ALLIED EQUITY A Diversified Mortgage Company
400 North Mountain Ave., Suite 223, Upland, CA 91786
Phone  909-932-9226 Fax  909-803-9840

Mortgage Related News

MBS RECAP: Jerky Knees After Fed

Posted To: MBS Commentary

Today brought the (not very) much-anticipated FOMC Minutes--a more detailed account of the conversation that transpired at the end of July when the Fed announced its rate cut. As expected, some at the Fed wanted to cut more. Some wanted to cut less. The consensus was that it was a mid-cycle rate adjustment that left room for the Fed to hike again or cut again depending upon how conditions evolve. This was perhaps somewhat less upbeat than some market participants may have hoped, but not so much so that we should credit the Fed as a market mover today. I'm more inclined to give the Fed some credit for nudging rate expectations microscopically higher and give the consolidation range credit for turning away the post-Fed rally in 10yr yields. To be clear, this is exactly in line with my pre...(read more)

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Mortgage Rates Pop Higher

Posted To: Mortgage Rate Watch

Mortgage rates moved higher today, and it had nothing to do with any of the day's events or news headlines. Quite simply put, the bond market (which dictates the rates that can offered by lenders) had already begun to weaken as of yesterday afternoon. Weakness continued overnight as global financial markets dialed back their demand for safe havens. In market terms, a safe haven is generally a lower rate of return with a higher guarantee of the return remaining stable. Fixed rate government bonds from financially solvent countries are a classic safe haven. And no matter what you've heard in the news, the US mortgage market is also squarely in the safe haven camp. The only major risk associated with mortgages as far as investors are concerned is how long the mortgage will last. That uncertainty...(read more)

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Low Rates "Nudged" Existing Home Buyers NAR says

Posted To: MND NewsWire

Existing home sales returned to an upward track in July after dipping 1.7 percent in June. The National Association of Realtors® (NAR) said pre-owned single-family homes, townhomes, condominiums, and cooperative apartments sold at a seasonally adjusted annual rate of 5.42 million units during the month, a 2.5 percent increase from the 5.270-million-unit rate in June. The July sales were 0.6 percent higher than the 5.39 million pace set in July 2018, the first time this year that 2019 sales exceeded those a year earlier. Sales were toward the high end of the range of estimates from analysts polled by Econoday , 5.25 million to 5.50 million and beat the consensus estimate of 5.39 million units. Single-family homes sold at a seasonally adjusted rate of 4.84 million, a 2.8 percent increase...(read more)

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MBS Day Ahead: Consolidating Into Fed Minutes, But Not Because They Guarantee a Breakout

Posted To: MBS Commentary

In the day just passed, a modest uptrend in yields was "defeated" from a technical standpoint. Yields broke below a trend-line marking "higher lows" that began last Thursday afternoon and spent the rest of the day moving mostly sideways at stronger levels. Stocks were weaker but that didn't necessarily have a bearing on bond market strength. If there was cause for concern, it's that bonds didn't rally below the lows from August 16th (which in turn represented higher lows versus the previous day). In the day ahead, bonds will likely continue feeling out a consolidative range heading into this afternoon's FOMC Minutes. Keep in mind that the Minutes do not represent a new policy decision from the Fed, simply a more detailed account of the meeting that occurred...(read more)

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Customer Retention, Broker Products; Yield Curve and Mortgage Rates

Posted To: Pipeline Press

Congratulations to Hawaii which became a state fifty years ago today. We’ve had plenty of economic cycles, small and large, in fifty years, although in general rates have been coming down since 1981. And we’ve had a flat or inverted U.S. yield curve for several months. Inverted yield curves don’t cause a recession: Two consecutive quarters of negative growth is the technical definition of a recession. Nine major economies have entered a recession or are on the verge of one, adding to fears the U.S. could see a downturn. The nine economies are Argentina, Brazil, Germany, Italy, Mexico, Russia, Singapore, South Korea and the UK. Bank of America CEO Brian Moynihan says recession risks in the US are low despite warning signals from bond markets, which he contends are mostly driven...(read more)

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Share of Custom Home Construction Remains Flat

Posted To: MND NewsWire

Residential construction has been famously slow for several years and some new analysis of Census data by the National Association of Home Builders (NAHB) shows that the lack of robustness is shared in the custom home sector. In an Eye-on-Housing blog article, Robert Dietz, NAHB Senior Vice President and Chief Economist says custom home building has been effectively flat over recent quarters. In the second quarter of this year the Census Bureau recorded a total of 49,000 custom home starts, a tiny decline from 50,000 in the second quarter of 2018. Dietz says the last four quarters, custom housing starts totaled 169,000, down 1.7 percent compared to the prior four quarters (172,000). Note that this definition of custom home building does not include homes intended for sale, so the analysis uses...(read more)

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Refinancing Wave Continues; Lenders May Have Capacity Restraints

Posted To: MND NewsWire

The volume of mortgage applications continued to be shored up by refinancing during the week ended August 16, but overall activity was down. The Mortgage Bankers Association (MBA) said its Market Composite Index slipped 0.9 percent on a seasonally adjusted basis, perhaps not surprising after it soared 21.7 percent the previous week. On an unadjusted basis the Index fell by 2.0 percent following a 27 percent gain during the week ended August 9. The Refinance Index managed a slight 0.4 percent gain from the previous week and was 180 percent higher than the same week one year ago . That index had increased by a cumulative 42 percent over the previous two weeks. The refinance share of mortgage activity increased to 62.7 percent of total applications from 61.4 percent a week earlier. The seasonally...(read more)

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MBS RECAP: Bonds Reject Bad Break, But What's Next?

Posted To: MBS Commentary

Bonds were breathing easy by the time the domestic session got underway. Before that, they kicked off the overnight session in lower yield territory. Modest gains meant a friendly break below the potentially troubling resistance trend that had developed over the past 2.5 days. Pictures are worth more than words here, so here is an hourly 10yr candlestick chart as of this morning: Very little changed after that. Notably, this is the 2nd straight day where Treasuries have followed European bonds overnight and then mostly side-stepped through the domestic hours. This won't necessarily be a trend, and it's not so much interesting as it is a reflection of the absence of domestic market movers during that time. That same absence won't be intact tomorrow as the Fed Minutes hit at 2pm ET...(read more)

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Mortgage Rates Fairly Flat Today, But Volatility Could Increase

Posted To: Mortgage Rate Watch

Mortgage rates held steady today, for the most part. If there was a leaning, it was toward slightly lower rates, but not by a wide enough margin to be significant. At first glance, holding steady at the lowest levels in nearly 3 years is great! In fact, it's still great at second glance. But the more information we consider, the more we may wonder why they're not lower. Reason being: 10yr Treasury yields (which often move in the same direction as mortgage rates and by similar amounts) are noticeably lower today! So why aren't mortgages following? For the explanation, we can simply dust off last Friday's commentary: The reasons for the discrepancies have to do with the fundamental differences between mortgages and Treasuries as investments. Simply put, a mortgage can be paid off any time whereas...(read more)

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New Fair Housing Rule Eases Defense of Disparate Impact Claims

Posted To: MND NewsWire

Monday's edition of the Federal Register featured a proposed rule that, depending on your viewpoint, would amend the Department of Housing and Urban Development's (HUD's) interpretation of the Fair Housing Act's disparate impact standard, (HUD) or "make a major change to a well-settled standard on how the agency and the courts review claims of discrimination under the Fair Housing Act of 1968" (Urban Institute.) The announcement from HUD says its proposed rule would provide more appropriate guidance on what constitutes unlawful disparate impact to better reflect the Supreme Court's 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. The court ruled that "disparate impact" is one arising out of an action that is not necessarily discriminatory...(read more)

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MBS Day Ahead: Apparently, It's Not Over Yet

Posted To: MBS Commentary

In the day just passed, we considered a rather melodramatic question ("is it over?"), which refers to the general strength in the bond market seen in August and our ability to maintain (or improve upon) the lowest rates in 3 years. Early weakness came from the European bond market following more reports that Germany was considering fiscal (not monetary) stimulus. A general " risk-on " bounce was also in effect following last week's lows in stocks and bond yields. It was a fairly quiet session, however, and we surmised it was simply a logical opportunity for markets to consolidate amid a relative lack of market-moving headlines. In the day ahead, we'll bask in the confirmation of yesterday's assessment. While these things can never be known ahead of time, it's...(read more)

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DPA Products; Webinars This Week; Credit News; Better.com is Worth What?

Posted To: Pipeline Press

Why is a 43% DTI, a line many view as “drawn in the sand,” so critical to the ability of a borrower to repay a loan? What about reserves or utility bill payment? If the borrower is already paying $2,000 a month in rent and their mortgage payment would be $1,800, shouldn’t that count for something? More thinking about credit, and its reporting, below. Lender Products and Services For lenders evaluating digital mortgage platforms who believe in empowering their loan officers with powerful technology to grow their referral business, delight their borrowers, and let their expertise shine throughout the experience, there is no better platform than Maxwell. Maxwell’s platform with powerful personalization features and integrations designed to make the loan officer the hero...(read more)

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MBS RECAP: Bonds Face Some Pressure as Correction Extends

Posted To: MBS Commentary

There haven't been many market moving headlines over the past 2 days with the exception of Germany removing the veil of secrecy from its fiscal stimulus discussions. That hit bonds on Friday and again in the overnight session. Otherwise, we've been essentially free from headline drama since Thursday afternoon (and no, Trump's dinner with Tim Cook wasn't a market mover). With all of the above understood, now consider that which came before it: plenty of headlines and plenty of gains in bonds (and losses in stocks). Putting two and two together, these news-free days have afforded the bond market (and stocks) a relatively innocuous opportunity (so far) to move in more of a corrective direction (i.e. higher yield) after 6 of the previous 11 days saw some of the biggest rallies in...(read more)

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Mortgage Rates Hold Relatively Steady Despite Bond Market Weakness

Posted To: Mortgage Rate Watch

Mortgage rates mostly held steady today , despite a move higher in broader interest rate indicators like the 10yr Treasury yield. Treasuries and mortgage rates typically track each other quite well, but that relationship has broken down in recent weeks due to the rapid drop in rates and the increase in volatility. The mortgage sector has a much tougher time adjusting to new realities compared to Treasuries. In other words, mortgage rates haven't been able to move lower nearly as quickly (though they have still managed to hit their lowest levels since 2016). The upside to that problem is that we get days like today where Treasury yields rebound without significantly damaging mortgage rates. In fact, many lenders are offering the same rates seen on Friday. Loan Originator Perspective Bond markets...(read more)

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Fannie Mae Predicts Two Additional 2019 Rate Cuts, Here's Why

Posted To: MND NewsWire

Fannie Mae used a fair number of trade-offs in while coming up with its revised outlook for the real gross domestic product (GDP) this year. The company's economists, headed by Chief Economist Doug Duncan, upgraded its full year forecast from 2.1 percent to 2.2 percent while at the same time painting a darker picture for the second half of the year. Second quarter growth beat expectations, according to Fannie's August Economic Developments report, largely because of strong consumer spending which is expected to have continued into this quarter. Nonresidential fixed investment and government spending are expected to weaken however, so the third quarter GDP has been downgraded from 1.9 percent to 1.8 percent. The economists continue to believe growth will slow next year, but that forecast has...(read more)

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MBS Day Ahead: Is It Over?

Posted To: MBS Commentary

In the week just passed, bonds rallied to new long-term low yields before bouncing on Friday. Hong Kong protests over the weekend kicked things off on a strong note and weak global economic data on Wednesday sparked the next leg of the rally. Thursday saw more of a momentum/capitulation move without much by way of concrete cause and effect. Friday's reversal was credited to news of potential German fiscal stimulus (more bond issuance, not more bond buying, as it would be if it were "monetary" stimulus). In the week ahead, bonds will get a chance to see how much momentum can build behind a technical bounce. In other words, we've had an impressively strong move to yields that are lower than much of the market anticipated. Has the relentless rally forced all hands? Has everyone...(read more)

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Trailing Doc and U/W Products; Vendor Trends and News, Capital Markets

Posted To: Pipeline Press

Builders can’t complain too much about material prices anymore. Building materials prices rose only 0.7% in July, and are down overall year-over-year. Despite tariffs, softwood lumber prices are down 20% over the past year and other products like gypsum, tar, and asphalt (roofing) have also dropped. Rising home costs are less due to “sticks and bricks” and more to labor, land, and regulatory costs & regulations. Regulatory costs & regulations? MLOs know about those, and for lenders who put out videos, and everyone else, they should know it is illegal to improperly use the screeching, belting tones of the emergency alert/broadcast system. The FCC lodged hundreds of thousands of dollars in fines against a number of broadcasters for the use of a sound effect. For example...(read more)

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Builder Confidence is Good, But it Could be Better

Posted To: MND NewsWire

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) moved one point higher this month. However, at 66, NAHB's measure of builder confidence in the new home market stayed within the 64 to 66 range where it has been now for four months. "While 30-year mortgage rates have dropped from 4.1 percent down to 3.6 percent during the past four months, we have not seen an equivalent higher pace of building activity because the rate declines occurred due to economic uncertainty stemming largely from growing trade concerns," said NAHB Chief Economist Robert Dietz. "Although affordability headwinds remain a challenge, demand is good and growing at lower price points and for smaller homes." The HMI is derived from a survey of its new home builder members that NAHB has conducted...(read more)

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New Home Sales Expected to Reflect Interest Rate Trend

Posted To: MND NewsWire

New home purchases are expected to be significantly higher in July according to data released by the Mortgage Bankers Association (MBA). Its monthly Builder Application Survey (BAS), indicates that applications for new home purchase mortgages increased by 11 percent month-over-month and were up 3.2 percent from July 2018. These estimates do not include any adjustment for typical seasonal patterns. "July's strong new home sales increase on a monthly and annual basis was driven by the ongoing decline in mortgage rates, combined with steady housing demand and a still-healthy job market," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "The average loan size decreased last month, likely influenced by the increase in the first-time homebuyer share, as these buyers...(read more)

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MBS RECAP: Relative Stability + Moderate Losses = MBS Fighting Back

Posted To: MBS Commentary

Perhaps more than any other day in the past few weeks, today stood as an example of the mortgage market's ability to put up a fight when the time is right. As we've discussed frequently, they've been getting pummeled by Treasuries as the latter's yields fell to new multi-year lows. MBS prices are at multi-year highs, to be fair, but in an underwhelming way compared to what's been going on in Treasuries. Our thesis was that the mortgage market needed TIME and STABILITY from the bond market, and it could work with one at a time if need be. If bonds could manage to weaken a bit, but not too much, that would be a bonus. Today, then, delivered on the the "stability" side of the equation with yields trading their narrowest range in more than 2 weeks and ticking that...(read more)

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Mortgage Rate Weirdness May Be Working in Your Favor Today

Posted To: Mortgage Rate Watch

Things have been weird enough for mortgage rates recently that we were forced to add a " Temporary Note on Mortgage Rate Inconsistency " to our daily coverage recently. It will likely return before too long, but with a few edits for clarity. Edits will also need to account for days like today, which offered a prime example of how the inconsistency can be corrected. There's a decent chance those first 3 sentences are confusing and/or relatively meaningless, so let's change that! Mortgage rates aren't the only rates out there. They exist in an ecosystem with more established players like US Treasury yields. They move so much like Treasury yields that even very smart people mistakenly believe Treasuries (specifically, the 10yr) dictate mortgage rates. Recently though, mortgage rates have moved...(read more)

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MBS Day Ahead: How Low Can We Go? And Why Mortgage Rates Can't...

Posted To: MBS Commentary

10yr yields rallied aggressively yesterday, and for no reason more compelling than a proverbial "snowball rally compounded by technicals and algorithmic trading." Ugh! I hate typing that stuff. It's annoying to be forced to reduce market movement to what feels like a "couldn't come up with anything better" type of explanation. We could also say that yesterday was the market's way of "giving up" after stocks were unable to sustain a bounce back from their rout on Wednesday. A surge lower in European bond yields didn't hurt either. If yields can so casually blast below 1.50%, it begs the question of how low we can go. The answer is complicated, to be sure. Certainly, we already know 10yr yields can go to 1.32%. They've done that before. We can...(read more)

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DPA, Non-QM Products; Deficits, Debt, The Yield Curve, and Mortgage Rates

Posted To: Pipeline Press

Some international rates have gone through 0 percent and are now negative. The low rates and high volumes have caused lenders to focus less on long-term planning and more on closing loans. Who can blame them? How would U.S. mortgage rates near 0 percent impact the future refi market for lenders? Here’s a piece worth a skim on why mortgage rates probably won’t hit 0% Mortgage Rates: Thinking the Unthinkable .” The yield on the 10-year Treasury note has fallen below the two-year yield for the first time since the financial crisis, causing a sell-off in the stock market. The 30-year yield is at an all-time low. An inverted yield curve has preceded every recession since 1950 by seven to 24 months. But former Federal Reserve Chair Janet Yellen says the latest inversion of the yield...(read more)

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MBS RECAP: Mortgage Market Starting to Play Like it Wants to Stay In The Game (Finally)

Posted To: MBS Commentary

Bonds digested the week's busiest day of economic data, by far, today. But markets in general are only interested in data that changes the economic narrative. Today's only real candidate in that regard would have been a surprisingly weak Retail Sales report. Since we didn't get that (it was stronger), bonds underwent a token sell-off and were quickly right back to paying attention to other things. Europe volunteered to be one of those "other things" today with talk of central bank stimulus from an ECB official. There were also a few blows traded in the trade war saga with China vowing "countermeasures" and Trump tweeting that any trade deal had to be on "our terms." No game changers there, but they certainly didn't hurt bonds. The afternoon saw...(read more)

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Mortgage Rates Fall Back Down to 3-Year Lows

Posted To: Mortgage Rate Watch

Mortgage rates fell today as the underlying market for mortgage-backed-securities (MBS) actually did a better job of keeping pace with broader bond market gains--not something they've been doing very well lately! For some lenders, it was enough to get them back to August 6th's levels, which were the best in nearly 3 years. The average lender can quote a conventional 30yr fixed rate of 3.625% for top tier scenarios. That said, there is much more variability between lenders at the moment. Take a look at the " Temporary Note on Mortgage Rate Inconsistency " below to learn more about why things have been volatile and inconsistent. There's no reason to expect broader market volatility to suddenly disappear, but as long as Treasury yields don't undergo a massive spike, the mortgage market should...(read more)

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Joe Sanchez
Allied Equity
Ph: 909-932-9226Fax:909-803-9840
400 North Mountain Ave., Suite 223
Upland, CA 91786 US
CA DRE License # 01201910, NMLS: 359382, Company ID: 359090
www.alliedequity.com
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