The move may help address nonbank liquidity risks highlighted in a recent FSOC report, Sam Valverde, acting president, told attendees at an industry meeting.

The goal of Newrez’s litigation, OneTrust claims, is not to secure a favorable judgment, “but to harm OneTrust’s standing and reputation.”

BofA is betting the Federal Reserve will make only one cut to the federal funds rate by the end of this year. MBA says originators are in for a $1.6 to $1.8 trillion year.

Mostly Flat After Initial Weakness

There’s a risk that a theme will emerge in the coming days, but a theme that only matters to people who write daily commentary on the bond market.  It involves an absence of new, interesting things to say as well as plenty of repetition. If today was any indication, the bond market’s base case for this week is to play the “11 day weekend” game that we joked about last week.  It looked like we might actually have some volatility earlier in the session.  Bonds sold off modestly at the 8:20am CME open, but the damage was limited to roughly 3bps in 10yr yields and much less than that by the 3pm CME close.

Market Movement Recap

09:46 AM Unchanged overnight, but sellers were lined up for the 8:20am CME open.  10yr now up 2bps and MBS down 2 ticks (.06).

12:43 PM Off the weakest levels and flat.  MBS unchanged and 10yr up 1.6bps at 4.438

03:11 PM Little changed.  MBS down 1 tick (.03) and 10yr up 1.4bps at 4.437

Mortgage rates moved modestly higher on the two days at the end of last week.  This put an end to a decent winning streak that had been in place since the beginning of the month, but it stopped well short of undoing much of the progress.  Technically, today’s average mortgage rates are higher for a third straight business day, but most prospective borrowers won’t even notice. For many lenders, the changes are so small that the average borrower won’t see any change from scenarios quoted on Friday afternoon.  In cases where there is a difference, that difference would be very small.   There were no significant sources of volatility in the bond market today (bonds drive interest rate changes) and that’s a theme that could continue for much of the week–at least as far as scheduled events are concerned.  In other words, there are times when we can point to calendar events that are highly likely to cause rate movement (like last week with the CPI data).  Then there are times like this week where it would not be a surprise to go the entire week without a big reaction to a scheduled event.  If you’re a fairly devout market watcher, you may be thinking “what about the Fed minutes on Wednesday?”  While it’s true that some past examples of Fed minutes have had a big impact on rates, it’s currently hard to imagine what they might contain that would constitute a surprise or new information in the current environment. 

Greetings from the Arch MI meeting room space! Heard in the hallways here at the MBA’s Secondary conference in Manhattan: “Our loan officers are telling their clients, ‘Yeah, the best time to buy a house was five years ago. The second-best time is… now.’” People’s memories are short, no one writes about how our industry helped millions of people during the pandemic, and the mainstream press is always looking for sensationalism. The latest example is “zombie mortgages”: 2nd mortgages taken out during 2008-2010 and that haven’t been paid. And we’re to blame? UWM’s DPA program, purportedly tied to Freddie, has garnered some interest. There’s another saying: the stock market is not the economy. But last week the Dow Jones Industrial Average closed above 40,000 for the first time in history. Apparently, investors have confidence the Federal Reserve will get inflation under control without throwing the country into a recession. Should we attribute this to the policies advanced by President Joe Biden and Secretary of the Treasury Janet Yellen? Some will. On an annualized basis, during the Trump Administration the Dow rose 11.8 percent, Barack Obama (+12.1 percent) and Bill Clinton (+15.9 percent). (Found here, this week’s podcasts are Sponsored by Truv. Truv lets applicants verify income, employment, assets, insurance, and switch direct deposits. Unlock the power of open finance, with Truv. Today’s features an interview with attorney Jay Beitel on the Supreme Court finding the funding of the CFPB constitutional.)

It’s not too common to refer to a week with Fed meeting minutes as “super slow,” but at the risk of complacency, how could the Fed possibly share any new ideas three weeks ago (the minutes are from the May 1st meeting) amid what has been a vast sea of Fed comments since then?  Moreover, how could any Fed member say anything to surprise the market when all of them have been so consistently on message or at least “near message?”  Beyond the Fed minutes and Fed speakers, there’s very little by way of market-moving econ data until Thursday and even then, the Thu/Fri reports are not traditionally a big deal.  Last but not least, Friday is a half day before a 3 day weekend.  All we can do in such an environment is watch and wait. 
So far, we’re watching modest weakness at the 8:20am CME open, but nothing that changes the prevailing 4.34-4.50 range.  It’s not uncommon to see opening/closing times move the market a bit more than normal when everything else is so quiet.

Mortgage rates have had a great month of May so far with almost every day being a winner up until yesterday and today.  Even then, the 2 day losing streak began from the lowest levels in just over 5 weeks.  Perhaps more importantly, apart from the past 2 days, today’s rates would still be the lowest in more than a month. In other words, rates have pulled back only slightly after a solid winning streak.  Granted, you could take an even longer term view and say rates only managed the winning streak because they were at their highest levels in more than 5 months by the end of April, but nobody likes a party pooper. The fact is that everything is almost always relative when it comes to assessing whether rates are doing well or not.  In the biggest picture, little has changed.  Rates are close enough to the highest levels in decades, but they still have a chance to look back at October 2023 as being the long-term high.   Our ability to avoid revisiting last year’s highs relies on incoming economic data.  This week’s Consumer Price Index (CPI) was palatable enough to keep hope alive, but it will take a better showing in June (and probably July and August) if we hope to see true confirmation of a shift.  

Moderate, Inconsequential Weakness

Bonds lost ground at a modest to moderate clip on Friday, but not for any interesting or obvious reasons.  The selling has been very linear over the past 2 trading days with Treasury yields fitting neatly inside a simple trend channel.  There is perhaps some small case to be made for excess weakness in European bonds spilling over the a US bond market that has nothing better to do and no compelling motivations of its own.  In the bigger picture, anything that takes place between 10yr yields of 4.34 and 4.50 would be considered very range-bound and that range might not be meaningfully challenged until the first week or two of June.

Market Movement Recap

09:15 AM Modestly weaker overnight with 10yr up 2.3bps at 4.40 and MBS down 2 ticks in 6.0 coupons

12:48 PM weakest levels of the day with MBS down 6 ticks (.19) and 10yr yield up 3.6bps at 4.413.

03:09 PM Just a bit more weakness, but flatting out now.  MBS down just under a quarter point and 10yr up 4.3bps at 4.42

We’re only a few days away from the MBA’s Capital Markets Conference. Attendees, don’t forget to pick up your badges, or else! (Speaking of interesting clips, watch U.S. Secretary of State Antony J. Blinken launch the Global Music Diplomacy Initiative; there is a rumor he’ll be on the stage at the next MBA conference.) One of the big topics next week will be servicing rights: transferring, valuing, and managing. The price that borrowers see on rate sheets is a combination of several factors, including mortgage-backed security prices and the price of servicing (which doesn’t always equal the value). Unlike securities backed by Agency mortgages, where there’s an active liquid market with screen prices, in pricing servicing there is no screen to go to. So, a model is employed, and those involved look at the fair market value versus Fair Market Value. (Yes, there is a difference.) A model may value servicing at one price, but it may trade differently resulting in a variance. The market could price a servicing package higher than fair market value, but not often. (Found here, this week’s podcasts are sponsored by LoanCare. The mortgage subservicer is known for delivering superior customer experience through personalization and convenience. Its award-winning portfolio management tool, LoanCare Analytics, supports MSR investors with a focus on customer engagement, liquidity, and credit risk. Hear an interview with Performance Experts Tim Braheem on what originators can be doing right now to get more referrals, including a free script to help close more deals.)