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Mortgage Apps Take a Nosedive, Rates on the Rise

Mortgage applications were down last week by the largest seasonally adjusted percentage since September 2017. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, dropped by 7.1 percent during the week ended October 12, and was down 7.0 percent unadjusted. There was a minor holiday, Columbus Day, that shortened the week for some financial institutions, but MBA said its numbers were adjusted to account for the holiday. Refinancing also suffered a major loss, declining 9 percent compared to the week ended October 5.  

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Mortgage Rates Modestly Higher Ahead of Fed Minutes

Mortgage rates didn't move much today.  Some lenders were perfectly unchanged, but the average lender was just slightly higher.  That's at odds with underlying bond market movement (which directly impacts rates)--at least at first glance.  Specifically, the bonds underlying mortgages were slightly stronger today.  That would imply slightly lower mortgage rates.  So why did rates rise?

As is often the case, today's seemingly paradoxical movement is due to timing.  Bonds were weakening ever-so-slightly yesterday--something that's consistent with lenders raising rates.  But the bond market didn't weaken enough for lenders to make those changes in the middle of the business day. 

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Mortgage Rates Modestly Higher Ahead of Fed Minutes

Mortgage rates didn't move much today.  Some lenders were perfectly unchanged, but the average lender was just slightly higher.  That's at odds with underlying bond market movement (which directly impacts rates)--at least at first glance.  Specifically, the bonds underlying mortgages were slightly stronger today.  That would imply slightly lower mortgage rates.  So why did rates rise?

As is often the case, today's seemingly paradoxical movement is due to timing.  Bonds were weakening ever-so-slightly yesterday--something that's consistent with lenders raising rates.  But the bond market didn't weaken enough for lenders to make those changes in the middle of the business day. 

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Home Price Reductions Are Increasing, Especially at High End

Recent research from Trulia shows home price reductions are increasing.  The share of homes for sale that have had at least one price cut since being listed is the highest since 2014.  This, the company says, is more evidence that the market may finally be tilting in homebuyers favor, but the benefits are certainly not evident across the board, or maybe even where they are most needed.

During the first part of this year the share of listings with a price changes stayed much as it was in 2017, but then shot up in July and August. When this is coupled with the slowdown in home price growth that has been noted in most indices, and inventories that are finally creeping up, the increase in price cuts, according to Trulia, could be a critical third confirmation that things may finally be shifting in buyers' favor.

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Falling Lumber Costs Push Builder Confidence Higher

Builder confidence ticked up 1 point in October, rising to 68. The National Association of Home Builders (NAHB), which produces the NAHB/Wells Fargo Housing Market Index (HMI) says this measure of confidence levels has held in the high 60s since June.

"Builders are motivated by solid housing demand, fueled by a growing economy and a generational low for unemployment," said NAHB Chairman Randy Noel. "Builders are also relieved that lumber prices have declined for three straight months from elevated levels earlier this summer, but they need to manage supply-side costs to keep home prices affordable."

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New MBA President Puts Regulatory Reform at Top of Wish List

MBA President and CEO Bob Broeksmit, the Mortgage Bankers Association's (MBA's) newly installed president and CEO, delivered his inaugural speech to MBA's annual convention on Monday, and he appears, at least from his prepared remarks, to be coming out swinging.  His address opened with the sentence, "Mortgage market regulations are increasing costs and limiting YOUR ability to serve YOUR customers."

After presenting his background in the mortgage industry, Broeksmit went on to detail what he and MBA plan to do about those regulations, noting that new leadership in seven regulatory offices* that oversee the mortgage industry presents new opportunities to educate and inform policymakers. He also said MBA will be working with the new Congress to be elected next month regardless of who wins. The goal is to recommend reasonable changes to the regulations and laws which he said have increased costs or prevented MBA members from serving their customers.

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Mortgage Rates Stay Steady, Waiting For a Sign

Mortgage rates were sideways to slightly higher today, prolonging a 3-day trend of exceptionally light volatility.  The 5 days before that (beginning on Wednesday, October 3rd) were completely different, with a huge move higher at first followed by a moderate recovery at the beginning of last week. That recovery largely followed the stock market weakness.

Stocks and rates don't always move in the same direction, but when stocks fall as quickly as they did last week, rates usually benefit.  After such moves level-off, rates tend to wait for stocks to see if there will be an aftershock or a big bounce.  For now, it doesn't look like stocks have made up their mind yet, as they too have continued in a largely sideways pattern during the last 3 trading sessions.

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Freddie Mac Announces More “Big Data” Tools

Freddie Mac is announcing a couple of enhancements to its Loan Advisor underwriting tool.  The additional capabilities will allow lenders to automate the assessment of borrower income and assets to reduce documentation which the company says will significantly speed-up the approval process. The automated collateral evaluation has been available in some form previously and with this announcement appears to be extended to condominium units. It is unclear from Freddie Mac's announcement whether there will be additional capabilities or whether it is being expanded to more locations or properties. What the company says is, "This new capability will speed up and lower the cost of the loan origination process for you and your borrowers. 

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Mortgage Rates Hold Steady as Stocks Stabilize

Mortgage rates held relatively steady today, finally leveling off after two solid days of improvement driven by the week's big stock market sell-off.  Stocks and rates don't always move in the same direction at the same time, but when stocks make a big move lower, rates tend to benefit.  This week's move lower in stocks was the 3rd largest since the financial crisis.  In that light, we only saw a mere token of improvement for mortgage rates, but we'll take what we can get considering it was the only meaningful drop in rates since August 10th.

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“Debt-to-Income” Now Biggest Player in Mortgage Denials

Mortgage denial rates ebb and flow with the economy, with lenders appetite for risk, and sometimes with the pressure lenders feel to make loans. Denial rates in 2017 continued to diminish as they have done since the economy began to improve in 2013 and were the lowest in any year since at least 2004. Using data collected from lenders under the Home Mortgage Disclosure Act (HMDA), CoreLogic estimates only about one in ten mortgage applications were denied last year. Poor credit used to be the primary reason that lenders turned borrowers away, but Yanling Mayer, writing in the CoreLogic Insights blog, says that, in the current credit cycle that has changed.  

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