Morning Report: Highly profitable Q2 for independent mortgage bankers

Vital Statistics:

 

Last Change
S&P futures 3546 20.6
Oil (WTI) 42.84 0.17
10 year government bond yield 0.68%
30 year fixed rate mortgage 2.93%

 

Stocks are higher this morning on no real news. Bonds and MBS are flat.

 

Mortgage Applications fell by 2% last week as purchases were flat and refis fell by 3%. “Both conventional and government refinancing activity decreased last week, despite 30-year fixed and 15-year fixed mortgage rates declining to near historical lows,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Mortgage rates have remained below 3.5 percent for five months now, and it’s possible that refinance demand may be slowing and will not significantly increase again without another notable drop in rates.” Are we seeing prepayment burnout? Or was the 50 basis point adverse market fee adding some noise? I suspect it was the latter.

 

Independent mortgage banks made a profit of $4,548 on each loan in the second quarter, up from $1,600 in the first quarter. Average volume for the quarter was $1 billion. 96% of firms were profitable. Total production revenue increased to 429 basis points from 362 bp in the first quarter.

 

ADP reported 428,000 new jobs in August. The Street was looking for 900k. The consensus for Friday’s jobs report is 1.4 million.

 

Rental prices are collapsing in New York City and San Francisco. “Since [COVID-19] really started to affect the U.S. market in March, it has dramatically decreased the amount of people commuting to work every day—either because of social distancing measures or layoffs resulting from COVID-19’s effect on the economy. Given this, there is less of a reason for Americans to cluster in urban centers,” says Zumper analyst Neil Gerstein. “We believe this has caused a migration shift, and a subsequent demand shift, to historically cheaper cities.”

 

 

Author: Brent Nyitray

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

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