Only 62% of likely purchasers surveyed in October were waiting to act in expectations of declines, down from 85% in April.

The number of government-backed home loans transferred from one borrower to another is up significantly this year as prospective buyers look for ways to avoid elevated interest rates. Some say this is the beginning of a larger movement, but others say regulatory hurdles will get in the way.

California, Midwest and Northeast cities are poised to see the greatest combined rise in sales and home values, but some affordability relief will also emerge nationwide in the next 12 months, Realtor.com said.

A Bit of Meaningless Weakness. More Important Stuff On Deck

Bonds lost ground to start the new week, but not for any compelling reasons.  If we could even make a case for the weakness being caused by something, we’d be forced to rely on unsatisfying explanations like technical corrections or a leveling off of the prevailing trend ahead of bigger-ticket data.  All that having been said, today was unequivocally a leveling-off of the prevailing trend ahead of bigger ticket data.  The focus is not so much on the 7-8bps of 10yr yield weakness on this data-free day, but rather on the 20-40bps of movement that could be seen in response to economic data and the Fed over the next 7 business days.

Econ Data / Events

Factory Orders

-3.6 vs -2.8 f’cast, +2.8 prev

Market Movement Recap

09:42 AM Moderately weaker overnight.  Treasuries unresponsive to EU bond gains.  10yr up 5.7bps at 4.266.  MBS down 10 ticks (.31).

11:23 AM Slightly weaker into 11am hour.  MBS down 10 ticks (.31) and 10yr up 7.5bps at 4.284.

12:37 PM Worst levels of the day.  10yr yields up 8.8 bps at 4.297.  MBS down 3/8ths.

02:24 PM sideways near weakest levels.  MBS down 11 ticks (.34).  10yr up 8bps at 4.289.

Apart from this past Friday, you’d have to go back to September 1st to see lower mortgage rates than today.  It probably makes the best sense to view last Friday as a slightly overdone rally as opposed to viewing today as some sort of ominous shift. More importantly, it probably doesn’t matter which way it’s viewed because the incoming economic data has the potential to send rates significantly higher or lower.  We’ve had our eye on the next 4 days of data for 3 weeks now due to the ate market’s preference for two key monthly economic reports. The first key report is CPI, the consumer price index, which serves as the most widely traded update on inflation. The last release was on November 14th and it sent rates quickly lower. The other key report is the big jobs report, aka “The Employment Situation” or NFP (an abbreviation of the data’s headline component: non-farm payrolls).  That doesn’t arrive until Friday, but NFP week brings several supporting actors that often get the volatility rolling in one direction or the other.  The first of these (ISM Non-Manufacturing and the Job Openings and Labor Turnover Survey) will be out tomorrow morning at 10am ET. In many ways, this entire week of data is in a position to confirm or reject the positive rate momentum seen over the past 3 weeks. For today, the average lender remains in the low 7% range for a top tier conventional 30yr fixed scenario.  

“People would learn more from their mistakes if they weren’t so busy denying them.” Here’s a little trivia for the compliance folks in the coffee room: The CFPB handles 20,000 consumer complaints per week, and given that financing a home, and then servicing the loan, is the largest financial transaction most individuals go through, you gotta figure a chunk of the 20,000 involve mortgages. While we’re on the CFPB, Director Chopra addressed issues related to refinancing in a hearing on Capitol Hill last Thursday. But the headlines have been grabbed by interest rate improvements in our free market economy, and the economics calendar this week will be highlighted by the U.S. jobs report on Friday, arriving just five days before the Federal Reserve’s December 13 meeting. (Expect payrolls growth will rise to 200K in November from 150k job additions in October, and the unemployment rate to stay steady at 3.9 percent.) Today’s podcast can be found here, and this week’s is sponsored by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite’s three core products, nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics, unite the people, systems, and stages of the mortgage process. Today’s has a wide-ranging interview with economist Elliot Eisenberg on government spending, the Fed’s balance sheet, and “Eisenbergian Economics.” Lender and Broker Products, and Services Servicing transfers are complicated, so it is critically important that you nail down the prep work beforehand. If you don’t, and the servicing transfer goes awry, it’s not only servicers who suffer, their customers do, too. The professional services team at ICE Mortgage Technology break down exactly what’s on the line, and what happens when poorly handled servicing transfers leave customers in a lurch. Read its new blog here to learn just how “high stakes” loan transfers can be, and the steps servicers can take to avoid borrower confusion, retention concerns, and even reputational risk, before they become a problem.

Bond rallies = lower rates.  We like bond rallies.  But when rates fall too quickly or consistently, it can be too much of a good thing.  That’s a phenomenon we were already discussing in the first half of last week, but Friday’s rally took it to the next level with 10yr yields moving below 4.20%.  That’s an 80+ bp rally in just over a month and our best justification was the fairly weak “no whammies” narrative (we’d prefer to see big rallies in response to big, obvious catalysts that leave no room for doubt or speculation).  With all of the above in mind, and in the absence of any new catalysts this morning, we’re resigned to characterizing this morning’s weakness as the logical reaction to Friday’s “too much of a good thing.” 

The other way to look at the last few weeks is to scrap the notion of a horizontal range boundary (probably a good idea, in retrospect) and instead view it through the lens of a larger, directional move in which yields took a quick break in the 2nd half of thanksgiving week (highlighted below) and then got back to the rally the following week ultimately overshooting only slightly.  Viewed in this light, today’s selling pressure puts yields perfectly in line with the trend.

The nice thing about all this analytical uncertainty is that it’s almost certain to give way to clear cause and effect as the week’s big ticket economic reports start rolling in tomorrow. 

Real estate finished November as the second best performing group in the S&P 500 Index adding 12%, trailing slightly behind tech’s 13% gain. The momentum was fueled by bets the central bank may begin cutting rates as early as next year.

Sergey Dyakin, CIO of Celink, outlines the nuances of implementing new technology in the HECM servicing business

The lobbyist for the Home Loan Bank System has asked the Federal Deposit Insurance Corp. to confirm that the private consortium can continue to be a “lender of last resort,” in direct conflict with the recommendations of its regulator, the Federal Housing Finance Agency.