CFPB – The Daily Tearsheet

Morning Report: Number of mortgages in forbearance drops

Vital Statistics:

	Last	Change
S&P futures	3142	34.1
Oil (WTI)	41.14	0.49
10 year government bond yield		0.73%
30 year fixed rate mortgage		3.16%

Stocks are higher despite a trade scare overnight. Bonds and MBS are down small.

I was interviewed by Steve Glener at IMN about the economy and housing. You can access the podcast here.

The Markit Purchasing Managers Index (a survey of businesses on the economy) came in better than expected. Manufacturing was a bit stronger than services. Overall it looks like the economy is back on trend.

The MBA has a new origination forecast for 2020. They expect to see $2.65 trillion in origination this year. I think the previous forecast was something like $2.05 trillion, so it is quite the jump. This should be the best year for originators since 2006, when Angelo Mozillo was a fixture on CNBC.

Despite the strong forecast, mortgage credit remains tight. Jumbos are hard to get, most lenders have high minimum FICOs for FHA, and the private label market is still digesting all the production from pre-COVID. My guess is that credit won’t ease up to pre-COVID levels until the whole forbearance issue is in the rear view mirror.

The number of loans in forbearance fell to 8.48%, according to the MBA. This is a decline from the 8.55% in the previous week and is the first decline in the MBA’s series. “The lower share of loans in forbearance was led by declines in GSE and portfolio and PLS loans, as more of those borrowers exited than entered a new forbearance plan,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “Fewer homeowners in forbearance underscores the continued improvements in the job market, and provides another sign of the fundamental health of the housing market, which has rebounded considerably over the past several weeks.”

The CFPB put out a notice of rulemaking for dealing with the QM Patch. “The GSE Patch’s expiration will facilitate a more transparent, level playing field that ultimately benefits consumers through promoting more vigorous competition in mortgage markets,” said CFPB Director Kathleen L. Kraninger. “The Bureau is proposing to replace the Patch with a price-based approach to QM loans to preserve consumer access to mortgage loans while also making sure consumers have the ability to repay them. ” Essentially, the 43% DTI test will be eliminated and the CFPB will use a price test, which checks the loan’s interest rate versus the average prime offer rate for a comparable transaction. There will be an adjustment for smaller balance loans and manufactured housing loans. It will be interesting to see if they make some sort of adjustment for people who are willing to pay a higher rate in order to bring less money to the closing table.

Manhattan real estate prices could drop 10% more. Prices were already down 15% even before COVID-19, so it sounds like the NYC market is going to be a bit heavy.

Why working from home may be the new normal.

Morning Report: Rates steady

Vital Statistics:

	Last	Change
S&P futures	3239	12.25
Oil (WTI)	51.46	0.19
10 year government bond yield		1.37%
30 year fixed rate mortgage		3.55%

Stocks are higher this morning as coronavirus fears ease. Bonds and MBS are flat.

The 10 year bond yield traded briefly yesterday below the 2016 closing low of 1.37%. So far, that level seems to be holding. The trader in me thinks that any sort of good news on the coronavirus front will send rates back up 10 – 20 basis points. Big moves generally have decent retracements, and the 1.37% seems to be providing technical support. Note that the German Bund is not at record lows and any bounce up in rates there will be felt in the US. While it feels like the path of least resistance is down in rates over the long term, that might not be the case over the next few weeks. Lock accordingly.

Home prices rose 0.4% MOM and 2.9% YOY according to the Case-Shiller Home Price Index. Separately, the FHFA House Price Index rose 0.6% MOM and 5.1% YOY. The FHFA index only looks at homes with conforming mortgages, so it excludes jumbos and distressed.

It looks like economic growth improved in January, according to the Chicago Fed National Activity Index. Note that Goldman and others are taking down Q1 GDP growth estimates based on Coronavirus.

Intuit is buying Credit Karma, which will help the company create a “personalized financial assistant” to help people manage their money. Credit Karma bought Approved, a digital mortgage platform in 2018, and this will be part of the strategy. “We wake up every day trying to help consumers make ends meet. By joining forces with Credit Karma, we can create a personalized financial assistant that will help consumers find the right financial products, put more money in their pockets and provide insights and advice, enabling them to buy the home they’ve always dreamed about, pay for education and take the vacation they’ve always wanted.”

Joe Biden has a housing plan, which includes returning to the Obama-era CFPB practices (presumably regulation by enforcement action), spending $100 billion on affordable housing, and a tax credit of up to $15,000 for first time homebuyers. The plan also includes aid for low-income renters and a task force to combat homelessness.

Morning Report: New Home Sales flat but trend is steadily upward

Vital Statistics:

	Last	Change
S&P futures	3259	20.25
Oil (WTI)	53.38	0.22
10 year government bond yield		1.62%
30 year fixed rate mortgage		3.71%

Stocks are up this morning as the tape exhibits a risk-on feel. Bonds and MBS are down small.

The FOMC meeting begins today. No changes in rates are expected, but market participants will be watching for changes in the interest on overnight reserves and changes in the Fed’s balance sheet.

Durable goods orders rose 2.4%, which was better than expected although the volatile transportation sector accounted for the growth. Ex-transportation they fell 0.1%. Capital expenditures continue to disappoint, falling 0.9%.

Home prices rose 0.5% MOM and 2.6% YOY according to the Case-Shiller home price index.

New home sales were roughly flat with November, but are up 23% on a year-over-year basis. For the year, new home sales came in at 681,000, up 10% from 2018. As you can see from the chart below, we are back towards historical norms, but given the increase in population, that isn’t enough.

Homebuilder D.R. Horton reported Q1 earnings that impressed the Street, with earnings up 53% and revenues up 14%. Orders were up 19% in units and 22% in dollar volume. The cancellation rate fell to 20% from 24%. The stock was up 2% in what was otherwise a putrid tape.

Black Rock’s bond strategist sees bond yields falling another 10 – 15 basis points, as uncertainty over coronavirus and the election seeps into the market. If the virus gets materially worse, and travel and business becomes curtailed, then we could be looking at 1.3% on the 10 year.

The CFPB has issued a statement on how it intends to police abusive behavior by lenders. The Bureau has decided that the definition of abusive behavior is too vague, and that uncertainty is having a negative effect on consumers by driving overly-cautious behavior in lenders. The money quote:

First, consistent with the priority it accords to the prevention of harm, the Bureau intends to focus on citing conduct as abusive in supervision or challenging conduct as abusive in enforcement if the Bureau concludes that the harms to consumers from the conduct outweigh its benefits to consumers. Second, the Bureau will generally avoid challenging conduct as abusive that relies on all or nearly all of the same facts that the Bureau alleges are unfair or deceptive. Where the Bureau nevertheless decides to include an alleged abusiveness violation, the Bureau intends to plead such claims in a manner designed to clearly demonstrate the nexus between the cited facts and the Bureau’s legal analysis of the claim. In its supervision activity, the Bureau similarly intends to provide more clarity as to the specific factual basis for determining that a covered person has violated the abusiveness standard. Third, the Bureau generally does not intend to seek certain types of monetary relief for abusiveness violations where the covered person was making a good-faith effort to comply with the abusiveness standard.

The MBA has more analysis of the change here.

Morning Report: Fannie takes up growth estimates

Vital Statistics:

	Last	Change
S&P futures	3331	11.25
Oil (WTI)	57.78	-0.64
10 year government bond yield		1.78%
30 year fixed rate mortgage		3.88%

Stocks are higher this morning on strong earnings out of IBM. Bonds and MBS are flat.

Home prices rose 0.2% MOM / 4.9% YOY according to the FHFA House Price Index. We are seeing growth pick up in New England and the Middle Atlantic, which have been laggards since the bubble burst.

Mortgage applications fell by 1.2% last week as both purchases and refis fell slightly. “Mortgage applications dipped slightly last week after two weeks of healthy increases, but even with a slight decline, the total pace of applications remains at an elevated level,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “The purchase market has started 2020 on a strong note, running 8 percent higher than the same week a year ago. Refinance applications remained near the highest level since October 2019, as the 30-year fixed rate was unchanged at 3.87 percent, while the 15-year fixed rate decreased to its lowest level since November 2016.”

Kathy Kraninger of the CFPB apparently sent a letter to Congress last week discussing the “QM patch” and recommending that regulators move away from debt-to-income ratios and use alternative measures as a way to determine ability to re-pay. The CFPB indicated that it does intend to extend the QM patch for a short while as the industry adapts to the new rules. The QM patch (which allows loans with DTIs over 43% to qualify for safe harbor provided they are saleable to Fannie and Fred) is set to expire in January 2021. The MBA made a statement on the proposal: “MBA appreciates CFPB Director Kathy Kraninger’s intention to temporarily extend the GSE patch and move away from the use of a standalone debt-to-income ratio,” Broeksmit said. “MBA has urged the Bureau to eliminate the use of DTI ratios as a standalone threshold in the QM definition, which would also remove the need to use the rigid, outdated Appendix Q methodology for calculating borrower income and debt. We look forward to working with the Bureau, and other stakeholders, on the proposed rule.”

Fannie Mae is out with a prediction that 2020 will be a good year for housing. Given Friday’s 1.6 million housing starts number, 2019 ended on a strong note – the highest in 13 years. While we have become accustomed to housing starts around 1.3 million since the bust, that is well below normalcy. In booms, it is not unusual to top 2 million. Fannie took up their GDP estimate a hair from 2.3% to 2.4%. In addition, they expect rates to remain stable. Origination volume is expected to moderate about 5% to $2.06 trillion, with purchase volume increasing 8% and refi volume falling 25%. Note that Realtor.com thinks there is a 4 million unit shortage right now.

Morning Report: MBA urges tweaks to the CFPB

Vital Statistics:

	Last	Change
S&P futures	3199	3.25
Oil (WTI)	60.61	-0.34
10 year government bond yield		1.89%
30 year fixed rate mortgage		3.96%

Stocks are flattish this morning on no real news. Bonds and MBS are flat as well.

Mortgage Applications fell by 5% last wee as purchases fell 2% and refis fell 7%. Mortgage rates were mostly unchanged, even as a potential trade deal between the U.S. and China caused rates to inch forward at the end of last week,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “With rates showing little meaningful movement, both refinance and purchase activity took a step back. As we move into the slowest time of the year for home sales, purchase application volume is declining but continues to outperform year-ago levels, when rates were much higher. Purchase activity was 10 percent higher than a year ago.”

Job openings ticked up to 7.3 million at the end of October, according to the BLS. Retail, financial, and durable goods manufacturing saw the biggest increases. The quits rate was stuck at 2.3%, which is odd given that the labor market is strong and wages are increasing.

iBuying, which means buying or selling property via platforms like Zillow, Opendoor or Offerpad accounted for 10% of all sales in several MSAs. These platforms permit the buyer and seller to bypass the traditional realtor and sell their properties directly to the company sponsoring the exchange. Does this save the seller money, since they aren’t paying realtor commissions? Not really. Zillow charges a 7.5% fee on average, which is higher than the 6% in realtor commissions a seller typically pays. That extra 1.5% is a convenience fee – you don’t have to stage the property, you get a non-contingent offer within a few days, and can sew the process up in a week or two.

The MBA and NAR filed amicus briefs urging the Supreme Court to maintain the CFPB, but to remove the language that says a Director can only be removed for cause. “When determining how to remedy an unconstitutional statute, courts seek to give effect to congressional intent and to avoid unnecessary disruption,” the brief said. “Striking down the entirety of the CFPA, or declaring it unconstitutional without addressing severance, would eliminate or call into question the legitimacy of the detailed, technical regulations that govern past and future real estate finance transactions, not to mention the authority of a federal agency responsible for enforcing a host of consumer protection laws. Such an outcome would immediately cause significant disruption to the American economy, overturning regulatory guideposts, upsetting settled expectations, and creating substantial uncertainty in our housing markets, all in contravention of Congress’s clearly expressed intent to promote financial stability. The Court should avoid causing such harm. Accordingly, in the event that the Court finds the for-cause removal provision unconstitutional, it should sever that provision from the statute.”

After yesterday’s blockbuster housing starts data, Fannie Mae took up their estimates for homebuilding in 2020. They anticipate housing starts will increase by 10% and housing will be the sector that leads the economy going forward.

Morning Report: FOMC minutes confirm no move in December

Vital Statistics:

	Last	Change
S&P futures	3110	1.25
Oil (WTI)	57.39	0.74
10 year government bond yield		1.76%
30 year fixed rate mortgage		3.93%

Stocks are flat this morning after China invited the US for trade talks in Beijing despite the resolution backing Hong Kong. Bonds and MBS are down small.

In economic data, initial jobless claims were flat at 227,000 last week and the Philadelphia Fed manufacturing survey improved.

The CFPB is conducting an assessment of the TRID rule. There doesn’t appear to be any specific issues the CFPB is looking to address, but it is part of the Trump Administration’s push to eliminate unnecessary burdens on business.

Independent mortgage banks had their best quarter in 7 years as pretax production profit rose to 74 basis points from 64 in the prior quarter. “A surge in refinance activity and a healthy purchase market led to robust mortgage volume in the third quarter, pushing up production profits to a high not seen since the fourth quarter of 2012 ($2,256 per loan),” said Marina Walsh, MBA Vice President of Industry Analysis. “The increase in profits was primarily driven by declining production expenses and higher loan balances, which mitigated the effects of lower basis-point revenue.” Interestingly, production revenue and secondary marketing income fell. The purchase share of the market fell from 74% to 60%.

Bold prediction: Within the next two years, we will see the majority of loans go through the entire process without any human involvement. It will be a much more mechanized process.

The minutes from the Fed confirmed the market’s view that the central bank will be out of the picture for a while. They removed the “act as appropriate” language in order to signal that stance. From the minutes:

In describing the monetary policy outlook, they also agreed to remove the “act as appropriate” language and emphasize that the Committee would continue to monitor the implications of incoming information for the economic outlook as it assessed the appropriate path of the target range for the federal funds rate. This change was seen as consistent with the view that the current stance of monetary policy was likely to remain appropriate as long as the economy performed broadly in line with the Committee’s expectations and that policy was not on a preset course and could change if developments emerged that led to a material reassessment of the economic outlook.

Translation: We aren’t moving in December. Note the Fed Funds futures agree with that assessment, although they are predicting more cuts in 2020. FWIW, the Fed generally tires to avoid modifying policy in the months leading up to an election for fear of appearing political. That said, the March futures are pricing in about a 25% chance of a cut.

Is the REO-to-Rental trade finally done? Blackstone has finally exited its entire position in Invitation Homes, which it created in the aftermath of the financial crisis. Invitation was one of the first to buy up distressed properties and rehab them to rent. Turns out Blackstone tripled its money on the trade.

Morning Report: A look ahead to the regulatory environment for the financial industry

Vital Statistics:

	Last	Change
S&P futures	2996	7.25
Oil (WTI)	53.47	-0.44
10 year government bond yield		1.78%
30 year fixed rate mortgage		3.97%

Stocks are higher this morning on expectations of an orderly Brexit and optimism on trade. Bonds and MBS are down.

Not a lot of market-moving data this week, although we will get a lot of housing indicators, with existing home sales, new home sales, and house prices. Note the FOMC meets next week, and it is looking like a lock that they will cut rates. The Fed funds futures are now handicapping a 91% chance of a cut.

The Index of Leading Economic Indicators declined in September, as trade concerns and manufacturing offset strength in other areas. “The US LEI declined in September because of weaknesses in the manufacturing sector and the interest rate spread which were only partially offset by rising stock prices and a positive contribution from the Leading Credit Index,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “The LEI reflects uncertainty in the outlook and falling business expectations, brought on by the downturn in the industrial sector and trade disputes. Looking ahead, the LEI is consistent with an economy that is still growing, albeit more slowly, through the end of the year and into 2020.”

It looks like the structure of the CFPB is going to be decided by the Supreme Court. The issue with the CFPB goes back to its structure, which makes it nearly impossible to remove a director. The idea was to make the CFPB less influenced by politics, however it also makes it completely immune to oversight and accountability. The case will move forward without the support of the government, as CFPB Director Kathy Kraninger doesn’t support the structure of the agency either. If the CFPB’s structure is declared unconstitutional, it wouldn’t mean the end of the agency, it would mean that the single, unfireable director would be replaced by a bipartisan board, which was actually the initial proposal when the CFPB was created during the drafting of Dodd-Frank.

Elizabeth Warren threatened to ban fracking if she wins the presidency. “On my first day as president, I will sign an executive order that puts a total moratorium on all new fossil fuel leases for drilling offshore and on public lands. And I will ban fracking—everywhere.” Needless to say, this would be incredibly disruptive to the US economy as natural gas prices would increase to $9.00 to $15 per mBTU, compared to current prices of around $2.00 – $2.50. Since natural gas is the main way we generate electricity, consumers and industry would feel it immediately, and this would cause uncertainty on steroids, and make Trump’s trade concerns look like a minor annoyance. She would be able to implement many changes via executive order, and she intends to use it. Given that Joe Biden is having trouble fundraising, it is looking more like a lock that she gets the nomination. Even some left-leaning pundits are worried.

What would that mean for the mortgage banking business? Regulations will undoubtedly be tightened, but they probably will affect the bigger banks more than the independent operators. She says she wants to re-implement Glass-Steagall, which is really a solution in search of a problem. However, if she succeeds in raising taxes and energy prices as much as she intends, it would almost certainly be the final nail in the longest running expansion ever, and that means the Fed Funds rate is probably heading back to zero. A return to ZIRP almost certainly means the 10 year will breach the 1.47% low set in 2012, which will would create another refi wave similar to the years immediately after the financial crisis. So, perversely a Warren presidency could be great for the mortgage banking business, as the industry feasts on easy refinances.

Morning Report: Housing is coming back

Vital Statistics:

	Last	Change
S&P futures	3003.75	4.25
Oil (WTI)	58.37	-0.94
10 year government bond yield		1.78%
30 year fixed rate mortgage		4.00%

Stocks are flattish as we await the FOMC decision at 2:00 pm EST today. Bonds and MBS are up.

Housing starts increased 12.3% MOM and 6.6% YOY to a seasonally adjusted annual rate of 1.36 million. This is the highest in 12 years. July was revised upward as well. Building Permits rose 7.7% MOM and 12% YOY to 1.4 million, which is close to historical levels (non-population adjusted). This data seems to comport with the MBA’s 30% rise in purchase activity. Permit activity increased the most in the Northeast, while falling in the Midwest.

Mortgage applications were flat last week despite a huge back up in rates. There was also an adjustment for Labor Day, so that will affect the numbers. Purchases rose 6%, while refis fell 4%. The average rate on a 30 year fixed rose 19 basis points to 4.01%, and government loans increased share.

CFPB Chair Kathy Kraninger believes her job security is unconstitutional and supports a Supreme Court review of a case pending before the 9th Circuit. Essentially, Dodd-Frank made the head of the CFPB basically untouchable – the President can only fire “for cause” and not at the discretion of the White House. “From the Bureau’s earliest days, many have used the uncertainty regarding this provision’s constitutionality to challenge legal actions taken by the Bureau in pursuit of our mission,” Kraninger wrote to staff. “Litigation over this question has caused significant delays to some of our enforcement and regulatory actions. I believe this dynamic will not change until the constitutional question is resolved either by Congress or the Supreme Court.” Given that the case is currently in front of the liberal 9th Circuit (aka the Nutty Ninth) the current structure will almost certainly be upheld and it will go to SCOTUS.

Some inside-baseball stuff: Despite the bet that the Fed will cut rates to a range of 175-200 basis points today, the Fed had to intervene yesterday to prevent the Fed Funds rate from breaching the top of the current 200-225 basis point range. The cause was a shortage of dollars in the money markets ahead of Q3 interim tax payments and a big Treasury bond issue. This caused overnight repo rates to surge to 500 basis points on Monday, and the punch line is that this problem might push the Fed to increase the size of its balance sheet, which means more QE. This stems from a change in how the Fed mechanically manages the Fed Funds rate in the immediate aftermath of the financial crisis. How will it affect mortgage markets? Not directly, however issues with financing / hedging and rate volatility will negatively impact mortgage rates, at least at the margin.

Morning Report: Fed Funds forecasts and mortgage rates.

Vital Statistics:

	Last	Change
S&P futures	2895.75	0.75
Oil (WTI)	51.89	-0.62
10 year government bond yield		2.11%
30 year fixed rate mortgage		4.12%

Stocks are flat this morning as we enter Fed week. Bonds and MBS are flat as well.

The big event this week will be the FOMC meeting which starts Tuesday. Given the disconnect between the market’s perception of the road ahead and the Fed’s prior forecast, something has to give. FWIW, the market is now assigning a 20% chance they will ease by 25 basis points at this meeting. By the December meeting, the market is forecasting the FOMC will cut rates either 2 or 3 times!

Compare that to the March 2019 dot plot, which showed most members of the FOMC thought rates would be unchanged for the year and about 1/4 of the members wanted to see a rate hike:

If the Fed Funds futures are correct and we are looking at a 1.5% Fed Funds rate, where will mortgage rates go? If history is any guide, probably nowhere. The last time the Fed Funds rate was around 1.5% (late Dec 2017), the 30 year fixed rate mortgage (according to the MBA) was in the low 4% range, in other words, right about here. Long term rates have already priced in the move. MBA 30 year FRM chart:

Quicken Loans settled with the DOJ over false claims allegations regarding FHA origination going back to 2015. The case was dismissed and Quicken settled for $32.5 million with no admission of guilt. Quicken fought the case the entire way, and eventually narrowed it down to a tiny fraction of what the Obama Administration wanted. Quicken Vice Chairman Bill Emerson said: “I think the current HUD administration realized how faulty the previous administration’s tactics were, and frankly, as we’ve said before, we viewed them as extortionist tactics and we just could not go along with that,” Emerson said. “We know we didn’t do anything wrong and so we continued to fight, and if that somehow caused the new administration to evaluate it differently, then great.”

Ed Demarco discusses the ways that private capital can be drawn back into the mortgage market. First, the CFPB’s ATR and QM rules need to change to bring down the allowable DTI ratios on Fannie and Freddie loans to that of the rest of the market. This is known as the QM patch, which basically says that any loans that meet F&F criteria meet the ability to repay test. The problem is that the QM laws specify a max DTI ratio of 43% and the GSEs allow up to 50%. This gives Fan and Fred a huge advantage over other lenders. The second issue revolves around the SEC and refining the data definitions in the registration rules. Third, Fan and Fred have all sorts of mortgage performance data that is unavailable to the broader market, and leveling the playing field would mean allowing other participants to see that data. Note however that DeMarco is only looking at the issue from the standpoint of originators. Buyers of private label securities have other issues that are still unresolved, especially when the issuer of the bonds also retains servicing. There is a conflict of interest issue that must be resolved as well. I discussed this about a year ago in Housing Wire.

Profitability improved for independent mortgage bankers in the fist quarter of 2019. Average revenue per loan came in at $9584, while average cost per loan was $9,299, or a net gain of $285 per loan, compared to a loss of $200 a loan in the fourth quarter. It looks like mortgage bankers reported a loss in the first quarter of 2018 as well.

Morning Report: Housing cycles and bond markets.

Vital Statistics:

	Last	Change
S&P futures	2815	-4
Eurostoxx index	377.4	1.8
Oil (WTI)	58.12	-0.14
10 year government bond yield		2.63%
30 year fixed rate mortgage		4.28%

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

Initial Jobless Claims fell slightly to 224k last week.

Durable Goods orders increased 0.4% in February, driven by an increase in commercial jet orders. Ex-transportation, they were down 0.1%. Core capital goods increased 0.8% as companies continue to plow capital back into expansion opportunities. Much of the increase in capital expenditures was in machinery, which is a positive sign for manufacturing. Still, economists are cautious on Q1 GDP, with many forecasting sub 1% growth for the quarter.

Construction spending rose 1.3% MOM and is up 0.3% YOY. Residential construction was down on a MOM and YOY basis. Housing continues to punch below its weight. Since construction is seasonally affected, January numbers tend to be a bit more volatile and have less meaning than summer numbers.

The MBA released its paper on CFPB 2.0, where they list out their recommendations for the CFPB. Much of what they say is similar to what Mick Mulvaney and Kathy Kraninger have been doing – increasing transparency regarding rulemaking and giving more guidance on what is legal and illegal. The Obama / Cordray CFPB was purposefully vague in promulgating rules, which makes life easier for regulators but makes it harder for industry participants. Regulation by enforcement was the MO of the Cordray CFPB, which ended with the new Administration, and the MBA agrees.

Specific to the mortgage business, the MBA recommends that the CFPB allow loan officers to cut their compensation in response to competitive dynamics, to extend the “GSE patch” which means loans that are GSE / government eligible are automatically considered to be QM compliant, to allow mortgage companies to pass on error costs to loan officers, and to raise the cap on points and fees.

CoreLogic looks at home price appreciation and the economic cycle. The punch line: While the current expansion is just short of a record length, and home price appreciation is declining, it doesn’t necessarily mean that house prices are in for a decline. In fact, housing typically weathers recessions quite well. I could caveat that the chart below only looks at a bond bull market. The 1978 – 1982 timespan of the misery index and inflation marked the bottom of the Great Bond Bear Market that lasted from the mid 1950s to the early 80s. The Great Bond Bull Market that began in the early 80s ended a few years ago, and while a bear market probably hasn’t begun yet the tailwind of interest rates falling from 17% to 0% isn’t going to be around this time. Finally, there are a few massive supports for the real estate market: rising wages, low inventory, and demographics. It is hard to imagine another 2008 happening if the economy peters out.