Good Tuesday AM,

 

Lots of ground to cover.

 

The ten-year continues to slowly claw its way back down in yield and is currently at .66%. Mortgage bonds also have some wind at their back and are up 21bps. Housing Starts and Building Permits released today were a home run. This housing market is on fire.

 

From Dan Rawitch and words to consider… What is amazing given the aforementioned markets is that bond yields are incredibly low. It is not normal to have low bond yields while the housing market and stock market are so strong. Why? Because those two hot markets have always and only resulted from a booming economy, which we have to opposite of. What is wrong with this picture? Which is correct? The bond yields or stock market? Bonds always win in the end and there is a reason that yields are so low. Short-term, bonds look like they have some more room to run but I fear that current resistance could lead to a slight pull back so be careful floating.

 

Moving on to some relevant and actionable information.

 

Start with a great perspective on rates from the WSJ. This picture tells the story. Commentary is below. Please see where rates are and the disparity between purchase money rates and refinance rates.

 

Homeowners across the country are rushing to refinance at record-low interest rates. Many are finding that lenders have reserved their best rates for buyers.

 

The average rate posted on Bankrate.com for a 30-year fixed refinance mortgage was 3.37% Friday, well above the 3.14% on offer for a purchase mortgage, according to the personal-finance website. The rate premium for refis over purchases widened this spring after the coronavirus pandemic shut down the economy and pushed interest rates lower across the board. The spread grew even bigger after Fannie Mae and Freddie Mac last week levied a new fee on lenders for most refinancing’s to shield themselves from potential losses. Mortgage lenders are still dealing with a flood of homeowners seeking to refinance, and some in the industry are struggling to keep up with demand. As of last week, nearly 18 million homeowners could still save money by refinancing, near an all-time high even after months of record-low rates, according to mortgage data and technology company Black Knight Inc. “The system is maxed out,” said Sam Polland, a mortgage-loan officer at Sandy Spring Bancorp Inc. in Rockville, Md. “Everyone is in this bad but good position.”

 

With so much demand, some mortgage lenders are prioritizing purchases, often offering lower rates to grab new business. Some mortgage bankers say they prefer to make purchase-mortgage loans over refis. Their per-loan compensation is typically a bit higher for purchases, according to mortgage-technology company LBA Ware. Financing home purchases also can often lead to more business through referrals and refis down the road. Refinancings, on the other hand, come and go with rates. Many factors go into the rate borrowers eventually receive, including their credit standing, the type of loan and how much they pay upfront to lower their rate. A refi where the borrower pulls cash out, for example, would typically have a higher rate than a traditional refi.

 

Now on to delinquencies which is the second most talked about subject after rates.…..

 

There was a climb of 8.22% in the delinquency rate for mortgage loans on one-to four-unit residential properties of all loans outstanding at the conclusion of the second quarter, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. With the survey in mind, if the payment was not made based on the original terms of the mortgage, servicers are asked by the MBA to report loans in forbearance as delinquent. With 628 basis points, the state of New Jersey showed the largest quarterly spike in overall delinquency, followed by Nevada, 600 basis points; New York, 575; Florida, 569, with Hawaii rounding out the top five at 525. Those regions most affected all include a prevalence of leisure and hospitality jobs that absorbed particularly hard hits by COVID-19. The nearly 4 percentage point jump in the delinquency rate was the biggest quarterly rise in the history of MBA’s survey. The second quarter results also mark the highest overall delinquency rate in nine years, and a survey-high delinquency rate for FHA loans.”

 

There is so much more today but I am calling it here. it’s just too long.

 

Please remain safe and stay healthy, make today great!