The Mortgage Bankers Association (MBA) said the volume of mortgage applications dipped slightly during the week ended September 8. MBA said its Market Composite Index, a measure of that volume, decreased 0.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index dropped 12 percent during the week, which was shortened by the Labor Day holiday. The Refinance Index declined 5 percent week-over-week and was 31 percent lower than the same week in 2022. The refinance share of mortgage activity was 29.1 percent compared to 30.0 percent the previous week. [refiappschart] The seasonally adjusted Purchase Index rose 1 percent but fell 11 percent before adjustment. Activity was 27 percent lower than the same week one year ago. [purchaseappschart] “Mortgage applications decreased for the seventh time in eight weeks, reaching the lowest level since 1996 ” according to d Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Last week’s decline driven by a 5 percent drop in refinance applications to the weakest reading since January 2023. The 30-year fixed mortgage rate increased to 7.27 percent last week and was 40 basis points higher than where it was in late July. Purchase applications increased over the week despite the increase in rates, pushed higher by a 2 percent gain in conventional loans. Given how high rates are right now, there continues to be minimal refinance activity and a reduced incentive for homeowners to sell and buy a new home at a higher rate .”

Spreads with the 10-year Treasury are unlikely to narrow from outsized levels even as inflation cools and Fed tightening ends, said Odeta Kushi, an FA economist.

But a great deal of variation in distress levels were reported between individual markets and property sectors, according to two new reports.

The securities have been hard to sell in part because the bonds will probably pay below-market coupons for years.

Executives were accused in a lawsuit of engineering a proposed $639 million acquisition of the fund by rival Rithm Capital Corp. in a way that is unfairly blocking a higher bid.

The fintech’s platform can assess a customer’s financial profile, run it through underwriting software and draft a pre-approval letter in minutes, according to a demo.

Calm Waters Again, But Tomorrow Could Rock The Boat

Much like yesterday (which saw the narrowest 10yr yield range in 2 years), today was exceptionally sideways.  If it weren’t for a few minutes of highs in the early morning, or the extent of the afternoon rally, it would have been just as narrow.  As such, it’s another day that adds to the sense of “bracing for impact” ahead of Wednesday’s CPI data.  While it’s always possible that big ticket data will thread the needle and result in minimal movement, there’s little question that any big departure from expectations will rock the bond boat for better or worse.

Market Movement Recap

09:00 AM Sideways to slightly stronger overnight, but bouncing back toward unchanged.  10yr down 0.8bps at 4.288.  MBS down 1 tick (.03).

12:11 PM Still very flat/sideways despite some morning volatility.  MBS down 1 tick (0.03).  10yr yield down 1bp at 4.284.

01:42 PM no reaction to 10yr auction.  10yr down 1bp at 4.284.  MBS down 2 ticks (0.06).

03:08 PM Some late day gains in the long end of the curve.  10yr down 2.6bps at 4.268 and MBS roughly unchanged (occasionally showing a 2 tick loss due to illiquidity).

Mortgage rates started the week slightly higher for the average lender, but still below last week’s highs.  Most of what was lost yesterday was gained back today.   All of the above makes the recent movement seem bigger than it actually has been.  The last 5 business days have been some of the narrowest since mid-July with 30yr fixed rates moving less than 0.125% from trough to peak. [thirtyyearmortgagerates] The absence of volatility makes sense because there’s also been an absence of big ticket economic data since last Wednesday. That will change tomorrow with the release of the Consumer Price Index (CPI). CPI is the most closely-watched monthly inflation report.  Given that inflation is the biggest reason for high rates, markets are poised to react to any unexpected results.  Traders already assume that fuel/energy inflation will push the headline number higher, but that “core inflation” (which excludes food/energy) will be in line with last month’s reading. The rate market is more focused on core inflation.  If it surprises to the high side, rates would likely rise–potentially abruptly.  If it comes in lower than expected, rates would likely move down.  The larger the departure from expectations, the bigger the potential move. CPI will be released at 8:30am ET, which is before almost any mortgage lender has rates available to lock.  

Yesterday I listened to the CFPB’s Rohit Chopra discuss home loans. Today I head from Nashville to Chicago, both known all over the world. Here, the United States has everything: mountains, forests, plains, rivers, swamps, tropical jungles, glaciers, beaches… I could go on. But apparently there is a certain attraction for some in Italy, Mexico, Costa Rica, Portugal for U.S. citizens, and those are the top countries for Americans buying real estate abroad. Back in the U.S. of A, the subject of a lack of inventory continues to be discussed from coast to coast. What if the “big companies” sold their holdings? Well, Invitation Homes is the largest single owner of single-family rental homes in the United States, managing more than 80,000 homes. But why should they, or any other corporate homeowner? Speaking of big numbers, among unmarried people ages 18 and over who have never been married, widowed or divorced, regardless of their sexual orientation, the odds of finding a potential mate in the U.S. are in men’s favor. There are roughly 89.8 unmarried men for every 100 unmarried women. (Today’s podcast can be found here and this week’s is sponsored by SimpleNexus, an nCino Company, and award-winning developer of mortgage technology for modern lenders. Hear an interview with Servbank’s Linda Case on how mortgage servicers can maintain high quality standards throughout the life cycle of a loan.) Lender and Broker Software, Products, and Services Just as Portsmouth, NH boasts the “Smallest Chapel in the World,” Down Payment Resource (DPR) specializes in finding small programs that make a huge difference in peoples’ ability to afford a home. If you’ll be in town for the New England Mortgage Bankers Conference, schedule time with Tani Lawrence to explore how DPR can help you support homebuyer assistance programs that unlock the doors to homeownership for more borrowers. And if you’re not in Portsmouth, no need for FOMO. You can still book time with Tani to learn how DPR can help you recover loans declined due to insufficient cash-to-close or disqualifying DTI ratios.

Bonds may be up a bit and down a bit between now and yesterday’s close, but none of it is super consequential in the bigger picture.  Of course there are a few ways to view the bigger picture depending on how big you want to go.  Looking back 4 or 5 months, bond yields have been in a very simple, linear, and unfortunate uptrend. 

In the slightly smaller picture, yields have been exceptionally sideways, trading mostly between 4.28 and 4.30 with some overrun in either direction.  It’s not unfair to conclude that trading levels are hunkering down in this low volatility pattern in preparation for what could be a higher volatility reaction to this week’s CPI and next week’s Fed announcement. 

Today’s only relevant calendar event is the 1pm ET auction of 10yr Treasuries.  Auctions haven’t been reliable market movers recently, but they always CAN be if the results are far enough from expectations and average stats.