Mortgage Industry News

You won't see too many days like today when it comes to mortgage rates and the underlying bond market that drives them. Bonds were eagerly awaiting this morning's Consumer Price Index (CPI), a key inflation report and an important source of guidance for the Fed rate outlook.  Reminder: while the Fed Funds Rate itself does not control mortgage rates, Fed rate EXPECTATIONS tend to correlate much better.  Fed rate expectations leapt higher this morning after inflation came in hotter than expected. The rest of the interest rate world followed in lock step. When lenders released their initial mortgage rates this morning, the daily average 30yr fixed was up 0.1% from yesterday--a very big move for a single day. But roughly half an hour later, the bond market began gradually moving back in the other direction. The recovery continued at a remarkably steady pace (not the sort of linear pace normally seen on days with sharp reactions to important economic data). The only other thing happening in a similarly linear fashion was the HEAVY selling in stocks.  I'd be the first to point out that it's generally a mistake to assume that a certain development in the stock market reliably predicts an outcome in the bond market. That correlation can be positive or negative depending on the day and the underlying motivations. In today's case, there were solid examples of both positive and negative correlation. Immediately following the inflation data, stocks and bonds lost ground in unison. We'd reconcile that by saying higher Fed rate expectations spell bad news for both. But then the stock selling continued--ultimately progressing toward the worst day of losses in over 2 months. 

What percentage of the industry is shifting credit policies? Yesterday the industry learned that Fairway Independent and Movement are “now implementing VantageScore 4.0 (owned by Experian, Equifax, and TransUnion)… The VantageScore 4.0 credit scoring model is offered through Experian, Equifax and TransUnion, as well as mortgage technology providers including Xactus, Calyx, and Optimal Blue. Its use in mortgage was pioneered by Fannie Mae and Freddie Mac, as well as the Federal Home Loan Banks, FHA, and the VA. Keeping up on things can be a full-time job, and Chrisman Demo Day returns tomorrow, October 15, at 10AM PT, with AI front and center, free to viewers. Three of the seven companies on the agenda are AI and automation tools, each taking on a different part of the loan. Watch where AI takes over a task, where it hands the file back to a person, and what that means for everyone downstream. Along the way, data and intelligence feeds the file, the Loan Origination Software carries it through processing, outsourcing supports the document-heavy work, and a CRM keeps the borrower connected through the next loan. Featuring demos from Cotality, Wilqo, MOZAIQ Agentic AI, One Diligence, Indecomm, NightOwl, and OptifiNow. Seven companies, 10 minutes each, one connected pipeline. Chrisman Marketplace members receive free demo access. Join the Marketplace to participate as a vendor. (Today’s podcast can be found here. This week’s ‘casts are presented by nCino, the platform for agentic AI in mortgage lending. nCino is helping mortgage lenders deliver a faster, simpler path to homeownership. Today’s has an interview with Seinfeld opener, new MBA Chairman, and Success Mortgage Partner’s Owen Lee on his involvement with the MBA, his priorities and goals as Chair, how the role will affect his professional responsibilities, and his outlook on opportunities and challenges facing the mortgage industry.)

Unrounded core CPI came in at 0.335, which nearly rounds to 0.4% versus an expectations of 0.2%.  This is a big surprise when it comes to inflation data, and it matters more at the moment given the rapidly evolving Fed rate hike outlook. Recent Fed speeches caused a significant pull-back in rate hike expectations. Today's inflation data undoes most of that progress.  It may not cause rates to break into new highs, but it makes a strong case for this week's lows being the floor until further notice.  Confused about the market reaction? Let's talk more. For those wondering why forecasters didn't expect more inflation, the first thing to check is that you're not confusing the concept of "higher price" with "inflation."  Two different things... We all know prices are up. The question is about the pace. Assuming we're on the same page there, the next thing to understand is that there isn't even the slightest possibility that an individual person's anecdotal observations about prices could ever hope to accurately inform the reality of the CPI data set. They're looking at a lot more prices than we individuals could ever see--let alone mentally process.  80-100 professional forecasters are evaluating the entire data set (although, some take this more seriously than others) and submitting forecasts each month. By the day of the release, the median forecast is the entire market's best guess as to where the data comes in. If the data comes in hotter than expected (which today's did... and significantly so), bonds sell off in proportion to the significance of the report in question. If you're wondering why today's reaction was so big despite core CPI being 0.3 vs 0.2, we can break that down too. First off, you're right that we've seen far smaller responses to similar data. But today's report was critically important to the Fed rate outlook (which has been very volatile recently).  Fed rate expectations fell sharply at the end of September and then have been in a holding pattern as traders waited to see if today's data would validate that sharp fall or reverse it. Core CPI of 0.335% and supercore at 0.423% is more than enough to throw lots of cold water on recently

Light Volatility and Modest Gains Ahead of CPI Bonds were modestly stronger in the overnight session in a move that is easiest to attribute to ongoing supportive buying in response to recently higher yields in the long end of the market. Fed Funds Futures were also in play as implied Fed Funds tracked fairly well with 10yr yields in terms of movement. Oil prices did little to explain the AM gains, but correlated well with an insignificant pull-back between 8:30-10:00am ET. Afternoon comments from Williams (who only sees the need for 1 more rate hike and then no hikes in 2027) helped the short end of the yield curve, but here too, all of the intraday volatility was very light in the bigger picture. Case in point, this was one of the first days in weeks without any lender reprices reported through 3pm ET.  Econ Data / Events Existing Home Sales 3.99m vs 3.95m f'cast, 3.93m prev

It was an uneventfully good day for mortgage rates. Unlike the average day over the past several weeks, there was minimal intraday volatility in the underlying bond market. This allowed the average lender to issue rates once this morning and avoid intraday rate changes.  Fortunately, the overnight market movement was in our favor today as traders continued finding value in recently higher bond yields.  Rates are based on the bond market where higher yields increasingly create demand among investors. In 2023, when the 10yr Treasury yield hit 5%, we saw a solid show of support from buyers. In 2026, we've been waiting to see a similar show of support as yields crested 5.3%. Last week brought the first potential evidence of such support.  This doesn't mean rates are out of the woods, however. Tomorrow brings important inflation data and inflation is a key consideration for bond investors. If inflation comes in higher than expected, yields/rates could move back up toward recent highs. But if it's lower than expected, it could reinforce the supportive undertones seen over the past several trading days and help the downward momentum in rates continue.