Morning Report: New home sales surge

Vital Statistics:

 

Last Change
S&P futures 3439 12.6
Oil (WTI) 43.54 0.87
10 year government bond yield 0.69%
30 year fixed rate mortgage 2.92%

 

Stocks are higher this morning after the US and China reaffirmed their commitment to a trade deal. Bonds and MBS are down.

 

New Home Sales came in at 900k, much higher than the 754k expected. This is the highest print since 2006.

 

new home sales

 

Energy prices are rising as Hurricane Laura has shut down natural gas and oil terminals. Servicers already lugging portfolios of loans in forbearance will now have to deal with additional disaster-related delinquencies.

 

Home prices were flat MOM in June, according to the Case-Shiller index. On an annual basis they were up 4.3%. The FHFA Index, which uses a different methodology, reported home prices rose 0.9% MOM and are up 5.7% on a YOY basis.

 

The Mortgage Bankers Association reported that the share of loans in forbearance was flat last week as 3.6 million homeowners (or about 7.2% of loans) are in plans. Ginnie Mae loans were flat at 9.54% and private label (jumbo and non-QM) are 10.37%. “The share of loans in forbearance declined for the 10th week in a row, but the rate of improvement has slowed markedly,” said MBA Chief Economist Mike Fratantoni. “The extremely high rate of initial claims for unemployment insurance and high level of unemployment remain a concern, and are indications of the challenges many households are facing. While new forbearance requests remain low, particularly for Fannie Mae and Freddie Mac loans, the pace of exits from forbearance has declined for two straight weeks.”

 

Economic activity decelerated in July however it is still growing above trend, according to the Chicago Fed National Activity Index.

 

Mortgage lenders are asking borrowers to confirm they don’t plan to seek forbearance right away. While the language varies, it generally says that borrowers certify they won’t seek forbearance until the loan is guaranteed by the government. Given that Fannie and Freddie charge either 5% or 7% to buy loans in forbearance, this is important. For mortgage lenders, the forbearance penalty is an added concern. “The hit more than wipes out your margin—over something you have no control over,” said Esther Phillips, senior vice president of sales at Key Mortgage Services Inc. “You can’t control what customers do after you close.” Key’s form asks borrowers to certify they haven’t applied for forbearance from any mortgage payments and have no plans to ask for it.

Author: Brent Nyitray

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

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s