The watchdog accuses the mortgage shop of providing illegal incentives to real estate brokers and agents, such as cash payments, paid subscription services, and catered parties, in return for purchase business.

Some respondents reprised calls for a return to more flexible capital rules and portfolio-level cross-subsidization. Others see danger in such a move.

The average for a 30-year home loan marked the fourth straight week of increases, according to Freddie Mac.

Lenders reported a net loss of $534 on each loan they originated in the last quarter, an improvement from the $1,972 loss per loan the quarter prior.

Offices impacted are located in Chicago, Cincinnati and Kansas City, a company representative said Wednesday.

Bonds Came Here to Chew Gum and Sell Off, And They’re All Out of Gum

There comes a time in protracted bond market selling sprees where the momentum takes on a glacial quality.  Intraday volatility may pay some heed to discrete big-ticket events, but the rest of the day is spent moving steadily toward higher yields in a mindless and disconnected way.  The past week and a half is a perfect example and today was no exception.  Yields were actually at their lows of the day an hour after the AM data, so we can’t really blame it for the sell off that took 10s to the brink of their highest levels since 2007 (or mortgage rates to their highest levels in more than 20 years).

Econ Data / Events

Jobless Claims

239k vs 240k f’cast, 248k prev

Philly Fed

12 vs -10 f’cast, -13.5 prev
prices paid 20.8 vs 10.1 f’cast, 9.5 prev

Market Movement Recap

08:51 AM 10s up to 4.312 in Asia, but back under 4.3 in early US trading.  MBS unchanged in 6.0 coupons, but illiquid at times (recently down 6 tick or 0.19).

10:07 AM Weakest levels now.  MBS down a quarter point and 10yr up 4.4bps at 4.302.

02:38 PM Losses may be leveling off now after a bit more selling earlier.  10yr up 5.4bps at 4.312.  MBS down 7 ticks (.22).

Readers of financial news outside the mortgage industry are accustomed to getting their mortgage rate updates on a weekly basis.  This has only recently started to change as other sources have caught onto the trend that we pioneered in 2009 when we first began tracking daily changes in rates.  If anyone was doing it before that, hats off to you! If you take your mortgage rate news on the daily, you already knew today’s headlines were highly likely based on the proximity to multi-decade highs discussed yesterday.  Today simply ended up being another moderately small, incremental step in a higher direction.   Yet again, the movement in the underlying bond market (the stuff that pushes mortgage rates higher) didn’t line up with any new headlines or major developments in economic data.  Traders are migrating toward higher rates in a methodical way with glacial momentum.  We won’t know when they’ll be done until the migration stops, unfortunately.  And yes, I did just basically say rates will keep going higher until they’re done going higher. The catch is that the inflection point could be this afternoon, or it could be months from now.  A few of the gloomiest doomsdayers might even say “years,” but such a time frame is unlikely unless it presupposes a substantial correction lasting long enough to provide meaningful, temporary relief. Tomorrow’s commentary will be a deep dive on the “why” behind the rate spike that almost everyone thought would be over by now. 

The GFC (great financial crisis) shaped and reshaped the worldview of any market-watcher that lived through it.  The 70s/80s were increasingly seen as a one-off aberration against a baseline of generally low, flat long-term rates in the 1-3% range.  Due to that paradigm, the post-covid volatility in inflation and rates has been accepted only slowly and painfully.  The paradigm continues informing the belief that 4.3% in 10yr yields is too damn high and buyers surely have to be lining up.  Unfortunately, when too many investors are on one side of the trade, the market often moves in the opposite direction.
At least that’s one of the old sayings.  Other variations include things like “the market will do what it must in order to prove the maximum number of traders wrong.”  But a closer look at
It’s true that their net long position is the highest it’s been in a long time, but not much longer than it was at the end of 2018.  It was also the longest in years in the middle of 2015 and the market did nothing to punish the imbalance.  In fact, bonds rallied to all-time low territory by the following summer.  
There are plenty of other traders who are short bonds.  Interestingly enough, leveraged accounts are net short 1,287m contracts.  That goes a long way toward offsetting the net long among money managers of 1.303m contracts.  
Long story short (no pun intended), glib witticisms about what the market “always does” are never as simple as they sound.  Bonds are adjusting to a new normal with shorter-term yields more anchored by Fed Funds Rate expectations (thus putting pressure on longer-term yields to un-invert the curve).  Additional pressure comes courtesy of a particularly heavy imbalance of Treasury issuance versus revenues as well as foreign governments selling Treasuries to prop up their devalued currencies. 
As has been and continues to be the case, short term yields need to fall significantly before long term yields get significant relief.  That won’t happen until the Fed signals a willingness to cut and that won’t happen until inflation and econ data do a lot more than they have to show the impact of the Fed’s policy tightening.  For inflation, that could merely mean repeating the recent 0.2% m/m core performance, but for econ data, things are going to have to start looking a lot more contractionary.

Time flies, and we’re more than halfway through the 3rd quarter. Few lenders and vendors look forward to heading into the autumn or winter of any year, and with the U.S. 10-year up to 4.30 percent, millions of borrowers content with low rates thanks to us, and with four consecutive negative prints in MBA mortgage applications, the demand for mortgages is now roughly 9 percent lower compared to the last positive print on July 14th. With mortgage rates hovering around 7.5 percent, we can all expect rate sensitive borrowers to continue to sit out. Lenders everywhere are grinding away at lowering their cost per loan. Of course, part of that is beating up on vendors when ordering, putting together bundling packages, looking at employee cost (more on that below) and manufacturing cost. Pricing exceptions are looked at dollar by dollar, which is often why Lender A doesn’t care much when a branch goes to Lender B when examining Lender A’s book of business showed unprofitability. Lenders are cutting expenses on technology and services, corporate overhead, and spending money on vendors. There is little reason to believe that this will stop. (Today’s podcast can be found here and this week’s is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology and other services to the mortgage industry for almost four decades. Hear an interview with Kristin Messerli on the next generation of home ownership.) Lender and Broker Software and Services

The founder of the company formerly known as Och-Ziff is threatening to oppose the transaction unless material changes are made to the agreement.