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Category: Mortgage News

Mortgage News analysis and perspective from National Mortgage News, an award-winning comprehensive digital resource serving the entire residential mortgage. Fidelity Home Group Mortgage News provides up to the minute mortgage and real estate news including mortgage rates.

Rate Reckoning Draws Closer

Rates are dictated by the bond market and bonds are flashing a warning sign about volatility on the horizon. In other words, rates look like they’re ready to make a bigger move in the near future, for better or worse.

This isn’t readily apparent at first glance–especially when it comes to mortgage rates (which are still very close to all-time lows).  Even when we look at a rate benchmark like 10yr Treasury yields, it seems that volatility has died down recently. 

But the absence of volatility is actually the problem.  Rates had been moving decisively higher early in the year as vaccines and fiscal stimulus fueled hopes of a quicker economic recovery.  More recently, political gridlock and the delta-driven surge in covid cases took 10yr yields back in the other direction. 

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MBS RECAP: Bond Weakness Reinforces The Consolidation Pattern

Bond Weakness Reinforces The Consolidation Pattern

Bonds were weaker overnight and the selling trend continued fairly steadily throughout the day.  The only exception was a bigger yield spike that coincided with (but wasn’t necessarily caused by) the EU close.  It is worth noting, however, that yields topped out the moment after the EU closing bell and have been sideways in a narrow range since then.  Jargon terms like “position squaring” and “illiquidity” …

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Lenders Continue to Expect Falling Profits, Refinancing Demand

With interest rates expected to rise and most homeowners who could benefit from refinancing having done so, mortgage bankers are not expecting the sometimes record profits of the last year or so to continue. Fannie Mae’s third quarter Mortgage Lender Sentiment Survey (MLSS) found just short of a majority of respondents expecting their profit margins to decline over the next three months, although that has also been the primary sentiment for the past three quarters. The current survey found 46 percent of lenders expecting a decrease in profits, down from 69 percent in the prior survey. Thirty-eight percent believe their profits will be unchanged and 15 percent expect them to be higher. Those expecting slimmer margins cited increased competition and changing market conditions for their pessimism, while GSE pricing and policies and strong consumer demand were the top reasons given among lenders with a more positive profitability outlook. 

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Foreclosure Activity Rises in First Post-Moratorium Month

The other shoe didn’t drop last month, but maybe the laces did start to unravel. ATTOM reports that, within a month after the government’s pandemic-related moratorium lifted, foreclosure filings nationwide rose 27 percent and were 60 percent higher than in August 2020 when the moratorium was in full force. There were a total of 15,838 properties that received a foreclosure filing during the month, either a notice of default, scheduled auction, or bank repossession. “As expected, foreclosure activity increased as the government’s foreclosure moratorium expired, but this doesn’t mean we should expect to see a flood of distressed properties coming to market,” said Rick Sharga, Executive Vice President at RealtyTrac, an ATTOM company. “We’ll continue to see foreclosure activity increase over the next three months as loans that were in default prior to the moratorium re-enter the foreclosure pipeline, and states begin to catch up on months of foreclosure filings that simply haven’t been processed during the pandemic. But it’s likely that foreclosures will remain below normal levels at least through the end of the year.”

 

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Huge Decline in Forbearances, Down 67 Percent From Peak

There was a huge reduction in the number of borrowers in COVID-19 related forbearance plans over the last week as servicers plowed through the remaining plans with August expirations and began processing those with September reviews. Black Knight says a net of 92,000 homeowners exited the program over the week ended September 7, a 5.4 percent decine. The forborne population is now 1.618 million loans, 3.1 percent of the 53 million universe of mortgages. The decline was seen across all investor classes with bank portfolio loans and those serviced for private lable security (PLS) investors decreasing by 40,000 or 7.7 percent. Both the combined Fannie Mae and Freddie Mac category (GSE loans) and the FHA/VA portfolios saw 26,000 borrowers exit, resulting in decreases of 3.8 and 5.1 percent, respectively.

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MBS Day Ahead: Range-Bound Risks as Rally Hits The Floor

Bonds are starting the day in moderately weaker territory.  In so doing, 10yr yields are rejecting the opportunity to break below the 1.30% technical level.  Notably, they rose above 1.30% just before the 3pm close yesterday (the time of day that holds the most weight for technical analysts in day-over-day terms). It remains to be seen how much 1.30% matters.  It’s been more of a “center of gravity” for a sideways range recently as opposed to a true pivot point (unlike July).  Coincidentally, 1.30% currently lines up with the bottom of the consolidation pattern, and…

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Mortgage Rates Improve Again, Making it Back to Last Week’s Levels

Mortgage rates moved lower again today, with many lenders making it back to the levels seen after last Friday’s jobs report.  In week-over-week terms, rates were still decidedly higher at the beginning of the day.  It wasn’t until the afternoon’s 30yr bond auction that the entire bond market improved enough for mortgage lenders to offer mid-day reprices.  A similar pattern played out yesterday.

Why do Treasury auctions matter to mortgage rates?  Treasuries and MBS (mortgage-backed securities–the bonds that most directly affect mortgage rates) are both part of the bond market.  They correlate quite well for a variety of reasons (not the least of which being that Treasuries are the risk-free starting point against which every dollar-denominated bond investment is measured).  As such, when Treasuries have a good day, MBS (and thus, mortgage rates) tend to have at least a decent day.  Today (like yesterday) was no exception.

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Credit Loosens as New Refi Programs Come on Line

Higher interest rates pushed refinancing lower in August and lenders moved to generate more origination activity. That, in part, led to an increase in overall credit access. The Mortgage Bankers Association (MBA) said its Mortgage Credit Availability Index (MCAI) gained 3.9 percent to 123.7 during the month. An increase in the index indicates credit is loosening.

The Conventional MCAI increased 7.6 percent, while the Government MCAI grew 1.1 percent. Of the component indices of the Conventional MCAI, the Jumbo MCAI was up 9.4 percent, and the Conforming MCAI rose by 5.1 percent.

“Credit availability increased in August, driven by significant activity across all indexes,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “This expansion was heavily driven by the addition of refinance loan programs at a time when the 30-year fixed rate has been above 3 percent for the past month, and refinance activity has trended lower.

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Equity Explosion Bodes Well for Lenders

American homeowners got $20,000 richer in the second quarter just sitting in their family room. Black Knight’s newest Mortgage Monitor says that was the average gain in borrower equity during the quarter as home prices continued to soar.

Tappable equity, the amount available to homeowners before reaching a maximum 80 percent combined loan-to-value (CLTV) ratio, hit a record high total of $9.1 trillion, a $1 trillion increase in a single quarter. The average mortgage holder saw his/her tappable equity grow by $20,000 during that period to a total of $173,000.

The weighted average CLTV for the mortgage market is now 46 percent, the lowest leverage on record. Fewer than 3 percent of mortgaged homeowners have less than 10 percent equity and only 0.6 percent are underwater, both record low figures.

 

 

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MBS RECAP: Strong Auction Trifecta Helps Bonds Hold The Range

Strong Auction Trifecta Helps Bonds Hold The Range

The day began with a relatively bond-friendly European Central Bank announcement falling failing to help Treasuries nearly as much as it helped European bonds.  That was forgivable in light of today’s Treasury auction and ongoing corporate bond supply glut.  After working through the supply and posting stellar stats at auction, bonds finally got the memo.  10yr yields rallied all the way down to the 1.287% …

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