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 1/27/23

Even with the most aggressive pace of rate hikes in over a generation during the past year, recent data suggests that there’s still a path to a “soft landing” for the Federal Reserve. The U.S. economy posted the kind of mild slowdown in the last quarter of 2022 that the Fed wants to see as it attempts to tame inflation without choking off growth. Gross domestic product beat expectations to rise at a 2.9% annualized pace, down from 3.2% in the third quarter and a long way from a recession.

MBS Weekly Market Commentary Week Ending 1/20/23

Have you heard? Inflation was so 2022. All jokes aside, after we learned last week that U.S. inflation cooled for the sixth consecutive month (the consumer price index dropped 0.1% in December compared to the month prior), expectations are now that the Federal Reserve is likely to downshift rate hikes to 25 BPS going forward, beginning at next month’s FOMC meeting.

MBS Weekly Market Commentary Week Ending 1/13/23

Pay attention to the bond market rather than the Fed. That’s what I’m hearing as we learned this week that inflation continued to ease in December, though much focus was also on Wells’ exit from the correspondent space and its ramifications. The headline CPI (-0.1% month-over-month, +6.5% year-over-year) posted the slowest inflation rate in more than a year and core inflation (+5.7% year-over-year), which excludes food and energy, also posted the smallest advance in a year.

MBS Weekly Market Commentary Week Ending 1/6/23

While it’s back to business as usual, it was a fairly quiet week as we settled into the new year. Fast inflation and high interest rates dominated the narrative and upended markets across the world last year. When the dust settled, 10-year Treasuries were 200+ BPS higher than the start of the year, the curve inverted in a bearish fashion faster and farther than ever, implied volume spiked, and mortgage spreads were pushed from stubbornly rich to suddenly cheap. The result was an entire trade-able universe moving out of the money, originations grinding to a halt, and duration becoming a function of illiquid trade flows.

MBS Weekly Market Commentary Week Ending 12/23/22

MCT would like to wish everyone a Merry Christmas and Happy Holidays. Talk to close the year has been dominated by the Federal Reserve’s most aggressive policy tightening in four decades and its impact on the economy, and for us the residential housing market.