The increasing frequency and severity of droughts was top of mind for panelists at AmeriCatalyst’s “Going to Extremes” conference Thursday.

In a Senate hearing, Director Sandra Thompson said a raise to the required income threshold provided to affordable housing was on the table, while housing regulators also faced questions related to property insurance hikes and title insurance waivers.

The nonpayment rate for non-qualified mortgages is up 21 basis points from February and 134 basis points from March 2023, Morningstar DBRS said.

The government mortgage-bond guarantor will require additional information on foreclosure prevention actions, and retire some forbearance reporting.

But views are split, at least in the near-term on whether rising mortgage rates are holding back the Spring home purchase season.

Good News and Bad News About Today’s Selling

The bad news is that bonds resumed their weaker tendencies today with 10yr yields moving back up into the 4.6’s.  Culprits included stronger economic data, hawkish Fed comments, and possibly the fact that the previous day’s gains were driven by corrective short-covering.  The good news is a bit of stretch to be considered as such.  In order to do so, we must consider that today’s high yields stopped well short of the high yields seen on Tuesday.  This pattern of “lower highs” is often seen at the beginning of a sideways consolidation, effectively ending the previous directional trend (at least for the time being).  It’s a bit too soon to conclude that’s the way things will play out this time, but on an objective note, today was the first time since April 5th that yields made it past the 48 hour mark without hitting a higher high. 

Econ Data / Events

Jobless Claims

212k vs 215k f’cast, 212k prev

Philly Fed Index

15.5 vs 1.5 f’cast, 3.2 prev

Philly Fed Prices

23.0 vs 3.70 prev

Market Movement Recap

08:37 AM roughly unchanged overnight a hair weaker after data.  MBS down 1 tick (.03) and 10yr up 1.7bps at 4.606.

09:41 AM Back to weakest levels after NYSE open.  MBS down an eighth.  10yr up 3.6bps at 4.625.

12:39 PM More Losses.  MBS down 10 ticks (.31).  10yr up 5.4bps at 4.644

03:13 PM hovering sideways near weakest levels.  MBS down 9 ticks (.28).  10yr up 4.8bps at 4.638

Tuesday marked the highest mortgage rates since November, capping a mini surge that began after last week’s inflation data. After a moderate improvement yesterday, rates moved back up toward (but thankfully not above) the recent highs today.  Financial markets reacted to stronger economic data and comments from Federal Reserve officials regarding the possibility of no Fed rate cuts in 2024 and even a small chance of rate hikes.  Importantly, Fed members don’t see hikes as being likely and the economic data would have to accelerate enough to justify a change in strategy.  We’re definitely not there yet, but we’re just as certainly not there when it comes to lower inflation readings required to validate the first rate cut.  At the March Fed meeting, officials still saw 3 cuts by the end of the year, albeit just barely.  Based on data that’s come out since then, markets are betting on only one cut. Other news sources are running headlines regarding a big jump in mortgage rates to 7.10% based on Freddie Mac’s weekly survey results released today.  Keep in mind that’s a weekly number based on average of last Thursday through yesterday and that it doesn’t account for the impact of discount points.  In other words, rates are definitely not 7.1 today, and especially not without points.

After the best day in a month and a half on Wednesday, the bond market is back to its recent habit of selling off and moving toward higher yields.  It looked the losses were set to be more modest at the beginning of the day, but things got worse after Fed’s Williams delivered a bit of a hawkish shift.  Williams was the one who pushed back against last week’s CPI report, saying recent inflation setbacks were not a surprise.  Today’s comments were only subtly different but markets honed in on his call for rate hikes in the event data justified it.  In truth, this is not a departure from the prevailing “data dependent” communication regime, but along with the data driven selling at 8:30am (Philly Fed reaction) it seems to have been worth something to traders so far this morning.

Fed Funds Futures suggested a greater focus on the Williams comments, which is what you’d expect given that Williams’ comments were more focused on near term policy possibilities.

What loan officer hasn’t had a memorable co-signing experience? Some more so than others. Along those lines, if you head to Disneyland or Disneyworld, and find bone chips or ashes on the floor of your favorite ride, it is probably not an accident. Nor is eking out a gain, or at least breaking even, in residential lending an accident. At the Great River Conference in Memphis, much of the information being presented is about how to do things more efficiently. And for good reason, as the MBA’s calculations for IMBs and mortgage subsidiaries of chartered banks last showed that total loan production expenses (commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations) increased to $12,485 per loan in the fourth quarter. On the income side of things, borrowers who obtained adjustable-rate mortgage loans (ARMs, for lack of a better acronym) 3 or 5 or 7 years ago have popped up on LO screens for refinances, and you can bet that the companies who own that servicing are all over those borrowers “like hounds on a meat wagon.” (Found here, this week’s podcasts are sponsored by Optimal Blue. OB’s smart solutions automate critical functions like pricing, hedging, trading, and social media. More originators and investors rely upon Optimal Blue’s integrated solutions, data, and connections to support their unique business strategies, no matter how complex. Hear an interview with Optimal Blue’s Mike Vough on refining margin management to improve loan profitability and reduce risk.)

Ohio-based Liberty Home Mortgage joins several companies who started using a more modernized FICO credit score for nonconforming mortgage originations recently.