More “Airbnb-style” rental property loans are making their way into non-qualified mortgage securitizations and could they be acting differently from the traditional non-owner occupied loans, a Standard & Poor’s report asks.

Asked about inflation risks ahead, she pointed to the impact of housing on the consumer price index, describing it as the “stickiest piece.” Stripping out housing, the U.S. consumer price index is only rising about 1.8%, she said.

The new threshold comes months ahead of the Federal Housing Finance Agency’s formal announcement.

The government will also begin allowing mortgage default insurance on homes worth up to C$1.5 million ($1.1 million), an increase from the current cap of C$1 million.

Tim Ryan, who joined the megabank in June, will work with COO Anand Selva to oversee enhancements to Citigroup’s data integrity systems, according to a memo.

So far in the new week, bonds have rallied a bit in the overnight session and sold off a bit after this morning’s stronger NY Fed Manufacturing data.  The result is a fairly flat morning with MBS and Treasuries both still just barely stronger.  If there was ever a week to expect “flat” to have a limited shelf life, this is it.  At no other time in the era of abundant Fed transparency has the market been so divided in its expectations of outcomes.  Not only are debates due to be resolved on the size of the rate cut, but we can also assume many market participants will be surprised by the dot plot.  If there’s a saving grace to limit excess volatility, it’s that anything the Fed says on Wednesday will continue to depend on the same economic data that has gotten us to this point.   
Here’s a visualization of the market’s indecision over the past week.  From 50/50 to nearly an 80% chance of a 25bp cut now to a roughly 70% chance of a 50bp cut…

The  new week began on a relatively quiet note in terms of mortgage rate movement and the underlying bond market.  There was modest volatility earlier this morning with a Manufacturing survey causing some headwinds for bonds.  This would normally lead to slightly higher mortgage rates, but bonds recovered shortly thereafter and spent the rest of the day near their best recent levels. As such, it’s no surprise to see mortgage rates also hanging out near their best recent levels.  The average lender is right in line with the lowest rates since February 2023 for the 4th straight day. That calm, narrow range is at high risk of changing in the coming days.  In addition to more relevant economic data in tomorrow’s Retail Sales report, this week’s biggest flashpoint will be Wednesday afternoon’s Fed announcement.   Traders have quickly shifted back to expecting slightly better odds of a 0.50% rate cut versus the minimum 0.25%.  That’s not even the important part of the announcement, however.  Markets will be more focused on the rate trajectory outlined in the Fed’s economic projections as well as the guidance offered in the text of the announcement and Fed Chair Powell’s press conference.  This will be the first Fed meeting in long time where there has been such an even split in forecasted outcomes.  Any time an outcome is guaranteed to surprise about half the market, it’s pretty much impossible to avoid volatility.  As always, keep in mind that volatility has no directional connotation.  Things could get better or worse!

Just Another Day of Waiting

Bonds started stronger, retraced back to ‘unchanged’ following the manufacturing data, and proceeded to grind out moderate gains by the end of the day.  It was a reasonably strong result given the absence of bullish impetus for bonds, but not one that falls outside the range of yields established during last week’s volatile consolidation.  Fed Funds Futures notably rallied such that the 50bp rate cut is once again the leading candidate.  This is a product of trader ruminations and speculation rather than the data.  Between Timiraos’s article last week, and Dudley’s this morning, the market thinks it’s being given clues from insiders. 

Econ Data / Events

NY Fed Manufacturing

11.5 vs -3.9 f’cast, -4.7 prev

Market Movement Recap

08:52 AM moderately stronger overnight but losing some ground after NY Fed Manufacturing data of all things!  MBS unchanged and 10yr up 0.2bps at 3.658

12:31 PM Steady near stronger levels.  MBS up 3 ticks (.09) and 10yr down 2.2bps at 3.632

02:42 PM No major changes from last update. Just a hair stronger.  MBS up an eighth and 10yr down 3bps at 3.624

The Pirate goes to the dermatologist and says, “Arrg, I got moles.” The dermatologist says, “Don’t worry, they’re benign.” The Pirate replies, “Arrg, count again, I think there be ten!” Health care, astronomy, and mortgage banking are filled with numbers. Losing daylight is the name of the game these days in the Northern Hemisphere. Chicago, where I head this weekend, is losing three minutes per day of sunlight, Anchorage five minutes, Honolulu one minute. Thanksgiving will be here before we know it; The official conventional conforming loan limits, issued by the FHFA/Freddie/Fannie triumvirate, doesn’t occur until Thanksgiving. But in recent years investors have “jumped the gun;” more below. Speaking of jumping the gun, today is Mexican Independence Day, marking the battle of independence after nearly 300 years of being ruled by Spain, but the celebrations began yesterday in places like Chicago. Things kick off September 15. On this day back in 1810, Father Miguel Hidalgo y Costilla gave a historic speech and rang the church bell which helped inspire the fight for freedom, and the date is helped by it being the birthday of Porfirio Diaz, president and dictator from 1876 to 1911. (Today’s podcast is found here and this week’s is sponsored by Visio Lending. Visio has a top-notch broker program and is the nation’s premier lender for buy and hold investors with over 2.5 billion closed loans for single-family rental properties, including vacation rentals. Hear an interview with Glenn Stearns on the choices that have shaped his mortgage career.)

Pricing talk includes yields ranging from 4.9% on the AAA, class A1 notes; 5.7% on the AA, class A2 notes; and 6.2% on the AA M1 notes.