Rocket said the Redfin deal is part of a purchase mortgage strategy, but originating and retaining residential mortgages in portfolio is the real endgame writes the chairman of Whalen Global Advisors.

The stopgap funding bill paves the way for Republican lawmakers to pivot to signature border and tax bills they seek to pass in the coming months.

Mixed Reaction to Retail Sales Makes For a Boring Monday

Despite coming in much weaker than expected, Retail Sales (the day’s only big-ticket market mover) didn’t provide much help for bonds. The catch was that the key internal component (the control group, aka retail sales excluding autos/gas/building materials) was stronger than expected. Bonds lost ground on the news, but began to rally about 30 minutes later. The net effect was essentially a restoration of Friday’s average mid-day trading levels, thus making for a ho-hum Monday.  

Econ Data / Events

Retail Sales

0.2 vs 0.6 f’cast, -0.9 prev

Retail Sales “control group”

1.0 vs 0.3 f’cast

NY Fed Manufacturing

-20 vs -0.75 f’cast, 5.7 prev

Business Inventories

0.3 vs 0.3 f’cast, -0.2 prev

NAHB Builder Confidence

39 vs 42 f’cast, 42 prev

Market Movement Recap

08:35 AM Weaker after retail sales, but a hair stronger on the day.  MBS up 1 tick (.03) and 10yr down 0.2bps at 4.311.

12:28 PM Nice recovery for reasons unknown (some big trades at 9:20am, but that’s about it). MBS up 5 ticks (.16) and 10yr down 4.8bps at 4.265

03:31 PM Losing some ground in the PM hours, but still slightly stronger.  MBS up 2 ticks (.06) and 10yr down 0.6bps at 4.307

“My friend showed me a photo of a famous meteor crater in Arizona. It’s amazing how close it landed to the Visitor’s Center!” Here in Tucson, the weather is fine but “tornado season” has hit with a vengeance in other parts of the United States. Anyone who thinks that the severity of storms is declining should reconsider. (Catastrophe and disaster updates below.) For some good news, call it “kicking the can down the road” or a “budget plan,” but Congress passed the budget appropriations bill, and it was signed by President Trump over the weekend. In six months we’ll get to watch it all over again. But for lenders, kicking the can down the road is not an option. Our MBA presented the IMB profit figures: tepid at best, and some would say indicate that there will be no easy sledding ahead. “Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a pre-tax net loss of $40 on each loan they originated in the fourth quarter of 2024, a decrease from the reported net profit of $701 per loan in the third quarter of 2024… (lots of stats below). (Today’s podcast can be found here and this week’s is sponsored by CoreLogic. Whether it’s using cash to purchase a home, debt consolidation, or a straight cash-out refinance, CoreLogic’s Precision Marketing’s data-driven insights pinpoint your best opportunities to retain and recapture your clients. Today’s has an interview with CMG and WIMIN’s Sharon Barney on experiences, challenges, and successes of women in the mortgage industry.)

After improving modestly in the overnight session, bonds contended with the Retail Sales data at 8:30am ET.  At first glance, it should have been helpful, given that the headline came in at 0.2 versus a forecast of 0.6, but the closely watched control group (which excludes cars, fuel, and building materials) was much higher than expected. With that, bonds briefly the overnight gains. They’ve been bouncing back ever since. Some of that bounce has to do with a glut of bond buying 10 minutes before the 9:30am NYSE open.  The rest may be down to the inability of stocks to sustain a rally in early trading.

Mortgage rates are based on movement in the bond market, and the bond market is closed for most of the weekend.  As such, one might assume that Monday’s mortgage rates would always be right in line with Friday’s.  But this is definitely not the case for two reasons: 1. The bond market may not officially open in the U.S. until 8:20am ET, but U.S. bonds begin to trade late Sunday night.   2. Mortgage lenders don’t set their rates for the day right when bonds start trading.  The average lender waits until around 10-11am ET. Because of this, there can be quite a bit of movement in bonds before lenders set rates for the day.  The only time we’d see Monday’s rates hold perfectly in line with Friday’s are occasions like today where the bond market was in similar territory to Friday’s levels in the 10-11am ET hour this morning. The sideways drift means mortgage rates continue operating in a narrow range near the lowest levels since mid-October.

An executive order issued late Friday cut the Treasury Department Community Development Financial Institution Fund and other federal programs to their legal minimum.

The provisionally approved rate hike would provide financial relief to State Farm’s California subsidiary, which has said it needs to shore up confidence with solvency regulators and ratings agencies.

A federal judge in Maryland ruled against the City of Baltimore’s attempt to block cuts to Consumer Financial Protection Bureau program funding on procedural grounds.

After two consecutive quarters of profits, independent mortgage bankers lost money in the most recent period, for the ninth time in the last three years.