Are you gradually eating dinner earlier? Join the trend. Want to know another trend that isn’t so benign? Along the lines of the STRATMOR piece below, I received this email over the weekend. “Rob, I’m a processor at a lender who was doing about $80 million a month in 2020 and 2021 but is now doing $15 million. We saved money during those years and retained servicing. But now we’ve eaten through our savings, sold all of our servicing, had some Agency buybacks, and are barely breaking even. We’ve moved to entirely best-efforts execution, outsourced as much as we can, are continuing to lay people off, and are shedding unused, expensive technology. Where will we go from here?” That is a rough note, but, if it is any help, you’re not alone out there. It’s going to be a difficult autumn and winter, and lender management not doing anything is similar to an ocean swimmer being caught in the waves while everyone is telling them to swim out past the breakers or in to the beach. (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 Nationwide Processing’s Guru Amrit Khalsa on offshoring operations and reducing fixed costs for lenders.) Lender and Broker Software, Programs, and Services Since hitting the scene, SimpleNexus’ single sign-on simplicity and mobile convenience have raised the bar for what mortgage technology should be. Now an nCino company, SimpleNexus is backed by a new wealth of resources that will raise the bar even higher. nCino has already harnessed the power of AI to fuel data intelligence and automation across every aspect of banking. For an up-close view into how nCino is using AI to redefine the customer lifecycle and banking as we know it, join us via webinar tomorrow, 9/26, at 11 a.m. ET. Register now for a front-row seat to how nCino is shaping the future of financial services.

The report comes from Federal Housing Finance Agency Inspector General Brian Tomney’s office, which also is keeping an eye on turnover risks at the government-sponsored enterprises.

Federal Reserve Board Gov. Lisa Cook said artificial intelligence holds great promise for the economy, but stressed the importance of human choice in decision making, both financial and otherwise.

The nation’s largest bank, which acquired the remains of San Francisco-based First Republic following its failure this spring, has completed its plans to close 21 offices this year. But the consolidation effort is likely to continue.

Thomas Nides, a former U.S. ambassador to Israel and longtime Morgan Stanley executive, will take over the megabank’s public affairs division as its work to fix regulatory concerns continues. He succeeds Bill Daley, the former chief of staff to President Barack Obama, who recently announced his retirement from Wells.

More than one securitization per month resulting from multiple disbursements of a single loan will be permitted beginning Oct. 1, the guarantor said.

Mortgage rates actually recovered a bit on Friday as the underlying bond market experienced a modest correction after spiking to the weakest levels in more than a decade over the past 2 days.  Despite the improvement, mortgages are also still near multi-decade highs.  Why is this the case when the Fed didn’t hike rates this week? This counterintuitive movement is fairly common when it comes to the 8 Fed meetings each year.  Rates have fallen on several occasions when the Fed hiked throughout this rate hike cycle.  There are several reasons this can happen.  Some are complicated, but two of the simplest reasons are all we need this time around.  First off, the Fed only has 8 scheduled opportunities to update rates every year while the bond market has thousands of opportunities every day. Because of that, a Fed rate hike is often just a lagging development that the market has already priced in.  The Fed actually tries to avoid surprising the market when it comes to hikes/cuts.  Via speeches and press conferences, it effectively preps the market for potential changes.  The market can trade these expectations in a variety of ways.  The most direct is via Fed Funds Futures, which give traders a way to bet on the level of the Fed Funds Rate on any given month well into the future. Traders haven’t budged in their expectation of this week’s meeting resulting in a 5.375% Fed Funds Rate for  months!

In a rather classic pattern, a hawkish read on the Fed gave way to international selling on Thursday.  From there, a token correction was slightly more likely in the absence of any big ticket economic data, and that’s what we’re seeing so far today.  In the AM hours, it’s been modest, to say the least.  Current 10yr trading levels are still worst than they were on Wednesday afternoon, but MBS and shorter-term Treasuries.

Waiting For October

It seems like September only just arrived, but our sights are already set on October as the scene of the next major battle in the bond market.  Today’s trading session offered nothing of value, although it was “nice” to see a token correction in bonds after hitting multi-year highs yesterday.  The coming week will be hard-pressed to reshape the narrative given the absence of big ticket data, but the following week has it in spades

Econ Data / Events

S&P PMI

services 50.2 vs 50.6 f’cast
manufacturing 48.9 vs 48.0 f’cast

Market Movement Recap

09:26 AM Moderately stronger overnight with additional buying at the 8:20am CME open.  MBS up 6 ticks (.19) and 10yr down 1.8bps at 4.476.

12:24 PM Additional gains after 10am.  MBS up more than a quarter point.  10yr down 5.2bps at 4.442.

02:03 PM Fairly flat.  MBS up 10 ticks (.31) and 10yr down almost 7bps at 4.428

Sometimes I send this Commentary out from some pretty nice places, sometimes not. Today comes from the tarmac at the Newark Airport, in Row 22, sitting next to some hairy guy who’s snoring and apparently went with the “Garlic Lover’s Pizza” last night. You can decide which category today fits in. “What do you call a small pepper in the autumn? A little chili.” Tomorrow is the fall equinox. Autumn? Autumnal? Different ways of saying similar things? Do you know the difference between a loan, a mortgage, a lien, a note, and a deed of trust? There are differences, just like there are differences in the reasons why people move. Unlike the convicted felon that I spent some time with yesterday, wanting a newer, better, or larger house or apartment has been the most common specific reason cited for moves over the past two years. That’s followed by establishing one’s own household, evidenced by a change in marital status becoming a more common reason for moving in 2022 than in 2021. The percentage of movers reporting housing unit upgrades declined, suggesting a reversal of a boom in housing demand that happened in 2020, early in the COVID-19 pandemic. A quarter of movers reported family-related reasons for their move, the second most often-cited general reason for moving in 2022 and in several recent years. (Today’s podcast can be found here and this week’s is sponsored by the Trade-In Mortgage powered by Calque. Homeowners can buy before they sell, make non-contingent offers, and tap their home equity to fund the down payment on their next home. Lenders can help their clients negotiate a lower purchase price, reduce their interest payments, and eliminate PMI. Hear an interview with Mayer Brown LLP’s Lauren B. Pryor on M&A activity in the mortgage space and what makes for a successful transaction in the current environment.)