Good Tuesday AM,

Yesterday, President Elect Biden chose Janet Yellen as the next Treasury Secretary. Ms. Yellen, if you remember, was an exceptional leader at the Fed and was the current Fed Chairman’s boss. Markets loved the appointment as Ms. Yellen is seen as a monetary and stimulus dove which, along with her close working relationship with Mr. Powell, should keep the flow of easy money flooding the system. Stocks loving the news this a.m., has the Dow +475 and now making a record over 30k. Loose monetary policy will devalue the dollar and juice stock prices further. As long as there is no inflation, it won’t be too harmful to the economy, that is as long as the Fed keeps buying bonds. If the Fed stops buying, the music stops and rates jump. Maybe not in 2020 but is a real possibility for 2021. On that note, after making a run at the top of the range, both Mortgage Bonds and Treasuries have been rejected (something we all understand). The trends don’t lie and the probability is high that we will run down and test the bottom of this trading channel which is another 30bps in price. The economic news today was mostly unfriendly to bonds, with the exception of consumer confidence. Consumer confidence dropped like a rock, which hopefully is not foreshadowing where the economy goes through the end of the year and Q1. The consumer cohort is typically much more accurate than the economists. Not to get into a long explanation why but 1) there are more consumers that are asked and so the responses smooth out any outliers 2) the consumers live in the economy, they don’t just guess at it. Case Shiller has home prices up 6.6% year over year, but that is always about where you live. Many cities are well above that rate. Tomorrow has PCE and the Fed Minutes if there is anyone on the desks to care. I would expect thin trading volume and potential volatility which will calm down next week.

New conventional limits just out in the last 60 seconds. The new conventional loan limit is $548,250. The new loan amounts are effective as of 1/1 but many lenders (including us) will allow borrowers to take advantage of them now. Here is the note from FHFA:

The Federal Housing Finance Agency (FHFA) today announced the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2021.  In most of the U.S., the 2021 maximum conforming loan limit (CLL) for one-unit properties will be $548,250, an increase from $510,400 in 2020

Winter is coming…

Percentage of adults living in households not current on rent or mortgage where eviction or foreclosure in the next two months is either very likely or somewhat likely.

Source: U.S. Census Bureau, Household Pulse Survey

Please remain safe and healthy, make today great.