I head to San Diego today, home to an estimated 300-500,000 roaming feral cats! Cat fans are quick to point out that the word “homeowner” has the word “meow” in it. (Try pronouncing it with the “meow” in there.) My cat Myrtle will never be herded, likes her privacy, and has never been a fan of the Consumer Finance Protection Bureau (although she has found some employees palatable). She especially seems displeased with what she views as, a CFPB power play combined with Big Brother tactics. (Details below.) Veering away from mortgages, but continuing with the Big Brother theme, Road & Track reports that California just passed a bill that will require cars to warn drivers whenever they drive more than 10 mph over the speed limit. The California Senate passed SB 961, which would require half of all new cars built or sold in the state to include passive speed limiters by 2029, and by 2032, that figure will rise to 100 percent. If it passes the Assembly and is signed into law, the new regulation will apply to all passenger vehicles.  Software, products, and services for lenders and brokers “Normally, I’d have to request a most recent pay stub from the borrower and wait for that to be sent over, but since she completed Truv, I just ordered a refresh report, made sure OT has been steady since I pre-approved her, and was able to finalize everything within a couple of minutes.” says Clark Jarstfer, Branch Manager at GVC Mortgage about a recent borrower. Truv’s digital income and employment solution will cut your closing time by 2-3 days and save you up to 80 percent with free re-verifications. Request a demo today!

Aira has secured €200 million ($217 million) in commitments from the European Union’s biggest bank. The money will go toward installing heat pumps in thousands of homes across Germany.

On top of cratering origination figures, the company faces lawsuits from counterparties over nonpayment.

The long-troubled lender owes at least $40 million to mortgage industry counterparties and tax collectors, it said.

The Consumer Financial Protection Bureau said in a new circular that it’s still watching for attempts to get borrowers to sign away rights that can’t be waived.

The top five depositories have a combined wholesale origination volume of more than $14 billion at the end of Q1 2024.

For most lenders, you’d still see modestly lower rates on several days in mid May, but apart from that, you’d need to go all the way back to early April to see anything lower.  Said differently, today’s rates are fairly close to the lowest levels in 3 months. If the 3 month distinction is to be earned in the near term, it will come down to the incoming economic data.  Scheduled reports on the labor market, economy, and inflation will help shape expectations for Fed rate policy and thus exert immediate influence on interest rates.  This is a big week for such data with additional reports in the coming days, including Friday’s jobs report which is typically one of the two biggest rate movers on any given month. Today’s data showed job openings coming in lower than expected for the month of April.  While it’s not as timely as the upcoming report on Friday (which is for May), it has nonetheless been important in the past year.  Lower job openings connote lower rates, all other things being equal.   All that having been said, the bond market (which underlies rate movement) had a fairly steady day of improvement, even after attempting to isolate the influence of the job openings data.  This could speak to a bit of anticipation for the rest of the week’s data to be similarly downbeat.  The risk here is that the data manages to surprise to the upside and cause a volatile bounce back toward higher rates. 

Once again, the bond market is starting the domestic session with 10yr yields several bps lower day-over-day.  We can credit European bonds for that overnight influence which, in turn, can credit things like weaker employment data, lower oil prices, and optimistic expectations for this Thursday’s European Central Bank (ECB) announcement. Also in the same vein as yesterday, MBS are not doing quite as well as their Treasury benchmarks, even if we use a fairer comparison like 5yr Treasuries (up an eighth of a point in price versus only 0.03 for 6.0 UMBS).  This could be as simple as modestly elevated supply in newly originated MBS combined with normal patterns surrounding Treasury auctions and jobs week.  It will merit a deeper investigation if the trend continues next week.
Here’s a quick and dirty way to use MBS Live charts to check relative performance in MBS over various amounts of time.  At a minimum, use a 5 day chart, but 1-3 months is probably ideal.  In this example, we use a 1 month chart which captures two good recent highs and lows.  We’re also using a 5yr Treasury yield as that will be even more forgiving (i.e. if MBS are still not doing as well as the 5yr, it’s even easier to say they’re underperforming).  As for the methodology, it’s as simple as seeing how each security is doing relative to the recent highs and lows.  In this case, MBS is still about 30% below its recent high whereas the 5yr is very close to making it back to its recent low.

More Gains After JOLTS, But They Might Have Happened Anyway

The winning streak continues for the bond market with 10yr yields dropping roughly 6bps by the 3pm close, just barely edging under the 4.34% technical level.  Improvement was linear through 2pm with only a temporary volatile reaction to the JOLTS data.  It’s not entirely clear that the mid-day gains had anything to do with JOLTS, in fact.  It’s just as easy to argue that the bond market is taking a lead-off in anticipation of softer economic data ahead.  That’s all well and good unless the data finds a way to surprise to the upside, but even then, some hope would be held out for the next CPI report next Wednesday.

Econ Data / Events

Job Openings (via JOLTS)

8.059m vs 8.34m f’cast, 8.355m prev
Lower = better for rates

Job “Quits” 

3.507m vs 3.329m prev 
lower = better for rates

Market Movement Recap

08:58 AM moderately stronger overnight thanks to Europe.  MBS up 2 ticks (.06) and 10yr down 3.6bps at 4.355

10:05 AM Modest gains after mixed JOLTS.  MBS up an eighth.  10yr down 4.8bps at 4.343

01:56 PM Modest additional gains into the PM.  10yr down 7bps at 4.321.  MBS up an eighth in 6.0 coupons and nearly a quarter in 5.5 coupons.

04:06 PM Off the best levels, but holding most of the gains.  10yr down 6.1bps at 4.33 and MBS up 5 ticks (.16).

“Hey Rob, thank you for continuing to highlight the insurance issues we’re having, like in yesterday’s commentary. Insurance companies are monitoring homes from the sky, and homeowners across the country have had their coverage ended due to aerial monitoring using drones, airplanes, and satellites. While we’re on “tech,” have you heard of ‘ActivTrak’?” Yup. It figures out your employee’s productivity and engagement by watching mouse & keyboard movements. Of course, there is software that simulates mouse movements that employees can purchase or download. It all turns into a game of cat and mouse! How long will it be until A.I. is capable of writing its own code, much faster and better than humans? Hey, I don’t need or want IT people writing like me, or sending my Commentary out when it isn’t me doing it, or faking politicians’ speeches, just because they can. I’d rather have computer scientists focused on… making it simpler to change my car clock when the time changes. Likewise, I don’t need biologists bringing back mammoths or dinosaurs, just because they can. But here’s something cool: the first tooth re-growing drug has begun tests. No more dentures?! Just in time for the Baby Boomers to need them.  Employment, transitions, & another industry vet’s retirement “Mega Capital continues to expand across the country by adding AEs along with operation staff to support the growth of the organization. In recent months we have rolled out our new broker platform mPOWERs to help with ease of use for the broker. We have added improvements to our Non QM platform with MGenius getting an upgrade to help assist brokers with their NON QM needs. On top of our great rates for conventional and government loas, we continue to improve our NON QM offerings. 3-month bank statement program, Assets utilization, and a refi with essentially a mortgage only rating needed. Our latest offering is our MVP program- $3M Loan amounts, FICO down to 660, 40 yr. I/O’s, transferred appraisals accepted, P&L with no bank statements required, 1099 program No tax return needed and the list goes on. Please contact your local AE or Mega Capital at 818 657 2600 to partner with us. Always looking for great talent to join the team. We are always looking to add sales talent, all AE’s especially those with the NON QM background, please reach out to Ed Darrow at 818 657 2600 x340.”