The folks here in Austin are sarcastically asking, “Who’s in your wallet?” Hopefully not Jennifer Garner or Samuel L. Jackson. The Consumer Financial Protection Bureau (CFPB… which always has our backs, right?), sued Capital One, N.A., and its parent holding company, Capital One Financial Corp., for “cheating millions of consumers out of more than $2 billion in interest.” “The CFPB alleges that Capital One promised consumers that its flagship ‘360 Savings’ account provided one of the nation’s ‘best’ and ‘highest’ interest rates, but the bank froze the interest rate at a low level while rates rose nationwide. At least IMBs and brokers don’t have to worry about running afoul of that kind of thing. Instead, many lenders here in Texas, and around the nation, are wondering who, or what, is going to bring the FHA into a new century: streamline refis that include escrows, SFR construction loans, having the monthly MI drop if the LTV drops to 75 percent (or after 7.5 years), and answering the question, “If loan quality is higher now than in 2008, why are the LLPAs the same and not diminished?” (Today’s podcast can be found here and this week’s is sponsored by Calque. White-labeled buy-before-you-sell solutions powered by Calque help you increase purchase volume and increase realtor business by helping them differentiate with a better process. With coverage in the 48 contiguous states, what are you waiting for? Hear an interview with Calque’s Michael Bremer and Ruoff’s Clint Morgan on vendor management, product expansion, and what tech offerings to look forward to this year.)

Los Angeles already had a housing affordability crisis before devastating wildfires burned entire neighborhoods to the ground. The disaster is making it worse.

The Federal Housing Administration mortgagee letter finalizes a draft put out for comment in November on the inclusion of rental payments from a boarder.

The finalized rule adds flexibility to the capital rules applied to the Federal Home Loan Banks to help them extend credit to their members.

Financial profiles of borrowers in the coastal areas where insurance coverage is required vary significantly from at-risk homeowners inland, CFPB’s analysis found.

Rocket Companies has unveiled a refreshed logo and announced plans to rename some of its businesses, hinting at more updates set to be revealed on February 9.

Mortgage rates officially hit the highest levels since May 2024 yesterday, even though the average was almost imperceptibly higher than last Friday’s.  We saw a similarly small move today, but in the opposite direction. In other words, the average rate moved lower by an amount that won’t even have an impact on many of yesterday’s rate quotes. As always, keep in mind that our rate index is an average of multiple lenders and on days with very small changes, some lenders can be noticeably better or worse compared to the previous day. This morning’s economic data featured the Producer Price Index (PPI)–a report that measures inflation at the wholesale level.  It came in at lower levels than expected.  That would normally be good for rates, but it didn’t have much of an impact today.  Tomorrow’s inflation report–the Consumer Price Index (CPI)–is in a different league. If it undershoots forecasts by the same margin, rates would almost certainly move lower.  Conversely, rates would almost certainly rise if inflation overshoots forecasts. There’s no guarantee of rate-friendly data tomorrow simply because today’s inflation report was lower than expected. CPI frequently departs from PPI on any given month, even though the two tend to do the same things over longer time horizons.

Broad, Negative Momentum is Masking Normal Market Movers

Tuesday featured a much weaker PPI report that failed to inspire any lasting rally in the bond market. While there were a few ways to reconcile that specific turn of events by examining the internal components of the data, it’s also true that bond market momentum has been broadly negative recently.  At times like this, data has to work harder if it wants to push rates lower.  It can even seem like rates move higher whether the data is good or bad. Today’s recap video includes an in-depth assessment of this phenomenon. Long story short, things are still mostly logical, as long as we’re considering all the pieces on the board.

Econ Data / Events

Core PPI M/M

0.0 vs 0.3 f’cast, 0.2 prev

Core PPI Y/Y

3.5 vs 3.8 f’cast, 3.5 prev

Market Movement Recap

08:42 AM initial gains after PPI, but mostly reversed now.  MBS unchanged and 10yr down less than half a bp at 4.781

12:15 PM MBS unchanged and 10yr up 1.5bps at 4.798

03:04 PM nearly unchanged at the close.  MBS up 1 tick (.03) and 10yr unchanged at 4.783

The Producer Price Index (PPI) may not be nearly as much of a market mover as the Consumer Price Index (CPI), but it has proven capable of producing logical reactions in the past when it’s come in much higher or lower than expected. Today’s installment was much lower than expected–something that should be good for bonds. While there was a brief, initial rally, it was quickly erased and bonds returned to relatively unchanged levels.

The easiest explanation is that the market is preoccupied with CPI and there’s limited directional correlation on any given individual month.

The deeper explanation is that the PPI components that flow through to consumer inflation didn’t miss the market as much as the headline suggested.

“The older I get, the earlier it gets late.” It was early to bed last night for me, early to rise, since today we are heading to Austin, Texas for the Sales Rally at University Federal Credit Union. I am sure that a conversation topic will be the capital markets and why mortgage rates are doing what they’re doing (which will also be discussed on today’s Capital Markets Wrap at 3PM ET, presented by Polly). Another will be the regulatory environment in Trump II. How might Elon Musk, with Tesla’s headquarters near Austin, handle rules and regulations and approval processes? Some Musk watchers point to the tunnel his company is building under Las Vegas as an example. Time will tell. (Today’s podcast can be found here after 5:30AM PT and this week’s is sponsored by Calque. White-labeled buy-before-you-sell solutions powered by Calque help you increase purchase volume and increase realtor business by helping them differentiate with a better process. With coverage in the 48 contiguous states, what are you waiting for? Hear a chat between Robbie and me on what good originators are focusing on and what the beginning of conference season means for our respective travel schedules.) Lender and Broker Services, Software, and Products “Class Valuation, the nation’s largest AMC, announces the launch of its New Construction Expert Appraiser Panel. New construction appraisals require specialized expertise and precision, and this expert panel was created to meet those unique demands. Every appraiser on this panel has undergone a rigorous testing process and has demonstrated experience and expertise in new construction valuations. With ongoing training and a commitment to the latest standards, Class Valuation provides reliable results you can trust. With a proven track record and industry-leading credentials, Class Valuation’s New Construction Expert Appraiser Panel offers a comprehensive solution for builders and lenders. A nationwide network of certified appraisers, combined with robust quality assurance and 24/7 support, ensures timely valuations while mitigating risks and delays. Learn more about Class Valuation’s New Construction Expert Appraiser Panel and why the nation’s leading home builders and new construction lenders are using Class Valuation for their valuations.”