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April 2020

April 1st, 2020

Click here for Weekly News Letter

Instructions on how to read this blog: Below is the news for the month when it happened and the market’s reaction.  For a full view of the month start at the bottom and work your way up. If want to know what just happened start at the top. All Times are Eastern Standard Time.  When the price of Mortgage Backed Securities (MBS) goes down rates go up, and when the price goes up rates come down. Remember in the bond market Bad News is Usually Good News and Good News is Usually Bad news.

Thursday - April 30

Market Wrap - Mortgage Bonds closed flat to slightly higher today while the 10-yr yield settled at .63%, unable to close below that key .60% level. Stocks declined but produced strong gains for the month. With today's decline, the S&P 500 wound up with a 12% gain for the month and had its biggest one-month gain since 1987. WTI oil gushed higher to $19.05/barrel, up $3.97 in after hours trading. Mortgage rates fell to all-time lows this week.

Late Morning Review - The unemployment line is growing. Over 30 million people are now unemployed across the nation in the past six weeks due to the pandemic induced shutdown of the U.S. economy. For the week ended April 25, 3.84 million Americans filed for first-time unemployment benefits, worse than expectations of 3.05 million. The worst of new claims could be in the rear-view mirror and has been declining since the 6.87 million record for the week ended March 28. The four-week moving average, which irons out seasonal; abnormalities, rose to 13.3 million, up 3.7 million.

Mortgage rates fell to record lows this week due in part to the global pandemic outbreak. Freddie Mac reports that the 3-year fixed-rate mortgage fell to 3.23% this week with 0.7 in points and fees. It is the lowest rate since record-keeping began in 1971. Freddie Mac said while many people are benefiting from low mortgage rates, it’s important to remember that not all people are able to take advantage of them given the current pandemic. A year ago the rate was 4.14%.

Consumer spending nosedived in March as the outbreak of the pandemic caused the stay-at-home orders while businesses across the nation shuttered. Personal Spending fell 7.5% in March from February, the sharpest decline since the Commerce Department began keeping records in 1959. The pandemic caused a shutdown of bars, restaurants and retail stores since mid-March while the soaring unemployment lines severely impacted consumer spending or household outlays, which makes up two-thirds of U.S. economic activity. In addition, Personal Incomes fell 2.0%.

Average Mortgage Rates - Mortgage News Daily  4/29/20 (Not ours)

Type             Rate          Points

30 Yr Fixed     3.22%      0.40

15 Yr Fixed     3.08%      0.40

30 Yr Jumbo   4.41%      0.50

Wednesday - April 29  

Market Wrap - Mortgage Bonds closed near unchanged to slightly higher today while Treasuries edged lower as risk on was the trade. The 10-yr yield finished at .62%. Stocks rallied big as the Fed has full support behind the financial markets and on hopes of a coronavirus drug. WTI oil ended at $15.13/barrel, +$2.79. Continue floating as long as the market allows us to. Be sure to catch tomorrow morning's  Weekly Initial Jobless Claims, Core PCE, Personal Income, Personal Spending and the Q1 Employment Cost Index that will be released tomorrow morning.

Late Morning Review -  Mortgage rates were essentially unchanged in the latest week and remain near historic lows. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage was 3.43% with 0.34 in points for the week ended April 24. The Market Composite Index, a measure of total mortgage loan application volume, fell 3.3%, the Refinance Index fell 7.3% while the Purchase Index rose 11.6%. The ten largest states had increases in purchase activity, which is potentially a sign of the start of an upturn in the pandemic-delayed spring homebuying season, as coronavirus lockdown restrictions slowly ease in various markets," said the MBA's Joel Kan.

Breaking news hit the wires this morning revealing positive trial results for the Gilead coronavirus treatment drug remdesivir.
This is an early-stage trial, so a lot more testing has to happen but it is OK to be optimistic because a cure is a game changer to this pandemic and its economic toll. Stocks are sharply higher in response to the Gilead headlines, along with double-digit ad revenue in Google's quarterly earnings report and ahead of the Fed statement this afternoon. The Dow Jones Industrial Average was up 500 points in early trading.

Falling oil prices have pushed the cost of gasoline lower in the past month and could edge lower in the next month. Motor Club AAA reports that the national average prices for a regular gallon of gasoline has fallen to $1.76 today, which is four cents less than last week, 28 cents cheaper than last month and $1.11 less than a year ago. “AAA forecasts that the national average will continue to decrease into next month, possibly dropping as low as $1.65,” said Jeanette Casselano, AAA spokesperson. “We haven’t seen gas prices that cheap since January 2009.”

 

Tuesday - April 28  

Market Wrap - Mortgage Bonds ended with modest gains today as the Fed continues to stabilize the mortgage market through its daily asset purchase program. Prices traded in a rather narrow range. Treasury prices rose after a plunge in April Consumer Confidence from 118.8 in March to 89.6 this month. The 10-yr yield fell to .61%. Stocks ended slightly lower after opening with big gains but those gains vanished after the Consumer Confidence data. The Fed statement will be released tomorrow afternoon at 2:00 p.m. ET.

Late Morning Review - The fallout from the coronavirus pandemic continues to severely impact economic activity across the nation while consumer attitudes have plunged. Stay-at-home restrictions, the closing of many businesses along with nearly 27 million people claiming first-time unemployment benefits reflects the sharp contraction in economic activity from COVID-19. The April Consumer Confidence Index fell to 86.9 from 118.8 in March and was the largest monthly decline since 1973 and the lowest level since 2014. Lynn Franco from the Conference Board said, "Consumers’ short-term expectations for the economy and labor market improved, likely prompted by the possibility that stay-at-home restrictions will loosen soon, along with a re-opening of the economy."

Just before the coronavirus hit here in the U.S. home price gains were beginning to percolate in February due to low rates, tight supplies and strong demand. The Case-Shiller 20-City Index rose by 3.5% annually in February from 3.1% in January and was up 0.4% monthly from January to February. National Home Price NSA Index, which covers all nine U.S. census divisions, rose 4.2% annually, up from 3.9% in the previous month, 0.5% monthly. Craig J. Lazzara said, "As much of the U.S. economy was shuttered in March, next month’s data may begin to reflect the impact of these policies on the housing market.”

Freddie Mac and Fannie Mae cleared up one important question on the minds of those in forbearance on mortgages due to the coronavirus pandemic. The question is what happens at the end of the forbearance as the missed payments will have to be paid back in one way or another. The CARES Act puts forth that a mortgage backed by the government or by the GSEs, that is in forbearance, does not have to pay back the missed payments in one lump sum. There are essentially three options that borrowers can enter into such as a repayment plan, payment deferral or modification, or modification of the loan.

Average Mortgage Rates - Mortgage News Daily  4/27/20 (Not ours)

Type             Rate          Points

30 Yr Fixed     3.27%      0.40

15 Yr Fixed     3.10%      0.40

30 Yr Jumbo   4.43%      0.00

 

Monday - April 27  

Market Wrap - Risk on was the trade today as stocks rose across the globe on news that some countries as well as several U.S. states were looking to ease lock downs. In addition, more announcements of global central bank stimulus also helped to buoy equities. The Dow closed above the key level of 24,000 at 24,133 and nearly 30% above its close of 18,591 on March 23. Mortgage Bonds ended lower as the Fed continues to pare back on its daily purchases and in the face of risk on today. The 10-yr yield inched higher to close at .66%, above the key .60% level, despite two strong Treasury Note auctions. Oil prices fell as a glut of supply far outweighs demand. WTI oil ended at $12.97/barrel, -$3.97. 

Late Morning Review - There is some cautious optimism in the air on reports that Italy, France, the U.K. as well as several states here in the U.S. will begin to ease lock down restrictions and open parts of their economy. Mortgage Bonds and Treasury prices are starting the week lower as Stocks attempt to push higher. The Dow Jones Industrial Average is up 262 points and is up 32% from the low of 18,213 hit on March 23.

It's Fed week and come Wednesday, we will hear what the Fed has to say about the economy, outlook and confirmation that will take whatever means necessary to help stimulate the economy upon reopening. The central bank punch bowls are being cracked open - last night Japan announced unlimited Bond buying to help stimulate the economy. Japan has been on an unlimited QE for the last three decades, yet, they still have no inflation and tepid economic growth.

Average Mortgage Rates - Mortgage News Daily  4/23/20 (Not ours)

Type             Rate         Change   Points

30 Yr Fixed  3.29%          -0.14     0.40

15 Yr Fixed   3.10%         -0.22     0.40

30 Yr Jumbo 4.50%         +0.01     1.00

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Forecast for Next Week -The upcoming week will continue to see more information on the pandemic while certain parts of the country look to reopen pockets of their economy.

It's Fed week. As mentioned, the Fed played an enormous role in helping the mortgage market. This week the Fed kicks off their two-day meeting on Tuesday and ends Wednesday with the release of the Monetary Policy Statement at 2:00 p.m. ET. The statement release will be followed by a press conference from Fed Chair Powell at 2:30 p.m. ET.

With no change expected in the near-zero Fed Funds Rate anytime soon, it is more about what the statement conveys and what Fed Chair Powell says at his press conference. The financial markets around the globe will be watching this highly anticipated meeting.

There are a few key economic reports to be released, including first-quarter Gross Domestic Product (GDP) numbers, which took an enormous hit in March. April Consumer Confidence, as well as a few key manufacturing reports, will be closely watched and bad readings are expected. Oil prices will also be on the radar screen after a crazy week due to increasing supplies, falling demand, and a lack of storage.

In addition, earnings season will continue as those numbers have been impacted by the coronavirus.

Reports to watch:

  • Housing data will be seen from Tuesday's S&P Case-Shiller 20-City Index followed by Pending Home Sales on Wednesday.
  • A key Consumer Confidence report will be delivered on Tuesday.
  • The first read on first-quarter Gross Domestic Product will be announced on Wednesday.
  • Manufacturing comes from Thursday's Chicago PMI and Friday's ISM Service Index.
  • Inflation data will come from Thursday's Core PCE and Employment Cost Index, while Personal Spending and Income numbers will also be released.200424 eco

Week in Review - One of the major effects of the coronavirus was the enormous destabilization of the mortgage-backed securities (MBS) market back in mid-March.       

MBS pricing and trading activity determine home loan rates, so a big and fast solution was necessary.

Thankfully, the Federal Reserve quickly came to the rescue by purchasing MBS to help stabilize the MBS market -- and it worked! Their massive MBS Bond buying program stabilized the market, helped the lending industry in numerous ways, and kept home loan rates in a sideways range throughout April.

Now the Fed, who was buying as much as $50 billion per day in MBS, purchased less than that amount this entire past week.

What does it all mean for homeowners or would-be homeowners today?

With the Fed buying significantly less MBS, there is a limit to how low home loan rates can go in the near-term, making today an incredible opportunity to capture historically low home loan rates.

Besides a sharply smaller Fed MBS buying commitment limiting the improvement to home loan rates, here are three additional reasons why home loan rates might not improve much further in the near-term, making today a great time to secure a home loan:
 

  1. Capacity at the lender level will limit how low home loan rates can go. Lenders are experiencing record mortgage volume. Whether a company is selling widgets or loans, when they are "flying off the shelf" the last thing a company does is lower price.
  2. MBS are now carrying an increased risk of default due to the current elevated unemployment rate. Investors in MBS will demand a premium for this risk, again putting a limit to lower rates.
  3. MBS hate good news. This week, stabilization in the oil market, and the idea that pockets of the U.S. economy will reopen, lend an air of optimism which limits interest rate improvement.

Friday - April 24  

Late Morning Review - Growing fears of a pandemic induced economic slowdown, chaos in the oil markets, a mixed bag of earnings and staggering first-time unemployment claims filled the event list this week in the markets. Economic data for the near future will continue to be weak but U.S. stocks are showing resilience and are having their best month since June. Stocks sold off ahead of the bad news in March, and are now rallying as the weak data streams in.

The coronavirus pandemic continues to impact consumers as well as economic data during the shutdown of many businesses across the nation. April Consumer Sentiment fell to 71.8 this month, down from 89.1 in March. It was the third straight monthly decline. Durable Orders, expensive products meant to last three years or more, fell 14.4%.

Next week, the Fed kicks off their two-day meeting on Tuesday and ends Wednesday with the release of the monetary policy statement at 2:00 p.m. ET. The statement release will be followed by a press conference from Fed Chair Powell at 2:30 p.m. ET. With no change expected in the near-zero Fed Funds Rate anytime soon, it is more about what the statement conveys and what Fed Chair Powell says at his press conference.

Thursday - April 23  

Market Wrap - Recent positive news for the mortgage market coupled with Fed buying supported MBS today while Treasury prices closed with modest gains. Stocks flip flopped on the Gilead drug news giving up early big gains only to close near unchanged. The yield on the 10-yr Note inched lower to .59%. Oil prices rallied for a second day closing at $16.80/barrel, +$3.02. Final April Consumer Sentiment will be released tomorrow and will garner some attention. 

Late Morning Review - Mortgage rates were unchanged in the latest remaining near historic lows. Freddie Mac reports that the 30-year fixed-rate mortgage is at 3.33% this week with 0.7 in points and fees. Freddie Mac said that mortgage rates have stabilized over the last few weeks as the market searches for direction in the fog of economic data. A year ago the rate was 4.20%.

Americans filing for first-time unemployment benefits hit 4.4 million in the week ended April 18 bringing the 5-week total to a staggering near 27 million or 16% of the labor force. The economic shutdown due to the pandemic has now erased all of the jobs gained since the financial crisis in 2009. It's not clear as to how high the unemployment rate will climb. Some forecasts are as high as 30%!!! To put it into perspective, the Great Depression of the 1930s saw a high rate of 25%.

Sales of new single-family homes fell the most in 6.5 years in March as the pandemic shut down businesses while many jobs were lost. The Commerce Department reports that New Home Sales fell 15.4% in March from February to an annualized rate of 627,000 units versus the 655,000 expected. Sales were down 9.5% annually. Losses were seen across all regions in the U.S.The median new house price increased 3.5% to $321,400 in March from a year ago while there was a 6.4 months supply of houses on the market. Further declines are seen in the near future.

 

Wednesday - April 22  

Market Wrap -  Mortgage Bonds closed with gains today after some positive mortgage news on forbearance hit the wires. The Fed buying also helped to lift Mortgage Bond prices. Treasury prices declined as investors shifted to the risk trade. The 10-yr yield inched higher to .62%. Stocks surged as crude oil rebounded. The Dow rose 456 points. WTI oil settled at $13.80/barrel, +$2.23. The closely watched Weekly Initial Jobless Claims and New Home Sales will be released tomorrow.

Late Morning Review - The FHA, Fannie Mae and Freddie Mac have announced measures to deal with mortgage forbearance for millions of borrowers due to the economic malaise caused by the coronavirus pandemic. The FHFA has announced that Fannie Mae and Freddie Mac will purchase certain single-family mortgages in forbearance that meet specific eligibility criteria. In addition, GSE mortgage servicers will not have to advance principal and interest (P&I) for more than four months of missed payments for borrowers in forbearance. These steps are being taken to loosen credit in the housing market.

House prices rose in February but they did not reflect much, if any, influence from the coronavirus outbreak. The FHFA reports that house prices rose 0.7% in February from January and were up 5.7% in the 12 months ended in February. Dr. Lynn Fisher, Deputy Director of the Division of Research and Statistics at FHFA said, “The growth in home prices coincides with other data showing robust housing market activity in early 2020 preceding the current crisis."

Mortgage rates were unchanged in the latest week and remain near historic lows. The 30-year fixed-rate mortgage was unchanged at 3.45% with 0.29 in points and fees. Mortgage application activity showed a slight Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "The pandemic-related economic stoppage has caused some buyers and sellers to delay their decisions until there are signs of a turnaround.

Tuesday - April 21  

Market Wrap - Mortgage Bonds ended the day near unchanged while Treasury prices rose with investors streaming into the safe haven of U.S. government securities. The chaos in the oil markets along with gloomy earnings forecasts stoked fears of a steep economic downturn and pushed the major U.S. stock indexes considerably lower. The Dow suffered a 631 point loss. The 10-yr yield settled at .56%. May WTI oil closed at $10.01/barrel and expires today, the June contract will trade tomorrow. There are no major economic reports due for release tomorrow. Treasuries are living in their own world as an ultra-safe haven trade and are seeing out sized pricing gains when compared to MBS.

Late Morning Review - Social distancing guidelines caused potential home sellers to pull properties off the market in March as the pandemic continued to disrupt the U.S. economy. The National Association of REALTORS® reports that March Existing Home Sales fell 8.5% from February to an annual rate of 5.27 million units versus the 5.35 million expected. However, year over year sales increased by nearly 1%.

The median existing-home sales price rose 8% annually to $280,600 while inventories were at a 3.4 month supply, well below 6 months that is seen as normal. "We have seen an increase in virtual home tours, e-signings and other innovative and secure methods that comply with social distancing directives,” said NAR President Vince Malta continued. “I am confident that Realtors® and brokerages will adapt, evolve and fight, ensuring the real estate industry will be at the forefront of our nation’s upcoming economic recovery."

Today, the Federal Housing Finance Agency (FHFA) announced the alignment of Fannie Mae's and Freddie Mac's (the Enterprises) policies regarding servicer obligations to advance scheduled monthly principal and interest payments for single-family mortgage loans. Once a servicer has advanced four months of missed payments on a loan, it will have no further obligation to advance scheduled payments. This applies to all Enterprise servicers regardless of type or size.

Monday - April 20  

Market Wrap - Decreased Fed buying was met with a barrage of selling today which ended with lower prices for MBS. Treasury prices rose as investors shifted to the safety trade with oil prices finishing in negative territory for the first time ever. The 10-yr yield closed at .61%. WTI oil settled at -$37.63/barrel for the May contract which expires tomorrow. The June WTI oil contract, which will begin trading on Wednesday, closed at +$20.30barrel. Stocks ended lower as negative oil prices weighed on the energy sector which spread to the broader market. The Dow lost nearly 600 points. The coronavirus pandemic continues to impact global markets. Tomorrow's economic data is limited to March Existing Home Sales.

 

Late Morning Review - A recent report out by UBS Wealth Management Americas showed that despite the coronavirus pandemic, U.S. home prices could very well hold steady in 2020. The housing market began 2020 on a solid note due in part to a strong job market and low mortgage rates. However, the outbreak of the coronavirus shut down much of the nation causing an enormous amount of workers to lose their jobs. “While we do not believe widespread price declines similar to the global financial crisis of 2009 are likely, cities that rely heavily on leisure, tourism and retail sales as well as cities with very low affordability levels could be at risk for price declines," said Jonathan Woloshin of UBS.

Plunging oil prices are pushing the energy sector stocks lower today and is spreading to the broader equity markets. West Texas Intermediate oil has declined to $10.52/barrel down &.74 to levels not seen since late 1999 as supply far outweighs demand. There are oil tankers sitting in oceans around the world filled with oil no place to go. The coronavirus outbreak has essentially removed gasoline demand through travel shutdown and stay-at-home orders. The national average price for a regular gallon of gasoline fell to $1.81 today but prices will push even lower this week to near $1 in parts of the country.

200417

Forecast for next week - The upcoming week will continue to be impacted by the coronavirus headlines and the economic slowdown associated with the virus fallout.

First quarter earnings reports will continue to be released in the upcoming week with the numbers being impacted halfway through the quarter due to the coronavirus outbreak.

All eyes will continue to watch the ever-surging Weekly Initial Jobless Claims numbers after 22 million first-time claims were reported in the past four weeks. The economic calendar is on the light side.

The Federal Reserve will continue to purchase mortgage-backed securities in the open market to add liquidity and to stabilize the market, not necessarily to lower rates.

Reports to watch:

  • Housing data will come from Tuesday's Existing Home Sales and Thursday's New Home Sales.
  • Weekly Initial Jobless Claims will be released Thursday with Durable Orders and Consumer Sentiment.
 

200417 eco

Week in Review - The leading indicator on the health of the job market is the Initial Jobless Claims report, which essentially tells us the length of the unemployment line. And that line just grew.

Over the past four weeks, approximately 22 million people have filed for unemployment benefits, erasing nearly a decade worth of job creation.

Although the unemployment rate is likely 13% or higher, this is temporary in nature due to the coronavirus. We expect many people will be headed back to work relatively soon as the virus passes.

We won't see the "pre-virus" 3.5% unemployment numbers for some time. However, the economy is expected to bounce back sharply as pockets of the country begin to reopen, putting people back to work.

There remains incredible opportunity during these uncertain times. Home loan rates are at all-time lows, affording many people the opportunity to refinance and restructure their personal debt.

With the Fed continuing to buy mortgage-backed securities, rates should hover near current levels for the foreseeable future. 

Friday - April 17  

Market Wrap - Mortgage Bonds began the day in positive territory but ended lower after the Fed exited from its daily purchase operations, a trend we have been seeing. Stocks surged and ended with back-to-back weekly gains on hopes of the economy reopening along with a possible virus drug from Gilead. The yield on the 10-yr T Note ended at .64%. WTI oil was last seen at $18.11/barrel, -$1.75. 

Late Morning Review - Plans and guidelines to reopen the U.S. economy along with a report out that a new drug could treat the virus are fueling the risk-on trade today. The White House announced guidelines last night to reopen the U.S. economy in three phases in an effort to restart the world's largest economy. State governors will have the call as to when their states will reopen.

Gilead Sciences antiviral drug remdesivir, has shown promise for the treatment of the coronavirus and is causing "rapid recoveries in fever and respiratory systems with nearly all patients discharged in less than a week" in patients at a Chicago hospital, medical site STAT reported. A treatment is a game-changer folks and would go a long way to opening up our economy to full strength.

Ellie Mae reports that lower rates have pushed the number of refinancing closings rose while purchase closings slowed due to restrictions associated with COVID-19. Refinancing closings were 55% in March of total closings versus 51% in February while purchase closings were 45% from 49%. Jonathan Corr, President and CEO of Ellie Mae said, "Despite the impacts of the coronavirus and stock market fluctuations, our lenders are leveraging technology to manage borrower demand for refinances while taking into account the health and safety of all players in the mortgage origination process."

Thursday - April 16  

Market Wrap - Mortgage Bonds started the day off to the upside but ran out of steam soon after the Fed exited for the day ending in negative territory. The Dow turned a 300 point early morning loss into a slight gain at the close as tech gains outweighed weak economic data. The 10-yr yield ended near unchanged at .62% though above session lows. WTI oil closed at $19.87/barrel, unchanged and the lowest price since February 2002 as supply continues to outweigh demand by a wide margin. There are no major economic reports due for release tomorrow. 

Late Morning Review - New home-building activity plunged in March from February as the coronavirus fears spread throughout the nation. The Commerce Department reports that Housing Starts fell 22% last month from February to an annualized rate of 1,216,000 versus the 1,300,000 expected. It was the largest decline since March 1984. Starts were up 1.4% from March 2019. Single-family starts, which make up a bulk of the sector, fell 17.5% while multi-family dwellings declined 32%. Housing Starts fell across all four regions of the country.

Americans filing for first-time unemployment benefits rose to 5.245 million for the week ended April 11, above the 5 million expected to bring the four-week total to nearly 22 million. It was a decline of 1.37 million from the previous week. The unemployment numbers have been pushed higher by recent measures to allow more workers to file that now includes independent contractors and others who previously would not qualify for benefits. The four-week moving average of claims, which usually irons out seasonal abnormalities, rose to 6.066 million, a jump of 2.568 million from the previous week.

There is also additional fallout from the coronavirus. The April Philadelphia Fed Manufacturing Index came in at a negative 56.6, the lowest since 1980. Oil prices are hovering near 20-year lows at $20/barrel for West Texas Intermediate due to falling demand and higher supplies. The average price for a regular gallon of gasoline is at $1.86 with spots around the country even lower. Airlines have cut 90% of flight schedules with ultra-low fares now seen. Retailers will have to slash prices once the economy opens. The White House is expected to discuss plans for reopening the economy with governors today.

 

Wednesday - April 15

Market Wrap - Lower stock prices boosted the bond markets today as risk off was back on the table for today's trade. Mortgage Bonds ended higher though off best levels. The 10-yr yield fell to 0.63% as the price surged as we watch the .60% level. U.S. stocks fell on weak economic data and corporate earnings due to the coronavirus fallout. WTI oil closed at $19.95/barrel, -$0.16. Weekly Initial Jobless Claims will be released tomorrow where it is expected that first-time claims were 5M last wee

Late Morning Review - 

Due to the continued economic fallout and uncertainty from the coronavirus, mortgage rates fell modestly in the latest survey. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage fell four basis points in the latest week to 3.45% in the week ended April 10. It was the lowest rate in the MBA's survey history. The Market Composite Index, a measure of total mortgage loan application volume, rose 7.3%, the Purchase Index fell 2% while the Refinance Index increased 10%.

The fallout from COVID-19 continues to wreak havoc on economic numbers as well as early earnings reports. After last week's staggering 700K jobs lost in March, March Retail Sales fell 8.7%, the biggest decline since the government started tracking it in 1992. The Empire State Manufacturing Index plunged 78.2 this month, also the worst reading in its history. Incoming economic data in the next month will be simply awful and virtually impossible to forecast.

Piling on was the CDC Director Dr. Robert Redfield saying a coronavirus second wave is "definitely" coming while experts predict rolling lock downs until 2021. Weak earnings reports were seen from Goldman Sachs, Citigroup and Bank of America with the two banks looking for a wave of loan defaults in the coming months. And if that were not enough, a barrel of oil has fallen below $20 a barrel, despite Saudi Arabia and Russia agreeing to cut production. The complete lack of demand and rising supply is causing prices to fall precipitously.

 

 

Tuesday - April 14  

Market Wrap - Decreased buying in the daily Fed operations coupled with a steady stream of sellers sent MBS lower today despite a decline in U.S. stocks. Treasury prices fell on an improving coronavirus situation in key places such as New York and as the U.S. economy may open next month. The 10-yr yield inched higher to close at .77%. The Dow and S&P closed lower though off their worst levels as investors brace for coronavirus induced earnings this week. The NASDAQ turned positive near the close led by shares of Amazon. The losses for the Dow and S&P today comes after stunning gains last week. WTI oil closed at $22.42/barrel, -$0.34. There are no economic reports due for release tomorrow. 

Late Morning Review - Mortgage applications to purchase new homes unexpectedly rose in March from February due in part low rates and strong economic conditions at the start of the month. The Mortgage Bankers Association's (MBA) Builder Application Survey showed that new home purchase applications rose 14% last month and was up 21% from a year ago. The MBA expects that new home purchases in April will decrease.

The Mortgage Bankers Association reports that the number of mortgage loans requesting forbearance continues to increase. The total number of loans in forbearance rose from 2.73% to 3.74% during the week of March 30 to April 5, 2020. Mortgages backed by Ginnie Mae had the largest weekly growth and the highest overall share in forbearance requests by investor type, while independent mortgage bank (IMB) servicers continue to have a higher share of loans in forbearance.

The major U.S. stock indexes are higher today as reports continue to reveal that more U.S. states are setting sights on reopening their respective economies as the virus numbers decline. In addition, President Trump said he hoped a return-to-work plan might be "ahead of schedule." Add in the huge and growing stimulus package and there is virtually "trillions" of reasons for stocks to be optimistic. The Dow Jones Industrial Average is up 500 points in morning trading.

Monday - April 13  

Market Wrap - Decreased buying in the daily Fed operations coupled with a steady stream of sellers sent MBS lower today despite a decline in U.S. stocks. Treasury prices fell on an improving coronavirus situation in key places such as New York and as the U.S. economy may open next month. The 10-yr yield inched higher to close at .77%. The Dow and S&P closed lower though off their worst levels as investors brace for coronavirus induced earnings this week. The NASDAQ turned positive near the close led by shares of Amazon. The losses for the Dow and S&P today comes after stunning gains last week. WTI oil closed at $22.42/barrel, -$0.34. There are no economic reports due for release tomorrow. 

 

Late Morning Review - Fears of an increased likelihood of forbearance and defaults along with a drop in liquidity sent mortgage credit availability plunging in March. A decline in the index indicates lending standards are tightening, while increases are indicative of loosening credit. The Mortgage Bankers Association reports that its Mortgage Credit Availability Index (MCAI) fell by 16.1% to 152.1 last month, the lowest level since June 2015, with declines seen across all loan types. Within the report, it showed that the Jumbo MCAI fell nearly 37%.

The Fed, as well as Congress, have put forth extraordinary measures in the past few weeks in an effort to aid Americans as well as small businesses that have been and continue to be negatively financially impacted by the coronavirus shutdown. Individual taxpayers who make less than $75,000 will be eligible for $1,200 checks, and married couples filing jointly who make less than $150,000 will get $2,400. They will also be eligible for $500 for each dependent child under 17. The income amounts are based on tax returns filed for 2018 or 2019.

Gas prices at the pumps continue to decline due in part to lower oil prices as demand declines. The national average price for a regular gallon of gasoline fell to $1.86 on Monday, down from $2.30 a month ago. Trilby Lundberg, an industry analyst says, "Gas prices have declined over the past seven weeks as demand declines amid widespread stay-at-home orders during the coronavirus pandemic." The highest price ever recorded was in July 2008, at $4.11.

Thursday - April 9  

Market Wrap - Mortgage Bonds ended the week on a bright note as the Fed 'threaded the needle' this week with just the right amount of purchases. 10-yr yield ended at .72%. Stocks are ending the week with the best weekly percentage gains since 1938, closing at 4:00 p.m. ET. Locking is recommended. Stocks and bonds are closed tomorrow for Good Friday

Late Morning Review - Like the cavalry to the rescue, the Fed came over the hill today and set forth an unprecedented stimulus package to the tune of $2.3T to again provide liquidity, relief and help to stimulate the economy. From the Fed's statement this morning: The Federal Reserve on Thursday took additional actions to provide up to $2.3 trillion in loans to support the economy. This funding will assist households and employers of all sizes and bolster the ability of state and local governments to deliver critical services during the coronavirus pandemic.

Mortgage rates remained unchanged in the latest week and at historic lows due in part to uncertainty surrounding the economic fallout from the coronavirus. Freddie Mac reports that the 30-year fixed-rate mortgage was at 3.33% with 0.7 in points and fees. Low rates will continue to be seen given the current environment along with low inflation.

The number of Americans filing for first-time unemployment claims surged once again in the latest week as the shutdown continues due to the coronavirus. Weekly Initial Jobless Claims soared by 6.606 million last week bringing the three-week post-shutdown total to a staggering 16.67 million! In addition, many states can't haven't even processed many more claims given the volumes. There will be more pain to come until the government opens up the economy for business.

Wednesday - April 8  

Market Wrap - Mortgage rates were little changed in the latest survey and remain just above all-time lows. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage rose two basis points to 3.49% with 0.28 in points. The MBAs Market Composite Index fell 18%, Purchase Index declined 12% while the Refinance Index dropped 19%. Application activity fell on economic weakness and the surge in unemployment.

The coronavirus fears continue to impact all sectors of the U.S. economy due to the soaring unemployment claims and a slowing economy. Fannie Mae released its March Home Purchase Sentiment revealing that it fell 11.7 points to 80.8 in March, its lowest reading since December 2016. Consumers also reported that homebuying and home-selling conditions have worsened and took a more pessimistic view of home price growth. Doug Duncan, Senior Vice President and Chief Economist said, "Americans are reporting greater concern about their job security than at any point in the last six years. Attitudes about current home-selling environment deteriorated markedly, falling to their lowest level since January 2017."

Late Morning Review - Mortgage rates were little changed in the latest survey and remain just above all-time lows. The Mortgage Bankers Association (MBA) reports that the 30-year fixed-rate mortgage rose two basis points to 3.49% with 0.28 in points. The MBAs Market Composite Index fell 18%, Purchase Index declined 12% while the Refinance Index dropped 19%. Application activity fell on economic weakness and the surge in unemployment.

The coronavirus fears continue to impact all sectors of the U.S. economy due to the soaring unemployment claims and a slowing economy. Fannie Mae released its March Home Purchase Sentiment revealing that it fell 11.7 points to 80.8 in March, its lowest reading since December 2016. Consumers also reported that homebuying and home-selling conditions have worsened and took a more pessimistic view of home price growth. Doug Duncan, Senior Vice President and Chief Economist said, "Americans are reporting greater concern about their job security than at any point in the last six years. Attitudes about current home-selling environment deteriorated markedly, falling to their lowest level since January 2017."

Tuesday - April 7  

Market Wrap - MBS opened and closed near unchanged having as did Treasury prices with risk on today's trade. The 10-yr yield ended at .75%. The major U.S. stock indexes ended sharply higher as states weigh reopening economy and that maybe the worst of the human toll from the coronavirus has passed. The Dow gained 560 points. The closely watched S&P 500 (2,846) is now up nearly 30% from the March 23 low (2,191) and down 16% from its all time closing high (3,386) hit on February 19. WTI oil fell by $2.19 to $20.22/barrel as demand slips and inventories rise. March Retail Sales and the NAHB Housing Market Index will be released tomorrow morning. MBS are stabilizing further with Fed buys pared down to $15B per day.

Late Morning Review - Home prices rose in February after solid gains in January though before the coronavirus became a threat here in the U.S. CoreLogic reports that home prices nationwide, including distressed sales, rose 4.1% from February 2019 to February 2020. On a monthly basis, prices rose 0.6% from January to February. “Before the onset of the pandemic, the quickening of home price growth during the first two months of 2020 highlighted the strength of purchase activity,” said Dr. Frank Nothaft, chief economist at CoreLogic.

Job openings remained elevated in February before the onset of the coronavirus shutdown. The Labor Department reports that job openings were nearly 7 million in February but those numbers will fall in a big way come March and April. The past two weeks saw 10 million in first-time unemployment gains with this week's numbers expected to be in the same range. The March Jobs Report saw 701,000 jobs lost in the government's Jobs Report.

 

Monday - April 6  

Market Wrap - Decreased buying in the daily Fed operations coupled with a steady stream of sellers sent MBS lower today despite a decline in U.S. stocks. Treasury prices fell on an improving coronavirus situation in key places such as New York and as the U.S. economy may open next month. The 10-yr yield inched higher to close at .77%. The Dow and S&P closed lower though off their worst levels as investors brace for coronavirus induced earnings this week. The NASDAQ turned positive near the close led by shares of Amazon. The losses for the Dow and S&P today comes after stunning gains last week. WTI oil closed at $22.42/barrel, -$0.34. There are no economic reports due for release tomorrow. 

 

Late Morning Review - The major U.S. stock indexes are rebounding today on hopes that coronavirus cases are peaking across the globe. New York State saw a slowdown in virus-related deaths and Italy has seen the smallest amount of deaths in two weeks. Australia could begin loosening virus-related restrictions next week. The rise in equity prices is luring money from the bond markets as the yield on the 10-year T Note has risen to .66%. As Treasury prices decline, yields move higher and vice versa.

The U.S. markets will get a breather this week from the chaos that has been happening since the coronavirus hit. This week is holiday shortened with an early close on Thursday at 2:00 p.m. ET for the bond markets and both the stock and bond markets are closed for Good Friday.

Here in the U.S., there are 336,907 cases of the coronavirus that includes 234 new cases with 9,624 total deaths. There are 1,288,474 cases of the virus reported worldwide, 70,569 deaths while 272,074 having recovered from the virus. Current risk assessment from the CDC: The immediate risk of being exposed to this virus is still low for most Americans, but as the outbreak expands, that risk will increase. Cases of COVID-19 and instances of community spread are being reported in a growing number of states.

Sunday April 5th 

Forecast for the Week - The economic fallout will continue to impact Americans in the coming months with early data showing that the number of job losses in recent weeks hit 10 million. Those numbers will most likely increase given the number of people that are still trying to start new unemployment claims.

The economic environment will probably grow worse during the next few months as we continue to battle the coronavirus. Until we see the end nearing, we can only speculate the economic impact ahead. For now, we see the Fed committing to $6T to help us through this tough time, and once out the other side, we could see the U.S. economy rebound significantly by the 4th quarter.

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Friday - April 3

Week in Review - The Coronavirus has impacted millions of Americans across the country due to job loss and furloughs making it difficult, and sometimes impossible, for homeowners to make their mortgage payments.

The U.S. government has stepped in to offer homeowners financial relief during this unprecedented time with the Coronavirus Aid, Relief, and Economic Security (CARES) Act. With this new Act, government-sponsored agencies such as Fannie Mae and Freddie Mac will offer forbearance agreements with protections for those homeowners in need.

What is a forbearance? A forbearance is an agreement between a homeowner and their mortgage servicer (to whom they send their mortgage payments) to suspend payments for a period of time. The homeowner does not incur late fees or other penalties during the forbearance.

Additionally, mortgage terms are unchanged, and the homeowner agrees to make up the accrued interest and payments in the future. Typically, a forbearance will affect a homeowner's credit rating, however, there are a few differences in forbearances during COVID-19 which can be found on the Fannie Mae and Freddie Mac websites.

Loan servicers have been instructed to provide mortgage relief options which include:

  • Ensuring payment relief by providing forbearance for up to 12 months.
  • Waiving assessments of penalties or late fees.
  • Halting of foreclosures and evictions of borrowers living in homes owned by the mortgage servicer until at least May 17, 2020 (Freddie Mac).
  • Suspending the reporting to credit bureaus of past due payments of those in forbearance due to the COVID-19 emergency.
  • Offering loan modifications for payment relief to keep mortgage payments the same after the forbearance period.
  • Borrowers are eligible regardless of whether their property is an investment, second home, or owner-occupied.

Bottom line: homeowners who have the ability to pay their mortgage should do so. In the event you are unable to make a future mortgage payment, please call your mortgage servicer immediately and request assistance on forbearance under the new CARES Act.

Market Wrap - Some stabilization was seen in the mortgage bond market today as the Fed continues to 'thread a needle' for rates, LOs and lenders. Mortgage Bonds closed near unchanged with the trading range not a wide as recent days. The 10-yr yield closed near unchanged at .60%. Stocks fell as coronavirus cuts into payrolls with 701K job losses in March. WTI oil rose $3.02 to $28.35/barrel. Next week is holiday shortened with the bond markets closing early on Thursday at 2:00 p.m. ET and closed for Good Friday. U.S. stocks are also closed on Friday.

Late Morning Review -  The coronavirus fallout continues to impact the U.S. economy and will continue for several months. The March Jobs Report showed 701,000 jobs lost, far below expectations and just the first in what will be a string of historic job losses. Based on nearly 10 million unemployment claims the last two Thursdays, the unemployment rate is already closer to 10%, rather than the 4.4% that was reported this morning.

There are some Wall Street firms reporting 47 million jobs will be lost and unemployment will hit 32% before the economy can possibly turn the corner once the virus is contained here in the U.S. The loss of 701,000 jobs in March was the first time the economy lost jobs since September 2010 and the worst month for American jobs since 2009, the height of the Great Recession.

Coronavirus update: Here in the U.S., there are 245,442 cases of the virus that includes 565 new cases with 6,098 total deaths. There are 1,034,170 cases of the virus reported worldwide, 54,465 deaths while 223,025 having recovered from the virus.

Thursday - April 2  

Market Wrap - Mortgage Bonds closed with gains today with some signs of stabilization occurring as the Fed tries to 'thread the needle' by buying mortgage bonds to provide liquidity. The 10-yr yield settled at .61%. Stocks closed with gains, due in part to higher oil prices, as the seesaw trading pattern continues. WTI oil spiked to $27.39/barrel today before closing at $25.18, up nearly $4.87 on reports of supply cuts. The big news was the record high 6.7 million weekly initial jobless claims for the week ended March 28 with more of the same to come. The March Jobs Report will be tomorrow but the data is collected from about mid-month to mid-month so we may not see a crazy bad number ... that will take place for the April Jobs Report

Late Morning Review - The economic fallout from the coronavirus continues to hit American workers across the nation. Americans filing for first-time unemployment claims hit nearly 6.7 million last week after the 3.3 million in the previous week. These are record numbers in the history of modern-day America. The St. Louis Federal Reserve is forecasting 47 million to go unemployed with a 32% unemployment rate in the upcoming months. However, the St. Louis Fed went on to say that once the coronavirus is behind us we could see a swift gain in jobs.

Freddie Mac reports that mortgage rates fell in the latest survey but the data could be a bit stale given how fast rates have moved in the past few weeks. The 30-year fixed-rate mortgage fell to 3.33% with 0.7 in points and fees. Despite the low rates, potential homebuyers are staying away from the market given the current coronavirus environment. Today's rates are most likely higher in this volatile environment.

After plunging in the past month due to weak demand and oversupply, oil prices gushed higher after the White House reported that Russia and Saudi Arabia have come to an agreement to cut production. West Texas Intermediate oil hit $27/barrel after the headlines hit, up from the $20 close seen yesterday. The slump in oil prices has pushed shares of energy companies lower which in turn has cast a negative vibe throughout the broader markets.

 

Wednesday - April 1  

Market Wrap - Stocks plunged as the physical and economic toll from the coronavirus worsens. The S&P lost 4% today while the Dow lost nearly 1,000 points. Mortgage Bonds didn't react well to the dive in stocks nor to Fed buying as sellers were plentiful .. prices closed flat though off worst levels. WTI oil fell to $20.32/barrel, slightly lower.

Late Morning Review - Mortgage rates plunged in the latest survey from the Mortgage Bankers Association due to the uncertainty caused by the coronavirus. The 30-year fixed-rate mortgage fell to 3.47% from 3.82% with 0.33 in points. Low rates pushed Market Composite Index higher by 15.3%, which is total mortgage application volume. The Refinance Index rose 25.5% while the Purchase Index fell 11%. Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting said, "Buyer and seller traffic - and ultimately home purchases - will also likely be slowed this spring by the restrictions ordered in several states on in-person activities."

The coronavirus is not only impacting the health of thousands of Americans, but it is also impacting the U.S. economy. With the shutdown of many businesses across the nation, economic growth will most likely suffer in the coming months. Goldman Sachs is out forecasting -34% Gross Domestic Product (GDP) in Q2 with a 15% unemployment rate. However, the investment bank sees a 19% increase in GDP in Q3. This would represent a V-Shaped recovery. In addition, a longer-term increase in unemployment would be detrimental to the housing sector.

Payroll growth in the private sector was less bad than expected last month but the coming months will probably see more severe data. ADP Private Payrolls saw losses of 27,000 jobs, well above the loss of 175,000 expected. Today's report covers up until March 12, before the shutdown began. Job losses are expected to be massive in the coming months. The report comes ahead of the government's Jobs Report on Friday morning.

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