A Senate budget bill includes language regulating the use of mortgage trigger leads, legislation that much of the industry supports.

While housing demand remains strained, national home price appreciation continued to make more room for buyers in August, according to First American.

“Someone asked me if I had plans for the fall. It took me a moment to realize they meant ‘autumn’ and not the fall of civilization.” The Autumn solstice is this weekend, and I will be heading to Chicago and then to Lincoln, Nebraska to visit with mortgage folks. Housing, of course, will be a topic: It will take more than the Fed’s rate cut to fix America’s housing problems. “Rob, are you hearing that new homeowners are having their insurance cancelled within weeks of funding, often due to “roofing issues”? Yes, I have. As we’ve been writing about for several months, renewal costs are going up, new policy prices are going up, carrier numbers are dropping, and drone usage is increasing surveillance. Keep in mind, however, that the insurance industry isn’t wantonly doing it. In the last few years insurance companies have taken underwriting hits, suffered from inflation in replacement costs, properties have been under-insured given the premiums, and state-level insurance restrictions have prohibited market pricing. (Today’s podcast is found here and this week’s is sponsored by Visio Lending. Visio has a top-notch broker program and is the nation’s premier lender for buy and hold investors with over 2.5 billion closed loans for single-family rental properties, including vacation rentals. Hear an interview between Rob and Robbie on interest rate pricing and other chatter from their travels around the nation attending mortgage conferences.) Lender and Broker Software, Services, and Loan Programs

Credit where credit is due: the rate market did an outstanding job of getting out in front of the Fed rate cut as well as the changes to the Fed’s rate cut outlook as communicated in the summary of economic projections (SEP).   The SEP contains the proverbial “dot plot” that shows each Fed member’s base case for where the Fed Funds Rate will be over the next few years.  It has a strong tendency to cause volatility for bonds/rates.  This week, however, it didn’t have a big impact. If anything, the dot plot was helping point toward slightly lower rates on Fed day, but Fed Chair Powell’s press conference took things back in a more neutral direction.  Those counterbalancing forces meant that this week’s potentially volatile mortgage rate reaction ended up being remarkably flat all things considered.  Granted, rates did move a bit higher on Wednesday and Thursday, but a modest recovery on Friday left the week-over-week change almost perfectly flat.  That is a stunning level of stability considering the stakes. Another way to look at all of the above would be to say the Fed’s friendlier rate outlook was well understood by the market coming into the week and it would take major changes in economic data to drive the next big picture move.  To that end, early October is the most reliable source of big ticket economic data. Next week has a few potentially important reports as well, but not until Thursday and Friday.

Modestly Weaker But Ultimately Uneventful

In terms of the realized volatility relative to potential volatility, this week turned out to be about as calm as we could have possibly imagined.  It is truly stunning that we will not be able to look back on daily bond market charts and pick out the most interesting Fed meeting in years.  As for Friday, it was void of data and serendipitously weaker for bonds.  One could argue that it’s a simple continuation of “selling the news” after “buying the rumor,” but we’d argue motivations don’t matter when we’re only counting a few bps of weakness in 10yr yields that leave us at levels that are still lower than all but a a week and a half of the past year and a half.

Econ Data / Events

Jobless Claims

219k vs 230k f’cast, 231k prev

Philly Fed Index

1.7 vs -1.0 f’cast -7.0 prev

Market Movement Recap

09:50 AM Slightly weaker overnight with additional selling early.  10yr up 3.4bps at 3.746 and MBS down 2 ticks (.06)

10:38 AM Additional losses in 10am hour.  MBS down 5 ticks (.16) and 10yr up 4.6bps at 3.757

12:01 PM Bouncing back on Waller comments.  MBS down only 2 ticks (.06) and 10yr up 2.5bps at 3.737

04:05 PM Slipping a bit again with MBS down 5 ticks (.16) and 10yr up 2.6bps at 3.738

Wednesday’s Fed rate cut was the worst kept secret in the financial world for months, and the 50bp rate cut was increasingly suspected in the week leading up to the announcement.  You’ve likely heard the old saying “buy the rumor, sell the news” when it comes to big ticket events in financial markets.  With bond yields being at the lowest levels in more than a year on the day before the Fed announcement, it’s very fair to view the strength as “buying the rumor” with the ensuing trading offering a fairly mild example of “selling the news.”  As 10yr yields rise back above last week’s range, it’s increasingly likely that this phenomenon is in its mature stages and the next impulse will be data driven.

As for the extreme correlation between Fed Funds Rate expectations and the bond yields most closely correlated with mortgage rate movement, here you go:

While still historically low, some of the changes in the first quarter appeared “troubling” and warranted extra scrutiny, according to Aces Quality Management.

As home prices rise, leading to larger transaction amounts, Certifid doubled the amount of wire fraud insurance coverage provided for transfers it vets.

The Federal Home Loans Bank System is under pressure to fund more affordable housing and has several proposals that may work in tandem with Vice President Kamala Harris’ goal of building three million new units in her first term.

Biden cast the Fed’s decision to lower rates as a vindication of his stewardship of the nation’s post-pandemic economic recovery and a sign of progress in the fight against high inflation that has been one of his — and Harris’ — biggest political liabilities.