The business combination is anticipated to occur on or about August 22, and trade under the symbols BETR and BETRW.

Favorable economic trends have helped keep homeowners current, but some signs of credit stress are also beginning to emerge, the Mortgage Bankers Association said.

Incidents have increased by five times on a quarter-to-quarter basis, starting with the shift in deposit relationships after Silicon Valley Bank failed, CertifID said.

Fannie Mae and Freddie Mac can likely withstand potential credit losses twice as high as last year’s in the latest scenario, but they are at more risk of slipping into the red.

This was supposed to be the week where a key inflation report would cast a vote on the fate of interest rate momentum. The vote was ostensibly friendly but rates surged higher anyway. What gives? First off, let’s revisit why rates would care so much about an inflation report.  CPI (the Consumer Price Index) is the biggest monthly report on inflation in the US.  Inflation is the key reason that rates are as high as they are.  If inflation falls back to target levels, rates would theoretically move lower in concert.   Last month’s CPI was good for rates because it came in below the consensus (the median forecast among multiple economists). It was also a noticeable departure from a highly indecisive trend at elevated levels that, until then, had simply refused to decide whether it would move higher or lower. As seen in the chart above, the indecisive trend resolved toward lower levels last month with core inflation falling to 0.16%. It matched that same level in the new data released this week.  If this were the only thing that mattered to interest rates, rates would be much lower than they are today.  Alas, rates found other things to worry about.  The following chart of 10yr Treasury yields serves as a benchmark for this week’s rate movement (starting with last Friday’s jobs report). If we take the 10yr yield’s word for it, rates are thinking less about inflation and more about other things.  Part of the reason is that inflation still has to prove it can maintain this trajectory.  Annual numbers remain far from target levels, especially at the core level.

Bonds Can’t Catch a Break

This week was supposed to be all about CPI confirming or rejecting the notion that core inflation was finally falling into line.  A reading at or below the forecast would ostensibly have done that, but bonds managed to sell off abruptly that same afternoon.  Now today, a modest 0.1% beat in Producer Prices (a far less relevant report) resulted in additional selling.  One might be forced to conclude that the selling is happening for reasons that transcend the data despite the persistent cries of “data dependent” from the Fed and those who hang on their every word. 

Econ Data / Events

Core Producer Prices month-over-month

0.3 vs 0.2 f’cast, 0.1 prev

Core PPI y/y

2.4 vs 2.3 f’cast, 2.4 prev

Market Movement Recap

09:35 AM Flat overnight and weaker after data.  MBS down 3/8ths and 10yr yields up 4.5bps at 4.152%

01:06 PM treading water at weakest levels.  MBS still down 3/8ths.  10yr up 5.5bps at 4.162.

03:15 PM Weakest levels for Treasuries, up 6.3bps at 4.17.  MBS down 10 ticks (.31), outperforming.

As the MMLA conference wraps up (congratulations to Dan Grzywacz, CMB, and nearly 40-year industry vet, who was this year’s James T. Barnes Award winner), the conversations still involve some seemingly endless topics. One of which is W2 versus 1099. There’s been a lot of “quacking:” about whether originators can be paid as independent contractors (1099) or need to be employees (W-2). Mortgage Muser and attorney Brian Levy has some new thoughts on this topic that are worthwhile even if he “ducks” providing legal advice in his entertaining and insightful mortgage blog. View past editions of the Mortgage Musings and subscribe to get emailed about new postings for free here. Another is sticky higher interest rates, and today at 3PM ET, Skylar Olsen, Zillow’s Chief Economist, will be co-hosting The Mortgage Collaborative’s Rundown, covering current events in the economy and mortgage market for 30-45 minutes. And there’s volume. According to Curinos, July 2023 funded mortgage volume decreased 30% YoY and 13% MoM. Curinos sources a statistically significant data set directly from lenders to produce these benchmark figures. (Today’s podcast can be found here and is sponsored by SimpleNexus, an nCino Company, developer of mortgage technology uniting the people, systems, and stages of the mortgage process into one seamless, end-to-end solution. Hear an interview with Equifax’s Joel Rickman on leveraging income and employment verifications during the home equity line of credit (HELOC) origination process.)

The Producer Price Index (PPI) has a sub-par record as a market mover for bonds when compared to CPI and other inflation metrics.  But markets have been more willing to react to many reports with traditionally poor track records.  PPI is no exception, but today’s example has arguably had an unjustifiably big impact.  Core PPI remained at 2.4% y/y.  The monthly reading was 0.1% higher than forecast, but last month was revised 0.2% lower.  Should be sort of a wash, but bonds took it as a selling cue.

Repossessions registered both monthly and annual increases, though, according to Attom.

The company is rolling out a special-purpose credit program to help address what it describes as “the biggest barriers to achieving homeownership.” Such programs are gaining popularity among banks.