The Department of Justice is seeking to terminate a Biden-era lending discrimination settlement with Lakeland Bank. Last month, the DOJ took similar action in a case involving Mississippi-based Trustmark National Bank.

Federal Reserve Gov. Christopher Waller said changes to the Federal Open Market Committee’s quarterly economic projections could lead to clearer communication with markets and market participants.

Any lender or mortgage loan originator hoping for lower rates to spur business is learning that hope is not a strategy. “Rob, you’re always talking about inflation, so here’s an example of wage inflation: In the Bay Area we just paid a plumber $212/hour to install a kitchen faucet. Granted, he has decades of experience, but still…” The markets are “tariff-ied”: inflation is expected to increase, shipping is down, and growth has slowed… after all, someone has to pay for the increased cost of goods (although who knows what will happen given the back and forth in the courts). In addition, I have not heard a single person suggest that privatizing Freddie and Fannie would result in lower mortgage rates. Many believe that once released from conservatorship, Fannie Mae and Freddie Mac could need to hold more capital to absorb losses, the capital coming from increased guarantee fees charged to lenders. In addition, upon release, unless there’s an “explicit guarantee” or backstop from Congress, investors may demand higher returns to account for increased risk. But Treasury Secretary Scott Bessent said that Freddie Mac and Fannie Mae wouldn’t be released from conservatorship if doing so puts upward pressure on mortgage rates/mortgage spreads. Investment manager Pimco, and others, await. (Today’s podcast can be found here and this week’s is sponsored by CreditXpert, the credit optimization platform that helps today’s top mortgage originators and more than 60,000 mortgage professionals qualify more applicants, make more competitive offers, reduce LLPA premiums, and close more loans. Hear an interview with CHLA’s Scott Olson on the rising costs of credit scores, the monopoly power of FICO, and how increased competition, from VantageScore to new credit scoring models, could reshape the mortgage lending landscape.)

Mortgage rates have been in an exceptionally narrow range since last Tuesday with the 30yr fixed index hovering just under 7%.  The average lender is just a hair higher today versus last Friday, but still just under 7%. As always, the index is best used as a tool to track day over day changes in rates rather than outright levels.  Individual rate quotes can vary quite a bit depending on the scenario, lender, and discount points. Monday’s economic data consisted of a key report on Manufacturing from ISM. This report often has an effect on rates. It was fairly minimal this time, but it helped rates avoid a sharper increase.  As the week continues, several other important reports will be released. Friday’s jobs report is traditionally the most closely watched when it comes to the rate market.

New Month Selling Trumps ISM Data

It’s not that this morning’s ISM data failed to help the bond market. In fact, it accounted for the highest volume of the day and the lowest yields of the day. But those yields were seized as an opportunity for seller to do what they’d already showed up to do earlier in the day. Bottom line, we had a bit of excess strength at the end of last week due to month-end trading and now a bit of a reversal as the new month gets underway. Yields are still nearer the lower end of the recent range, which makes today’s modest correction all the less threatening. 

Econ Data / Events

S&P Manufacturing PMI

52.0 vs 52.3 f’cast

ISM Manufacturing

48.5 vs 49.5 f’cast, 48.7 prev

ISM Employment

46.8 vs 46.5 prev

ISM Prices

69.4 vs 70.2 f’cast

Market Movement Recap

10:03 AM Slightly weaker overnight, but recovering a bit after ISM data.  MBS down 2 ticks (.06) and 10yr up 2.1bps at 4.425

01:20 PM More weakness into PM hours.  MBS down 9 ticks (.28) and 10yr up almost 6bps at 4.463

05:09 PM Modest recovery into the close.  MBS down 5 ticks (.16) and 10yr up 4.2bps at 4.446

The ISM Manufacturing PMI has more potential than most economic reports to cause a reaction in the bond market, even if it isn’t perfectly consistent. As today’s only big ticket data, it was well positioned to set the tone this morning. While it may not be doing that in a resounding fashion, one could still argue that the weaker result is least helping bonds avoid additional weakness.
The net effect is that 10yr yields are pushing slightly lower from the 4.45% after bouncing there several times starting at 4:30am ET.  Anything between here and 4.39% should be considered “in limbo” as we wait for more data.

Uncover the key reasons why lenders should care about liner failures and how environmental risks can derail loan performance when ignored during review.

The regulator has postponed the building code in question, but is otherwise battling the challenge raised during the Biden administration.

The company anticipates a $139.8 million contingency liability and nearly $60 million related expense in a court battle with Pine River Capital Management.

Besides the investment, Citi was also the sole bookrunner on Vontive’s first-ever securitization, made up of $150 million of residential transition loans.