Followers of Islam cannot pay interest on loans. Androscoggin Bank figured out a way to structure a new product that addresses that challenge and paves a path to more homeownership.

The company, which is a large investor in mortgage servicing rights, hired a former MetLife executive it previously worked with to oversee the business line.

The U.S. Securities and Exchange Commission is probing the non-QM lender, which pledges to promote homeownership in underserved communities, over its mortgage-backed securities, according to people with direct knowledge of the matter.

The mortgage technology companies finalized an agreement with the Federal Trade Commission that permits the controversial deal to proceed.

Fairly Uneventful But Perhaps Not For Long

The week began with a perfectly normal example of a summertime Monday with lighter volume, no major movement, and trading levels remaining well inside the range of the past few sessions.  Bonds started fairly flat but improved at the 8:20am CME open (movement surrounding opening bells = another hallmark of lighter summertime trading).  Gains continued at a modest pace despite Treasury auctions.  Perhaps bonds are having a ceiling feeling as long as this week’s data plays ball?  

Market Movement Recap

09:24 AM Flat to slightly weaker overnight. Friendly bounce at 8:20am CME open.  10yr down 1.1bps at 4.204.  MBS up an eighth of a point.

01:31 PM Flat through the uneventful 5yr Treasury auction.  10yr down 1.7bps at 4.419.  MBS up 3 ticks (.09).

03:26 PM Best levels of the day with MBS up 7 ticks (.22) and 10yr yields down 3.5bps at 4.401.

Mortgage rates hit fresh multi-decade highs last week with many lenders hitting the mid-7% range earlier in the week for top tier conventional 30yr fixed scenarios.  There was some immediate relief on Wednesday, but things have been broadly sideways since then. Today’s market movement put a bit more of a positive spin on the “sideways” vibes from the 2nd half of last week.  The average lender is almost back down to 30yr rates of 7.25%.  As always, the rates that we mention should not be considered in a vacuum.  Their highest and best use is to measure the average day over day change, expressed in terms of an “effective rate” (one that accounts for upfront costs without needing a separate line item).  With that in mind, from the recent peak, the index is down 0.20%, which means mortgage lenders are quoting actual rates anywhere between 0.125% and 0.25% lower compared to last Monday and Tuesday. Keep in mind, things can change rapidly as the week progresses.  There are several economic reports that have a strong track record of causing volatility for rates–at least one on each of the remaining days this week. 

As the rumor spreads that millions of women are lined up to be weighed at the Fulton County Jail, we head into late summer and early autumn, rarely a time for increased home sale activity. The National Association of REALTORS®’ total membership in July 2023 is 1.56 million. There are about 547k active listings. That’s one listing per three NAR members, which doesn’t even include non-NAR real estate agents. Analysts continue to point to the nationwide housing market struggling with low inventory levels and decreased affordability. While active inventory through the first six months of 2023 was higher than the record lows set in 2022, new listings have been lagging below 2022 levels. Just simply not enough homes? But Hawai’i’s Marcelle Loren writes, “I don’t agree with the reports of a lack of inventory. There’s just a lack of agents digging up properties to sell. For example, the death of Baby Boomers is a source of inventory: Rising costs are prompting more adult children to sell the homes they inherit from their parents. (Today’s podcast can be found here and this week’s is sponsored by Black Knight. Black Knight is an award-winning software, data and analytics company that drives innovation in the mortgage and real-estate industries, and the capital and secondary markets. Listen to an interview with the company’s Conrad Ficca and Richard Lombardi on climate risk and how lenders can mitigate its impact through data.) Lender and Broker Software and Services

The “data dependent” waiting game is nothing new, even if there have been some changes in how the market has interpreted data.  Specifically, the days of relying on CPI as the month’s one and only big ticket market mover are over.  Traders and the Fed already know that month-over-month inflation is currently on track for 2% based on the last 2 reports. 
This has caused some to cry foul over the absence of a more dovish shift, but in his two most recent appearances Powell has reminded us that they’re not ignoring the progress on inflation and instead are actually looking ahead to how the next 8 months of inflation might evolve based on other econ data. To that end, “other econ data” is as important as anything right now, and this week brings a ton of it.
Apart from Monday, each of the remaining days has a big ticket event (all times ET):

Tuesday:

JOLTS at 10am 

Wednesday

ADP at 8:15am
Q2 GDP at 8:30am

Thursday

Claims and PCE at 8:30am

Friday

NFP at 8:30am
ISM Manufacturing at 10am

The rate of increase cooled for the 14th straight month in June, dropping over 10% year over year, according to CoreLogic.

The lender was accused in a recent lawsuit of failing to meet its obligations to underserved borrowers in lieu of wealthy clients.