Morning Report: Jerome Powell returns to the Hill

Vital Statistics:

	Last	Change
S&P futures	3,778	17.82
Oil (WTI)	106.38	0.24
10 year government bond yield		3.07%
30 year fixed rate mortgage		5.90%

Stocks are higher this morning as Jerome Powell heads to the Hill to testify in front of the House. Bonds and MBS are up.

Jerome Powell reiterated his commitment to reducing inflation and said a recession is a possibility. “At the Fed, we understand the hardship high inflation is causing. We are strongly committed to bringing inflation back down, and we are moving expeditiously to do so,” the Fed chief said in remarks for the Senate Banking Committee. “We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses. Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2%,” Powell said. “We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy.”

Despite the increase in interest rates, the employment market remains resilient. Initial Jobless Claims ticked down slightly to 229,000 last week, which is still historically very low.

The CFPB is reviewing the Non-QM rule. The CFPB’s Qualified Mortgage Rules to explore ways to spur streamlined modification and refinancing in the mortgage market, as well as assessing aspects of the “seasoning” provisions. The other thing probably worth exploring is the APOR / HPML issue and how it is applied in a period of rapidly rising interest rates.

The number of mortgages in forbearance fell last week to 0.85% from 0.94%. So far we are seeing scant evidence that the increase in interest rates and the weakening economy is having an effect on loan performance. “Servicers are whittling away at the remaining loans in forbearance, even as the pace of monthly forbearance exits slowed in May to a new survey low,” said Marina Walsh, CMB, MBA Vice President of Industry Analysis. “Most borrowers exiting forbearance are moving into either a loan modification, payment deferral or a combination of the two workout options.”