In my travels I’ve eaten some unusual foods, although maybe not this unusual, but here in Boise the talk is about how unusual it is that applications and locks have suddenly shot up in the last several business days. It is nice to hear and see the hustle and perseverance from originators pay off some. Taking a look at the big picture, per the U.S. Census Bureau, nearly 40 percent of all homeowners own their homes free and clear, or 33.4 million mortgage-free, single-family homes and condos. And some percentage of those have credit card debt that is 25 or 30 percent, so a tax-deductible loan at 7 percent can be pretty attractive. Sure enough, refis are hitting the numbers: as reported last month, 89 percent of people with mortgages have an interest rate below 6 percent, down from a record 93 percent in 2022. (Today’s Commentary podcast can be found here and this week’s is sponsored by Lender Toolkit and its AI-powered AI Underwriter and Prism borrower income automation tools. By providing lightning-fast underwriting decisions, your market reputation with borrowers and Realtors will soar, which means more repeat and referral business. Hear an interview with Stavvy’s Angel Hernandez on industry and regulatory affairs, and the state of loss mitigation solutions.) Lender and Broker Services, Products, and Software Ready to sprint? After successfully automating the front end of the mortgage loan process, is the industry ready to conquer what remains? To those with the vision of responsible innovation, the answer is ‘yes.’ Much of the mortgage lifecycle is still reliant on outmoded, labor-intensive processes and fragmented legacy technology. To address this disconnect, FHFA convened industry participants to explore data digitization as the vehicle for change. Clarifire’s current blog, “Responsible Innovation – A Future Vision for the Mortgage Industry,” looks at the five correlating challenges that continue to impact lenders, vendors, and regulators. It’s time to implement responsible automation with CLARIFIRE® promoting borrower engagement, 24/7 self-serve access, dynamic automated rapid results, operational efficiencies, and meaningful cost savings. Meet us at MBA’s Servicing Solutions Conference & Expo and learn how to deliver cohesive innovation with a better approach, better results, and better software. CLARIFIRE®, truly BRIGHTER AUTOMATION®.

The guidelines come as lenders face lawsuits over alleged discriminatory valuations.

The government-sponsored enterprise financed 955,000 mortgages last year, down from the 1.8 million loans it backed in 2022.

Conversations around a potential sale started at the end of 2023 and the deal will close at the end of the first quarter, according to the Guild Mortgage executive.

Gate House Compliance is working with experts like Michael Waldron and Paul Hancock to provide services like fair lending and servicing assessments.

Between a new partnership with REdistribute and two other agreements, the mortgage technology company says it has access to over 90% of property listing data.

As is often the case, there are a few ways to look at rates at the moment.  In the medium term, we can still take heart in the fact that rates are about a percent lower than the long-term highs in mid-October.  In the shortest of terms, we might also be tempted to rejoice in the fact that rates moved slightly lower today, hopefully signaling that yesterday’s big spike has been contained. Somewhere in between those two time frames, however, a clear trend is emerging.  Unfortunately, it’s heading toward higher rates and the low levels from 2 weeks ago now look like a small outlier in that process. Fortunately, trends don’t predict the future. They only tell us where we HAVE BEEN and not necessarily where we’re going.  The latter is most likely to be determined by economic data and we have a fairly good installment on the way tomorrow morning.  Bigger reports have bigger potential to cause volatility, but we won’t see those for several more weeks.  Between now and then, fans of low rates are hoping for tame economic data and for the uptrend in rates to level off while we wait for the main events next month.

Refreshing Resilience, But Not Guaranteed

On a positive note, it was refreshing to see the bond market make gains on the day following a large, data-driven sell-off.  Such sell-offs frequently involve a 2nd day of momentum even when they prove to be temporary in the bigger picture.  Central banker comments may have been helpful in reframing the reaction to CPI–especially Goolsbee’s assertion that “even if inflation comes in a bit higher for a few months (as many forecasts suggest), it would still be consistent with our path back to target.”  His speech was released at 9:30am and that is incidentally when bonds began trending toward lower yields. Making matters confusing was the fact that European bonds rallied more sharply at 10am after comments from a Bank of England official.  The fact that Treasuries bottomed out at the EU close suggests the BOE comments may deserved more credit.  Either way, it’s unclear whether we were destined to see these gains without help from central bankers.  “Help” remains a theme going forward.  We’ll need it in the form of weaker econ data on Thursday if we hope to see another day of moderate gains.

Market Movement Recap

09:44 AM 2-way volatility resolving with moderate gains.  MBS up an eighth.  10yr down 3bps at 4.295

12:38 PM Steady gains continue.  10yr down 7bps at 4.255.  MBS up 3/8ths.

02:34 PM Off the best levels now with MBS down just over an eighth from the highs but still up a quarter point on the day.  10yr yield down 6.1bps on the day at 4.265.

05:16 PM Flat to slightly stronger into the close.  MBS up just under 3/8ths.  10yr down 8.5bps at 4.245.

Have you ever been to a chiropractor? You know, where there’s something out of alignment, you describe it to them, and then they work their magic? Here’s a chiropractor of a different sort with a different kind of patient. Today I head to Boise where there are 43 chiropractors. Okay, I made that figure up. Here’s something that’s not made up: originator comp. Yesterday afternoon’s Commentary mentioned the shift in regional manager’s pay to more profit-based rather than strictly volume and raised the issue of paying loan originators based on profits rather than in basis points of production. The note prompted this reminder from attorney Brian Levy. “No. As much as that makes sense from a business perspective, it’s illegal to pay LOs on profits under TILA’s LO Comp Rule. There are other things a lender can do that are permissible, but the whole gist of the LO Comp Rule was to prevent LOs from being paid on individual loan profitability.” (Today’s Commentary podcast can be found here and this week’s is sponsored by Lender Toolkit and its AI-powered AI Underwriter and Prism borrower income automation tools. By providing lightning-fast underwriting decisions, your market reputation with borrowers and Realtors will soar, which means more repeat and referral business. Hear an interview with PHH’s Sabrina Dean-Bass on why a commercial/business purpose loan servicer matters.) Lender and Broker Services, Products, and Software “Are you trying to gain an edge in pricing and predicting cash flows? Start by better understanding the value of your servicing portfolio. Although valuing servicing is a key responsibility in secondary marketing, the process isn’t always straightforward. And if you’re still using grids to value servicing assets, you could be compromising transparency, profitability, and efficiency. Fortunately, Optimal Blue offers a better way to manage the opaque MSR asset, and we’d love to tell you more during the MBA Servicing Solutions Conference in Orlando. Steve Baselice, capital markets solutions specialist, will be on-site at the Optimal Blue booth and ready to lend his decades of expertise to your business needs. Additionally, plan to attend the Tech Showcase session, which will include an overview of Optimal Blue’s technology, presented by Mike Vough, VP of hedging and trading products. To learn more, contact us.”

Wednesday is shaping up to be a victory based on early trading, with bonds pushing back tentatively on yesterday’s big sell-off.  The emphasis is on tentative though.  This morning’s gains have barely erased a quarter of yesterday’s weakness.  It’s only a victory because this has occurred amid a lack of motivation and an absence of relevant, scheduled market moving events.  We’ll have to wait for tomorrow’s Retail Sales (and several other reports) for an update on economic data.  None of the above would be as big a deal as CPI or NFP, but it can help refine the trend.