Mortgage Industry News

Not Quite The Rally You'd Expect, But a Rally Nonetheless Today's vitals might be a bit confusing at first glance. Payrolls came in at -23k versus forecasts of 80k. At most moments in history, that would be worth a substantial rally. Today it was only worth 3bps in the 10yr and a quarter point in MBS. To be fair, it was worth even less without a late day drop in oil prices for unrelated reasons. But at this moment in history, low payroll counts are far more common and they're doing far less to influence the unemployment rate (case in point, today's FELL to 4.1% from 4.2%). This went a long way toward offsetting the drop in payrolls. Nonetheless, payrolls remain very important to traders even if economists have shifted more of their focus to other metrics.  Econ Data / Events Average earnings mm (Jul) 0.1% vs 0.3% f'cast, 0.3% prev Non Farm Payrolls (Jul) -23K vs 80K f'cast, 57K prev Participation Rate (Jul) 61.4% vs -- f'cast, 61.5% prev Unemployment rate mm (Jul) 4.1% vs 4.2% f'cast, 4.2% prev Market Movement Recap 09:06 AM sharply stronger after jobs data but off the very best levels. MBS up 10 ticks (.31) and 10yr down 5.3bps at 4.625 11:20 AM MBS up 7 ticks now (.22) and 10yr down 2.5bps at 4.652 (well off the lows of 4.603) 02:38 PM Very flat. MBS still up 7 ticks (.22) and 10yr down 2bps at 4.658

Mortgage rates dropped moderately today after the latest jobs report showed much lower jobs created than expected. The monthly jobs report is one of the most--if not THE most--important pieces of economic data to the rate market on any given month. If the numbers are close to forecasts, there isn't always a big reaction. Today's numbers were quite far from forecasts for some parts of the report, but slightly offset by others. The net effect was a decent improvement in the underlying bond market. Because mortgage rates are based on bonds, rates dropped accordingly. The average top-tier 30yr fixed rate moved down from 6.77 to 6.74--the lowest since July 20th. 

Mortgage application activity declined for a second consecutive week as higher borrowing costs continued to weigh on both purchase and refinance demand. The Mortgage Bankers Association (MBA) reported a 2.9% decrease in total application volume on a seasonally adjusted basis for the week ending July 31. Purchase applications decreased 4% from the previous week on a seasonally adjusted basis and were 3% lower than the same week one year ago. Elevated mortgage rates continue to challenge affordability, dampening buyer demand despite improved housing inventory in some markets. Refinance activity also softened, with the Refinance Index falling 2% from the prior week and remaining 9% below year-ago levels. As rates moved higher, fewer homeowners had an incentive to refinance. "In the wake of the July FOMC meeting, longer-term rates increased, pushing the 30-year fixed mortgage rate to 6.81 percent, its highest level in more than a year,” said Mike Fratantoni, MBA’s SVP and Chief Economist. Next week's data will likely bounce back higher given that rates have dropped noticeably so far in August. Per MND's daily rate tracking, 30yr fixed rates hit 2 week lows on Wednesday and moved even lower on Friday. Mortgage Rate Summary: 30yr Fixed: 6.81% (from 6.76%) | Points: 0.65 (from 0.69) 15yr Fixed: 6.13% (from 6.15%) | Points: 0.73 (from 0.84) Jumbo 30yr: 6.72% (from 6.70%) | Points: 0.52 (unchanged) FHA: 6.43% (from 6.41%) | Points: 0.75 (from 0.88) 5/1 ARM: 6.03% (from 5.98%) | Points: 0.99 (from 1.23)

As many of us prepare to head to So Cal for the California MBA’s Western Secondary (800 or so registered), artificial intelligence continues to be the buzz. I recently received this question: “Rob, does it seem to you that we’re now at the same inflection point with AI as when everyone was afraid that DU & LP were going to replace all the underwriters?” Could be, and of course we still have underwriters. Meanwhile, borrowers still need help, and rates don’t show signs of going down. I received a question about “off the beaten path” routes for assistance. The Mortgage Credit Certificate Program might help. “The MCC program is a homebuyer assistance program designed to help lower-income families afford homeownership. The program allows homebuyers to claim a dollar-for-dollar tax credit for a portion of mortgage interest paid per year, up to $2,000. The remaining mortgage interest paid may still be calculated as an itemized deduction.” (Today’s podcast can be found here. This week’s ‘casts are sponsored by Figure. Figure is shaking up the lending world with their five-day HELOC, offering borrower approvals in as little as five minutes and funding in five days. Figure has hundreds of partners in the Banking, Credit Union, Home Improvement, and of course, IMB space embedding their technology. Today’s has an interview with Wilqo’s Tiffany Jacobelli on building scalable teams, processes, and operational frameworks that can handle mortgage volume surges without sacrificing quality, compliance, or borrower experience.)

Nonfarm payrolls (NFP) FELL 23k versus an 80k forecast.  Last month was revised down as well. From a traditional market-watching perspective, this is pure rally fuel. Indeed, bonds are rallying sharply so far. Let's hope it sticks. Why wouldn't it? As labor force dynamics have shifted, it doesn't take much job growth (or perhaps any?) to keep the unemployment rate steady. In fact, unemployment dropped in today's report, though it should be noted it's offset by a lower labor force participation rate (meaning unemployment basically held steady). We've seen some shifts in trading patterns after jobs reports in the past year, so don't assume this rally completely sticks (it could, and that would be great, but it's not as much of a given as it would have been if these numbers came out in 2024).