Mortgage rates moved definitively lower today, restoring almost all of the ground lost during September's weakness. This has been a gradual process of improvement that began roughly 2 weeks ago, but today was the biggest victory by far. The most prevalently-quoted conforming 30yr fixed rate is now safely 4.125% again for top tier borrowers. It spent most of the last 2 weeks at 4.25%.
Whereas big market movements can often result from surprising news headlines or exceptionally strong/weak economic data, today's gains come courtesy of investors shifting their trading.......(read more)
Total construction spending in the U.S. in August was estimated by the Census Bureau today to be at the seasonally adjusted annual rate of $961.0 billion, down 0.8 percent from spending in July and 5.0 percent higher than the $915.3 in construction outlays in August 2013. Total spending in June was revised up from the original estimate of $963.7 billion to $968.8 billion.
Construction spending in August was estimated at $89.3 billion on a non-annualized basis compared to $87.6 billion in July. Year-to-date spending this year is estimated at $623.1 billion compared to $583.2 billion at the same point in 2013.
A lawsuit challenging the manner in which profits from Fannie Mae and Freddie Mac (the GSEs) have been allocated to the U.S. Treasury was dismissed on Tuesday by a U.S. District Court judge. The suit, brought by institutional investors Perry Capital, LLC, Fairholme Funds, Inc. and Arrowood Indemnity Company, contested a change in the Senior Preferred Stock Agreement negotiated between the GSEs and the Treasury Department in August 2008 when the GSEs were placed in government conservatorship.
The three companies originally filed separate lawsuits in July 2013 but it appears that they may have been combined by the courts into a single action. The investors maintained that the 2012 changes violated the original terms of the government's 2008 bailout agreement and that they unlawfully impair shareholder value.
Last week was another down week for mortgage applications according to the Mortgage Bankers Association (MBA). Its Weekly Mortgage Applications Survey data for the week ended September 26 showed a 0.2 percent decrease in applications as reflected in its seasonally adjusted Market Composite Index. Compared with the previous week the decline in the unadjusted index was twice as large.
MBA's Refinance Index was down 0.3 percent from the week ended September 19 and applications for refinancing comprised 56 percent of total loan applications. That share was unchanged from the previous week.
The Consumer Financial Protection Bureau (CFPB) filed a Consent Order on Tuesday against Lighthouse Title, a title insurer based in Holland, Michigan. The order was, the Bureau said, sending "a clear and simple message" that it intends to pursue legal action against financial institutions that pay in any manner for referrals. The administrative proceeding carried a civil money penalty of $200,000.
The Bureau said that Lighthouse Title had violated the Section 8(a) of the Real Estate Settlement Procedures Act, (RESPA) and its implementing regulation, Regulation X. The relevant section of RESPA states, "No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person."
Mortgage rates were slightly higher today leaving September s one of only 3 months this year with noticeable upward movement. Things could have been worse had it not been for the steady improvements seen during the second half of the month. Today was an exception to that recent trend, but it's tempered by the fact that yesterday's gains were the best of the month. The only downside is that the most prevalently-quoted conforming 30yr fixed rate for top tier borrowers remains 4.25% whereas it would have likely moved to 4.125% if rate went the other direction today.
The Consumer Financial Protection Bureau (CFPB) came down hard on Michigan-based Flagstar Bank both legally and verbally as it issued the first enforcement action under its new mortgage servicing rules which went into effect in January 2014. The action claims that Flagstar had "failed borrowers" at every step in the foreclosure process by illegally blocking those borrowers' attempts to save their homes.
"Because of Flagstar's illegal actions and unacceptable delays, struggling homeowners lost the opportunity to save their homes," said CFPB Director Richard Cordray. "The Bureau has been clear that mortgage servicers must follow our new servicing rules and treat homeowners fairly. Today's action signals a new era of enforcement to protect consumers against the cost of servicer runarounds."
There was what the S&P/Case-Shiller Home Price Indices called "a significant slowdown in price increases in July S&P Dow Jones Indices said today. Nineteen of the 20 cities in the survey saw a lower year-over-year gain in July than they had registered in the previous month and only three cities still showed increases in the double digits.
The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 5.6 percent annual gain in July 2014 compared to a 6.2 percent annual increase in June. The 10- and 20-City Composites showed year-over-year increases of 6.7 percent, a substantial decline from the 8.1 percent gain for each during the 12 months ended in June. Las Vegas, Miami and San Francisco were the only cities to report double-digit annual gains. Cleveland's rate remained unchanged at +0.9 percent for the 12 months ending July 2014.
Mortgage rates fell at a healthy pace today, bringing them to the lowest levels since September 9th. Gains in bond markets help rates move lower and bond markets were stronger right from the outset today on a combination of factors. Determining the most prevalently-quoted conforming 30yr fixed rate for top tier borrowers is more of a toss up at current levels with 4.25% and 4.125% sharing roughly equal territory.
Loan Originator Perspective
"As long as we remain under 2.5% yield on the 10 yr treasury, I'm suggesting floating....for now. With a yield under that level, we've just reentered the long term downward trend channel. We'll need to see a few days worth of confirmation for me to be confident rates will continue lower, because this could just be a test and rates move right back up. Float cautiously, and as always, be ready to lock." -Brent Borcherding, www.brentborcherding.com
"If you have been floating for the past week or so, you have been fairly well rewarded. I have favored floating as month/quarter end tends to favor rates. With tomorrow marking end of month, we are on to looking at economic data. We have non farm payrolls at the end of the week which could spark a movement one way or the other. My advice would be to lock all loans by end of day tomorrow. It is way to risky to float through the payroll report on Friday. I think starting Wednesday, we give back some of the gains we have enjoyed over the last few days as the market prepares for the coming data. Then the direction of rates will be dictated by the payrolls report and revisions to prior month. If jobs are better than expected with positive revisions, rates will be pressured higher but if worse than expected we should see rates continue to move lower. I think the best day to lock this week will be tomorrow. This could all change if we get some kind of tape bomb due to the geopolitical risk floating around the world." -Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.25
- FHA/VA - 3.75-4.0%
- 15 YEAR FIXED - 3.375-3.5
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- The hallmark of 2014 so far has been a disconcertingly narrow range in rates. Too many market participants bet on rates going higher in 2014, and markets have punished that imbalance with a paradoxical move lower.
- As of June, rates are now lower year-over-year, but that's mostly due to rates' path higher in 2013. The current path in 2014 remains sideways, though it has recently approached (but not broken) the lows set in late May
- European markets continue to play a prominent role, generally helping rates in the US remain lower than they otherwise might be.
- From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range. While top tier rates moved up an eighth of a point in early September, to truly move out of the "narrow range," we'd need to see another .125% higher (best-execution at 4.375%)
- As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.' Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy. It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).
Pending home sales declined slightly in August, mirroring a similar pull-back in existing home sales announced last week. The National Association of Realtors® (NAR) said today that its Pending Home Sale Index (PHSI) for August was 104.7, a decline of 1.0 percent from July's level of 105.8. Existing home sales, also according to NAR, slipped 1.8 percent in August. The month however remained the second best of 2014 for both performance measures.
The PHSI is a forward-looking indicator based on contract signings for home purchases. Despite the slight decline in August the index is above 100, considered an average level of contract activity for the fourth consecutive month. The August index was 2.2 percent below the PHSI in August 2013....(read more)