los Angeles at the L1 event I learned of the book, “Rethink Everything You Know About Being A Next Gen Loan Officer: Kyle Draper and Brian Vieaux team up with 39 mortgage and real estate industry thought-leaders and influencers to help originators adapt their business marketing and relationships to attract the next generation of homebuyers.” Heard in the hallways of this conference: “Congress is a hot mess now. They’re all more concerned about being re-elected than in enacting meaningful change. Every year we spend our time talking about the upcoming election, but what comes of it? Those in our industry need to think about any election’s influence on housing and our own business.” In that case, join the Mortgage Action Alliance: it’s free and there’s strength in numbers. (Found here, this week’s podcast is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology and other services to the mortgage industry for almost four decades. Hear an Interview with Richey May’s Tyler House on the importance of data integrity for companies looking to make informed decisions.) Lender and Broker Services, Products, and Software Truv saves lenders 60-80 percent over competitors. That’s the savings of multiple full-time employees. For example, Compass Mortgage saved roughly 60 percent in verification costs and maintained their same conversion rate. “Truv has given us the ability to lower costs, all while speeding up the verification process and providing better employment data” said Justin Venhousen, COO, Compass Mortgage. Stop wasting money. Contact TRUV today to discuss how we can help you with your income, employment, insurance, and asset verifications.