“Unpacking the Shifts in Bond Market and Mortgage Rates: A Recap of January 5, 2024”

In a somewhat rare occurrence, Friday saw market shifts prompted by the jobs report and ISM Non-Manufacturing Index, only for these movements to be nullified by the day’s end. The ISM Non-Manufacturing Index had the more notable impact, perhaps due to the jobs report’s lackluster strength and the Index revealing the lowest employment figures since July 2020. Nonetheless, the impact on bonds was minimal, particularly beneficial for Mortgage Backed Securities (MBS) that are not subject to the auction cycle concerns of Treasuries.

Key data and events included:

The nonfarm payrolls posted 216k versus a forecast of 170k and previous figure of 173k. The unemployment rate was 3.7%, better than the forecasted 3.8%. However, the participation rate dropped by 0.3%, which suggests a rise in unemployment. The ISM Services PMI was 50.6, lower than the forecasted 52.6 and the previous 52.7. The ISM Service employment was at its lowest since July 2020, and Service Prices were 57.4 against a previous 58.3.

Examining market movements, by 08:57 AM, there was additional selling after the jobs report resulting in MBS decreasing a quarter point on the day, and a 5bps rise in 10yr to 4.055. The ISM data brought more gains at 10:11 AM. But by 12:35 PM, the post-ISM growth began to fade. At 02:14 PM, a level of stability was recorded, although the end of the trading day saw MBS levels back to their starting point and Treasuries up to 4.051. This might be due to apprehension over the upcoming auction cycle and curve steepening favoring shorter durations.

“Legal Battle Erupts: G-Rate Accuses NAF of Employee Poaching and LO Compensation Rule Violation”

G-Rate claims that NAF has successfully enticed a minimum of 30 employees by employing illicit compensation procedures for loan officers. These include actions like tampering with lead sources.

“Keeping Pace with the Ebb and Flow: A Close Analysis of Mortgage Rates in 2024”

The notable employment report that usually releases on the first Friday of every month plays a crucial role in influencing interest rate instability. Today was no different, but it is worth noticing that the potential magnitude of the impact doesn’t always match its real effect. Initially, it gave an impression of justifying its influence when the report indicated a surprising increase in job creations, which typically leads to higher interest rates. Consequently, the bonds correlated with mortgage rates started to escalate after the release of these figures. However, other data facets in the report helped to counterbalance this effect in no time.

Moreover, other relevant economic indicators contributed to managing the initial reaction. According to the Institute for Supply Management, the ISM Services index, an extensive measure of the service sector’s wellbeing, dropped to levels signaling negligible growth. The employment element of the index, which carries more significance, reached its lowest since the covid restrictions, making the bond market react more readily than to the jobs report.

Despite a slight dip in the afternoon, the overall impact was reasonably favorable for mortgage rates with the bond market ending virtually unaltered. The day concluded with the average mortgage lending rates being slightly lower than the previous day.

“Projecting the Future of FHA: A Loss of $7 Billion and the Potential Impact on Reverse Mortgages”

The Congressional Budget Office raises an alarm that the Federal Housing Administration is at risk of a multi-billion dollar deficit come 2024. Furthermore, delays in legislative actions could potentially lead to mandated budget cuts.

“Former Citizens Bank Executive Joins Pennymac TPO: A Strategic Move in Mortgage Lending Industry”

Pennymac has announced Kristy Dickey as the newest FVP of TPO sales. Furthermore, the company has boosted its team with the addition of five senior account executives, who were previously part of Citizens until it made the decision to withdraw from its wholesale channel.

“Revolutionizing Homeownership: Innovations and Updates in Rocket Pro TPO Mortgage Products”

The expansion of the wholesale division of Rocket Mortgage now includes an enlargened ONE+ program, in addition to incorporating Fannie Mae HomeReady and Freddie Mac Home Possible loans into their range of services.

“Insights into the Mortgage Backed Security Market Dynamics: An Overview of January 5, 2024”

The week concluded with contrasting performances from the jobs report and the ISM Services data. While the former created some disruptions, the latter managed to offset them, suggesting that the vibe is more nuanced than it appears.

Could it be that the ISM Services data wielded more influence over market movements and volumes than the jobs report did? Surprisingly, the answer is affirmative, although there are some justifications. It’s fair to classify the jobs report as two-edged today. It surpassed predictions at surface level. Nevertheless, revisions sent the figures of preceding months downward. While the jobless rate stuck to 3.7%, a 0.3% drop in the participation rate effectively pushed the net increase to 4.0%. Hence, today’s jobs report didn’t really grab the headlines, which is apparent in the chart showing the bond market completely overturning the trade just before ISM came into play.

The weight of the ISM data was more noticeable. It turned out to be the feeblest report of the past few years in several aspects, principally concerning the employment factor. This piqued the market’s interest more than anything else, but it fell short of establishing a durable motivational source for bond bulls.

“Maximizing Your Profit: A Guide to No-Closing-Cost Refinancing”

Refinancing your mortgage under a no closing cost scheme means that the lender assumes responsibility for all initial closing costs. For the borrower, this entails having a somewhat increased interest rate on their fresh loan.

“Exploring the Future of Mortgages: Industry Insights and Predictions for 2024”

As we move beyond the customary period for sharing New Year greetings, crucial subjects such as the “ability to repay” regulations remain vital and memorable for mortgage lenders and vendors. Brian Levy, a legal expert and author for Mortgage Musing blog, recently provided a discourse on the significance of the Dodd Frank Act’s Ability to Repay Rule. This rule is designed to protect both lenders and borrowers from triggering a reoccurrence of the 2008 housing market crash. Additionally, Levy elaborated on the CFPB’s latest enforcement action against Colony Ridge, which focused on fair lending practices, violation of the LEP language exploitation, and the Interstate Land Sales and Full Disclosure Act of 1968.

At present, approximately 4-6,000 lenders are engaged in HMDA-related paperwork. For timely discussions and strategic insights in the mortgage industry, consider tuning into the STRATMOR Group’s sponsored weekly podcast.

Simultaneously, broker and lender service providers, programs, and software are encouraging a strong start to the year. Rocket Pro TPO is inviting clients for IGNITE Live hosted by EVP, Mike Fawaz on January 8th at 4pm ET. Key announcements and insights on new products and technologies will be presented. They also announced an upgrade to their ONE+ by Rocket Mortgage product, which now includes Freddie Mac’s LPA. This could result in a 16 percent increase in client eligibility, with the lender further offering to cover 2 percent of the client’s purchase price as a down payment, but no less than $2,000. They’ve also introduced a new 1 percent LLPA credit for Fannie Mae HomeReady and Freddie Mac Home Possible loans of no more than $350,000, guaranteeing at least a $2,000 benefit. For further information, please communicate with your Rocket Pro TPO Account Executive.

“Understanding the Decreasing Trend in Reverse Mortgage Volume and Securities Issuance in December”

In examining the data on Home Equity Conversion Mortgage (HECM) activity for December 2023, Reverse Market Insight (RMI) aptly captioned their observations with the term “thud.” Given the demanding circumstances recorded across 2023, that year ended disappointingly in terms of HECM endorsement volume and the issuance of HECM-backed Securities (HMBS), presenting a less than ideal closure to […]