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Mortgage Related News

FHFA Director Watt Weighs in on Financial Reform Debate

Posted To: MND NewsWire

Bloomberg News is reporting on a proposal from Federal Housing Finance Agency (FHFA) Director Melvin Watt regarding the future of Fannie Mae and Freddie Mac (the GSEs). The two former companies, which have been in conservatorship under FHFA since 2008, are at the heart of the current debate on housing finance reform. Watt's proposal, titled "Federal Housing Finance Agency Perspectives on Housing Finance Reform," was sent to Senate Banking Chairman Michael Crapo (R-ID) and the committee's ranking member, Sherrod Brown (D-OH). In the proposal's cover letter Watt said that he and the FHFA staff feel they should provide their views "independently and transparently to those who have requested them while continuing to provide technical assistance to the committee and its members on other proposals...(read more)

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Urban Institute Weighs in on the Rent vs. Own Under New Tax Bill

Posted To: MND NewsWire

While recently passed Tax Cuts and Jobs Act will benefit the take-home pay of most Americans, and allow them to save up to buy a home if they wish, other factors will offset that benefit . This will make renting look more attractive than homeownership to many. Two analysts, Laurie Goodman and Edward Golding, writing for the Urban Institute (UI) looked at the potential impact of the new law and constructed a matrix showing how changes will affect families in various income groups. Their calculations take into account that the increased standard deduction will mean fewer taxpayers will itemize and the lower rate will mean smaller benefits for those who do. UI profiled four families, each with three members, and earning $50,000, $75,000, $150,000, and $300,000 a year. Each buys a home valued at...(read more)

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MBS Day Ahead: Buyers Still Alive, But Still Waiting to Charge

Posted To: MBS Commentary

Yesterday's recap is a good read if you didn't happen to catch it. Here's a link. In general, there are 2 things going on with rates right now. 1. confirmed uptrend beginning in mid-December and still intact 2. lurking buyers potentially getting closer to buying after a break to the highest levels in more than a year. Actually these 2 things are always going on with rates if we reduce them to their categories. If we did so, they would read: 1. currently confirmed trend (aka "what's actually happening") 2. potential changes to that trend (aka "what might happen") As has been the case in recent days, bond markets are trading for reasons that transcend most any economic data or news headline. The exception would be news headlines for traders focused on corporate...(read more)

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Report From NEXT; Lender and Investor Freddie/Fannie Changes: Part Three

Posted To: Pipeline Press

As if we don’t have enough measures of housing and real estate prices, here’s another one. The RE/MAX National Housing Report tells us what most already knew: The median home price rose 8.1% year-over-year, with 50 of the report’s 54 markets posting increases . While we’re at it, and since people seem to like lists, LendingTree ranked the top 100 Most Competitive Homebuyer Markets based on the house hunters who are putting more money down, have high credit scores, and start loan shopping before home shopping. I’ll save you some time – 6 of the top 10 are in California, despite its 13% state income tax. And sorry Detroit, San Francisco, Phoenix, and many others. Amazon announced the final 20 cities for its 2 nd headquarters : Atlanta, Austin, Boston, Chicago...(read more)

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MBS RECAP: Not The Kind of "Interesting" We Were Looking For

Posted To: MBS Commentary

Well... at least things are interesting . The winter holidays are always a challenge from an analytical and market-watching standpoint. It seems like a vast oversimplification (indeed, I didn't believe it was true when someone tried to educate me years ago), but "new year momentum" can really be the primary motivation for bond markets. And it really can be something we just have to wait for until the 2nd week of January. In the case of 2018, the 2nd week of January suggested the New Year momentum was toward higher rates. As we wrap up the 3rd week of of January, that continues to be the case. It's really that simple. There's no need to dissect causality on smaller scales. But if you want smaller scale causality, we can talk about a fairly massive amount of corporate debt...(read more)

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Be Careful With News on Mortgage Rates Today

Posted To: Mortgage Rate Watch

It's Thursday, which means Freddie Mac released its weekly update on mortgage rates . This is typically not that big of a deal because mortgage rates don't tend to move enough in the short term to expose the shortfalls of Freddie's methodology. To be perfectly fair to Freddie, their methodology is fine for those who want a once-a-week look at rates and who aren't currently in the process of shopping for a mortgage or home. Unfortunately , much of the consumer-level interest in mortgage rate news comes from those who are in the process of shopping from a mortgage or home! Granted, they're not seeking out Freddie's rate survey, but they do tend to come across internet news that cites Freddie's data as a source. Enter the pitfalls. Freddie's survey deadline is Wednesday for any given week and...(read more)

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A Request; Should Fannie and Freddie Update Their Credit Requirements?

Posted To: MND NewsWire

There is a rather unusual request up on the Federal Housing Finance Agency's (FHFA's) website. Two FHFA analysts, saying that the issue of updating the credit score requirements for Fannie Mae and Freddie Mac (the GSEs) is among the most difficult they have faced, are personalizing an earlier formal Request for Input (RFI) published in the Federal Record. Robert M. Dunsky, Principal Financial Engineer, and Elizabeth R. Spring, Senior Policy Analyst, from the Offices of Housing & Regulatory Policy and Policy Analysis & Research respectively wrote the request. They explain that the GSEs currently use the Classic FICO model, supplementing it with their own automated underwriting systems (AUS) where no credit score is available for a borrower. FHFA believes an update to the GSE credit score...(read more)

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New Home Construction Retreats Quickly in December

Posted To: MND NewsWire

Both housing starts and permits were expected to retreat a bit in December , following their strong performances in October and November. Permits did tick down, but housing starts, which were exceptionally strong in November, gave back in a much bigger way. The U.S. Census Bureau and the Department of Housing and Urban Development said starts were at a seasonally adjusted annual rate of 1,192,000, an 8.2 percent month-over-month decline, and were off by 6.0 percent from the December 2016 pace. The November estimate for housing starts was revised up from 1,297,000 to 1,299,000. The housing starts number was substantially lower than analysts had anticipated . Those polled by Econoday had made predictions ranging from 1,230,000 to 1,320,000 units, with a consensus of 1,280,000. The performance...(read more)

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MBS Day Ahead: Is it Over?

Posted To: MBS Commentary

Is the decades-long bull market in bonds over? I imagine we'll be talking about this sort of thing every time yields spike to multi-month highs and even every time they spike aggressively after hitting multi-month lows. It's a bit of an unfair conversation. As long as you are capable of understanding that rates can't go perpetually lower, you will have a big leg up on anyone who asks you "is it over?" It was never going to last forever in the first place! Let's back up a bit and talk about what's going on in the short term. Simply put , we were hoping to see 10yr yields bounce at a ceiling of 2.60%. We were somewhat optimistic about that after seeing Tuesday's candlestick break lower from the upper Bollinger Band line seen in the following chart, but with plenty...(read more)

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Borrowers Get Ahead of Tax Changes, Refinance Activity Up in December

Posted To: MND NewsWire

The new tax law appeared to have slightly influenced mortgage originations in December, ahead of its actual implementation. Ellie Mae, in its December Origination Insight Report , said the share of refinances ticked up and closing rates on both purchases and refinances increased from November, across all loan types. Both increases were possibly due in part to borrowers trying to lock in the existing mortgage interest deduction limit ($1 million) before the new $750,000 limit kicked in on January 1. The closing rates on all loans increased from 70.9 percent to 71.2 percent while closing rates on refinances rose from 65.1 percent to 65.6 percent and that for purchases increased to 76.1 percent from 75.5 percent. Closing rates also increased across FHA, conventional and VA loans for both purchases...(read more)

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Mortgage Rates Gently Rising from Recent Lull

Posted To: MND NewsWire

Since 2006, mortgage interest rates have fallen 242 basis points, from 6.41 percent to 3.99 percent. A decline of 246 basis points in the 10-Year Treasury Note during the same period was largely responsible for the change. However, during the first two years of this period, from 2006 to 2008, the risk premium rose by 78 basis points. Michael Neal, writing in the National Association of Home Builders (NAHB) Eye on Housing blog, says it was this premium that was targeted by federal monetary policy and those policies were partly responsible for its decline. The current risk premium, 1.66 percent, is only 4 basis points higher than it was in 2006, before that spike. After nearly 12 years of low rates, often historically so, rates are on the move again . The Federal Housing Financing Agency's (FHFA...(read more)

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Upcoming Conferences and Training; Conventional Conforming Changes: Part Two

Posted To: Pipeline Press

“Employee engagement is a hot topic for organizations big and small. Regardless of size, a highly engaged workforce is a company’s greatest asset and can be a determining factor in how successful the company is. But the only reliable way to measure engagement is through an employee survey.” Here are the top five employee engagement survey mistakes , per Clark Schaefer Hackett. Part 2 of Recent News. Stay Tuned for Part 3. Should the mortgage market be supported by shareholder-owned utilities with regulated rates of return and an explicit government guarantee of mortgage bonds? That’s the current feeling of the FHFA , which oversees Fannie & Freddie. New reimbursement criteria have been established for servicer expenses related to foreclosure attorney fees and sale...(read more)

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MBS RECAP: No Easy Victories as Bonds Revisit Weaker Levels

Posted To: MBS Commentary

Last week's bounce at a ceiling of 2.60% (twice, essentially) was enough for some DEFENSIVE hope. In other words, it introduced the possibility of the recent selling trend running out of steam near these levels. But as I cautioned at the time, there were connotations for a strong OFFENSE bringing rates in the other direction. For that, we would have at least needed to break below 2.52% and preferably 2.42% in the bigger picture. With yesterday's bounce at 2.52%, today ended up looking like a natural progression back toward higher levels. There were ample headlines relating to the government shutdown and stop-gap funding bill today. At times, markets appeared to react to these, but those reactions are hard to separate from other trading considerations in play. The 'other consideration'...(read more)

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Mortgage Rates Highest in 9 Months

Posted To: Mortgage Rate Watch

Mortgage rates were only moderately higher today, but the move was enough to officially bring them to the highest levels since the Spring of 2017. In other words, most lenders' rate quotes are fairly similar to recently bad days (like last Wednesday), but in terms of outright costs, you'd have to go back 9 months to see anything worse. There was precious little by way of overt motivations for today's move. Whereas rates have a longstanding history of responding to economic data and other events that speak to the economy/inflation/etc., many of the recent movements have had more to do with arcane considerations among bond traders than the aforementioned history. The timing of today's weakness is unfortunate as rates were just starting to look like they might be reinforcing recent ceilings. To...(read more)

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Reverse Mortgages Draining FHA Resources, Overhaul Needed

Posted To: MND NewsWire

Several housing authorities recently suggested changes to the form and operation of the Home Equity Conversion Mortgage (HECM) program, more commonly known as reverse mortgages. The program, administered by the FHA, serves homeowners over the age of 62, allowing them to draw on their home equity while remaining in their homes. Last year the Department of Housing and Urban Development (HUD), FHA's parent agency, made significant changes in rules affecting HECM borrowers . The first change reduced the maximum mortgage amount from 60 to 70 percent of the borrower's home value, and introduced a new formula, tied to not only the property value, but also loan rates and the applicants age. At the time this change was announced, it was predicted the typical applicant, who was previously able to borrow...(read more)

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Builder Confidence Down From 18-Year High, Still Strong

Posted To: MND NewsWire

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which hit an 18-year high in December, backed off a bit this month . NAHB said the composite index, a measure of builder confidence in the market for new homes, was down 2 points from that new peak to 72. All three of the Index components moved down slightly. "Builders are confident that changes to the tax code will promote the small business sector and boost broader economic growth ," said NAHB Chairman Randy Noel. "Our members are excited about the year ahead, even as they continue to face building material price increases and shortages of labor and lots." Analysts had expected a slight decline in the index after its five-point surge in December. Those polled by Econoday had a consensus of 73, with a...(read more)

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Freddie and Fannie Changes - Single Security Moving Forward; Upcoming Events

Posted To: Pipeline Press

“It doesn’t matter if you are rich or poor, as long as you have money.” Banks are where the money is, and plenty of them are paying attention to Congress. Eliminate Dodd-Frank? No. Revise? Perhaps. The most significant effort to revise the Dodd-Frank Act has bipartisan support, and we have a co-sponsored Senate bill . The proposed legislation mostly addresses regulations on small and midsize banks – in the future community banks or credit unions with less than $10 billion in assets could offer mortgages outside the typical Qualified Mortgage rule so long as they don’t sell that mortgage but keep it in-house . By holding that mortgage on the books, it would be deemed a Qualified Mortgage. Fannie, Freddie, Conventional Conforming Updates There are too many for just...(read more)

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MBS Day Ahead: Bonds Continue Battle For Lesser Evil

Posted To: MBS Commentary

There's bad news and not-quite-as-bad news. Longer-term bonds (the stuff we care about) are either in a modest, steady, long-term uptrend (in rate), or they're in a more aggressive, shorter-term uptrend. Actually, they're currently only truly inside the latter (the worse one), but they're very close to the gentler trend--perhaps even trying to break into it this week. This is what bond bulls have been reduced to by late 2017 weakness. The best we can hope for in the near term is a "less aggressive sell-off. " The lines in the chart below help visualize the trends. The yellow lines mark the gentler trend and the teal lines mark the greater evil. For good measure, the important recent ceiling of 2.60% is marked by the white line. We definitely want to avoid breaking...(read more)

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Application Volumes Rise Despite Surging Rates

Posted To: MND NewsWire

Mortgage activity continued strong during the second week of the New Year. The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of loan application volume, increased 4.1 percent on a seasonally adjusted basis during the week ended January 12. Volume on an unadjusted basis was up 32 percent, as the index readjusted from its downturn during the holiday week ended January 5. The seasonally adjusted Purchase Index rose 3 percent from a week earlier while the unadjusted index was up 32 percent. The unadjusted index was 7 percent higher than during the same week in 2017. The Refinance Index increased 4 percent from the previous week but lost market share. It accounted for 52.2 percent of all the week's applications, down from 52.9 percent a week earlier. Refi...(read more)

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MBS RECAP: Bonds Scratch Out Victory Despite Headwinds

Posted To: MBS Commentary

Had it not been for a fairly abrupt sell-off in stocks (the first big day of losses in 2018, and the biggest open-to-close sell-off since late August for some major averages), there's no guarantee that bonds would have ended the day stronger. Even then, only some of the yield curve was stronger--specifically 7yr notes and higher. This is part of the "curve flattening" trade that dominated 2017 (2yr and 10yr yields getting closer together). That trade grew volatile at the end of the year as well as last week, corresponding with our last 2 big sell-offs. As the curve flattened over the past few business days, longer-term yields (which more closely follow mortgage rates) have been able to hold under key ceilings (like 2.60% in 10yr yields). There are important floors too --like 2...(read more)

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Mortgage Rates Still Working on That Ceiling

Posted To: Mortgage Rate Watch

Mortgage rates didn't move much today. Most lenders were just slightly lower/better this morning, but mid-day market weakness prompted several of them to reissue higher rates. In the bigger picture, however, the past several days represent a welcome stint of relative calm. The general trend had been toward higher rates beginning in mid-December. Granted, that general trend could continue and the past few business days could merely be a pause. But the point is, whether it's a pause or the beginning of a reversal, either would begin the same way. The important development in underlying bond markets has been resilience at the weaker (read: higher rate) levels. Using 10yr Treasury yields as a benchmark for rate in general, we'd want 2.60% to continue to act as a ceiling. The ingredient we're still...(read more)

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Housing Demands are Changing, Builders Slow to Follow

Posted To: MND NewsWire

Builders are building more houses, but a survey conducted by the National Association of Home Builders (NAHB) found they are essentially building the same ones . The survey, released during the association's International Builders' Show last week, found the size and configuration of homes built in 2017 changed little from the previous year , even though builders increased their output by 9 percent. Home sizes had been trending down , but they were up ever so slightly last year, from 2,622 square feet (SF) in 2016 to an average of 2,627 SF in 2017. Forty-six percent of homes had four bedrooms and 37 percent had at least three full baths compared to 45 percent and 35 percent respectively in 2016. Home builders continue to battle problems of affordability due to the scarcity of buildable lots...(read more)

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MBS Week Ahead: Light Data, Glimmer of Hope, and a Word of Caution

Posted To: MBS Commentary

Don't get too excited. Despite a few close calls and false alarms, bonds managed to close below last Tuesday's highs for three days in a row. Now they begin the 4th day in slightly stronger territory. To an optimist's eye, the bond market is building a case for a ceiling bounce. One way to approach such potential bounces is to consider the implication of technical analysis. One of the more mainstream technicals for this purpose is the Bollinger Band study. It consists of 3 lines. The middle is typically set at a 21-day exponential moving average (or a 20-day simple moving average), with the outer bands typically set 2x standard deviations higher and lower. This results in a moving range that ends up encapsulating most of the trading that takes place in any given security. That's...(read more)

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Natural Disasters and Compare Ratios; Q3 Performance and Fee Changes

Posted To: Pipeline Press

Replacing real estate agents with “something else that doesn’t earn a 6% commission” is certainly a discussion topic. Here’s one new venture: peer to peer real estate marketplace . But as Brian B. from New Jersey points out, “If a new company says it’s taking out the middleman and it will handle all the paperwork, isn’t it now the new middleman?” All I know is what I read in the newspapers, and The National Association of Realtors reports 88% of all buyers financed their homes the past year, but 98% of younger buyers financed, showing finding financing is especially key for young homebuyers. I guess they have less moola. At the other end of the mortgage process, servicers of loans along the Gulf Coast are now seeing increasing delinquencies from...(read more)

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Mortgage Rates Avoid More Dire Outcomes After Inflation Report

Posted To: Mortgage Rate Watch

Mortgage rates caught a break yesterday by moving lower for the first time this week. They arguably caught a break again today by not moving any higher than they did. Underlying bond markets (which drive mortgage rate changes) were rocked this morning by stronger inflation data. The important Consumer Price Index (CPI) was expected to hold steady at the same low levels that have persisted since the middle of 2017. The modest uptick in inflation sent bond yields higher and resulted in most mortgage lenders putting out noticeably higher rates this morning. Lenders don't like to put out more than one rate sheet per day if they can help it, but if markets move enough, they will "reprice." After the initial trauma, bond markets began a trend of improvement that ultimately resulted in widespread...(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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