“Why did the homeowner take so long in remodeling his home? He had trouble with da siding.” There are LOs, or correspondent investors, who have spent months or years building up their renovation referral book of business. I am sure that they saw this coming with the Trump tariff policies: A quarter of large renovation projects could be scrapped or considerably scaled back because tariffs make them cost-prohibitive, according to new research from Zonda. Meanwhile, Robbie Chrisman reports that Day #1 of the California MBA’s Mortgage Innovators Conference in Huntington Beach delivered a deep dive into how private equity is shaping the future of the mortgage industry, with leaders from Redwood Trust, Andromeda, and FundingShield highlighting capital’s growing role in innovation, risk management, and consumer experience. The afternoon pivoted to the power and pitfalls of AI, as panels and tech demos explored cutting-edge tools transforming lending operations, from compliance automation to borrower engagement. Sessions emphasized the urgent need for strategic implementation, regulatory alignment, and customer-focused tech to stay competitive in a rapidly evolving market, setting the tone for a high-impact, tech-forward year ahead. (Today’s podcast can be found here and this week’s are sponsored by HomeEQ, the fully digital HELOC from Arc Home, which empowers brokers to quickly provide borrowers with easy access to their home equity. Brokers can benefit from competitive compensation, along with comprehensive training and a complete marketing plan designed to help them re-engage former clients and grow their business. Hear an interview with Aidium’s Spencer Dusebout on how AI is transforming the mortgage industry, from redefining lead scoring and boosting CRM adoption to supporting, not replacing, loan officers, with a spotlight on the launch of innovative “Agents” designed to streamline workflows and enhance borrower engagement.)

Mortgage rates moved back up to the higher levels seen earlier this week after the official announcement of a trade deal between the U.S. and the U.K. Most lenders actually began the day fairly close to yesterday’s latest levels, but were ultimately forced to raise rates in response to weakness in the bond market.   The rationale for this market reaction can be debated. Some market watchers conclude that a trade deal is simply “good for stocks and bad for bonds” because it’s economically bullish. While that sentiment CAN account for some of the movement, it’s not the whole story. Bonds (which dictate rates) have specific concerns regarding inflation, foreign demand, and issuance needs. These are high level topics that are beyond the scope of a daily mortgage rate recap, but suffice it to say “rates have a lot on their minds” when it comes to how trade policy shakes out.  Unfortunately, it’s sort of a no win situation in the short term.  The only exception would have been a full exemption from tariffs. In the bigger picture, today’s mortgage rate increase is unremarkable–sort of average–and it leaves the rate index well below the early April highs, despite being well above the range seen during the month of March.

Surprisingly Big Sell Off Relative to The Inspiration

Bonds ended up selling off somewhat sharply today with the bulk of the blame apparently reserved for the UK/US trade deal. In fact, the pace of the selling wasn’t something we would have predicted when the details emerged this morning. This raises questions about what other motivations could be in play.  Certainly, the “precedent thesis” is relevant (i.e. what does today’s deal imply about how other trade deals may look?). The simplest way to approach it would be to conclude that tariffs will go up enough to increase inflation, but not so much as to hinder growth–both bad for bonds and for the Fed’s rate cut prospects.

Econ Data / Events

Jobless Claims

228k vs 230k f’cast, 241k prev

Unit Labor Costs

5.7 vs 5.1 f’cast, 2.2 prev

Market Movement Recap

09:16 AM Slightly stronger after AM data, but still weaker on the day.  MBS down 1 tick (.03) and 10yr down 1.3bps at 4.283

10:40 AM weakest levels of the AM.  MBS down 6 ticks (.19) and 10yr up 4.6bps at 4.316

02:46 PM sharply weaker after auction with MBS down 3/8ths and 10yr up 10bps at 4.37

Bonds mostly lost ground in the overnight session, and then lost just a bit more ground after the 8:30am econ data.  This consisted of Jobless Claims coming in slightly lower than forecast, and Labor Costs rising to 5.7% for Q1 vs 2.0% in Q4. Of the two, the latter likely accounted for the initial selling impulse, but it was short-lived. Bonds rallied with 10yr yields dropping almost 4bps, and have since bounced back to the weakest levels of the morning (but this is too far removed from the AM data to blame the AM data). The only other relevant scheduled even is the 30yr bond auction at 1pm ET. Apart from that, trade related headlines may cause some ebbs and flows with the US/UK deal being announced.

Monetary policy is on track to loosen later rather than sooner. Housing finance firms may look more to home equity until or unless a change revives activity.

The San Diego-based lender reported a net loss of $23.9 million for the January-March period, down from a net income of $97.9 million the quarter prior.

Bill Pulte once again claimed he’s signed over 50 directives at the housing regulator, although he’s only made some of those that affect lenders public.

The comment period for the Affirmatively Furthering Fair Housing interim final rule has been extended, but consumer advocates are clear in their opposition.

An index of applications for home purchases jumped 11.1%, the most since January, while a gauge of refinancing increased at a similar rate, according to Mortgage Bankers Association data released Wednesday.

There’s nothing like a Fed announcement day to get almost every media outlet to run headlines that attempt to tie the day’s market movement to the Fed’s rate decision. The problem in today’s case is that there wasn’t even anything remotely resembling a decision, nor did anyone expect there to be. Markets were effectively betting on a zero percent chance of a rate cut at this meeting, and that’s been the case for several weeks. Fed speakers had also been very clear in their shoulder shrugs during that time, saying that there are two big policy considerations in play right now, each arguing in the opposite direction. Specifically, the Fed has a mandate to “promote maximum employment,” which could also be viewed as “promote a strong economy,” and a mandate for “price stability,” which is fancy talk for the Fed’s inflation fighting role.  When Fed speakers have recently referred to those two mandates being in tension, they mean the potential drag on the economy from tariffs and tighter fiscal policy argues in favor of lower rates if it translates to higher unemployment and weaker economic data.  Contrast that to the potential increase in inflation due to tariffs, which argues in favor of higher rates. Simply put, there was nothing the Fed could do today but sit on its hands and wait to see which side of the mandate ended up having more compelling evidence, and nothing for Fed Chair Powell to do but reiterate that fact multiple times when almost every reporter asked a different version of the same question.