Shiny Trinket

Forbearance numbers continue to show improvement

The rate of forbearances (delaying the repayment of mortgage loans) are dropping HousingWire’s Kathleen Howley cites Black Knight in reporting a drop of 22% from May’s peak of 4.7 million. “The total weekly drop was 66,000 loans, a slower pace than the decline of 150,000 in the prior week, the report said. Measured as a share of all mortgages, 7% of home loans are in forbearance, down from 7.1% in the prior week,” says Howley.

She goes on to report that the rate for home loans in Ginnie Mae securities, primarily mortgages backed by the Federal Housing Administration (FHA) or the Veterans Administration (VA) also dropped, along with the forbearance share for mortgages held in bank portfolios or in private-label bonds.

Howley quotes FTN Financial’s Walt Schmidt, saying, “We’re seeing a bifurcation in the numbers, with GSE forbearances lower than the rates for the Ginnie space and the private-label space.” There is a correlation between the drop in the overall number of mortgages in forbearances and job market gains, with the unemployment rate in August dropping to 8.4%.

Howley adds that while the economy has added 10.6 million jobs since April, it’s not even halfway toward replacing the 22.2 million jobs lost between February and March, according to government data. “Most economists are predicting the soft jobs market will persist into 2021. Fannie Mae Chief Economist Doug Duncan forecasts the unemployment rate will average 8.8% in 2020 and 7.1% next year,” she says.

Source: HousingWire | BlackKnight | TBWS

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage Backed Securities (MBS) which are traded in real time, all day in the bond market.  This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events.  When MBS pricing goes up, mortgage rates or pricing generally goes down.  When they fall, mortgage pricing goes up.  Tracking these securities real-time is critical.  For more information about the rate market, contact me directly.  I’m among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning.  Last week the MBS market worsened by -1bps.  This caused rates to move mostly sideways for the week. We saw a bit of elevated rate volatility last week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to move rates this week. 1) Central Bank, 2) Geo-Political, and 3) Domestic

1) Central Bank: We hear from the Central Banks from 3 of the 6 largest economies in the world. The Bank of Japan (with a fresh new PM) and Bank of England (with Brexit looming) will be interesting this week, but it will be our Federal Reserve on Wednesday that will be the week's biggest market driver. We get their interest rate decision (no suspense there, they have already beaten us over the head with the idea that they are not going to touch rates for a very long time), live press conference with Fed Chair Powell, and we'll get their Economic Projections (the famous "dot plot" chart).

2) Geo-Political: Brexit is back in the spotlight as they have an important Parliamentary procedural vote today as the Brexit FINALLY concludes this month. Domestically, we have movement on keeping our government open past the end of the month and no movement on a new COVID stimulus bill.

3) Domestic: We get some key economic releases this week to focus on, including retail sales, which is expected to moderate into more realistic levels now that the $600 weekly "helicopter" money has stopped. Also, Initial Weekly Jobless Claims will continue to get a lot of attention.

This Week's Potential Volatility: Average

Rate markets last week ended mostly unchanged; however, we did see volatility spike. This week we get retail sales and jobless claims numbers that will help determine the medium-term direction of rates and could once again spike rate volatility.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Matt McGuire is a Mortgage Loan Originator with Edge Home Finance, specializing in residential home loans for real estate purchase and refinances. He enjoys making his clients happy while helping them achieve their dreams and goals. Matt has spent the last 10 years in the mortgage and banking industries, gaining valuable experience in loan origination, loan processing, underwriting, post-closing/loan servicing, and management. This unique blend of skills and knowledge helps Matt walk all of his customers through each step of the loan process with the care and guidance they deserve. Matt was born in Florida, is a proud Richfield Spartan, and currently resides in Lakeville with his wife, two dogs, and two cats. Matt is a huge sports fan and also enjoys traveling, fishing, and boating.

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

Matt McGuire (NMLS 1535656) - A Member of Edge Home Finance Corporation (NMLS 891464)