Here
is something a little unusual. With an eye on possible Christmas presents, for
something non-mortgage related here is a gun that shoots a
small amount of table salt to kill house flies - and with a five foot range!
Returning to something more usual, this morning we learned that mortgage
applications rose 1.4 percent in the week ended August 15. The MBA reported
that refis were up 3 percent (and account for 55% of all apps) and purchase
apps fell 0.4 percent.
On
the servicing side of things (most lenders want to service their loans, but not
all can actually afford to do so) the CFPB released a bulletin outlining
expectations for mortgage servicers that transfer loans; bulletin includes
information on how mortgage servicers should pay attention to new rules
protecting consumers applying for loss mitigation help or trial modifications.
The updated bulletin, which can be accessed here, replaces the CFPB's
February 2013 guidance. The CFPB explains that its "concern in this area
remains heightened due to the continuing high volume of servicing
transfers."
Most view
this updated bulletin as a more detailed supervisory tool rather than a
departure from the CFPB's previous stance (in place since January) on mortgage
servicing transfers. For example, the original bulletin included seven general
information requests for certain servicers planning transfers and this bulletin
includes the same list except it added the following request: "A detailed
description of how the servicer will ensure that it is complying with the
applicable new servicing rule provisions on transfers." The CFPB's
approval is not necessary for a mortgage servicing transfer unless there is an
overriding agreement (e.g. consent order) governing the company. Given the
wave of transfers and the corresponding increase in headline pressure, it is
not surprising to see continued regulatory headwinds impacting specialty
servicers which are likely to further increase the costs associated with growth
via acquisitions.
(Speaking of
transferring servicing, MSR tapes? I've seen a few. MountainView Servicing
Group has had two offerings, the first; a $1.6B FNMA/GNMA servicing
portfolio. The package was 94% fixed rate, 94% retail, WaFICO 740, WaLTV 80%,
WAC of 3.92%, $225k average loan size, with New York (30.9%), California (12.1
%), New Jersey (11.5%), and Virginia (5.6%); the second a $348M FHLMC/FNMA
portfolio with 99% fixed rate/first lien, WaFICO 755, WaLTV 75%, WAC of 4.18%,
$234k average loan size, with Colorado (61%), California (15%), Arizona (6.5%),
and Illinois (6%); Interactive Mortgage Advisors' offerings included a
$3.17B GNMA package with 3.67% Wtd Avg Note Rate, a 12 month Average
Escrow Balances of 1.07% of UPB, sub-serviced by nationally known company, with
DLQs (not including FC/BK) of 5.37%.)
But the CFPB
impacts all areas of residential lending, not merely servicing, and recently
released its annual CARD Act, HOEPA, and QM
adjustments, as shown in this Ballard Spahr release. "The
CFPB has published a final rule regarding various annual adjustments it is
required to make under provisions of Regulation Z (TILA) that implement the
CARD Act, HOEPA, and the ability to repay/qualified mortgage provisions of
Dodd-Frank. The adjustments made by the final rule are effective January
1, 2015. The CARD Act requires the CFPB to calculate annual adjustments of (1)
the minimum interest charge threshold that triggers disclosure of the minimum
interest charge in credit card applications, solicitations and account opening
disclosures, and (2) the fee thresholds for the penalty fees safe harbor.
The calculation did not result in a change to the current $1.00 minimum
interest charge threshold. However, in the final rule, the CFPB increased
the current penalty fee safe harbor of $26 for a first late payment and $37 for
a subsequent violation within the following six months to, respectively, $27
and $38.
"HOEPA
requires the CFPB to annually adjust the total loan amount threshold that
determines whether a transaction is a high cost mortgage when the points and
fees are either 5 percent or 8 percent of such amount. In the final rule,
the CFPB increased the current dollar thresholds from, respectively, $20,000 to
$20,391, and $1,000 to $1,020. Pursuant to its ability to repay/QM rule, the
CFPB must annually adjust the points and fees limits that a loan must not
exceed to satisfy the requirements for a QM. The CFPB must also annually
adjust the related loan amount limits. In the final rule, the CFPB
increased these limits to the following: For a loan amount greater than or
equal to $101,953 (currently $100,000), points and fees may not exceed 3
percent of the total loan amount. For a loan amount greater than or equal to
$61,172 (currently $60,000) but less than $101,953 (currently $100,000), points
and fees may not exceed $3,059 (currently $3,000). For a loan amount greater
than or equal to $20,391 (currently $20,000) but less than $61,172 (currently
$60,000), points and fees may not exceed 5 percent of the total loan amount.
For a loan amount greater than or equal to $12,744 (currently $12,500) but less
than $20,391 (currently $20,000), points and fees may not exceed $1,020
(currently $1,000). For a loan amount less than $12,744 (currently $12,500),
points and fees may not exceed 8 percent of the total loan amount." But
hey, don't take Ballard Spahr's word for it - read all about it in the Federal Register.
The
volatility that we saw last week is dissipating from the market. (Let's see
what happens in October when the Fed isn't engaged in QE3!) Yesterday we saw a
combination of lack of market-moving news from overseas (Ukraine and Israel)
and good news here stateside. Housing Starts rose almost 16% in July to their
highest level in eight months, and Building Permits increased by 8.1% to a 1.05
million pace, the fastest rate of building applications for single-family
dwellings since November. No wonder builders are optimistic! From a
year ago, home construction was up 21.7%. Starts on single-family
homes, which reflect the bulk of the market, climbed 8.3% in July from
June. Construction of multifamily units-mostly condominiums and
apartments--rose 33% to a pace of 423,000 units, the highest level since
January 2006. We also were reminded about the lack of inflation, in spite of
the best forecasts by "experts". The Consumer Price Index was
+.1% in July, the smallest gain since February. QE has not caused the
widespread inflation many thought - yet.
Originators keep producing, and
the Fed keeps buying. The New York Fed's daily MBS operations amounted to
$1.591 billion total, or 92.2% of the scheduled $1.725 billion slated for
purchase. But rates edged higher, basically because they wanted to, and 30-yr
agency MBS prices closed lower/worse about .125.
The economic calendar at
midweek features the Fed minutes from the July 29-30th meeting. These come out
at 2PM EST, 8AM HST, as the market will no doubt be scrounging for any
information and tidbits beforehand. In the early going this morning the
10-yr yield is slightly higher at 2.41% and agency MBS prices are worse a tad.
Executive
Rate Market Report:
Generally
quiet start early this morning but no improvement in the MBS or treasury
markets even with US stock indexes aiming at a lower opening at 9:30. At 9:00
the 10 yr -2/32 2.41%, 30 yr MBS prices -5 bps frm yesterday’s closes. At 9:30
the DJIA opened -15, NASDAQ -7, S&P -3; 10 yr unchanged at 2.41% while 30
yr MBS prices -6 bps in price.
Mortgage
applications increased 1.4% from one week earlier, according to data from the Mortgage
Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week
ending August 15, 2014. The Refinance Index increased 3% from the previous
week. The seasonally adjusted Purchase Index decreased 0.4% from one week
earlier. The unadjusted Purchase Index decreased 2 percent compared with the
previous week and was 11 percent lower than the same week one year ago. The refinance
share of mortgage activity increased to 55% of total applications from 54% the
previous week. The adjustable-rate mortgage (ARM) share of activity increased
to 7.8% of total applications. The average contract interest rate for 30-year
fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased
to 4.29% from 4.35%, with points increasing to 0.26 from 0.22 (including the
origination fee) for 80% loans. The average contract interest rate for 30-year
fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased
to 4.18% from 4.24%, with points increasing to 0.23 from 0.19 (including the
origination fee) for 80% loans. The average contract interest rate for 30-year
fixed-rate mortgages backed by the FHA decreased to 3.99% from 4.04%, while
points remained unchanged at 0.03 (including the origination fee) for 80%
loans. The average contract interest rate for 15-year fixed-rate mortgages
decreased to 3.44% from 3.48%, while points remained unchanged at 0.30
(including the origination fee) for 80% loans. The average contract interest
rate for 5/1 ARMs decreased to 3.10% from 3.24%, with points decreasing to 0.44
from 0.45 (including the origination fee) for 80% loans.
Yesterday
and Monday we got better housing data with
the NAHB index gaining 2 points and July housing starts and permits twice as
strong as forecasts. Starts up 15.7%, permits +8.1%. The better data set off a
run of experts declaring the housing market getting back on track with the
outlook much better. The MBA data this morning didn’t co-operate with those
more positive reports on purchase apps, down 0.4%. The re-finance sector was
widely declared as dead by a few housing experts, saying all re-finances have
now been achieved; this morning MBA data showed re-finances increased 3.0% frm
the previous week.
This
afternoon (2:00 pm) the minutes of the 7/30 FOMC meeting will be released. Always something to chew on with more
specifics than we get when the meeting concludes with the policy statement.
Likely the minutes will get a little ink, but with Yellen speaking Friday at
Jackson Hole, the minutes are somewhat dated given the title of her speech is
“The Labor Market”, following her remarks Mario Draghi will also speak on the
EU economy.
Not likely
MBS prices will improve today with treasuries still unwinding huge long
positions. No
geo-political reasons for short term traders to buy now, the issues are still
out there but this week there has been no fearful news from Ukraine, and Putin
is scheduled to meet next week with Ukraine leaders and EU countries. Some
relaxation occurring now in Ukraine, Israel and Iraq; nothing really has
changed, just not worsening. The fear factor into treasuries has ebbed this
week. The economy is back in the headlights. As we noted last Friday, the bond
market had become overbought basis the near term; since then prices have
slipped and interest rates have Increased a little; the 10 yield up 7 bps frm
Friday’s close while MBS prices -36 bps since Friday’s close. Trading volume though
is the lowest we have seen this year in both stocks and bonds ahead of Jackson
Hole on Friday. The wider outlook is still bullish, a close over 2.48% will
change the pattern and turn the 10 bearish frm a technical perspective.
WE SUGGEST
KEEPING LOCKED THROUGH THE DAY. POTENTIAL FOR VOLATILITY IS HIGH, NOT MUCH
ACTUAL TRADING IN STOCKS OR BONDS THIS WEEK.
PRICES @
10:00 AM
10 yr
note:-5/32 (15 bp) 2.42% +1 bp
5 yr note:
-2/32 (6 bp) 1.59% +1 bp
2 Yr note:
-1/32 (3 bp) 0.44% +1 bp
30 yr bond:
-12/32 (37 bp) 3.23% +2 bp
Libor Rates:
1 mo 0.155%; 3 mo 0.234%; 6 mo 0.328%; 1 yr 0.552%
30 yr FNMA
3.5 Sept: @9:30 102.42 -6 bp (-30 bp frm 9:30 yesterday) 4.0 coupon 105.58 -3
bp (-27 bp frm 9:30 yesterday)
15 yr FNMA
3.0: @9:30 103.47 +1 bp (-16 bp frm 9:30 yesterday)
30 yr GNMA
3.5 Sept: @9:30 103.52 -11 bp (-24 bp frm 9:30 yesterday) 4.0 coupon 106.27 -3
bp (-23 bp frm 9:30 yesterday)
Dollar/Yen:
103.33 +0.41 yen
Dollar/Euro:
$1.3287 -$0.0033
Gold:
$1297.30 +$0.60
Crude Oil:
$95.76 +$1.28
DJIA:
16,916.93 -2.66
NASDAQ:
4520.33 -7.18
S&P 500:
1980.58 -1.02
No comments:
Post a Comment