Morning Report: Forbearances tick up

Vital Statistics:

	Last	Change
S&P futures	3890	-9.3
Oil (WTI)	60.73	0.14
10 year government bond yield		1.44%
30 year fixed rate mortgage		3.15%

Stocks are lower this morning on no real news. Bonds and MBS are down small.

The number of loans in forbearance ticked up slightly last week, according to the MBA. 2.6 million homeowners (or 5.23% of mortgages) are in forbearance plans right now. “A small increase in new forbearance requests, coupled with exits decreasing to match a survey low, led to the overall share of loans in forbearance increasing for the first time in five weeks,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “The largest rise in the forbearance share was for portfolio and PLS loans, due to increases for both Ginnie Mae buyouts and other portfolio/PLS loans.”

Home prices rose 0.9% MOM and 10% YOY in January, according to CoreLogic. First-time homebuyers are being particularly affected by this, as there is a dearth of entry-level homes on the market, and rapid price appreciation is negating the positive effect of low interest rates.

The Fed meets this month, and will almost surely discuss the rapid increase in interest rates at the long end of the curve. One policy prescription could be a re-introduction of Operation Twist, where the Fed sells short-dated paper and buys long-term bonds as a way to flatten the yield curve. This would have the effect of pushing down long-term rates.