Archive for the ‘Mortgage News Daily’ Category

Mortgage loan delinquencies were down from the third quarter of 2018 in the fourth quarter. The Mortgage Bankers Association (MBA) said the improvements held across all loan types and all stages of delinquency although there was a slight uptick in foreclosure starts. The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 4.06 percent of all loans outstanding, down 41 basis points (bps) from the third quarter and 111 bps from the fourth quarter of 2017 according to MBA's National Delinquency Survey.

Mortgage rates were slightly higher today, marking the 6th day in a row where they've reversed course versus the previous day.  This is the sort of behavior we see when underlying financial markets are having a hard time making up their mind (or are simply waiting for something before committing to the next big move).

In the case of mortgage rates, the underlying financial market is the bond market.  There are specific bonds that most directly affect mortgage rates, but they are almost always moving in the same direction as other bonds anyway.  That allows us to use something like the 10yr Treasury yield to keep an eye on interest rate momentum.  There we see yields locked in an increasingly narrow range since the beginning of the year.

Freddie Mac and Fannie Mae (the GSEs) reported solid financial results for both the fourth quarter and the entirety of the 2018 fiscal year on Thursday. The annual income was higher for both GSEs, although each posted a decrease quarter-over-quarter. Fannie Mae's total comprehensive income for the fourth quarter was $3.2 billion compared to $4.0 billion in the third quarter, and it reported a $16.0 billion total for the year.  Because of ramifications from the 2017 tax act, its comprehensive income for the 2017 year was only $2.6 billion.

The perceptions, expectations, and plans of prospective homebuyers appear to be undergoing a transition according to results from the most recent Housing Trends survey report from the National Association of Homebuilders (NAHB).  Rose Quint writes about the fourth quarter 2018 survey in a five-part series in the association's Eye on Housing Blog.  She says that, for starters, there has been a steady erosion in the percentage of adults who said they planned to purchase a home within a year. That share slipped quarterly from 24 percent in the fourth quarter of 2017 to 13 percent in both the third and fourth quarters of 2018.

While we have not yet seen figures from the Census Bureau for December let alone January, the Mortgage Bankers Association (MBA) is reporting a surge in new home sales last month.  Information from MBA's Builder Application Survey (BAS) indicates that those sales, while unchanged from January 2018, increased by 43 percent compared to December 2018.  The change does not include any adjustment for typical seasonal patterns.

On a seasonally adjusted basis, MBA estimates sales were at an annual rate of 713,000 units. This is an increase of 29.2 percent from the December estimate of 552,000 units. Before adjustment MBA estimates that there were 54,000 new home sales in January 2019, up 45.9 percent from 37,000 new home sales in December.

Mortgage rates recovered today after rising to the highest levels in a week as of yesterday.  The improvement followed a much-weaker-than-expected Retail Sales report--something investors have been waiting on for nearly 2 months due to the government shutdown. 

Retail sales comprise an important part of economic activity, and the economy is one of the biggest considerations for interest rates.  Generally speaking, economic strength pushes rates higher, all other thing being equal.  Thus, the unexpectedly weak retail numbers had the opposite effect. 

How big was the effect?  Not quite as big as most other media outlets would suggest.  

Mortgage rates hadn't changed much over the past few business days, even though they arguably should have moved a bit higher yesterday.  That made today's adjustment slightly more abrupt. 

Why was there an adjustment?

Mortgage rates are based primarily on the trading levels in the bond market.  In turn, the bond market takes cues from a multitude of factors big and small.  Among the biggest considerations for bonds are the various regularly scheduled economic reports.  Among those reports, inflation data is traditionally very important to bonds.  And finally, among inflation data, today's Consumer Price Index is probably the most widely followed. 

A total of 8.8 million households bought homes in the two years preceding the most recent American Housing Survey (AHS).  The survey, sponsored by the Department of Housing and Urban Development, is conducted by the Census Bureau every two years.  The AHS is a nationally representative survey of residential structures in the US and of the households that occupy them. Results of the 2017 survey were released last year and the National Association of Home Builders (NAHB) has taken a detailed look at the findings, publishing several blog entries.  Carmel Ford of NAHB's Economics and Housing Policy Group has now published a paper on the characteristics of those recent buyers and their transaction.

Mortgage applications have now fallen in six of the last eight weeks. The Mortgage Bankers Association (MBA) said its seasonally adjusted Market Composite Index, a measure of application volume, fell lost another 3.7 percent on a seasonally adjusted basis during the week ended February 8.  On an unadjusted basis the composite was down 4.0 percent. The Refinance Index decreased 0.1 percent from the previous week although the refinancing share of applications submitted rose to 43.2 percent. During the week ended February 1 refinancing had a 41.6 percent share.

Mortgage rates were roughly unchanged yet again today, although the average lender was charging microscopically higher fees compared to yesterday.  The key ingredient in today's market movement (which ultimately translates to mortgage rate movement) was the promise of a deal to avert another government shutdown at the end of the week. 

Late in the day yesterday, congressional leaders on both sides of the aisle signaled a potential deal was in the works.  The fact that Trump didn't immediately dismiss the deal was taken as evidence of its viability.  This resulted in bond markets losing ground today, which normally coincides with higher rates.  It was also the inspiration for a good amount of today's improvement in stocks.