With the whirlwind of Trump Administration news (Jonathan McKernan to lead the CFPB, playing hardball in Gaza, ending penny production, pardoning former Illinois Gov. Rod Blagojevich, freeing Mark Fogel, firing the head of government ethics, beginning the gargantuan task of cutting government spending, trying to rename of the Gulf of Mexico, ramping up deportations, to name a few), it is good to keep an eye on residential lending. I received this note. “Rob, stick to mortgages and keep politics and regulatory changes out of your Commentary.” Unfortunately, they are all intertwined, and lenders are keenly aware of what helps or hurts borrowers. (The MBA has assured us that the CFPB’s APOR will be released Thursday.) For example, the new HUD Secretary Scott Turner says he plans to quickly launch a review to root out inefficiencies at the agency, and that Fannie & Freddie privatization, cost-cutting, and a new name are his priorities. For lenders, especially independent mortgage bankers attending the TMBA conference, current topics include the Community Reinvestment Act for IMBs, restrictions on foreign ownership of U.S. soil, state adoption of the CSBS model capital, liquidity, and governance framework, and watching to see how the state by state impact of the NAR settlement plays out. (Today’s podcast can be found here and this week’s is sponsored by CoreLogic. Originators who leverage their Marketing Solutions as part of their customer retention practices have seen their pipelines increase by up to 4 times when compared to traditional lead generation methods. Hear an interview with Mortgage Advisory Partners’ Brian Hale on the recapitalization of Fannie and Freddie.)

We know that bonds take a majority of their economic data cues from two reports: NFP and CPI. We knew that today’s CPI was critically important in commenting on the potential “pause” of inflation’s descent back toward target levels. We also suspected, for a variety of reasons, that CPI could be an even bigger market mover than the jobs report. Unfortunately, it was.
Economists expected month over month core inflation to come in at 0.3%.  As it happened, it nearly came in at 0.5% (the unrounded number was 0.446%).  Used autos, housing, and medical services all played large roles in the surprise. The results keep the annual rate of change stalled out above 3%.

The bond market response was obvious, to say the least. 

Lastly, on the topic of CPI vs the jobs report, the torch has indeed been passed, although either report could cause a bigger reaction than the other if it were far enough from forecast.  That just happened to be CPI this time.

Plaintiffs alleging the lender manipulated home valuations ten years prior argued the interpretation of the rule cited in determining the case’s standing was a stretch.

Joseph Otting, who is leading Flagstar’s turnaround, said potential buyers may be interested in acquiring the regional bank once it gets past certain challenges.

Neo Home Loans, the business at the center of the trade secrets suit, has always maintained its independence in its lender partnerships, its co-creator claims.

Lenders increased offerings in jumbo and non-QM segments as the industry focuses on customers with strong credit, the Mortgage Bankers Association said.

The MBA disclosed the year-end rankings of income-producing mortgage servicers at its yearly conference for this part of the industry.

What to Expect From Wednesday’s Inflation Data

Bonds lost ground overnight in sympathy with European bonds. The domestic session was almost perfectly flat and entirely uneventful. Powell’s testimony was a complete non-event with no new concepts for anyone who’s tuned in to the past few appearances. Wednesday brings the critical CPI data. There’s plenty of anxiety over this one as early year inflation data is notoriously more difficult to forecast. That said, forecasts always do a perfect job of accounting for changes in annual CPI that result from older data falling out of the calculation (because that’s just simple math, after all). In addition to forecasting difficulty, markets are also eager for clarity on whether inflation continues stalling at prevailing levels or begins to make renewed progress toward the 2% target. Needle-threading is always possible, but any major indication in one direction or the other will likely give rates a big push in the logical direction.

Market Movement Recap

11:34 AM Weaker overnight and mostly flat through Powell testimony.  MBS down a quarter point and 10yr up 3.7bps at 4.531

01:23 PM No reaction to 3yr auction and little-changed from last update.  MBS down just over a quarter point and 10yr up 4.1bps at 4.534

03:04 PM Modest attempt to rally into 2pm, but back to same levels now.  MBS down a quarter point and 10yr up 4.4bps at 4.537

Any recap of financial news headlines will likely mention Fed Chair Powell’s congressional testimony today.  Some efforts could even be made to link today’s rate movement to various Powell comments, but that’s not what actually happened. The real story is that bonds (which dictate mortgage rates) lost ground moderately and steadily overnight, largely due to the interconnectedness of global financial markets and the fact that European bonds were having an even worse day.  By the time the sun was up in the U.S., bonds were basically done moving for the day.  None of Fed Chair Powell’s comments made any difference, nor did he say anything we haven’t already heard in his past few appearances. When bonds are weaker, rates move higher, all other things being equal. As such, it’s no surprise to see a modest increase in average mortgage rates, but not one that’s big enough to lose much sleep over. Things could move higher or lower in a much bigger way tomorrow following the release of the Consumer Price Index (CPI) data at 8:30am ET.  As is always the case with big economic reports, there’s no way to know if the reactions will be good or bad.  Additionally, there’s always some chance that the data “threads the needle” and matches expectations closely enough that we see fairly minimal movement by the end of the day. All we can do on the eve of such reports is to call attention to the  potential for volatility.

Hah! Just kidding… But did you think, “Oh no!” or “Yippee!” when you saw that subject line? The ups and downs of the Consumer Finance Protection Bureau, an agency that touches mortgage debt, credit cards, credit bureaus, and cash substitutes, is all the talk at the TMBA in Houston. One industry vet wrote me saying, “As much as we all complain about regulation through enforcement, at least there was an ‘adult in the room’ telling us to eat our vegetables. As a colleague of mine said, ‘I have seen this movie before, the popcorn is great but the ending sucks.’” Today at noon, PT, 3PM ET, Capital Markets Wrap, presented by Polly, will be covering the turmoil at the CFPB, the impact on TRID/ATR enforcement, tariffs and inflation, and the misconception that regulations will disappear without legislative change. Don’t forget that OMB Director Russell Vought was hit with two union lawsuits after he issued directives freezing much of the CFPB work and work tasks. Is reading attorney Brian Levy’s Mortgage Musings a work task? Folks at the CFPB have to figure that out, but others can decide for themselves whether to read Levy’s latest about the CFPB shutdown. (Click here to view prior editions and to subscribe for free.) But wait… there’s more! A U.S. judge on Monday ordered the Trump administration to fully comply with a previous order lifting its broad freeze on federal spending: another court order. (Today’s podcast can be found here and this week’s is sponsored by CoreLogic. Originators who leverage their Marketing Solutions as part of their customer retention practices have seen their pipelines increase by up to 4 times when compared to traditional lead generation methods. Hear an interview with Logan Finance’s Nick Pabarcus on the 2025 outlook for non-QM, how those loans are priced, how the anticipated rate environment will impact non-QM business, and the future of Non-QM products.)