When I board an airplane, it is to go from point A to point B, like today from Denver to San Francisco. As long as it’s on time and somewhat economical, put me in whatever seat in steerage. But others, apparently, want to savor the experience in comfort. Swiss Air has taken this to an extreme, and now must re-balance their jets due to the weight of first class seats! The Federal Reserve’s Open Market Committee is fully expected to “take some weight off” of rates next week. For those of you playing along at home, the FOMC meets three more times in 2024: September 17-18, November 6-7, and December 17-18. So, beware anyone saying that the Fed is going to cut rate five times in 2024. Interest rates are one thing, but everywhere I go originators are doing things to help their clients and stay relevant, like educating them, hosting classes with real estate agents for people in the area and studying up on their company’s products and services. (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 Mace Innovations Chris Mace on the best ways for companies to approach change management.) Lender and Broker Software, Services, and Loan Programs “Yep, we’re seeing it too. App volume, credit report volume… It’s all trending upward, so get ready. At Service 1st, we’re prepping for the fall conference season. That includes the MBA Annual in Denver. We’ve never had more near instant IRS transcript pilots, opportunities with ICE Mortgage, reductions in credit reporting spend, and much more to announce. We’ve been busy during the slowdown, and we’re stoked to show what we’ve been up to. Saddle up, Partner! Let’s get those meetings scheduled now for Denver. Book here.”

In trading ahead of the debate, Treasuries rallied as oil tumbled and after U.S. bank regulators released revised details on proposed bank-capital rule changes.

Issuance of CMBS has been torrid recently, with overall sales this year through Monday of $69.7 billion.

Homebuilders that get more than a 10th of their revenue from the U.S. have surged, but concerns over an economic slowdown have cast a shadow on stocks recently.

Federal Reserve Vice Chair Michael Barr’s planned revision of the capital proposal addresses a key concern the housing finance industry has.

The analytics tool takes a look at geography and borrower activity to help pinpoint areas with high concentrations of loans at risk from natural disasters.

Mortgage rates are based on trading in the bond market and bonds consistently take cues from economic data.  Among the data, some reports are vastly more important than others–as we’ve seen after several recent examples of the jobs report. The Consumer Price Index (CPI) is another extremely important report.  At least it can be, at times.  On many occasions in the past few years, CPI had a bigger impact on rates than the monthly jobs report, but times are changing.  Inflation metrics have cooled down significantly and the trend has been more stable.  In fact, the last 3 CPI reports were consistent with inflation being under the Fed’s 2.0% annual target (the next 9 would need to play ball in similar fashion for official, final victory). The Fed figures that victory is highly likely at this point, considering some of the softening in other economic data.  Even if tomorrow’s CPI were to come in much higher than expected, it wouldn’t be enough to push rates too much higher in the big picture. As for today, there were no significant reports and bonds continued drifting into stronger territory.  The average mortgage lender was able to offer just slightly lower rates compared to yesterday’s latest levels.  This means we’re at another 17 month low.

Will The Market Still Care About CPI?

Ask anyone who’s been following the rate market for many years what the most important economic report is and you’re far more likely to hear “the jobs report” than any other answer.  But at many times over the past 2-3 years, the Consumer Price Index (CPI) was arguably top dog.  This only began changing a few months ago, but it has certainly changed.  The question is whether there is still any major anxiety left for CPI.  If it weren’t for the fact that this is one of the only big ticket reports that comes out in the blackout period leading up to a Fed rate cut where the size of said cut is a matter of debate, we would confidently say CPI is almost completely inconsequential.  But because of all that “stuff,” we can’t rule out a volatile response to a big beat/miss.  

Market Movement Recap

09:07 AM Slightly weaker overnight, but bouncing back now.  MBS up 2 ticks (.06) and 10yr unchanged at 3.70

01:27 PM Steady, modest gains into PM hours.  MBS up 5 ticks (.16) and 10yr down 4.6bps at 3.654

03:56 PM At best levels after hours.  MBS up a quarter point.  10yr down 6bps at 3.641

The new week is off to a nice, anti-climactic start.  Monday morning’s yields were slightly higher at first but fell into stronger territory by mid day.  Today brought a milder repeat of the same pattern with smaller losses overnight and a quicker recovery in the morning. All of the above has played out in the absence of any significant economic data.  Things change tomorrow with CPI and the 10yr Treasury auction, or at least they could change if there any big surprises in the data.  
Believe it or not, yields are still trading slightly higher than last Friday’s lows and also a bit higher than the lows seen on Monday, August 6th. Gains have been getting smaller and trading levels have been homing in on something in the high 3.6’s–effectively consolidating ahead of inflation data this week and the Fed next week.  While these sorts of tempered consolidations can imply resistance to further gains, they also suggest an openness to additional gains if the data justifies it.  Contrast that to the rally in early August which was anything but tempered.

Every once in a while, a new loan program is “invented.” Lenders have to make sure they’re doing it correctly. (Don’t try this at home.) At events around the nation, invention may not be first and foremost but adjusting business models and paying close attention to trends is. Topics like what regulators and examiners are doing, leveraging data to drive profitability and growth, digital marketing compliance, recruitment and retention, the impact of homeowner’s insurance changes on lending, and managing a compliant appraisal process, and promoting advocacy are all topics at The Mortgage Collaborative’s event here in Denver. Along with it all is using technology appropriately. “Rob, have you heard of any worthwhile group texting apps to reach borrowers or clients?” Yes, I have. Try Reach. (No, this is not a paid ad.) (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 Nation One Mortgage’s Phil Crescenzo, Jr. on what the various election outcomes in November could mean for the housing market and mortgage industry.) Lender and Broker Software, Services, and Loan Programs Regulatory requirements constantly evolve, and servicers need comprehensive technology and robust data to help automate processes, enhance decision-making, and reduce risk. ICE is committed to compliance with integrated, scalable solutions that help servicers adapt as new rules and regulations are introduced. ICE continually invests in its solutions and expert-led training sessions so servicers and their teams can prepare for upcoming compliance changes and be ready to meet regulators’ implementation deadlines. Read how ICE’s solutions can help support your compliance needs.