“Honey, what did you do today?” “Well…” People do some cockamamie stuff against all odds. What are the odds of a lender or LO retaining their client after the loan has been brokered out or the servicing’s been sold? UWM released KEEP, “an industry-leading technology that utilizes AI to send pre-validated refinance opportunities as soon as a borrower is able to obtain meaningful savings on their monthly payment.” (More below.) “Rob, I recently interviewed at a broker shop that, as it turns out, is sending over 95 of its loans to one wholesaler. What are the odds? Does that sound right to you?” Many will argue that a broker’s duty is to shop multiple wholesalers for every loan, knowing that one company is not going to have the best product, price, and service every day for every client. Or even near that. Therefore, if indeed 95 percent were sent to one wholesaler, that would defy all the odds. What do you think the odds are that every home builder out there employs immigrants of one size & shape or another? I’d say 100 percent. Hate to be the bearer of bad news, but every construction company uses immigrants to build America. Some will claim that they literally have built America. (Today’s podcast is found here and Sponsored by Richey May. Richey May’s consulting, cybersecurity, business intelligence, and automation services are designed by mortgage experts to help you continue to drive growth and increase profitability. Hear an interview with LodeStar’s Alayna Gardner, AMP, on how her podcast (Lending Leaders) and other conversation-based content focused on thought leadership is ushering in a new era of content marketing.)

While it’s true that there have only been 8 business days so far this month, it’s also true that today is the only one of the 8 where mortgage rates haven’t been lower than the previous day for the average lender.  That’s the bad news. The good news is that today’s increase was modest.  In fact, if you take yesterday out of the equation the average lender’s conventional 30yr fixed rates are easily at the the lowest levels since February 2023.  That’s a drop of more than .75% in just over a month, which is a quick pace of improvement.  It’s also part of the longest trend of rate improvement in more than 3 years. Many times, when it comes to movement in financial markets, “too much of a good thing” means you might see the opposite of that thing–at least to some extent.  That’s certainly a possibility, but it depends on incoming economic data and the market’s reaction to the Fed’s rate outlook next week.   NOTE: we’re not as interested in the Fed’s rate cut because that part of the policy shift is already reflected in today’s interest rates.  Rather, if the Fed communicates a more aggressive rate cut outlook in the upcoming months, rates could continue lower.  Conversely, if the rate cut outlook underwhelms, there’s room for rates to bounce back up and hold steady until the next major round of economic data.

The latest violations come as the bank expects to face more than $3 billion in regulatory fines for anti-money-laundering failures.

There’s support for Reg X modernization, but both consumer and mortgage groups are concerned about language mandates, and the industry opposes fee restrictions.

The Kansas City-based firm created the ETFs in response to demand from clients, in particular the wealth management community.

The government agency’s new issuances in August totaled over $40 billion, marking a high not seen since late 2022.

The latest inflation news is almost sure to result in a 25 basis point cut next week, but some are still hoping for 50 basis points, as well as reductions totaling almost 200 basis points through the end of 2025, Wolters Kluwer found.

Mortgage rates moved lower again today despite a key inflation report coming in higher than expected.  This is counterintuitive for anyone who’s been following rate movement closely over the past few years.   During that time, inflation reports have had a strong, direct connection to mortgage rate volatility with higher inflation begetting higher rates and vice versa.  But as we discussed yesterday, the prominent role of inflation data is fading to that of a supporting actor.  It is now the labor market that is almost always on center stage. It’s not that inflation doesn’t matter or that it couldn’t matter again in the future.  Rather, it’s just that today’s Consumer Price Index (CPI) was only one report.  It would have been unable to undo the net impact from the past 3 CPI reports which all conveyed significant progress toward the Fed’s 2.0% annual inflation target (in fact, if you asked just those 3 reports, we’re already below 2.0% annually). Despite all of the above, the bond market (which dictates rates) still gyrated a bit this morning.  It simply wasn’t enough to derail the mortgage rate improvements.  Many lenders were relieved to see an absence of negative backlash.  Their pricing improvements suggested they had been waiting to see how today’s data would impact the market.  Do note, however, that some lenders improved rates yesterday afternoon and are not much better today.  Also note that due to the structure of the underlying market for mortgage backed securities, there are certain pricing advantages at rates that end in .125% and .625%.  As such, when broad national averages (i.e. “best case scenarios”) approach 6.125%, there can be larger-than-normal swings in that direction that won’t readily apply to loan scenarios at higher rates.

Does Today’s Inflation Data Change Anything?

Bonds initially sold off following the higher-than-expected core CPI reading this morning.  Shelter inflation spiked back to troubling territory as well–something that was perhaps an even bigger problem for bonds.  Nonetheless, bonds moved back to stronger territory in short order.  The only lingering damage was to the Fed’s rate cut outlook for next week.  Markets were already squarely in the 25bp camp, but today’s data went a long way toward sealing the deal.  When it comes to the longer term rate outlook, today means nothing.  The Fed and financial markets would be hypocritical if they allowed one inflation report to materially alter the outlook.

Market Movement Recap

09:39 AM Slightly stronger overnight then modestly weaker after CPI.  MBS down 3 ticks (.09) and 10yr up 1.9bps at 3.665

10:41 AM Back into stronger territory now with MBS up 2 ticks (.06) and 10yr down 2.4bps at 3.622

01:03 PM bonds were weaker into the 10yr auction and remain just barely weaker despite stronger results.  10yr up 1bp at 3.655 and MBS down 3 ticks (.09).

03:26 PM Back to ‘unchanged’ now with MBS actually up 1 tick (.03) and 10yr up only 0.3bs at 3.649

Heading into today’s CPI data, there were valid doubts about the data’s role as one of the two biggest market movers (the jobs report being the other).  Those doubts proved to be well founded as far as MBS and Treasuries are concerned with all of the initial reaction being erased in the first two hours of trading.  Specifically, bonds lost ground after the data, but gained it all back.  The only place we see any lasting negative impact is in near-term Fed Funds Futures, where CPI has further tipped the scales in favor of a 25bp rate cut next week.  So why aren’t other bonds suffering?  It all goes back to the thesis that the overall pace of rate cuts matters more than the size of the first one.

To show that this isn’t merely a phenomenon of bonds versus Fed Funds Futures, consider longer term futures contracts.  For example, Even the June 2025 contract is showing a return to pre-data levels.  In other words, it’s all about the pace of rate cuts and not the size of the first one.