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There are some things in life you can’t avoid, but only two things you can’t avoid paying for: taxes and interest payments. In Part 1 of this series, we looked … Continue Reading Death, Taxes, and Interest Payments: Part 2

6/28/2022 11:42:24 AM

“Nothing in this world is certain except death and taxes.” Benjamin Franklin said this in 1789, and it’s just as true now as it was then. There’s just one thing … Continue Reading Death, Taxes, and Interest Payments: Part 1

6/21/2022 8:21:55 AM

For better or worse, Canadians have a lot of trust. In each other, in their government, in the places they eat, in the places they shop – and apparently in … Continue Reading Beware of “Friendly” Calls From Your Bank

6/9/2022 8:05:53 AM

You’ve probably seen the headlines: the Bank of Canada has raised their key interest rate. Yet again. And this hike isn’t any less forgiving than the last one. In another … Continue Reading Rates Are On the Up and Up… But For How Much Longer?

6/3/2022 7:51:42 AM

Just a few months ago, all anyone could talk about was the red hot housing market. Sky high property values. Historically low interest rates. It’s amazing how quickly the conversation … Continue Reading The Tide Turns for the Canadian Housing Market

5/6/2022 8:16:39 AM

The federal government dropped the 2022 budget a couple of weeks ago. Immediately after, articles came pouring out about how it will impact different people, different businesses, different industries. A … Continue Reading The Federal Budget: Here Are the Parts That Could Affect You

4/22/2022 8:22:31 AM

Yesterday was Wednesday the 13th – but for some, it might have felt like Friday the 13th. That’s because the Bank of Canada announced they’re upping their rate by a … Continue Reading Bank of Canada Raises Benchmark Interest Rate

4/14/2022 7:52:59 AM

Mortgage News Daily

It's one of the perennial "yeah buts" of the two largest and most widely-cited home price indices: there data is always about 2 months old by the time it comes out.  This is the nature of home price reporting.  It doesn't mean the data is bad or wrong--simply that it should be taken with a grain of salt given that interest rates and consumer sentiment took a decisive turn for the worse in both May and June. So if you've had your salt, here's the latest on home prices (in April) from both the FHFA and S&P Case-Shiller: FHFA Home Price Index +1.6% in April vs +1.6% in March +18.8% over 12 months in April vs +19.1% in March Case Shiller 20-City Price Index +1.8% in April vs +2.4% in March +21.2% over 12 months in April vs +21.1% in March There are a few ways to glean more timely data, but there are grains of salt here too.  The following chart shows the percentage of active listings with price drops as of last week.  It DOES NOT take into account the extent to which those homes may have been swinging for the fences in terms of list price.  It also doesn't make any comment about the actual final sales price.  It's highest and best use would be to suggest a general shift has taken place over the past 2 months (the same 2 months not counted by the big indices above) from a frothy real estate valuation landscape to "something else."  In so many ways, it remains to be seen what "something else" ultimately looks like.

6/28/2022 3:26:50 PM

You can rest assured that no animals were harmed in the making of this commentary! But the harm felt by stockholders during the last several months has not been trivial, and not only confined to lenders. As has been discussed in this Commentary, just because the open market can see their stock prices fall doesn’t mean those companies are faring any worse, or better, than non-public companies. And other companies in related industries have not fared much better. For example, Redfin (a full-service real estate brokerage that owns lender Bay Equity) hit a high of over $95 a share and hit a low a few weeks ago of $7.13. Put another way, if you had sunk your life savings of $1 million into Redfin stock in February of 2021 your life savings would stand at $75,000. Ouch. The speed and magnitude of the rate move in 2022 has hurt many, but to keep things in perspective remember that the highest interest rates were in October 1981, a whopping 18.45 percent. Fortunately, no one is talking about rates moving up that high, and in fact there is a growing school of thought that mortgage rates may have plateaued for the foreseeable future leaving LOs asking, “What kind of products can we offer clients to blunt the impact of these higher rates?” Capital markets and product departments to the rescue! (Today’s podcast is available here and this week’s is sponsored by Ignite Integration Solutions, Inc., a custom software provider that has created industry leading LOS CORE integrations in addition to a library of Encompass base tools and plug ins, and custom API development with our team of 100% on shore developers to support both Mortgage Lenders and Vendors as clients and partners.)

6/28/2022 9:59:46 AM

Last week was significantly calmer than the previous week for rates (and many other things in the financial market, for that matter).  After hitting the highest levels since 2008 on June 14th, rates lurched lower through last Thursday.  Due to idiosyncrasies in the mortgage bond market, certain scenarios saw some of the best single-day improvements in years, depending on the day. Gains gave way to losses by Thursday afternoon, and a gradual rise has followed.  The average lender isn't anywhere near as high as they were in mid-June, but neither are they as low as they were in the middle of last week.   As has been the case many times during the 2022 rate spike, there is a much higher degree of variation between lenders compared to more stable times for rates.  The average lender was only moderately higher when it comes to mortgage rate quotes today.  Notably, the bond market suggested a bigger jump.  The actual jump may have been smaller due to more conservative rate-setting strategies among mortgage lenders on Friday afternoon. Conforming conventional 30yr fixed loans are still in the high 5% range for ideal scenarios.

6/27/2022 3:12:22 PM

Bond Market Defensiveness Justified by Weak Auction Coming into the domestic session, bonds were weaker without any overly compelling justifications.  Sure, we can always gather a handful of the usual suspects and paint a picture, but it would have been just as easy to do so for an unexpected AM rally.  It wasn't until the afternoon's 5yr Treasury auction that we had objective and substantive evidence for trader defensiveness (it was very weak, even after the AM sell-off).  This may not tell us anything too specific, but in a general sense, bonds are nervous about this week's supply (Treasury auctions, etc).  Thursday's inflation data is also a safe assumption.   Econ Data / Events Durable Goods 0.7 vs 0.1 f'cast, 0.4 prev Pending Home Sales +0.7 vs -3.7 f'cast, -4.0 prev Market Movement Recap 08:38 AM Gradual selling continues overnight with AM data not helping.  10yr up 7.3 bps at 3.209 and MBS down 10 ticks (.31). 11:07 AM Decent bounce, but still slightly weaker on the day.  MBS down just over an eighth of a point and 10yr up only 4.3bps at 3.181. 01:21 PM Weakness after the 5yr Treasury auction.  MBS at new lows, down roughly 3/8ths and 10yr yields back at the highs, up more than 6bps at 3.20%.   04:02 PM Near the weakest levels at the end of the day.  MBS is a bit of a moving target due to liquidity, but generally down at least 10 ticks (.31).  10yr yields are up just under 7bps at 3.205. 

6/27/2022 3:03:28 PM

Pending Home Sales hit their most recent peak in October according to data reported in November, 2021 by the National Association of Realtors (NAR).  In each of the subsequent 6 months, the NAR's Pending Home Sales Index declined until bottoming out in April at 99.2.  Apart from the first 2 months of the pandemic, that was the lowest reading since 2014. Today's report (for the month of May) finally saw the index improve.  While the gains barely registered, it was a much stronger showing than the median forecast which called for a 3.7% decline. Realtors remain cautious nonetheless. "Despite the small gain in pending sales from the prior month, the housing market is clearly undergoing a transition," said NAR Chief Economist Lawrence Yun. "Contract signings are down sizably from a year ago because of much higher mortgage rates." Yun blamed the general ongoing slump on the interest rate surge seen in 2022 so far, saying "choking off demand via higher mortgage rates is damaging to consumers and the economy. The better way to balance the market is through increased supply, which also helps the broader economy." Yun isn't wrong regarding a correlation between sharp rate spikes and pending sales.   That said, experts were already questioning the sustainability of the housing market's trajectory--both in terms of prices and sales--well before the brunt of the recent rate spike.  In other words, some sort of reckoning was inevitable.  The meteoric nature of the rate spike simply made the timing obvious.  

6/27/2022 2:43:08 PM

As rates moved up from the lows seen at the end of May, we viewed it as the confirmation of the broader sideways momentum that we hoped would replace the pervasive upward momentum that had been in place for most of 2022.  As rates moved down from the long-term highs that followed the CPI scare and Fed adjustment, we knew we'd be looking to flesh out the boundaries of that range.  We're already seeing the first candidate based on selling pressure from Friday and now this morning. That selling began after yields failed to break below 3%.  This gives us our first potential floor to watch, albeit at a higher version of the range compared to the version we might have seen without the CPI surprise.  These two versions are marked by the red and teal lines in the following chart.  The key question for the week ahead is whether the upper teal line offers much support.  If it does, it would tacitly suggest that the heavy selling from 2 weeks ago was a bit overdone.  More importantly, it would be an even stronger confirmation that those levels marked the highest rates of the year (to whatever extent such things can be "confirmed"). One final thought on "confirmation..."  Such conclusions are only as good as the economic data that supports them.  We've already seen the chaos that can ensue when inflation surprises to the upside in the current environment.  So "confirmation" of a sideways range relies on the assumption that the biggest and most surprising inflation spikes are behind us.

6/27/2022 11:31:11 AM

“I used to be indecisive. Now I'm not so sure.” Management teams at lenders and vendors can’t be indecisive in this environment. Who’s going to be right, come Q4 of this year, and Q1 of 2023, which many believe are going to be extremely painful as the purchase market seasonally slows. Are the cuts lenders are making now enough to show warehouse lenders and broker-dealers profitable months and quarters? News continues to hit the tape, including Russia’s first default on debt since 1918. As mentioned in Saturday’s commentary, last week we had the FGMC (First Guarantee) big layoffs/closure of its correspondent and wholesale divisions. There was JPMorgan’s mortgage-related layoffs. That said, what makes headlines these days should be lenders and vendors who aren’t laying people off rather than those that are. How about lenders, servicers, and asset holders watching the Florida (“The Plywood State”) homeowner’s insurance nightmare: FedNat Insurance has said it will cancel 68,200 homeowner insurance policies in Florida at the end of June, just the latest insurer to retreat from “God’s Waiting Room” where we’ve seen powerful storms and pervasive fraud. Managers definitely have their hands full. (Today’s podcast is available here and this week’s is sponsored by Ignite Integration Solutions, Inc., a custom software provider that has created industry leading LOS CORE integrations in addition to a library of Encompass base tools and plug ins, and custom API development with our team of 100% on shore developers to support both Mortgage Lenders and Vendors as clients and partners.)

6/27/2022 9:56:41 AM

In 2020 and 2021, housing boomed and rates plummeted at a pace that many considered to be unsustainable . 2022's role is to take things back in the other direction.   In other words, things are " normalizing " after a period of frenzied movement.  The normalization process can seem scary in cases where the thing being normalized was exceptionally big, different, and fast.  It's safe to say that housing demand, home prices and rates were all moving in a manner that could easily be described as big, different, and fast. As we watch the normalization process unfold, it's fair to wonder if it's a sign of more dire developments.  After all, mortgage rates skyrocketed well into the 6% range last week as markets braced for impact from the Fed's policy announcement.  At the time, we were hopeful that we'd just seen the highest rates of the year .  This week only added to those hopes. If you happened to see other news this week that suggested HIGHER mortgage rates, rest assured, that news is dated .  Even if it had a release date as recent as June 23rd, it almost certainly draws on Freddie Mac's weekly mortgage rate survey which tends to capture rate movement at the beginning of the week only to report it on Thursday morning. When we examine actual daily averages, we can see that Tuesday's rates weren't very different from last Friday's, but the following two days saw huge improvements before pulling back just slightly on Friday.

6/24/2022 4:00:00 PM

Bonds Lost Ground, But It Was Still Sort of a Victory As the day began, bonds flirted with the idea of breaking into positive territory.  We'd hoped to see them merely hold steady--especially after the weaker consumer sentiment data, but it was not meant to be.  After a brief rally on the sentiment data, bond buyers were done for the day.  Yields followed stocks and oil higher (correlation not necessarily causality) into the afternoon.  On the bright side, yields remained under the 3.13% technical level and MBS flat-lined with only an eighth of a point of weakness.   All of the above is technically a victory considering it still leaves us in much better shape than the end of last week. Econ Data / Events Consumer Sentiment 50.0 vs 50.2 f'cast, 50.2 prev Inflation expectations:     1yr: 5.3 vs 5.4 prev     5yr: 3.1 vs 3.3 prev New Home Sales 696k vs 588k f'cast, 629k prev Market Movement Recap 09:39 AM Slightly weaker overnight on mixed EU econ data, but improving a bit during domestic trading.  10yr up only 0.4bps at 3.093 and MBS down only 3 ticks (.09)  10:19 AM Initially stronger after the drop in consumer inflation expectations at 10am.  Treasuries trading in choppy pattern around unchanged levels.  MBS lagging due primarily to illiquidity.  10yr perfectly unchanged at this moment at 3.089 and MBS down 6 ticks (0.19) with the caveat being that there is a 9 tick gap between buyers and sellers.  10:44 AM Quick burst of selling without any obvious motivation.  Bonds at weakest levels now with 10yr up 4bps at 3.13 and MBS down 3/8ths  01:03 PM Fairly sideways after the selling mentioned in the last update.  Off the weakest levels with 10yr yields up 3.6bps at 3.124 and 4.5 UMBS down just under a quarter of a point. 04:21 PM Sideways-to-slightly weaker drift continues for Treasuries with 10s up 4.9bps at 3.138.  MBS have been more flat, currently down just over an eighth at 99-27 (99.84).  Notably, 10s were under the 3.13% technical level by the 3pm CME close. 

6/24/2022 3:28:45 PM

Last month's New Home Sales data from the Census Bureau was a real downer.  It showed sharp declines in sales and a puzzlingly abrupt jump in inventory levels.  One thing we used to point out about this data series was its immense margins of error.  These could frequently result in major revisions that ended up painting completely different pictures compared to the initial release. For whatever reason, the size of those revisions remained stable enough in recent years that our coverage hasn't felt the need to point it out as regularly.  Today doesn't necessarily bring that old school feeling back with a vengeance, but there was moderately big revision that brought last month's 591k reading up to 629k (for the month of April). The bigger news is the extent to which May's new home sales crushed forecasts.  The median forecast saw sales coming in at 588k--a far cry from the actual reading of 696k.  When taken in conjunction with last month's positive revision, it completely changes the tone of the long-term trend from one of "volatile reversal" to "gradually leveling off." Granted, big margins of error cut both ways and there's no guarantee today's 696k will remain intact by the time it's revised in a month.  That said, it could go higher or lower.   As always, keep in mind that the new home market is significantly smaller than the existing home market.  That one still conveys more of a "volatile reversal," albeit to levels that are in line with pre-pandemic highs in 2016-2018.

6/24/2022 11:56:13 AM