After Nexpoint refused to vote via its proxies at the UDF IV annual meeting, the existing directors supporting the sale to Ready Capital were declared elected.

Now that the legislation has been taken out of a budget bill, the Community Home Lenders of America argues for a regulatory approach to rein in trigger leads.

Eastern Union put the blame on the other company Fannie Mae suspended, Sevenstone Capital, which was by former employees who left over four years prior.

Mortgage lenders can now submit loan information through VA’s new management system, replacing the need for email submissions.

The Federal Housing Administration is giving servicers more leeway to automate borrower contact but it’s also requiring them to reach further afield.

Mortgage rates were having a pretty decent day at first.  The bond market was only slightly weaker overnight (implies some upward pressure on rates), but quickly improved after the Consumer Price Index (CPI) data at 8:30am ET.  Notably, CPI was right in line with forecasts–something that often results in lower conviction and volatility for interest rates.  We only tend to see big reactions to ‘as-expected’ numbers on the most closely watched reports.  In other words, today’s market reaction confirms just how closely CPI is being watched. 8:30am ET is early enough in the day that it allows bonds time to improve before the earliest mortgage lenders release their rate offerings for the day.  As such, the average lender was 0.03% lower than yesterday when morning rates came out.   The good times only lasted about an hour.  Whether it was a reaction to the Bank of Canada’s policy announcement (a thing that actually impacted the U.S. bond market today) or strategic repositioning among bond traders ahead of next week’s Fed announcement, bonds lost more than enough ground for the average mortgage lender to reissue rates at higher levels in the afternoon.  When the smoke cleared, today’s rates ended up being 0.02% higher than yesterday as opposed to 0.03% lower.  This isn’t a big swing in the bigger picture, but together with the previous two days, rates are now up 0.12% so far this week.

Why Bonds Sold Off After a Decent AM Rally

It was a day for “explanations” in the bond market with the morning rally needing to be explained in the context of CPI data that came in right on the screws and a subsequent sell-off that also seemed to happen for no apparent reason.  In fact, selling continued even after the well-received 10yr Treasury auction. To some extent, the AM selling can be tied to the Bank of Canada announcement, which was universally panned as ultra-hawkish (despite a 0.50% rate cut). The continued selling is more mysterious and can only really be explained with curve trading and repositioning following the AM CPI data. The big clue: Fed Funds Futures for next week rallied and never sold off.  But the farther one moves into the future, the bigger the reversal became. Bottom line, traders sold long term bonds to buy the shortest term debt and the buying hasn’t even necessarily taken place yet.

Econ Data / Events

Core M/M CPI

0.3 vs 0.3 f’cast, 0.3 prev
unrounded, 0.308

Core  Y/Y CPI

3.3 vs 3.3 f’cast, 3.3 prev

Shelter CPI M/M

0.336 vs .382 prev

Market Movement Recap

09:04 AM Weaker overnight and stronger after CPI.  MBS up 7 ticks (.22) and 10yr down 0.5bps at 4.216.

10:30 AM Giving up gains.  MBS up only 3 ticks (.09) and 10yr up 1.8bps at 4.239

01:14 PM Strong 10yr auction, but being traded in more of a “no whammies” kind of way.  10yr still up 2.3bps at 4.243 and MBS unchanged.

02:07 PM New lows with MBS down an eighth and 10yr up 5.4bps at 4.275

The Mortgage Bankers Association is out with the latest survey of mortgage applications and refinance activity led the charge this week.  In fact, purchase activity declined a bit and refis saw their best weekly gains since September. The following chart shows the week over week change in the refi index: At first glance, it would be easy to assume that this is due to some sort of distortion in the week after Thanksgiving, but if that was the case, we would have seen a similar outlier in the other direction last week.  It’s more likely that the sharp decline in rates is the x factor. Notably, MBA’s weekly survey data only shows rates declining from 6.69 to 6.67, but MND’s daily rates tell a different story with a drop from 6.88 to 6.68.  That 0.20% decline would certainly be enough to account for the jump in activity, especially in a market where the outright activity is so historically low. Other highlights from this week’s MBA survey:
Refi share of total apps increased to 46.8% from 38.7%
Share of VA applications increased to 16.3% from 13.6%
5/1 ARM rates dropped to 5.81 from 6.24

Today’s headline and core CPI readings were both perfectly in line with forecasts.  After the data came out, bonds rallied and Fed Funds Futures moved to price in a near certainty of a Fed rate cut next week.  To make matters more confusing, monthly core CPI was 0.31% before being rounded to 0.3%, so it’s not as if a low unrounded number explains the rally.  Instead, we have to turn toward housing inflation–the biggest problem child for this data series–and consider the substantial progress in this report and in general.

Owners’ Equivalent Rent (OER) is especially notable when we consider the broader context (along with the fact that it’s the single largest individual component of CPI).  If there is no other reason for this morning’s paradoxical move, it is the implication of the following chart.

Despite the initial gains, bonds have turned around and moved back in line with pre-data levels.  Blame Canada?  The Bank of Canada (BOC) released its latest policy statement this morning and despite a 50bp rate cut, the rest of the announcement was interpreted as hawkish by bond traders.  The spike in CA yields corresponds with the reversal in US rates, at the very least, but US traders may also be interested in preparing for this afternoon’s 10yr Treasury auction. 

“I love Christmas lights! They remind me of the people who voted for (insert name of politician). They all hang together, half of them don’t work, and the ones that do aren’t all that bright.” There are, however, bright people who read this Commentary. In response to yesterday’s opening about what your plan should be upon finding someone lurking behind your shower curtain, Karen F., the wife of a world-famous economist, wrote, saying, “You have now reclaimed the element of surprise and can meet your attacker face to face. It’s best to confront your intruder with some household object that can easily be weaponized.” Speaking of defending property, half of home sellers say they’d be more likely to use an agent on their next home sale if they didn’t have to pay the buyer’s portion of the commission fee. Funny, because 47 percent of sellers think their home would have sold for more money if they’d used an agent. In the end, 80 percent of sellers who did not use an agent have regrets about their home sale, and 54 percent wish they had used a real estate agent. (Today’s podcast can be found here and this week’s podcasts are sponsored by Bundle, the attorney-prepared legal documents company that is dedicated to the real estate, mortgage, and title industry. Save 20 percent all week with the code “Chrisman.” Hear an interview with Xactus’ Shelley Leonard on what lenders should be thinking about in 2025 to push the edge of innovation and advance the modern mortgage.) Lender and Broker Software, Services, and Products