Some things are surprising, like this video of a small child being chased by a wild pit bull. (Parental discretion may be advised.) What if you’re a landlord in a rent control area, and your monthly insurance bill surprisingly just double or tripled, now what? You can’t pass that on to tenants. Although many expect rates to decline, the rapidity of the recent drop was surprising. How much of a shot in the arm can the industry expect? You can bet good money that whoever owns the servicing on that 7 or 8 percent fixed-rate loan, originated earlier this year or last year, has already reached out to that borrower. That would not be surprising. What would be surprising is if the originator, even though he or she doesn’t own the servicing any longer, hasn’t contacted the borrower with important points about refinancing, and made their value proposition clear. But talk to your capital markets team about EPO penalties! (Today’s podcast is found here and this week’s is sponsored by PHH Mortgage. If you are looking for a Correspondent Lending partner or an experienced, award-winning subservicer who can manage your forward and reverse, residential and commercial, and performing and non-performing loans, look no further than PHH. Hear an interview with the Institutional Risk Analyst’s Chris Whalen on ways to intelligently improve risk-based capital requirements.) Lender and Broker Software, Products, and Services “Truv income and employment verification (VOIE) and assets (VOA) are made for any customer. It doesn’t force you to combine different solutions to get the job done. It customizes the verification type for each customer to optimize conversion. How does it work? We have 3 ways to verify income: Payroll login, Bank Login and Document Upload. We use Smart Routing to decide if a customer goes through the Payroll login or the Bank login. This model was trained on over >10M of transactions. Smart Routing optimizes conversion based on what we know about the customer and the 300,000+ employers we’ve seen. We use our Document Upload process for cases where it doesn’t make sense to send the customer to a Payroll or Bank verification, or when a customer doesn’t complete the verification. Our process successfully verifies income in 75% or more of cases. Want to see how it works? Contact us!”

A drop in interest rates pushed mortgage applications sharply higher last week although nearly all the gains belonged to refinancing. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, increased 6.9 percent on a seasonally adjusted basis from one week earlier and was 6.0 percent higher before adjustment. The Refinance Index was 16.0 percent higher than the prior week and 59 percent above the level one year ago. The refinance share of mortgage activity topped 40 percent for the first time since March 2022, moving from 38.2 percent the prior week to 41.7 percent. [refiappschart] The seasonally adjusted Purchase Index increased 1.0 percent and 0.3 percent before adjustment. It was 11.0 percent lower than the same week in 2023.   [purchaseappschart] “Mortgage rates decreased across the board last week and mortgage application volume reached its highest level since January of this year,” according to Joel Kan, MBA’s Vice President and Deputy Chief Economist.  “The 30-year fixed rate fell to 6.55 percent, reaching its lowest level since May 2023, following dovish communication from the Federal Reserve and a weak jobs report, which added to increased concerns of an economy slowing more rapidly than expected, As a result of lower rates, refinance applications increased across all loan types, particularly for VA loans, and were almost 60 percent higher than it was at this time last year and were at its highest level in two years.” 

Crisis-era issues highlight why certain measures like equity and insurance innovations may be good for servicers to have on hand, a new report suggests.

The lender says it’s reached an “agreement in principle” to end a consumer class action complaint over its wide-ranging January hack.

The parent of United Wholesale Mortgage came in two cents lower on operating earnings, which does not take into account a drop in mortgage servicing rights valuation.

High borrowing costs led to fewer mortgage originations in the second quarter, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit released Tuesday.

President Joe Biden’s administration and Senate Democrats are ramping up pressure on the Federal Home Loan Bank system to pump more money into solving the nation’s housing crisis.

In and of itself, today was quite awful for mortgage rates with conventional 30yr fixed rates moving up faster than on almost any other day in the past few years.  As unpleasant as that sounds, if you forget about the past 2 days, the average lender is still offering the lowest rate in well over a year. This is how things often play out when the bond market forces a quick move to extreme rate levels.  For example, several of the biggest drops in daily mortgage rates have followed quick moves to long-term highs. There are other complicating factors driving the swings over the past 3 days especially.  We alluded to these yesterday, but they deserve a bit more attention in light of the ongoing volatility.  Mortgage rates moved much more than the Treasury yields to which they’re often compared.  That is not logical at first glance because the mortgage-backed securities (MBS) that determine mortgage rates didn’t get hurt nearly as much as Treasuries today.  In other words, mortgage rates shouldn’t have moved as quickly as they did based on bond market movement. The issue has to do with the structure of the MBS market.  It would take a tome to explain all the nuts and bolts, but in a nutshell, it means that lenders often end up having more advantageous costs when they offer rates that end in .125% and .625%.   (NOTE: The rest of this is rather technical despite an attempt to keep it as basic as possible.  Don’t sweat it if you don’t understand it.)

MBS Outperform as Bonds Aggressively Unwind Weekend Rally

There’s been no shortage of directional movement over the past 5 business days with last Wednesday’s Fed announcement serving as the starting point for huge rally with a big cast of characters.  Whereas the first 4 days of this wild ride had distinct motivations, today’s selling in the bond market was more to do with the absence of any additional motivation.  Bottom line, as of yesterday afternoon, there was some uncertainty as to whether the Yen carry trade had fully unwound and today’s trading suggests it is at least far enough unwound to no longer serve as an impetus for massive stock selling and bond buying.  Treasuries took the biggest hit, partly because they outperformed yesterday and partly due to the ongoing auction cycle.

Econ Data / Events

ISM Services

51.4 vs 51.0 f’cast, 48.8 prev

ISM Biz Acitivity

54.5 vs 49.6 prev

ISM Prices

57.0 vs 55.8 f’cast, 56.3 prev

Market Movement Recap

08:44 AM Weaker overnight and pushing back toward positive territory.  MBS up 1 tick (.03).  10yr up 2.8bps at 3.823.

12:26 PM Weaker into PM hours.  MBS down an eighth and 10yr up 8.3bps at 3.878

02:51 PM Weakest levels at 2pm and slight bounce after that.  MBS down 5 ticks (.16).  10yr up 9.3bps at 3.887

“Borrow money from pessimists: They don’t expect it back.” We are re-entering conference season, and mortgage conference attendance is all over the map. Some groups have seen a drop. At the other end of the spectrum, the California MBA’s Western Secondary in a couple weeks is well ahead of last year’s numbers. Topics on agendas? Here in Southern California, at the CAMP event, there are two sessions on homeowner’s insurance. In fact, today California’s Insurance Commissioner is on the stage… and not suspended above a dunk tank. Many companies have “trimmed their sails” and are moving forward, and today at 11am PT/2pm ET, join STRATMOR Group Senior Partner Garth Graham, Customer Experience Director Mike Seminari, and Senior Advisor Sue Woodard for the first episode of Advisory Angle, presented by the Chrisman Commentary. From impending restrictions on trigger leads, capacity issues, non-traditional compensation plans, and the customer experience, the trio will talk about how the refi world has already changed and why it won’t provide the lift all lenders are looking for in this market. There are things lenders can do now to keep their businesses afloat, which Garth, Mike, and Sue will explore in this month’s episode. (Today’s podcast is found here and this week’s is sponsored by PHH Mortgage. If you are looking for a Correspondent Lending partner or an experienced, award-winning subservicer who can manage your forward and reverse, residential and commercial, and performing and non-performing loans, look no further than PHH. Hear an interview with H&M Mortgage’s John Hudson on what makes a 26-year-veteran mortgage executive leave the comfy confines of a salary and decide to open a broker shop and originate.)