This is the second acquisition deal Old Republic has been involved in this year, after selling its title production business in January.

Decreased homeowner equity corresponds to recent declining prices reported by leading housing researchers, but tappable amounts still sit near record highs.

Mortgage rates were effectively unchanged on Thursday with the average lender very close to the best levels in over a year. But when it comes to the underlying bond market and the rates available to consumers, there are some dislocations that suggest risk is increasing. Specifically, bonds lost ground today. This normally implies higher mortgage rates. But the timing and magnitude of bond market losses can dictate the size of mortgage rate changes as well as the timing. In today’s case, bonds were in better shape this morning when mortgage lenders published their daily rate offerings.  There was additional bond market weakness as the day progressed, but not enough to trigger a mid-day rate change from lenders (mortgage lenders prefer to avoid mid-day changes unless bonds make bigger moves). Bottom line: instead of going into tomorrow with a cushion from the bond market, mortgage lenders will have to raise rates a bit in order to catch up.  NOTE: this assumes that bonds hold their exact same levels through tomorrow morning.  That’s certainly NOT a guarantee considering we’ll get the release of September’s CPI inflation data at 8:30am ET.  There’s no way to know how CPI will come in. Markets have already positioned for everything they think they know about the data.  In other words, there is a consensus expectation that monthly core CPI will be 0.3% and non-core (headline) CPI will be 0.4%. If the actual numbers are higher, rates would be more likely to rise tomorrow, but if they’re lower, bonds could bounce back enough that mortgage rates continue to hold steady, or actually improve. 

CPI Just as Risky as Usual–Perhaps More So

Bonds sold off on Thursday in a move that was as easy to chalk up to position-squaring ahead of CPI than anything else. The recent uptick in oil prices is also worth noting, but only if we remember that correlation is not always causality when it comes to that pairing. Given the absence of big ticket econ reports during the shutdown, Friday morning’s CPI is getting plenty of attention–more than it deserves, to be sure, and much more than it would outside a shutdown. That said, the data is just as “live” in terms of its potential to cause volatility.

Market Movement Recap

09:32 AM Slow, steady selling overnight and flat so far at weaker levels.  MBS down 3 ticks (.09) and 10yr up 3.3bps at 3.98

11:20 AM MBS down 6 ticks (.19) and 10yr up 4.8bps at 3.995

01:17 PM Flat at weaker levels.  MBS down 6 ticks (.19) and 10yr up 4.9bps at 3.996

Everything’s relative when it comes to rates being high or low, but let’s agree that the past 2 years have relentlessly driven home the notion of an increasingly flat, narrow range that has perfectly orbited a 10yr yield around 4.34%. If that’s our reality, you know things have been pretty good when 3bps of gradual overnight selling leaves yields under 4.0%. As for underlying reasons, the move was so gradual that we don’t necessarily need any better explanation than the consolidation vibes discussed in yesterday’s recap.  But if you MUST have something to blame, oil prices are up again.

Economies and strategies impact various groups differently. Remember Mervyn’s, Montgomery Ward, or a dozen other large department stores that are no longer? Saks Fifth Avenue is now rumored to be potentially joining them. Residential lending is obviously impacted by the slowing economy: if you want lower rates, a government shutdown is one way to negatively impact the U.S. GDP. Interest rates were a topic at the MBA Annual, and thousands of lenders and vendors have headed home. (Nadia Evangelou, Senior Economist & Director of Real Estate Research at the NAR, is the guest on today’s Big Picture at noon PT.) Vendors, including Byte Software with its fabled baked goods, have packed up their booths. Next year it’s off to Chicago. Where will Freddie and Fannie will be then? The FHFA sent out a note saying that Bill Pulte is donating his salary to wounded veterans. It is a nice gesture, but prompted one reader to write, “Let’s say the FHFA Director makes $300k a year. Maybe a little more, maybe a little less. Bill Pulte is worth $100 million. If you invest $100 million at 3 percent per annum, the yearly income is $3,000,000, or $8,200 a day. Context is good.” (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 Click n’ Close’s Ian Kimball on how originators prioritize strategic growth initiatives, operational execution, and go about market expansion.)

While the Federal Open Market Committee has yet to meet this month, investor pricing of longer-term bonds helped mortgages by 11 basis points, Wallethub said.

Forbearance or refinancing may help some, workarounds can keep many mainstream loans moving and one type of uncertainty does have an upside for rates.

In addition, John Roscoe and Brandon Hamara have been appointed co-presidents at the government-sponsored enterprise, effective immediately.

The Department of Justice has filed a motion opposing the Consumer Financial Protection Bureau employee union’s appeal of an August D.C. Circuit ruling allowing the administration to fire up to 90% of the agency’s workforce.