MBS Weekly Market Commentary Week Ending 8/19/22

MBA mortgage applications drop to a 22-year low

This week saw talk of Wells Fargo scaling back its mortgage division (possibly greatly exaggerated), MBA mortgage applications dropping to a 22-year low, and U.S. retail sales resiliently remaining flat despite a drop in gasoline prices, though the biggest story was Ginnie Mae and FHFA releasing jointly updated seller/servicer requirements.

To be eligible for Ginnie Mae and GSE loans, issuers/servicers need a net worth base minimum of $2.5 million plus add-ons of 25-basis points for GSE servicing, 35-basis points for Ginnie product, and 25-basis points for private-label and other servicing loans. Tangible net worth or total assets must be greater than or equal to 6%.

TBA rule, requiring IMBs to hold 2.5% in reserves is gone

“Origination liquidity” has been significantly reduced and the requirements recalibrated to better reflect expected margin call risk. Fannie did confirm that the TBA rule, requiring IMBs to hold 2.5% in reserves, is in fact gone. It’s a win for the prospect of hedging in general since the 50-basis points liquidity on IRLCs appears to be regardless of best efforts or hedged pipelines. Importantly, FHFA and Ginnie Mae extended the implementation timeline to provide servicers sufficient runway to adjust to the new requirements. Agency lender letters are expected to come out in September.

In times of lean volume, lenders need to maximize their gain on sale, as such they must fully-leverage the secondary mortgage markets.

It’s a reminder that the industry is constantly shifting and evolving. Over the past few years, MCT has been focused on the sophistication of best execution which has evolved with a proliferation of potential loan sale executions due to more buyers, more approved buyers, fee adjusted considerations, mandatory versus best efforts delivery, AOT, co-issue, etc.

Our clients have shown a willingness and desire to move away from the status quo, or “the way it’s always been done,” to implement new processes and technologies. That has led to the digitization of workflows that were once “black box” processes, thereby increasing efficiency, transparency, and access to actionable data (e.g., automated AOT, digital TBA trading, and whole loan sales via marketplaces).

Lenders need to maximize their gain on sale

In times of lean volume, lenders need to maximize their gain on sale, as such they must fully-leverage the secondary mortgage markets. We are always pushing the boundaries of digitization and automation in pursuit of efficiency, transparency, and profitability for our clients. At the same time, we pay cautious and necessary consideration to security and privacy of client data and information. We have a 20-year track record of doing what’s right for our clients.

We meet clients wherever they are in their growth cycle. If a client wants to benefit from our technology and also desires hands-on support, we’re there for them. And if they opt for autonomous use of our award-winning, all-inclusive capital markets platform, we’re ready to enable them. Near-term and long-term, it’s about helping our clients thrive. Contact us today to learn more.

Looking for more tips on how to navigate this period of increased volatility? Hopefully, you attended our webinar on Improving Profitability to Counter Market Headwinds. We have also published several blogs over the last few weeks, including Strategies for Mitigating Risk in a Volatile Market, which provide more subject matter on the current market. As always, contact us if you are looking for a better suite of secondary marketing products or more guidance on how to manage market volatility.

10-Year Treasury Yield Curve

Compare this chart with the mortgage rates chart to see how the 10-year treasury and mortgage rates are correlated. Read more below to learn how mortgage rates are tied to the 10 year treasury yield. View raw data on U.S. Department of the Treasury website.


Mortgage Rates Today

The current MBS daily rates are shown below in this chart for 5/1 Yr ARM, Jumbo 30 Yr, FHA 30 Yr, 15 Yr Fixed, 30 Yr Fixed. Sign up for our MBS Market Commentary to receive daily mortgage news in your inbox.

About the Author

Robbie Chrisman, Head of Content, MCT

Robbie started his mortgage industry career with internships during high school and college at Peoples National Bank in Colorado, and RPM & Bay Equity in the San Francisco Bay Area. After graduating from The University of Texas at Austin with a degree in Finance in 2014, he went to work at SoFi, where he rose to Director, Capital Markets assisting in the creation of SoFi’s residential mortgage division before leaving to work for TMS in Austin, Texas. From there, he went to work for FinTech startup Riivos in San Francisco and now is the Head of Content at Mortgage Capital Trading (MCT) in San Diego.

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Previous Weekly Market Reviews by Mortgage Capital Trading (MCT)

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MBS Weekly Market Commentary Week Ending 3/31/23

The market reaction went a little “too far, too fast” in regard to the Fed policy pivot. We witnessed the coupon stack (i.e., the price spread between TBA coupons) decompress in more than a trivial manner in a short period. However, the primary mortgage market has been largely reluctant to follow the Treasury rally, and mortgage rates have ultimately not dropped by the same amount as Treasury yields.

MBS Weekly Market Commentary Week Ending 3/24/23

The FOMC raised its benchmark rate by 25 basis points to a new range of 4.75%-5.00% on Wednesday, a middle ground policy move made in the hope of tampering inflation without further harming the banking system. The raise marks the 9th consecutive rate hike since the Fed began hiking in May of last year and brings the target fed funds rate range to the highest level since September 2007. While the central bank’s monetary policy has been aimed at correcting inflation, it has also revealed hidden weaknesses (e.g., entities whose balance sheets relied on low interest rates).

MBS Weekly Market Commentary Week Ending 3/17/23

Next week will reveal the Fed’s resolve on continuing to beat the drum on their aggressive inflation fight. The word until now has been that the central bank will keep hiking interest rates until inflation is under control.

MBS Weekly Market Commentary Week Ending 3/10/23

Events this week likely will lead to a higher peak interest rate than investors had been expecting just weeks ago. Central bankers appear worried about a cycle in which workers seek higher pay to offset inflation’s bite, and in turn trigger more price increases. In fact, inflation remains high because people have jobs and earn enough income to cover stubbornly expensive housing costs. Robust hiring is good for the economy and workers, but elevated pay growth puts added pressure on the Fed to bring down earnings. 

MBS Weekly Market Commentary Week Ending 2/10/23

The week after the jobs report is generally pretty data-light, and this week was no exception. With a dearth of data, market movement hinged on “Fed speak” and consumer sentiment. We saw some volatility return to bond markets as investors built in expectations for a more hawkish Fed. As a reminder, the Fed raised its benchmark rate last week to a range of 4.5% to 4.75%. Let’s run through what we’ve learned in the wake of that decision and a robust U.S. payrolls report that took some wind out of investors’ sails that had hopes for rate cuts by summer.

MBS Weekly Market Commentary Week Ending 2/3/23

As strong as economists may have thought the job market was, it’s even stronger. In addition to headline non-farm payrolls in January (517,000) beating estimates by around 300,000, employment numbers were revised higher for the past two months. Yes, a tight labor market is anathema to any sort of quick stop to the Federal Reserve’s rate hiking cycle, but the growth rate in average hourly earnings is declining, which will be welcome news to Fed Chair Powell and his colleagues. There exists a raging debate among economists over whether we’ll need a sharp rise in unemployment to keep inflation low.