Yes, WeWork has filed for bankruptcy, but if you look at GDP and employment, our economy is doing pretty well. Did you know that the Dallas metro area is home to the headquarters of companies responsible for originating 78 percent of residential volume? You probably didn’t, as I just made that up out of thin air. Texas’ growth and not having state income tax both help. Here in Dallas at the TMBA Education Symposium, there is plenty of discussion about the industry incorporating non-traditional products into their lineups, such as reverse mortgages, bond programs, buydowns, renovation loans, construction to perm financing, and jumbo loans, all have value to lenders. Meanwhile, loan originators are looking at a “full stack” loan origination & processing platform like Realfinity.io to go “independent” allowing them to get the most competitive pricing directly from wholesale lenders with no overlays due to corporate expenses. (No, this is not a paid ad… Check out this WSJ article which really opened my eyes. To learn more about going independent reach out to Luca Dahlhausen.) 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 nCino’s Jay Arneja on the company’s rebrand and the seamlessness of the nCino Mortgage Suite.

The retention rate among servicers is at a 17-year low the latest Intercontinental Exchange Mortgage Monitor report found.

The mortgage shop is accusing Tammy Richards of breaching her contract by allegedly stealing customer loan information.

The late executive was praised for her leadership and active mentoring of women in the mortgage industry.

An Office of Management and Budget memo took issue with cuts to the Treasury Department and an attempt to take the Consumer Financial Protection Bureau into the congressional appropriations process.

The Consumer Financial Protection Bureau released a report last week examining state CRA laws that have a more expansive scope and are more tightly integrated in the state licensing process.

In and of itself, today would rank among the handful of “worst days” of any given year in term of mortgage rate movement.  In other words, comparing today’s rates to Friday’s shows a big jump relative to the average day.  Specifically, most lenders are offering rates that are at least an eighth of a percent (.125%) higher versus Friday morning. All that having been said, this is a prime opportunity to “put things in perspective.”  Here’s how the rate index chart looks after today’s “big” losses. In other words, the bond market retains much of what it gained last week.  These sorts of corrections are common in situations like this.  They don’t tell us much about the future.  If anything, it’s more of a confirmation that last week’s drop was as big and impressive as it seemed at the time. In the coming days, we’ll see whether this is the start of a deeper give-back or just a token bounce after a huge move.  The US Treasury auction cycle is one of the only sources of guidance on the calendar when it comes to rate momentum this week.  Auction results are announced at 1pm ET on each of the next 3 days and that could lead to more volatile bond trading shortly thereafter (volatile bond trading, in turn, leads to changes in mortgage rate offerings–sometimes even in the middle of the day).

Bonds Feeling Defensive Ahead of Auctions?

The title of today’s recap gets a question mark because it’s fairly impossible to conclusively tie today’s market movement to measurable motivations.  In other words, we don’t have any economic reports or stand-out news headlines that coincide with a bigger push of volume and volatility.  Instead, domestic traders simply started selling first thing in the morning and backed off quickly after the first few hours.  The rest of the day (essentially 10am through the close) was spent drifting sideways.  If we want to jump to a fairly safe conclusion, it would be hard to disprove the notion that bond traders are feeling somewhat apprehensive about this week’s Treasury auction cycle.

Market Movement Recap

09:25 AM Slightly weaker overnight with small but notable uptick in selling as U.S. trading ramped up.  10yr up 5.2bps at 4.629.  MBS down a quarter point.

02:43 PM Steadily weaker all day.  MBS down almost half a point.  10yr up 8bps at 4.656

04:48 PM What looked like a very faint trend a few hours ago now looks like a flat line.  Current levels are right in line with 10am.  10yr yields up 6.8bps at 4.645.  MBS down just over 3/8ths.

Bonds are starting the new week in slightly weaker territory.  There are not compelling motivations for the move in terms of data, events, or headlines, but that doesn’t mean we don’t have any justification.  In fact, a rally as big as the one seen during the previous 3 business days is often followed by at least a temporary correction/consolidation.  Depending on the broader context, these corrections can last a day or significantly longer.  

In some cases it is actually the big initial rally that is the correction before the longer-term trend continues (as seen in the chart above).  While that gloomy eventuality can’t be ruled out, it would depend on economic data and inflation in the coming weeks and months.
Either way, we now have a few useful pivot points overhead.  These levels don’t predict the future, but if yields break and hold above these levels, it would be a bit more bearish than another random move higher.  Another way to use this chart would be to conclude that a correction in yields isn’t too troubling until it starts breaking these ceilings.

Do you use make up? Charles Revson of Revlon observed, back in the days when you could observe these things, “In the factory, we make cosmetics; in the store, we sell hope.” Informed mortgage people know that hope is not a strategy, and companies can’t hope that they’re never the victim of a hack. Here in the Dallas, Texas, area, headquarters of Mr. Cooper, the company was hit with a cyberattack forcing it to lock down its systems and impacting thousands and thousands of clients of hundreds of lenders whose clients rely on them. I don’t know if live-time cyber-attack maps are for real, but they are mesmerizing. Be careful out there! As of 2023, the average cost of a data breach in the United States amounted to $9.48 million dollars, up from 9.44 million U.S. dollars in the previous year. The global average cost per data breach was 4.45 million U.S. dollars in 2023. (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.) Lender and Broker Software, Products, and Services How to Avoid Racial Redlining: A Lesson from a Recent $9 Million Redlining Suit. The Department of Justice (DOJ) continues to fulfill Attorney General Merrick Garland’s 2021 promise that his department would “spare no resources” in upholding fair lending laws. In fact, over the past two years, its Combatting Redlining Initiative has secured $98 million in agreements with banks from Los Angeles to Newark, N.J. Most recently, the DOJ settled a $9 million redlining suit with a $7 billion-asset Rhode Island bank. While most financial institutions do not deliberately engage in racial redlining, regulators and the DOJ don’t care about a financial institution’s intentions. They care about its impact. They also want every institution, big and small, to have a strong fair lending compliance program. In a new article from the experts at Ncontracts, learn how to avoid redlining, with lessons learned from recent settlements. Read the full article for more.