While purchase volume is up 20% from last year, it was 5% lower than one week ago, although a 4% increase in refinance activity helped pick up the slack.

“Why did the Tibetan Monks go to Las Vegas? They are very good at games of chants.” One topic among hallway chats with lenders here at the MBA Annual is keeping costs down. After all, everyone is selling, or putting their loans into portfolios, at roughly the same price, so whether a lender is doing $10 million a month or $1 billion a month, cost and efficiency are paramount. The current STRATMOR write up is titled, “Rates Drop, Pipelines Pop: Don’t Let Fulfillment Flop.” One of the simplest (I didn’t say easiest) ways to improve the cost per loan is ask your staff, “What are you trying to do to improve your pull through?” After all, higher pull through automatically lowers your cost per funded loan. And while IMB numbers are dropping, those remaining are carefully eyeing ARM, home equity, and non-Agency programs. (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 Bradley’s Jonathan Kolodziej on the evolving enforcement of federal and state consumer financial laws and some lender best practices for adapting to changes in the regulatory environment.) Services, Products, Software, and Tools for Lenders and Brokers

Mortgage rates were perfectly unchanged today, on average.  With that, they remain in line with the lowest levels in more than a year and very close to the lowest levels in more than 3 years.  Recent momentum has been moderate and favorable. In the absence of big economic reports that are on hold due to the shutdown, bonds have taken cues from other developments like the new tariffs announced 2 weeks ago and the regional bank drama seen last week.  These market movers would normally be operating in the background–perhaps not even meriting discussion–but the dearth of data and the generally narrow range makes their effects more noticeable.  In thinking about the relatively uneventful return to long-term lows, it’s good to remember that momentum comes and goes when it comes to rates and the bond market that drives them.  Sometimes, a string of good luck is the only required catalyst for a token pull-back.  Bonds are showing some fatigue as 10yr yields have pushed just under 4.0%. It may take some more convincing in the form of data or other events to motivate additional improvement. 

20yr Treasury Auction to The Rescue

The day began with a bond market that looked like it might take an opportunity to retrace a small portion of the gains seen in recent days.  Even at its worst, it wasn’t that threatening (i.e. 10yr yields never rose above 3.98%). But any notion of a pull-back was effectively erased at 1pm with the results of the 20yr bond auction. Bids totaled 2.73 times the auction amount–right in line with the 6-auction average and the yield came in 1.3bps lower than expected. A 20yr auction wouldn’t normally be an obvious market mover, but the muted range and dearth of data made the reaction more noticeable. With that, bonds moved back into positive territory on the day and held steady through the 3pm close.

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

10:33 AM Losing some ground after opening stronger.  MBS down 2 ticks (.06) and 10yr up 0.5bps at 3.974

01:52 PM Decent recovery after 20yr auction.  MBS up 1 tick (.03) and 10yr down 1.8bps at 3.952

03:33 PM Just off best levels.  MBS unchanged and 10yr down 1.5bps at 3.955

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.