Two vultures are in a field, eating a dead clown. One vulture says to the other, “Does this taste funny to you?” The last thing you want to hear about your company is that it “preyed upon” customers, which is the opposite of funny. “Don’t do the crime if you can’t do the time”: A federal court has issued an order banning the operators of the Home Matters USA mortgage relief scam from the telemarketing and debt relief businesses and requiring them to turn over $19 million as a result of a lawsuit by the Federal Trade Commission and the California Department of Financial Protection and Innovation. Named were Home Matters USA, Academy Home Services, Atlantic Pacific Service Group, and Golden Home Services America, and the owners of the companies, Michael R. Nabati, Armando Solis Barron, Dominic Ahiga (also known as Michael D. Grinnell), and Roger S. Dyer… taking millions of dollars from thousands of struggling homeowners seeking mortgage relief. At the other end of the “beneficial” spectrum, the MBA’s Bill Killmer, SVP for Legislative and Political Affairs, will be interviewed tomorrow on L1’s Roundup. (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. Hearn an interview with Rice Park Capital Management’s Chris Bixby and Candor’s Mark Hinshaw on the recent partnership between the two companies and the future of AI underwriting.)

The wholesale lender wants its logo removed from the Facebook page and for Ramon Walker, the creator of the page and owner of Client Direct Mortgage, to pay over $100,000 in outstanding EPO.

As the book of business written during the 2020 t0 2022 period enters peak delinquency years, default notices are expected to rise, fourth quarter earnings comments revealed.

The company, which has paired down its operations to concentrate on reverse mortgages, got a similar notice in December.

A deal between consumers and a Multiple Listing Service doesn’t solve the issue of buyer brokers “steering” clients to listings with higher commissions, lawyers for the government said.

Amid an upturn in deposits, banks are searching for ways to put this new cash to work. The traditional option — boosting lending — is hard to do right now. That’s left banks to park more money in high-quality securities that they believe will boost returns without heaping on too much credit risk.

U.S. new-home construction sank at the start of the year by the most since the onset of the pandemic, indicating the recovery in the housing market will be gradual as many buyers await a further decline in mortgage rates.

At present, the Consumer Price Index (CPI) and the jobs report are the two most important considerations for interest rate momentum as far as economic reports are concerned, But it wasn’t always so.  For more than a decade leading up to 2022, (CPI) was not remotely as important because inflation ceased to be a major concern after 2010. Since 2022, we could view the Producer Price Index (PPI) in a similar light.  Sure, it’s an inflation report, but it focuses on the more volatile wholesale side of the supply chain.  Markets continued taking cues from CPI while PPI bounced sharply higher and lower depending on the month.   All that began to change in late 2023 as PPI surged sharply lower, helping to build a case for inflation calming down.  Since August, we’ve seen more evidence of rates being willing to react to this previously unloved data. But the data can cut both ways.  PPI has spiked a few times in the past few months and today was the latest example.  In many ways, it adds insult to the injury already done by CPI earlier in the week. Thankfully, the market still isn’t willing to move nearly as much for this report, so the damage was not nearly as big in terms of upward rate movement.  That said, the movement was still enough to take the average lender to the highest levels in over 2 months.

If CPI is a 10 out of 10 on a scale of economic data that causes bond market volatility, PPI is never more than a 5.  It’s a good thing too.  All it took was a 0.1% deviation from expectations for CPI to send bond yields 15+ bps higher on Tuesday.  Contrast that to today’s PPI deviation of a whopping 0.4% (specifically, m/m core PPI came in at 0.5 versus a median forecast of 0.1).  If this had been CPI, 10yr yields would likely have jumped 30+ bps, but that’s assuming anyone would believe the number. 

This level of deviation is all but unheard of on CPI.  On the other hand, PPI is historically much more volatile.

Inflation Surprises Delay The Decision

In the short term, it’s nice to see that today’s massively higher PPI reading didn’t do more than it did to crush the bond market’s spirit.  This isn’t the craziest turn of events given that we already had a bit of spirit crushing after Tuesday’s CPI, but that several Fed speakers said they’re not reading too much into one month of data that breaks from the recent disinflationary trend.  In the slightly bigger picture, however, there’s an opportunity cost.  Sure, things may not be unimaginably worse than they were last week, but where would we be if inflation came in slightly below forecast?  Very likely, that would have resulted in a much more constructive narrative heading into March where a decent result in NFP and CPI in 3 weeks would pave the way for the Fed to give the first signal that a rate cut would be on the table in subsequent meetings.  As it stands, even if the data released in March is bond-friendly, it will have to be taken with a grain of salt until April.  More waiting as opposed to less.

Econ Data / Events

M/M Core PPI

0.5 vs 0.1 f’cast -0.1 prev

Y/Y Core PPI

2.0 vs 1.6 f’cast, 1.8 prev

Market Movement Recap

09:08 AM Moderate overnight weakness and additional selling after PPI data.  MBS down half a point.  10yr up 7.5bps at 4.311

10:47 AM Well off the lows now with MBS down only 11 ticks (.34) and 10yr up 6bps at 4.295

12:36 PM Slipping again.  MBS down 14 ticks (.44) and 10yr up 7bps at 4.307.

04:53 PM Near best levels since before this AM’s data after a steady afternoon grind.  MBS down only 10 ticks (.31) and 10yr up 4.3bps at 4.279