Stocks are higher this morning as oil prices stabilize and bonds find a level. Bonds and MBS are up small.
We are coming up on the end of the quarter, where asset allocators begin to make adjustments for the upcoming quarter. We could see some swings in the bond market over the next couple of days which will be exacerbated by the PCE report tomorrow.
Mideast oil exports are picking up as shippers become better at avoiding Iranian drones and other pipelines pick up the slack. Current Middle Eastern oil shipments are running around 80% of pre-war levels. Daily volume was 13MM barrels per day, which is much higher than the roughly 7.5MM / day we saw during the summer. So things are improving despite a stalemate on the hostilities side.
Delinquencies ticked up 14 basis points last month to 3.53% according to the ICE First Look. This is up 10 basis points on a YOY basis, but is still well below pre-pandemic levels. The seriously delinquent rate remained at 1.04% or about 574,000 homes.
Foreclosure starts ticked down 6%, but are up 29% YOY. Foreclosure inventory build was only 2,000 units to 89,000 units which is still up 41% YOY. Foreclosure volumes were depressed due to COVID-era restrictions, but are returning to more normal levels. The current foreclosure percent (0.54%) is more or less where we were in February 2020.
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The MBA Annual conference in Chicago is rapidly approaching. Are you looking to hedge a pipeline of non-QM loans or your servicing portfolio? CME Group lists SOFR futures including Eris SOFR Swap futures and are an excellent way to manage this risk. Plus, with the rollout of Eris Options this past summer, you have even more tools to tailor your strategy. Talk to John Douglas at john.douglas@erisfutures.com to book a meeting.
In addition, Eris Innovations will also have a cocktail hour on Monday afternoon. Space is limited. Please reach out to john.douglas@erisfutures be placed on the guest list.
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MBA CEO Bob Broeksmit laid out three ways the government could improve housing affordability. First, he says that FHFA could direct Fan and Fred to lower their LLPAs overall or do something for first time homebuyers. Note I wrote an article advocating just that earlier this year. He argued that the GSEs are charging too much in g-fees for the amount of risk they are taking.
“Housing is too big a part of the economy for it to flounder, and there are things we can do immediately to rejuvenate it,” Broeksmit stated.
He started with the guarantee fees and the loan-level price adjustments from the GSEs, both of which he categorized as “too high.”
“If you look at their quarterly profits and you look at the credit quality of the loans they close, there’s a big mismatch between the price they’re exacting and the risk they’re taking,” Broeksmit said.
“You could do that with an across-the-board change to LLPAs,” Broeksmit noted. “You could do it targeted to first-time home buyers, you could do it to certain loan amounts. You could turn it into a closing cost credit. There are myriad ways to do this.”
I like the idea of a LLPA adjustment targeted to first time homebuyers because it won’t just push up prices across the board which defeats the purpose.
He also said that FHA could lower its insurance premium as well and there could be something done on credit scores.
