Monthly Archives: February 2016
Mortgage rates maintained recent sideways momentum today, holding inside a narrow range established last week. This range is particularly interesting to mortgage rate watchers because it is very much in the middle of 2 distinct zones. One of those zone is the recently-achieved lows. Technically, these were the lowest levels in more than 2 years, but the best few hours were very close to all-time lows.
The other zone is still far from being considered “high”–except inasmuch as we could say 30yr fixed rates were in the “high 3’s”–but it is a range that we’ve spent quite a bit more time in recently. More problematically, moving back into the “high 3’s” zone would make it look like rates had officially bounced at those multi-year lows and would now be heading steadily higher. The verdict can’t be rendered until we see more decisive movement higher or lower.
For now, the most prevalently-quoted conventional 30yr fixed rate remains 3.625% on top tier scenarios. Some of the less aggressive lenders are back up to 3.75%, but that was the case as of late last week as well.
The overall delinquency rate on mortgage loans has now fallen below historic average levels. The Mortgage Bankers Association (MBA) said on Thursday that 4.77 percent of all mortgage loans on one-to-four-unit residential properties were at the end of the fourth quarter of 2015. That rate is a seasonally adjusted one.
The rate, gathered through MBA’s National Delinquency Survey, represented a decrease of 22 basis points from the third quarter and 91 from the delinquency rate in the fourth quarter of 2014. It was the lowest level recorded by MBA since the third quarter of 2006. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.
Foreclosures were begun on properties at a rate of 0.36 percent, down 2 basis points from the previous quarter and 10 from the previous year. This start rate was the lowest since the second quarter of 2003.
Loans in the foreclosure process, sometimes referred to as the foreclosure inventory, were at a rate of 1.77 percent at the end of the fourth quarter. That was 11 basis points below the inventory at the end of the third quarter and 50 points lower than on December 31, 2014. The foreclosure inventory has not been that low since the third quarter of 2007.
Serious delinquencies, loans that are 90 or more days past due, including those in foreclosure, represented 3.44 percent of all mortgages, the lowest rate since the third quarter of 2007. The rate was a 13 basis point decrease quarter-over-quarter and 108 points year-over-year.
Marina Walsh, MBA’s Vice President of Industry Analysis, said “As the job market has improved and national home prices have rebounded, fewer borrowers were becoming seriously delinquent, while borrowers previously behind on their payments were in a better position to pursue alternative options to resolve delinquent loans.
Walsh noted that the overall delinquency rate is now back to pre-recession levels, “and at 4.8 percent, was lower than the historical average of 5.4 percent for the time period 1979 to 2015. The rate at which new foreclosures were started decreased to 0.36 percent, the lowest rate since 2003 and only one-fourth of the record high level during the worst of the foreclosure crisis in the third quarter of 2009.”
“Mortgage performance is closely connected to job market health and most states saw employment growth continue over the past year,” she said. “However, there were increases in the foreclosure starts rate in a handful of states that have economies closely tied to the oil industry. Out of 12 states that had an increase in foreclosure starts in the fourth quarter, five of those were in states with oil-dependent local economies. Oklahoma, North Dakota, Louisiana, Colorado, and Texas saw increases in new foreclosures while the national average continued to trend lower.
“Foreclosure inventory rates continued to decline in both judicial and non-judicial states. New Jersey and New York, which lead the nation in foreclosure inventory rates, had the largest year-over-year declines in their respective histories.
Mortgage rates were mostly unchanged today, though a few lenders were microscopically higher in cost. That’s an uncommon result for the day of the big jobs report release, but in today’s case it may be somewhat understandable.
More often than not, the most important part of the Employment Situation data–at least as far as markets are concerned–is the top line job creation (aka “nonfarm payrolls” or simply, NFP). The median forecast for today’s NFP was 190k and actual job creation fell well short of that at 151k. Normally, that’s all bond/mortgage markets would need to know before moving toward lower rates, but there were caveats.
The unemployment rate moved slightly lower than expected and wage growth improved much more than expected. The latter has been increasingly important when it comes to deciding how to react to the jobs report each month. When combined, the caveats were enough to offset the slower pace of job creation. Bond markets were weaker in the morning, resulting in most lenders beginning the day with slightly higher rates. Bonds improved in the afternoon as stocks and oil prices fell, allowing some lenders to release rate sheet improvements, thus bringing the average back near unchanged levels.
The most prevalently-quoted conventional 30yr fixed rate remains 3.75% for top tier scenarios with a handful of the more aggressive lenders at 3.625%. The average lender is right in line with their lowest rates in more than 8 months.
Mortgage rates had a far more tumultuous day despite ultimately hanging on to the lowest levels in more than 8 months. Whether you wanted to be happy, sad, excited, or scared, there was something for everyone today. The bond markets that underlie mortgage rate movement began the day in weaker shape (implying higher rates). We’ll never know if they would have been content to stay there because an important economic report sent bond yields and stock prices screaming lower at 10am. Lenders who hadn’t yet put out their first rate sheets of the day were able to open up at new 8-month lows. Of the lenders who already had rate sheets out, most ended up publishing mid-day improvements within an hour or two.
Despite a gentle drift back in the wrong direction, it looked like rates were set to hold their ground at the new, lower levels. Things changed in the afternoon as equities markets quickly recovered all of their losses for the day. This is/was important because stock market weakness has been a feather in the cap of bond market strength and the mortgage rate rally. Bonds couldn’t help but weaken amid the stock surge. Most of the lenders who had previously recalled rate sheets for a positive reprice now did so for negative reprices. The net effect is very little movement from yesterday’s latest levels, but perhaps another modicum of motivation to capitalize on these rates while they remain as low as they are.
So to recap, that’s “higher, lower, higher” on the day to end in line with yesterday’s levels or slightly better. 3.75% is the most prevalently-quoted conventional 30yr fixed rate with 3.625% being a runner up on top tier scenarios.