There’s an old LO joke, telling their client, “When you’re buying a house, be sure to do it with a significant other, and make sure that one of you has good credit. That’s why it’s called ‘significant’ other: sign-if-i-can’t.” Everyone in our biz knows that owning property is a great way to build wealth, although between elevated inflation, stubborn mortgage rates, and general economic uncertainty (one can argue that the future is always uncertain, right?), it may not feel like the right time to plunge into the housing market. But every LO should know that if past patterns hold true, inflation can actually boost homeownership and people who are living through this time may be more inclined to buy a house in the future! A fine selling point when an originator is speaking with a potential client. (Found here, this week’s podcast is 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 has an interview with Sagent’s Uday Devalla and Perry Hilzendeger on new servicing platforms and technology.) Lender and Broker Services, Products, and Software On Jan. 1, 2024, ICE’s dedicated technology experts rang in the new year by helping 92 mortgage and home equity clients successfully complete all month-end, quarter-end and year-end processing. That’s nearly 52 million active and inactive loans serviced using the industry-leading MSP® loan servicing system processed in under 24 hours. Read more from the mortgage technology experts at ICE to learn what goes into this critical yearly regulatory process and see how ICE helps its clients meet reporting requirements.

Higher interest rates continued to depress mortgage applications last week. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, decreased 10.6 percent on a seasonally adjusted basis during the week ended February 16. The volume declined 8.0 percent before adjustment. The Refinance Index declined by 11.0 percent compared to the previous week but eked out a 0.1 percent gain from the level one year earlier. Refinance applications accounted for 32.6 percent of the total, down from 34.0 percent the previous week.   [refiappschart] The seasonally adjusted Purchase Index dropped 10 percent week-over-week and was down 6 percent before adjustment. Purchase applications lagged the same week in 2023 by 13.0 percent.   [purchaseappschart] “Mortgage rates moved back above 7 percent last week following news that inflation picked up in January, dimming hopes of a near-term rate cut,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Mortgage applications dropped as a result with a larger decline in refinance applications. Potential homebuyers are quite sensitive to these rate changes , as affordability is strained with both higher rates and higher home values in this supply-constrained market.” Other Highlights from MBA’s Weekly Mortgage Applications Survey
Loan sizes were changed only slightly, to an average of $381,800 for all submissions and $440,700 for purchase mortgages.
The FHA share of applications decreased to 13.2 percent from 13.5 percent and the VA share decreased to 12.1 percent from 13.3 percent. USDA applications accounted for 0.5 percent of the total.
The average contract interest rate for conforming 30-year fixed-rate mortgages (FRM) increased to 7.06 percent from 6.87 percent, with points inching up to 0.66 from 0.65.
Thirty-year FRM with jumbo loan balances had a rate of 7.16 percent with 0.45 point. The prior week the rate was 7.00 percent with 0.39 point.
The average rate for FHA-backed 30-year FRM jumped to 6.91 percent from 6.68 percent and points increased to 1.03 from 0.89.
Fifteen-year FRM saw an increase of 8 basis points to an average rate of 6.61 percent while points dropped to 0.77 from 0.94.
The average contract interest rate for 5/1 adjustable-rate mortgages (ARM) increased to 6.37 percent from 6.30 percent, with points increasing to 0.71 from 0.60.
The ARM share of activity increased from 7.0 to 7.4 percent of total applications.

Significantly more Americans own a home now than a decade ago, but the disparity between Black homeownership rates and those of other racial and ethnic groups has grown wider, according to the National Association of Realtors.

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The rebuff Tuesday ends months of deliberations over the cases, which had been fully briefed since late September. The court as a whole gave no explanation for either the rejection or the unusually long delay.

Slow Start as Markets Wait For Inspiration

Bonds got off to a slow start despite the holiday-shortened week.  Yields began in slightly higher territory in Asia, but rallied back to ‘unchanged’ by the start of U.S. trading and to slightly stronger levels by the end of European trading.  The 2nd half of the U.S. trading day brought better selling, but not enough to take bonds into weaker territory as of the 3pm CME close.  More importantly, all of the above took place in a narrow enough range to argue against any deep analysis.

Market Movement Recap

09:59 AM Slow, steady gains all night and into U.S. hours.  10yr down 2.5bps at 4.256.  MBS up 3 ticks (.09).

11:43 AM Modest gains continue.  MBS up 6 ticks (.19) and 10yr down 2.9bps at 4.252.

02:55 PM Weakest levels of the afternoon, but still slightly positive.  MBS up 3 ticks (.09).  10yr down half a bp at 4.275.

03:42 PM More sideways over the past hour with MBS still up 3 ticks (.09).  10yr now down 1bp at 4.271.

Most mortgage lenders set rates for the first time this week on Tuesday (today) due to yesterday’s holiday.  Federal holidays mean banks are closed which, in turn, means no activity in the part of the financial market that determines mortgage pricing.  Even though a majority of the U.S. financial system was closed yesterday, the rest of the world was open.  This occasionally results in volatility in rates on the first day after a 3 day weekend, but today is thankfully not one of those days. In fact, market movement was very calm with bonds improving just slightly compared to last Friday.  When bonds improve, mortgage rates are generally able to move down.  That is technically the case today, but the market movement was so small that the average borrower will not be seeing much of a difference in today’s rates versus last Friday’s. In the bigger picture, rates are still very close to their highest levels in more than 2 months following a series of higher inflation readings last week.  This week doesn’t bring nearly as much economic data, which is a blessing and a curse.  On the upside, this decreases the potential volatility.  On the downside, it also means rates will have to wait for any inspiration to move lower.  The week’s biggest risk in terms of scheduled events is Wednesday’s release of the meeting minutes from the Fed announcement (3 weeks ago).  There’s no reason to expect major fireworks considering the many Fed speeches between now and then, but it always makes sense to consider the potential for bigger moves following any major communication from the Fed.

Bonds were moving with a clear purpose at the end of 2023 before embarking on a small, logical correction at the beginning of 2024.  In terms of 10yr yields, the case looked to be closed on the correction after defending a ceiling at 4.19%, but last week’s data stretched the range more than 10bps higher.  “Data dependence” reigns supreme for the foreseeable future, so what to do in the absence of data apart from hurry up and wait? 
Data is conspicuously absent on this holiday-shortened week with Wednesday’s Fed minutes being the only calendar item that has ever made the list of heavy hitters.  Even then, it’s not clear what the minutes could say that has not already been communicated via recent speeches.  As such, unless we find unexpected inspiration elsewhere, we’re left to watch overhead range boundaries while hurrying up and waiting for the next shoe to drop.
From a technical standpoint, one might be inclined to pass the time by seeing whether the 4.32 ceiling breaks in 10yr yields before the 2 week uptrend (yellow line in the chart below).  These are far from perfect tea leaves, but it would amount to one small vote in favor of the breakout direction (i.e. breaking below the yellow line is what you’d rather see if you don’t want rates to go any higher).