There’s a tendency, among bond watching loan originators, to focus a bit too much on whatever is happening on the present day in the bond market.  Higher rates today? “Oh no… It’s bad.  Why is it bad?  Why can’t we catch a break?  Oh well, looks like good times are over!”  Lower rates today?  “Whoo hoo!  Mortimer, we’re back!  OMG, I am going to have so many clients calling to get a lower rate.  How long till we’re back in the 3s?” But the reality is nowhere near either of these extremes.  Sometimes a 6bp sell-off in 10yr yields is just a 6bp sell-off.

A modest amount of weakness makes solid sense here.  Yesterday’s auction was a bit weaker than the previous day’s 3yr auction.  So today’s 30yr auction could continue that trend of shunning duration.  An hour later, we’ll hear from Powell in a bit of a wild card appearance.  We know Powell will have unscripted comments as he’s on a panel discussing monetary policy in a global environment, but it remains to be seen how focused any of the comments are on recent domestic policy decisions.  The path of least resistance for any Fed chair on the week after a policy announcement that subsequently saw a 50bp rate rally is to say something to push back on that rally.

Originators: Want to add value for your potential current or previous clients who are veterans? Send them a link to Veteran’s Day discounts and free meals. LOs and brokers are good at staying in touch with potential clients and continue to prospect and talk to previous clients. (In fact, the current STRATMOR blog is titled, “Listening to Real Estate Agents Can Pay Off for Originators”.) A good reason to talk to previous clients is about their credit card balances. As noted in the Commentary recently, Americans’ credit card debt hit a record $1.08 trillion in Q3, with delinquencies led by Millennials, according to the Federal Reserve Bank of New York. So LOs, this means your previous clients are potentially paying 20-30 percent in non-tax-deductible interest on their outstanding credit card debt… A good reason to touch base. (Today’s podcast can be found here, and this week is sponsored by nCino makers of the nCino Mortgage Suite. With three products tailored to the needs of the modern mortgage lender, nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics unite the people, systems, and stages of the mortgage process. Hear an interview with Polunsky Beitel Green’s Marty Green on the Fed’s no-hike decision last week and how the central bank is weighing financial conditions moving forward.) Lender and Broker Software, Products, and Services In the South, a forecast of snow will clear essential items from grocery store shelves in a matter of minutes. In the mortgage industry, winter has come, and lenders who will survive are stocking up on essentials that will help them identify and win over borrowers. Lenders determined to weather the chill are turning to TrustEngine BIP, a data-driven borrower intelligence platform (BIP) that ignites deals by matching the right loans with the right borrowers at the right time. What’s more, by equipping mortgage advisers with consultative advice, TrustEngine fuels interactions that earn consumer trust, referrals and repeat business. Don’t find yourself staring at empty shelves. Contact TrustEngine to fuel your #LendingSuccessEngine today.

Some of the lender’s servicing systems continue to be shutdown as of Wednesday.

Earnings benefited from low delinquencies and slow prepayment speeds, but high rates will limit growth opportunities.

The company posted net income of under $301 million in the third quarter, including a $93 million positive mortgage servicing mark.

As the leading player in a specialized niche within the consolidating mortgage market, Finance of America is being watched closely.

A significant fallback in rates brought some borrowers back to the table but cooled interest in adjustable-rate loans, which had surged throughout October, the Mortgage Bankers Association said.

There have been more than a few days in the recent past with absolutely massive day-over-day swings in mortgage rates.  In fact, on each of the first 4 days of the month, mortgage rates changed by more than 0.10%–which is a relatively large move even when it shows up all on its own. But the volatility is dying down quickly in the current week–not in a bad way, either.  Putting Monday’s corrective spike aside, the past two days have seen the average 30yr fixed rate fall by a total of less than 0.10%. Perhaps it is even more notable that the bond markets that underlie rate movement managed to have a calm and orderly reaction to the week’s most anticipated scheduled event: today’s 10yr Treasury auction. Treasuries are often said to be the benchmark or basis for 30yr fixed mortgage rates.  While that’s not perfectly true, it is true that mortgage rates often move in the same direction as the 10yr Treasury yield and in relative proportion.  The implication is that any big news for 10yr Treasury yields could have also been big news for mortgage rates.  Auction results CAN be big news, but today’s was just “pretty good” news.  It allowed 10yr yields and mortgage rates to hold on to the moderate gains that were already intact.  

Well-Received 10yr Auction Helps Validate New Range

With the present week lacking in terms of scheduled data and events, it fell to the Treasury auction cycle to act as a litmus test for the bond market’s recent rally.  Things continue to go well in that regard with a very strong 3yr auction yesterday and a “not weak” 10yr auction on Wednesday.  The absence of weakness helps to validate the 4.5%-ish 10yr yield level as part of the current range. The long end of the curve has been rallying at the expense of the short end (2yr yields rose 2.3bps while 10s fell almost 7).  Some caution is in order given the curve’s recent propensity for quick corrections and the potential for curve-based resistance at -46bps (currently at -44bps after being as high as -15bps exactly one week ago).

Market Movement Recap

09:38 AM MBS down 2 ticks (.06), sometimes more due to liquidity.  10yr down 1.1bps at 4.558

12:10 PM MBS catching up.  Now up an eighth on the day.  10yr down 3.5bps at 4.534

01:12 PM additional gains after 10yr auction.  10yr down 5.6bps at 4.513.  MBS up about an eighth.

04:13 PM Mostly holding gains.  10yr unchanged from last update.  MBS up exactly an eighth.

You should know that caffeine increases the power of aspirin and other painkillers, which is why it is found in some medicines. You should also know the “50-50-90 rule”, which definitely applies to me: Anytime you have a 50-50 chance of getting something right, there’s a 90 percent probability you’ll get it wrong. Cute sayings aside, one thing you don’t want to be wrong on is Fair Lending, and every lender, and their employees, should know the rules and regulations surrounding it, and know that its enforcement is a priority of the Consumer Finance Protection Bureau and is often mentioned in its Supervisory Highlights. In today’s “Mortgage Matters” presented by Lenders One (at 2PM ET, 11AM PT) attorney Brian Levy addresses Fair Lending, as well as the NAR verdict and other “hot” legal and compliance topics. Today’s podcast can be found here, and this week is sponsored by nCino makers of the nCino Mortgage Suite. With three products tailored to the needs of the modern mortgage lender, nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics unite the people, systems, and stages of the mortgage process. Hear an interview with Argyle’s John Hardesty on recent integrations with Fannie Mae and ICE. Lender and Broker Software, Products, and Services The Loan Vision team is excited to attend the MBA’s Accounting and Financial Management Conference! Stop by table 2 in the Exhibit Hall to learn how companies that run Loan Vision show a 25 percent reduction in OPEX/time to close, a 20 percent reduction in overall accounting headcount, complete LOS to G/L automation, and improved reporting and visibility that allow for better business decisions. Be sure book time with Carl Wooloff here to get an early introduction to our newest product, that focuses on allowing our customers to be more profitable with less volume; LV-PAM, a modeling tool that provides actionable intelligence with consolidated loan data. Loan Vision’s innovation continues to provide you the “insights you need in the software you trust.”