Morning Report: Originations declined in the third quarter

Vital Statistics:

S&P futures4,56427.2
Oil (WTI)67.821.58
10 year government bond yield 1.38%
30 year fixed rate mortgage 3.30%

Stocks are higher this morning on hopes that the Omicron variant of COVID will be more mild than other strains. Bonds and MBS are down.

The upcoming week will be relatively data-light, as is typical following the jobs report. The biggest numbers will include the Consumer Price index on Friday, and job openings on Wednesday. There is no Fed-speak as we are in the quiet period ahead of the December FOMC meeting next week.

While the Fed isn’t expected to do anything with interest rates next week, the Street thinks the central bank might double the pace of tapering. This would explain some of the widening in MBS spreads.

The number of mortgage loans in forbearance fell below 1 million last week, according to data from Black Knight. Forbearance plans are down 18% from a month ago.

Mortgage origination hit 3.59 million units in the third quarter, according to data from ATTOM. This is up 3% from the same quarter last year, but is down 8% from the second quarter. In 2021, we saw quarter-over-quarter declines in Q2 and Q3, which is rare given that this is the seasonally strong period. That said, Q1 of 2021 was an exceptionally good quarter and the good times couldn’t necessarily last.

“The overflow stack of work that was hitting lenders for several years shrank again in the third quarter across the U.S. amid a few emerging trends,” said Todd Teta, chief product officer at ATTOM. “It looks more and more like homeowner’s voracious appetites for refinance deals has eased notably, while purchase lending also dipped. It’s still too early to say if the trends point to major shifts in lending patterns or the broader housing market boom. But the drop-off is significant, especially for home buying, which could suggest an impending housing market slowdown. We will be watching the lending trends extra closely in the coming months.”

I would also add that this report looks only at units, and not dollar volume. If you look at dollar value, the drop was only 6% since home prices (and average loan sizes) are rising.


Author: Brent Nyitray

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

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