A second week of lower interest rates appeared to send homeowners scrambling to refinance their higher-rate mortgages assumed over the last few years. The Mortgage Bankers Association said its Market Composite Index, a measure of mortgage loan application volume, increased 16.8 percent on a seasonally adjusted basis. On an unadjusted basis, the Index increased 15.0 percent compared with the previous week. The Refinance Index soared by 35.0 percent compared to the prior week and was 118 percent higher than the same week one year ago. The refinance share of applications rose to 48.6 percent from 41.7 percent. [refiappschart] The seasonally adjusted Purchase Index was 3.0 percent higher than a week earlier, and the unadjusted Index was up 2.0 percent. It trailed the Index from the same week in 2023 by 8.0 percent. [purchaseappschart] “Rates on both 30- and 15-year fixed-rate mortgages decreased for the second consecutive week, and combined with the previous week’s rate moves, spurred another strong week for application activity as borrowers with higher rates took the opportunity to refinance,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “ Overall applications increased almost 17 percent to the highest level since January 2023 , driven by a 35 percent increase in refinance applications. The refinance index also saw its strongest week since May 2022 and was 117 percent higher than a year ago, driven by gains in conventional, FHA, and VA applications. Additionally, purchase applications increased by 3 percent, with small gains seen across the various loan types, indicating that prospective homebuyers are slowly reentering the market.” 

This morning I head through Chicago to Michigan to the MMLA Conference, where one of the discussion topics will be the NAR changes and how they impact lenders (if they do). What would some consider a great job for a “washed up creative” to do? Well, as this short video that Maryland’s Ken S. points out, real estate agent comes to mind, and reminds us that three out of four participants in a real estate transaction have no interest in a low price, and in fact want a higher price. “The more money they spend, the more money I make!” Homeowner’s insurance will also be a topic, as once again our clients, or potential clients, are facing rates that sometimes cause the loan to fall through. For those out there hoping for lower mortgage rates… what will lower rates do to housing prices, especially houses in the first-time home buyer sector? (Today’s podcast is found here and this week’s is sponsored by Truv. Truv lets applicants verify income, employment, assets, insurance, and switch direct deposits. Unlock the power of open finance, with Truv. Hear an interview with MBA’s Mike Fratantoni on volatility, spreads, and how the latest economic data is fitting into the Fed’s thinking.) Lender and Broker Software, Services, and Products What does the CFPB have in store for mortgage servicers? The most recent proposed rule, “Streamlining Mortgage Servicing for Borrowers Experiencing Payment Difficulties,” is poised to make significant changes to loss mitigation requirements. Industry comments are due in less than a month. With proposed RESPA changes, early intervention, notification of loss mitigation determination, credit reporting consistency, and assistance for those with limited English proficiency all on the table, you’ll want to check out Clarifire’s current blog, “CFPB Proposes More Rules for Mortgage Servicers.” Discover more about the proposed rules and how CLARIFIRE® is uniquely designed to help your organization implement changes quickly and easily for uninterrupted servicing of your borrowers’ needs. Connect with us today to streamline and add capabilities to your organization and experience CLARIFIRE®, a modern, intelligent innovation that’s truly BRIGHTER AUTOMATION®.

The lender says the acquisition will boost its retail run rate to more than $240 million per month.

Nexa Mortgage is attempting to move one case to federal court after a state judge ordered it to pay over $13,000 in sanctions.

Sellers of contract-for-deed home financing deals must provide disclosures, financing terms and assess a borrower’s ability to repay, the CFPB said in an advisory opinion.

Five other cities are now at over $1 million in median price, up from four in previous periods, the National Association of Realtors said.

Against the backdrop of high interest rates and inflation, consumers have held off buying homes or pursuing bigger renovations that typically need financing. This pullback in spending has hurt Home Depot and other retailers, a reversal from the pandemic when people upgraded their houses.

“I ordered a book titled, ‘How to scam people online’ two months ago. It still hasn’t arrived yet.” Let’s open today’s Commentary with a couple topics that “bookend” lending. On the secondary marketing end, the current state of buybacks, Freddie Mac’s 2nd mortgage program, mandatory versus best efforts spread, and long-term lock demand by LOs have been hot topics, and these will be covered in “The Capital Markets Wrap” today at 12 PT/3PM ET for 45 minutes featuring Rob Kessel, Marcus Lam, and Ira Selwin. In the primary markets, the “LO 1099?” question continues to be brought up, especially by LOs doing their own research in their own states. “Show me where it says I can’t do that that!” is something no compliance person wants to hear. Lenders should hesitate to jump into claiming mortgage originators are “1099 employees” without other changes to the typical relationship, especially given the kinds of penalties typically found with income tax violations. Oh, and blindly compensating your originators differently for brokered loans? Nothing’s changed since the CFPB Supervisory Highlights seemed to make that a clear violation. (Today’s podcast is found here and this week’s is sponsored by Truv. Truv lets applicants verify income, employment, assets, insurance, and switch direct deposits. Unlock the power of open finance, with Truv. Hear an interview with California MBA’s Susan Milazzo on what to expect at next week’s Western Secondary Conference in Los Angeles.) Lender and Broker Software, Services, and Products

If you’re just here to keep an eye on daily changes in mortgage rates, today was solid.  There was a modest improvement versus yesterday and the average lender is almost perfectly in line with 6.5% when it comes to top tier conventional 30yr fixed rates. For those interested in more of the nuts and bolts, today’s improvement came in response to a lower-than-expected reading in this morning’s key economic report, the Producer Price Index (PPI).  PPI measures inflation at the wholesale level and occasionally has a fairly decent impact on rate when the results are much higher or lower than forecast.  Today’s results were lower.  Bonds/rates hate inflation.  As such, rates improved after these results. But there is another inflation report that packs a much bigger punch than PPI and it will be out tomorrow morning.  The Consumer Price Index (CPI) measures inflation at the retail level.  Along with the similar PCE inflation that will be out in 2 weeks, CPI represents the inflation metric that the Federal Reserve would like to see at 2%. To be clear, year over year core inflation has no chance of hitting 2% tomorrow, but monthly inflation readings would merely need to keep doing what they’ve been doing in order for the Fed to be convinced that 2% annual inflation is a near certainty. There’s no way to know ahead of time whether the data will be friendly or damaging–only that CPI is responsible for some of the biggest spikes and drops over the past few years.

PPI Drives Decent Rally; But CPI Packs a Bigger Punch

This morning’s core m/m Producer Price Index hit 0.0% versus a median forecast of 0.2%.  Unsurprisingly, the friendly inflation reading resulted in immediate but reasonably subdued gains for the bond market.  It goes without saying that PPI will always be 2nd fiddle to CPI (the Consumer Price Index).  With CPI looming tomorrow morning, it’s no surprise to see bonds avoid getting too carried away trading today’s data.  The reaction would likely be quite a bit more aggressive if we see a similarly big drop/miss in tomorrow’s CPI data.

Econ Data / Events

Core Producer Prices m/m

0.0 vs 0.2 f’cast, 0.3 prev
last month revised down 0.1

Core Y/Y PPI

2.4 vs 2.7 f’cast, 3.0 prev

Market Movement Recap

08:34 AM A hair stronger overnight with modest additional gains after PPI.  MBS up an eighth and 10yr down 2.8bps at 3.877

10:53 AM Initial rally stalled out at 9:30, but without a major correction.  MBS still up an eighth and 10yr down 4bps at 3.866 (up from lows of 3.848)

02:38 PM Sideways to slightly stronger near the days best levels.  MBS up 6 ticks (.19) and 10yr down nearly 5bps at 3.857

04:24 PM Heading out near the day’s best levels with MBS up 7 ticks (.22) and 10yr yields down 5.7bps at 3.848.