Mortgage Industry News

Any food science major will tell you that the difference between jelly and jam is that jam has chunks of fruit in it; jelly is strained. There is also a difference in costs in our biz. Here in Honolulu at the MBAH conference, costs are part of the discussion, and sure enough, there is a map of the mortgage closing costs by state. There is also a difference in denial rates, state by state, for a variety of reasons, so the National Association of Realtors® recently examined data from 2023 to give homebuyers some information as to where denial rates are the highest and lowest, and which groups they most impact. The best (Easiest? Most qualified borrowers?) states to buy in, according to the study, are Alaska, North Dakota, and Nebraska, which all had drastically lower denial rates. The toughest are a trio of Southern states: Mississippi (rejecting 19% of all 2023 mortgage applications), Louisiana (18%), and West Virginia (15%). (Today’s podcast can be found here and this week’s is sponsored by TRUE. TRUE cuts time to critical loan events from days to minutes by using background AI workers to instantly validate data and automate underwriting decisions. Today’s has an interview with TRUE’s Steve Butler on the next evolution of “background AI” in mortgage tech: from cutting decision times to minutes, enabling instant pre-approvals, exposing the hidden costs of partial AI solutions, and what’s ahead in reshaping the future of lending.) Products, Software, and Services for Brokers and Lenders

After rallying fairly well last Wednesday and Thursday, bonds pulled back on Friday, but not enough to erase more than half of the week's gains. The new week is starting out in uneventful fashion with trading levels reasonably close to Friday's latest levels after a bit of overnight weakness. The day's only econ data (NY Fed Manufacturing) isn't a big market mover to begin with and has already passed without a trace. With that, the focus remains square on Wednesday's Fed dot plot as a key informant for near-term bond market volatility.  Tuesday's AM data also has some chance to cause a response--largely due to Retail Sales. Geopolitical headlines haven't been a big issue for better or worse as far as bonds are concerned although that could change depending on the nature of any additional escalation. The bigger picture trend arguably remains rangebound with Friday's weakness acting as a rejection of another breakout attempt (of the 4.40% range floor).  But someone more inclined to bullish interpretations could also argue that a general downtrend (green lines in the chart below) is in place with this morning's friendly bounce adding the latest piece of evidence.

Not Reading Too Much Into Friday's Weakness At first glance, with only one report on the calendar, it's only logical to give Consumer Sentiment credit for sparking today's bond market selling spree.  Closer inspection adds nuance.  First off, selling began in earnest at 8:20am--the unofficial opening bell for bond market trading and a time of day where inclined sellers/buyers are often lined up and waiting to trade accordingly. Then there's the fact that the post-data selling didn't begin until 6 minutes after the data--an odd eventuality given the tendency for reactions to be perfectly immediate. Last but not least, we can entertain several reasons that traders might be interested in moving to the sidelines ahead of next week's potential geopolitical developments and Fed announcement.  Econ Data / Events Core MM PPI 0.1 vs 0.3 f'cast, -0.2 prev Core YY PPI 3.0 vs 3.1 f'cast, 3.2 prev Monthly Headline PPI 0.1 vs 0.2 f'cast, -0.2 prev Jobless Claims 248k cs 240k f'cast, 248k prev Continued Claims 1956k vs 1910k f'cast, 1902k prev Market Movement Recap 09:09 AM Roughly unchanged overnight and losing ground early.  MBS down just over an eighth and 10yr up 2.3bps at 4.387 11:33 AM steady selling all morning.  MBS down 10 ticks (.31) and 10yr up 6.2bps at 4.425 01:37 PM 10yr yields are now up 8bps on the day at 4.443 and MBS are down nearly 3/8ths of a point 03:24 PM Worst seems to be over for selling.  Still weaker though with MBS down 9 ticks (.28) and 10yr up 5.2bps at 4.416

The top tier 30yr fixed mortgage rate index rose 0.04% on Friday, which would be a medium-sized defeat in and of itself. In the broader context, however, it was an acceptable adjustment on what has otherwise been a solid week.  Specifically, today's rates are still 0.08% lower than last Friday's. There were no standout individual sources of inspiration today. Keen observers may note that today's Consumer Sentiment data seemed to coincide with mid-day upward pressure in rates, but that was a bit deceptive.  The upward pressure began in earnest at 8:20am ET, which is essentially the opening bell for the bond market.  It's true that the weakness accelerated after the Consumer Sentiment data, but not until 6 minutes afterward, and that's an uncommon delay when it comes to rates responding to economic data. All that to say: it looks like the rate market was somewhat determined to lose some ground today.  This can happen on weeks like this one where there has been a solid improvement through Thursday and where the following week brings additional sources of potential volatility.

After a Memorial Day-induced lull, mortgage application activity rebounded sharply last week, according to the Mortgage Bankers Association’s (MBA) latest survey. Both purchase and refinance demand climbed to their highest levels in over a month, with the composite index rising 12.5% on a seasonally adjusted basis.  “Coming out of the Memorial Day holiday, mortgage applications increased to the highest level in over a month, driven by growth in both purchase and refinance applications,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Despite ongoing uncertainty surrounding the economy, homebuyers seem to be taking advantage of loosening housing inventory in certain markets.” Refinance applications jumped 16% on the week and are now 28% higher than the same week last year. Purchase apps rose 10% week-over-week and are now running 20% above 2024 levels, marking a continuation of the strong year-over-year gains seen in recent reports. There are only 2 other weeks with higher purchase index readings going back to May 2023, and they were only barely higher. It should be noted that refi index, while not officially seasonally adjusted  does include a smoothing adjustment for holiday weeks.  Last week's data noted a Memorial Day adjustment, one that is not present in the current week's data.  Because certain holidays fall on a different day of the week, adjusting for them is an imperfect science. In all likelihood, if we could completely remove seasonality and holiday effects, last week's refi index would have been stronger and the present week would have shown a much smaller increase.