The Federal Reserve’s top regulator cited the financial crisis of 2008 repeatedly in a speech about the merits of new risk-capital standards — proposals that have drawn unprecedented fire from banking trade groups and members of Congress.

The expansion of housing-related tax programs could be in peril because of the upheaval.

High costs associated with fraud or defect risk this year have made some coverage compelling but thin mortgage business margins can make lenders selective.

One in every 123 purchase applications showed indications of fraud in the second quarter, outpacing the first, the report found.

Should the Federal Reserve step back into the market and restart their loan purchase activity?

Also, the Mortgage Bankers Association welcomes new lobbyist, Snapdocs names new CEO and Dovenmuehle hires chief information officer.

Rates were already high coming into this week. As of last Friday, that meant an average 30yr fixed rate just under 7.5%. As of this Friday, we’re closer to 8%. Certain lenders may be quoting lower rates, but that often involves the presence of discount points.  The Freddie Mac survey (orange line above) doesn’t account for discount points.  It’s also a weekly average and has not yet counted the rates seen on Thursday or Friday. Friday brought a sharp rise to the highest levels in 23 years.  The most obvious culprit was the big monthly jobs report which showed job creation (nonfarm payrolls) increasing far faster than economists predicted. It was one of only a handful of months in the past few years that came in higher than the 12 month trailing average. Perhaps just as importantly, this is a level of job growth (336k) that falls at the upper edge of the pre-pandemic range. Most economists thought we wouldn’t be breaking back above 300k after averaging less than 200k for the past 3 months.  In a world where the Fed constantly reiterates “data dependence,” this was a blow for rates.  10yr Treasury yields–the most ubiquitous long-term rate benchmark–left no doubts as to the bond market’s response. It’s easy enough to see the vertical line after the jobs data, but what’s up with the fairly big recovery later in the day?  If bonds are freaked out about data, why would they erase a majority of the losses?

Logical Reaction to Jobs Data, But Why The Mid-Day Bounce?

Nonfarm Payrolls (NFP), the headline component of the big jobs report, crushed even the most bullish forecasts (336k vs 170k median forecast).  In a data dependent bond market, it was no surprise to see yields spike significantly and quickly.  10s hit 4.887 at the peak.  It was a surprise, however, to see a fairly substantial mid-day recovery that erased more than half of the AM losses.  Unfortunately, that recovery is not attributable to any fundamental motivation in the economy or news headlines.  Rather, it’s likely a byproduct of trading dynamics often seen on the Friday before a 3 day weekend.

Econ Data / Events

Nonfarm Payrolls

336k vs 170k f’cast, 227k prev (revised up from 187k)

Unemployment Rate

3.8 vs 3.7 f’cast, 3.8 prev

Earnings

0.2 vs 0.3 f’cast

Participation rate

unchanged at 62.8

Market Movement Recap

08:33 AM Hit hard after jobs data.  10yr up 11.8bps at 4.837.  MBS down 5/8s.

08:52 AM Here’s that sell-off… 10yr up 15.8bps to 4.877.  MBS down 3/4

11:03 AM Decent little bounce.  MBS down “only” half a point.  10yr up 9bps at 4.809.

02:35 PM Bounce back got more “decent” and has been flat all afternoon.  MBS down only a quarter point.  10yr up 5.9bps at 4.778

This week has brought a series of fairly simple mornings with the initial reaction to economic reports playing out in a logical direction.  Monday: stronger ISM pushed rates higher.  Tuesday: stronger JOLTS caused heavy selling. Wednesday: weaker ADP helped bonds recover.  Thursday: stronger claims led to initial selling pressure.  Now today, the biggest report of the week is unsurprisingly producing the biggest result.  Time to reset the clock on waiting for econ data to make a case for friendlier Fed policy and a better rate outlook.

National MI turned heads yesterday by announcing its temporary increase to AUS conforming loan amounts, despite the official FHFA word not coming until the end of November. (More below on the amounts.) Our biz is filled with “numbers people,” good or bad. According to Curinos, September 2023 funded mortgage volume decreased 30 percent YoY and 14 percent MoM. The average 30-year conforming retail funded rate in September was 7.01 percent, 18bps higher than August and 146bps higher than the same month last year. (Curinos sources a statistically significant data set directly from lenders to produce these benchmark figures.) Inventory and sales aren’t helping. Economist Dr. Elliot Eisenberg summed things up. “August data showed MoM housing starts down 11.3 percent to their lowest level since 6/20, the NAHB housing index down sharply M-o-M for the second month in a row, and new home sales weakening 8.7 percent MoM, the biggest decline since 9/22. Existing housing sales slipped to their lowest level since 1/23, and August pending home sales fell 7.1 percent.” (Today’s podcast can be found here and this week’s is sponsored by TRUE. TRUE creates accurate data that powers automation and optimizes every step of the lending lifecycle, helping lending organizations rapidly process loans, dramatically cut costs and risk, and radically improve the customer experience. Hear an interview with Ally Home’s Glenn Brunker on affordability across the nation and why potential homeowners should get off the sidelines.)