Morning Report: Loans in forbearance fall

Vital Statistics:

 LastChange
S&P futures340229.6
Oil (WTI)37.710.46
10 year government bond yield 0.69%
30 year fixed rate mortgage 2.92%

Stocks are higher this morning on good overseas economic news. Bonds and MBS are flat

The FOMC meeting begins today. We will get the official policy announcement tomorrow afternoon. There is talk that the Fed will change its inflation targeting policy from managing a single point in time to an average over time. The practical effect will be for the Fed to let inflation build before raising rates.

August new home purchase applications rose 33% YOY, according to the MBA. “The housing market continued to exceed expectations in August, as housing demand for new homes stayed strong and the job market continued to recover,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Despite economic uncertainty and the pandemic’s distortions to typical seasonal patterns, the comparisons to August 2019 show strength.”

The number of loans in forbearance fell by 15 basis points to 7.01% of mortgage servicers’ portfolio. Fannie and Freddie loans fell to 4.65%. Ginnie Mae loans fell to 9.12% and non-QM / portfolio rose to 10.71%. Part of the reason for the big drop in Ginnies / increase in portfolio loans was due to early buyout activity, where investors buy delinquent Ginnie loans out of the pool and portfolio them.

“The beginning of September brought another drop in the share of loans in forbearance, with declines in both GSE and Ginnie Mae forbearance shares,” said MBA Chief Economist Mike Fratantoni. “However, at least a portion of the decline in the Ginnie Mae share was due to servicers buying delinquent loans out of pools and placing them on their portfolios. As a result of this transfer, the share of portfolio loans in forbearance increased. Forbearance requests increased over the week, particularly for Ginnie Mae loans. With just under 1 million unemployment insurance claims still being filed every week, the lack of additional fiscal support for the unemployed could lead to even higher increases of those needing forbearance.”

In other economic data, the New York Empire State Survey improved last month, while industrial production rose 0.4% while manufacturing production rose 1%. Capacity Utilization rose to 71.4%.

Author: Brent Nyitray

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

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