Think back to October 17th. MBS opened slightly weaker and ended the day down about an eighth of a point.  That was the last time we had a weaker start, and there are some parallels to today. In both cases, the weakness was modest. In both cases, the previous session closed at the best levels in at least a month.  In fact, yesterday’s 5.0 MBS prices matched their best close in over a year.  We can definitely forgive (and possibly even  expect ) a small pull-back after such a consistent rally. As discussed in yesterday’s video, it was beginning to seem like a good moment for broader consolidation.

And a bonus chart in light of yesterday’s discussion of oil prices…  Clearly not a 1:1 correlation, but fans of the oil/Treasury connection could at least say the rebound is not doing us any favors.

Kin, a direct-to-consumer insurance provider, has started a mortgage broker in Florida which also takes loan applications through a call center or online.

The company’s servicing valuations fell but by less than in previous quarters. Lower rates both aided production and created recapture opportunities.

The NRMLA/Riskspan Reverse Mortgage Market Index set a new high of 502.42, with the dollar amount of home equity for those 62 or over reaching $14.4 trillion.

The housing agency director also announced plans to donate his salary to help wounded veterans as CHLA and ICBA push for the enterprises to resume MBS buying.

Bank of America has a playbook for government shutdowns, which includes providing fee and payment waivers as well as loan deferrals and forbearance programs, CEO Brian Moynihan said at the American Bankers Association’s annual convention.

The bonds that underly mortgage rates were only slightly stronger today, but that’s never a bad thing when they closed near the best levels in a year the previous day. Additionally, those bonds improved by the end of the day yesterday, meaning that mortgage lenders were going into today with a bit of a cushion. When lenders set rates, they are basically looking at a constantly-moving bond market and locking in rates that will be in effect for the rest of the day.  Mid-day changes only happen if bonds make a big enough move and yesterday’s wasn’t big enough for most lenders. Yesterday’s cushion combined with today’s modest additional improvement for fairly decent drop in the average top tier 30yr fixed rate.  We’re also now in the zone of rates where movement happens more quickly due to the underlying architecture of the mortgage bond market.  In not so many words, this causes rates to accelerate toward levels that end in 0.125 or .625 for reasons that are too esoteric to dig into today (if you want to nerd out, here you go: Why Mortgage Rates Move in Jumps Instead of Straight Lines). Some lenders are offering their lowest rates in over a year, and some in over 3 years.  The average lender is right in line with 1-year lows and close enough to 3-year lows.

Slow, Steady Gains Continue

Perhaps the absence of big-ticket econ data has left bond traders to ponder a reality that they see as economically challenging.  Perhaps non-gov reports like today’s Philly Fed services index are contributing to those assumptions.  Perhaps other indicators like oil, forex, etc. are exerting some influence. Or perhaps this is the tail end of a short-term repricing driven by last week’s banking concerns or Fed balance sheet expectations. Either way, volume was light and gains were modest as yields push their lowest levels in more than a year.

Econ Data / Events

Philly Fed Non-Manufacturing Biz Activity

-22.2 vs -12.3 prev
employment -4.5 vs +9.4 prev
new orders -17.4 vs +0.5 prev
prices 35.8 vs 38.8 prev

Market Movement Recap

10:43 AM Moderate gains so far this morning.  MBS up 3 ticks (.09) and 10yr down 2.1bps at 3.958

01:49 PM Treasuries off best levels, but still stronger and broadly sideways.  MBS up 3 ticks (.09) and 10yr down 1.7bps at 3.962

On the one hand, there’s not much going on for the bond market these days.  The jobs report is a flat-out requirement in terms of informing major changes in momentum. On the other hand, there are a few concerns in the background that have been helping the general uncertainty resolve in favor of buyers. One of last week’s contenders was regional bank losses.  An ongoing consideration is the level of reserves on the Fed balance sheet (not a huge consideration, and mostly baked-in, but probably modestly positive for bonds when the Fed stops letting reserves go lower).

Then there’s oil.  Oil should never be mistaken as a primary indicator for bonds. It is infinitely better described as logically correlating due to global economic momentum. But there’s no denying oil’s role in inflation, and that’s yet another small nudge in favor of better bond buying–or at least it can be.

“What do Costco and Las Vegas have in common? You go to buy a gallon of milk, and it costs you $285.” There isn’t a lot of autumn foliage here in Las Vegas, but if you’d like a map of the fall colors, here you go. I’ve received a few comments about how the industry is changing, and in curious ways. There is some creative thinking out there. Along those lines, I received this note. “Rob, have you heard of a title company franchise where LOs and brokers keep title fees, and “own the revenue stream yourself”?” Yes, I think that you’re talking about Proliant Settlement Systems. Does it mean that you could have real estate agents, loan officers, and title officers all working for one company? I don’t know… ask your attorney. Every lender has an attorney these days, right? And innovation is out there. UWM and Bilt announced a strategic partnership whereby UWM mortgage customers can “earn valuable Bilt Points with each on-time payment while accessing exclusive Neighborhood Benefits™, creating an entirely new value proposition for both homeowners and the independent mortgage brokers who serve them:” here. (Today’s podcast can be found here and this week’s are sponsored by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite’s three core products nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics, unite the people, systems, and stages of the mortgage process into a seamless end-to-end solution embedded with data-driven insights and intelligent automation. Hear an interview with Secure Insight’s Andrew Liput and Halcyon’s Kirk Donaldson on their integrated solution that combines borrower identity, income, and settlement agent verification into a single secure workflow, enhancing mortgage fraud prevention and compliance.)