Shutdown or no shutdown, the National Park Service’s Fat Bear Week is approaching, focused on how these behemoths tip the scale. Here’s your tip of the day: Having books in your Zoom background makes you seem more trustworthy. What if one of them is “The Complete Idiot’s Guide to Mortgages”? Maybe put some gold bars on the shelf instead? You can buy them now at Costco. Owning a home is a great way to build wealth, although mortgage rates are at 23-year high and mortgage applications have fallen 27 percent year-over-year… is your staffing down 27 percent from a year ago? (I know that’s simplistic, but…) At least you’re not Tanner Winterhof whom the Federal Reserve issued an enforcement action on for falsification of bank documents. On the more constructive side of things, originators and others can learn about special-purpose credit programs (set out unique standards and benefits to make loan qualification easier for people who are from underserved populations) in today’s Mortgage Collaborative’s Rundown at 3PM ET. (Today’s podcast can be found here and this week’s is sponsored by Built. Built is powering smarter and faster money movement for the entire construction and real estate ecosystem, all while reducing risk. Hear an interview with LoanSense’s Catalina Kaiyoorawongs on why resuming student loan payments matters to the mortgage industry.) Lender and Broker Software, Programs, and Services In challenging down economic times, Loan Vision is your solution to maximizing profitability and reducing costs in your business. With Loan Vision, companies see improvements of 25 to 35 percent decrease in days to close the books, 20 percent reduction in accounting headcount, complete LOS to G/L automation, and improved reporting and visibility that allow for better business decisions. Don’t accept a competitive disadvantage or get caught flat footed in a recovering market. To improve your cash position, gain a competitive edge, and prepare your business for sustained growth, contact Carl Wooloff to schedule a call today.

The trading day began on a fairly positive note with a strong hand-off from Europe and reasonably friendly inflation data at 8:30am.  After a few moments of indecision, bonds rallied modestly on the data, but have been giving back the gains as we head into the PM hours.  The rest of the day may be dictated by month/quarter-end tradeflows and government shutdown headlines.   Notably, there is a clear Fed trade pattern in stocks and bonds, suggesting markets are actively adjusting Fed policy expectations based on data and events.

MSP users who are not Encompass customers are a particular target and vice versa, ICE Mortgage Technology chair Ben Jackson said.

Public policy experts debated the effect of rising rates on the mortgage market, the impact on homebuyers and ways that Fannie Mae and Freddie Mac could exit conservatorship at the National Mortgage News Digital Mortgage Conference.

To help those who may not get paid during a budget deadlock, credit unions are reviving past programs such as low-interest loans, payment deferrals and forms of relief.

Even as Freddie Mac’s survey put rates at their highest since December 2000, factors like rising oil prices and a government shutdown could slow the economy.

The Federal Reserve Inspector General’s report on the failure of Silicon Valley Bank found that officials at the Federal Reserve Bank of San Francisco wanted to remove the CEO from its board before examiners downgraded SVB’s supervisory ratings.

Bonds Bounce Despite Stronger Data

Bonds lost ground overnight and logically added to the losses after the morning’s Jobless Claims data.  Dovish comments from Fed’s Goolsbee helped push back in the other direction and month-end tradeflows added to gains in the afternoon.  All told, it was a token correction much like last Friday’s, but one that had more of a foundation in a relevant market movement factor (i.e. new ideas from Goolsbee on the Fed possibly being able to claim some victories on inflation without the need to visibly damage the labor market as evidence of success). 

Econ Data / Events

Jobless Claims

204k vs 215k f’cast, 202k prev

GDP (Q4 final)

2.1 vs 2.1 f’cast, 2.0 prev

GDP Delator

1.7 vs 2.0 f’cast, 4.1 prev

Market Movement Recap

08:49 AM Weaker overnight and additional selling after data (despite an initial, paradoxical mini rally). 10s up 6bps at 4.667.  MBS down 3/8ths after factoring out some illiquidity

12:24 PM Back into positive territory on gradual gains kicked off by Goolsbee comments. MBS up 3 ticks (.19).  10yr still up 1.1bps at 4.618, but down from highs of 4.688.

02:58 PM Best levels of the day with MBS up 6 ticks (.19) and 10s down about half a bp at 4.601

Pending home sales failed to add a third month onto the mini rally it staged in June and July. The National Association of Realtors® (NAR) said its Pending Home Sale Index (PHSI) declined 7.1 percent to 71.8 in August and is now down 18.7 percent from its August 2022 level. The PHSI ended a three-month decline in June, rising 0.3 percent followed by a 0.9 percent increase in July. [pendinghomesdata] The PHSI is based on contracts signed during the month to purchase existing single-family houses, condos, and cooperative apartments. It is a leading indicator of those sales which are expected to close over the following 30 to 60 days. NAR will report September’s existing sales on October 19. “Mortgage rates have been rising above 7 percent since August, which has diminished the pool of home buyers,” said Lawrence Yun, NAR chief economist. “Some would-be home buyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets.” “It’s clear that increased housing inventory and better interest rates are essential to revive the housing market ,” added Yun. The index in all four of the nation’s major regions declined compared to both July and to the prior August. The Northeast PHSI was down 0.9 percent to 62.6 and was 18.2 percent lower on an annual basis. The index for the Midwest lost 7.0 percent and 19.1 percent compared to the two earlier periods to a reading of 71.3.  

The past few days have seen rates surge to new multi-decade highs with the average lender quoting 7.6+ for top tier conventional 30yr fixed scenarios. Not too much has changed today apart from the direction of the movement and the fact that modest gains weren’t brutally dashed as the day progressed. In fact, most lenders updated rates  for the better at some point today as the underlying bond market improved.  The caveat is that the outright levels aren’t much lower than yesterday’s multi-decade highs. Nonetheless… longest journeys, single steps, and all that… Any time rates skyrocket–whether for a period of hours, days, or months–market watchers are on the lookout for a bounce.  Bounces come in all shapes and sizes.  In all cases, it only ever makes sense to take them one day at a time until a clear trend has been established.  Furthermore, that trend has to have backing from a clear shift in the economic data and Fed policy stance.   The current bounce is best measured in “hours” so far.  We’re a long way from being able to say it represents some sort of ceiling for rates, but we can always hope this tiny sapling grows into a mighty tree as long as we remember that hope is no basis for a strategy.   Today was “nice.”  If tomorrow is nice, that would also be “nice.”  But it’s a good time to remain skeptical and defensive until the niceness becomes overwhelming.