This morning, I head from Los Angeles to Orlando, FL for the big NAMMBA Connect event. I received this question. “Rob, in your travels, are you hearing that there might be new thinking when it comes to LO comp issues?” The industry, the MBA, the CFPB, and others know that the firm guidelines for LO compensation need to be reviewed, and hopefully with industry input. If you ask any LO out there, they’d like to see the rules change for bond loans, for competitive reasons (which actually help borrowers), or for mistakes. Oddsmakers in Las Vegas believe that if and when a change in LO comp happens, it will be centered on bond loans since changing LO comp rules would actually help bond borrowers, often low- or moderate-income people, “get on” the home ownership train. (Today’s podcast is found here and this week’s is sponsored by Candor. Candor’s authentic Expert System AI has powered more than 2 million flawless, hands off underwrites. Every credit risk decision Candor makes is backed by a Warranty, eliminating repurchase worries. Hear an interview with Argyle’s John Hardesty on the latest happenings from his company, including the intensive vetting and testing required to earn status as a GSE-approved provider.) Lender and Broker Software and Services Ask yourself this question: when evaluating the current market value of a subject property, are you using the best AVM on the market? We understand that when making critical business decisions, accuracy, and details matter. That’s why we’re highlighting First American Data & Analytics and their Procision AVM to have your back. First American’s Procision AVM updates and tests every residential property in the United States and updates the models’ underlying data on a daily basis. And the best part? Their AVM is designed for your specific business need – so you get the best results and highest satisfaction. But don’t just take our word for it – their data speaks for itself. As a nationwide, single-source data provider, First American Data & Analytics will fuel your biggest ideas so you can focus on growing your bottom line. Learn more about the Procision AVM and receive a free data sample.

Today brought the release of the first benchmark revision to the payroll data through March 2024.  It caused widespread confusion both before and after it came out–partly because it didn’t come out on time, but mostly because it’s esoteric, nuanced, and incredibly stale data.  After all, the time frame in question began in April 2023 and stopped just under 6 months ago. 
In other words, this is mostly data for research economists and not an ideal resource for timely decision making.  Still, some would say that a drop in the average NFP of 68k each month during that time frame means the Fed should be less inclined toward “patience” on the rate cut front due to an impressively resilient labor market.  Unfortunately, it’s far from as simple as it sounds and the confused trading reaction speaks to that complexity. 

Although the day to day changes in mortgage rates have been modest recently, the slow and steady improvement has brought the average top tier 30yr fixed rate back near the lowest levels in more than a year.  Apart from 2 days earlier this month, rates are as low as they’ve been since May, 2023.  There were no significant sources of inspiration for today’s market movement although there was some volatility surrounding the release of updated payroll figures for extremely old labor market data.  The Quarterly Census of Employment and Wages (QCEW) is the closest thing we have to a “final answer” to the questions that are asked every month regarding the number of jobs in the U.S. economy. While it has far more coverage than the monthly jobs report, it sacrifices timeliness.  Today’s revisions covered April 2023 through March 2024–ancient history when it comes to a financial market that is looking for real-time indications of labor market softening. Nonetheless, some market participants would argue that a downward revision–stale though it may be–at least does nothing to hurt the case for lower rates.  That said, it will be the more timely economic data that actually dictates the momentum between now and the Fed meeting in about a month.

Without considering the potential of building equity in a property, in 48 of 50 markets renting was better; appreciation flips that to 29 cities in favor of buying, First American said.

Federal Reserve Gov. Michelle Bowman said she has concerns about an uptick in inflation and will need to see more positive data before supporting an interest rate cut.

A report from the Office of Inspector General disclosed that the Federal Housing Finance Agency issued enforcement actions against two Home Loan banks.

How challenges created by climate change and some regulations related to it can create new avenues for business according to Chief Credit Risk Officer of Planet Home Lending.

From a “dislocation” in single-family servicing to a spike in a multifamily performance indicator, Q2 numbers point to emerging opportunities and risks.

File today under “nice.”  While it wasn’t amazing, significant, or even the byproduct of any interesting events, mortgage rates managed to drift modestly lower, ultimately matching their lowest levels since August 5th.   The lowest rates in just over 2 weeks might seem like it’s worth more enthusiasm, but we didn’t learn anything new about the current trends that we didn’t know yesterday.  Simply put, there was a ton of rate volatility earlier in the month and we’ve been in a slow, largely sideways grind since then as we wait for more compelling motivations. The average lender remains near 6.5% for a top tier, conventional 30yr fixed scenario.

What’s Up With ‘Secret’ Jobs Revisions?

When it was limited to social media, it was one thing, but alarming headlines regarding seemingly under-reported labor market revisions hit the mainstream today.  Given the big role or the labor market in the rate world these days, that seems highly relevant at first glance.  But as was the case the last time the QCEW (Quarterly Census of Employment and Wages) was revised, there was plenty of sound and fury with very little significance for markets.  The revision will be out on Wednesday morning.  It isn’t a new jobs number, and the market already expects a negative revision between 600k and 1m for the 12 months ending March 2024.  Why all the focus on this topic (which pertains to data that’s almost 6 months old)?  Because it was a very boring, low-volume, uninspired day for bonds despite incidental gains.

Econ Data / Events

Leading Indicators

-0.6 vs -0.3 f’cast, -0.2 prev

Market Movement Recap

09:04 AM

Roughly unchanged overnight but gaining ground early.  MBS up 3 ticks (.09) and 10yr down 3.5bps at 3.837

01:05 PM

Best levels of the day.  MBS up 5 ticks (.16) and 10yr down 5.2bps at 3.82

03:34 PM

sideways at best levels.  No change from the last update and minimal movement since then.