Morning Report: Fed week

Vital Statistics:

 

Last Change
S&P futures 3218 14.6
Oil (WTI) 41.54 0.22
10 year government bond yield 0.58%
30 year fixed rate mortgage 2.98%

 

Stocks are higher this morning in anticipation of further stimulus out of DC. Bonds and MBS are flat.

 

The FOMC will meet this week. There should be no changes to monetary policy, but perhaps there will be discussions about further measures the Fed could take to support the economy.

 

Aside from the Fed, we will get the first pass at second quarter GDP on Thursday. The consensus is a decline of 35%. Friday will have personal income and outlays. We will also get consumer confidence numbers this week.

 

Black Knight is acquiring Optimal Blue from Cannae Holdings. “Optimal Blue is a business that we have respected for many years. By bringing Optimal Blue into the Black Knight family, we will be adding industry-leading product, pricing and eligibility (PPE) capabilities to our already robust set of solutions and enhancing our already comprehensive data and analytics capabilities,” said Anthony Jabbour, CEO of Black Knight. “In addition to Optimal Blue’s high-quality and passionate management team, we are pleased and honored to be partnering with two experienced and successful investors in Cannae and THL, both of which we have known and respected for a long time and are confident will provide meaningful value-add.” Cannae is trying to acquire CoreLogic, which just reported earnings this morning.

 

1 in 3 homeowners could save $300 a month on their mortgage payment by refinancing. This works out to be 15.6 million homeowners. That said, many are unable to refi due to tighter credit these days. “Mortgage lenders are being exceptionally cautious about who they lend to, in part due to a fear of borrowers who immediately request forbearance on the loan, before the loan can be sold on by the issuer,” said Jeff Tucker, economist at Zillow.com. “This is putting pressure on lenders to effectively narrow their credit box, especially reducing access for borrowers with FICO scores below 700.”

 

Jumbo mortgages are no longer the cheapest mortgages around. In mid-July, the average rate on a jumbo was 3.77%, about 40 basis points higher than the typical conforming rate. This reversed a trend that had been in place since 2015. Blame COVID and the resulting stress in the financial markets. Jumbo and non-QM securitizations dried up in March and have yet to return. Forbearance is an issue as well, with 10% of jumbos in forbearance versus 8% for all mortgages.

 

The Trump Administration reversed a particularly aggressive reading of the Affirmatively Furthering Fair Housing rule implemented by the Obama Administration which attempted to Federalize local zoning restrictions. Despite all the howling in the media, we are just going back to the standard that existed from 1968 through 2015.

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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