FHFA – The Daily Tearsheet

Morning Report: Adverse Market fee delayed until December

Vital Statistics:

	Last	Change
S&P futures	3446	2.6
Oil (WTI)	43.54	0.87
10 year government bond yield		0.71%
30 year fixed rate mortgage		2.94%

Stocks are flat this morning as Hurricane Laura is expected to make landfall sometime tonight. Bonds and MBS are flat.

The FHFA delayed the 50 basis point adverse market fee until December 1. It also carved out refinances below $125,000. From the press release: “The fee is necessary to cover projected COVID-19 losses of at least $6 billion at the Enterprises. Specifically, the actions taken by the Enterprises during the pandemic to protect renters and borrowers are conservatively projected to cost the Enterprises at least $6 billion and could be higher depending on the path of the economic recovery.” Now the big question will be whether the aggregators remove the fee or keep it in their rate sheets. Quicken and PennyMac have already. Here is the MBA’s take on it.

Mortgage applications fell by 6.5% last week as purchases increased by 0.4% and refis decreased by 10%. “Mortgage rates were mixed last week, but the rates for 30-year fixed mortgages and 15-year fixed mortgages declined,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Despite the lower rates, conventional refinance applications fell 11 percent and government refinance applications fell 6 percent, which pushed the total refinance index to its lowest weekly level since July.” Rates had been ticking up for a while, with the 10 year bond stuck around 70 basis points.

Luxury homebuilder Toll Brothers reported earnings yesterday. Sales revenue fell due to the pandemic, but orders were up 23% in units and 18% in dollar value. The $2.21 billion in new contracts was a record third quarter (they have an October fiscal) for the company.

Consumer confidence declined in August as expectations of a quick economic recovery were quashed. “Consumer Confidence declined in August for the second consecutive month,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index decreased sharply, with consumers stating that both business and employment conditions had deteriorated over the past month. Consumers’ optimism about the short-term outlook, and their financial prospects, also declined and continues on a downward path. Consumer spending has rebounded in recent months but increasing concerns amongst consumers about the economic outlook and their financial well-being will likely cause spending to cool in the months ahead.”

Durable Goods orders rose 11.2% in July, which was much higher than expectations. Ex-transportation orders rose 2.4% and core capital goods orders (a proxy for capital expenditures) rose 1.9%.

Morning Report: The FHFA is listening to industry on the 50 basis point refi fee

Vital Statistics:

	Last	Change
S&P futures	3421	28.6
Oil (WTI)	42.54	0.17
10 year government bond yield		0.64%
30 year fixed rate mortgage		2.91%

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

The upcoming week will be pretty data-light, although we will get real estate prices and new home sales on Tuesday and personal incomes / spending on Friday. Jerome Powell speaks on Thursday.

The Wall Street Journal is reporting that the FHFA is negotiating with the mortgage industry to delay the 50 basis point hike for refinances:

As of Friday, the agency was negotiating delaying the fee with industry groups but was opposed to canceling it outright, according to people familiar with the discussions. Industry groups, including the American Bankers Association and the Mortgage Bankers Association, have generally sought to eliminate the surcharge altogether, the people said.

That said, the 50 basis point fee probably equates to something like 1/8% in rate, so it probably won’t end the refi wave. The industry was most concerned about the short fuse on the announcement, and the prospect of losing 50 basis points on loans that are already locked and in the pipeline.

Housing Wire got a quote from ex-MBA president Dave Stevens:

Dave Stevens, former president and CEO of the Mortgage Bankers Association and former commissioner of the Federal Housing Administration, told HousingWire on Saturday that, “If true, it seems clear that Director Calabria listened to industry concerns about the impact of this short time frame to implement. And while the logic of the fee remains in question, this is a good sign and hopefully will lead to a change in behavior going forward where impact assessment conversations can take place prior to major policy announcements.”

Even if they delayed the implementation by a month, it would give people a chance to clear out their pipelines.

Loan aggregator Amerihome is no longer doing self-employed borrowers for non-delegated. I guess with so many W2 refinancings out there, why mess around with harder files? Expect to see other aggregators make similar announcements.

Lower rates and tight supply has home prices rising at a double-digit clip. The issue is that these increases are happening in a period of economic weakness, which has some pros worried. That said, the COVID crisis has caused many builders to temporarily slow building, and many sellers to pull their listings since they don’t want to have people walking through their homes.

Morning Report: Stocks fall on pessimistic FOMC minutes

Vital Statistics:

	Last	Change
S&P futures	3357	-16.6
Oil (WTI)	42.54	-0.32
10 year government bond yield		0.65%
30 year fixed rate mortgage		2.89%

Stocks are down this morning after the Fed minutes revealed pessimism about the economy. Bonds an MBS are up.

Initial Jobless Claims rose back above the 1 million market last week.

The Fed released its minutes from the July FOMC meeting yesterday. The big revelation was a moderating of economic expectations into the end of the year. The money quote: (note this is from the staff economists)

The projected rate of recovery in real GDP, and the pace of declines in the unemployment rate, over the second half of this year were expected to be somewhat less robust than in the previous forecast.

There was also discussion about the concept of yield caps, in other words the Fed targeting specific maturities in the Treasury market to keep the 10-year or 5-year bond yield below a certain target level.

A majority of participants commented on yield caps and targets—approaches that cap or target interest rates along the yield curve—as a monetary policy tool. Of those participants who discussed this option, most judged that yield caps and targets would likely provide only modest benefits in the current environment, as the Committee’s forward guidance regarding the path of the federal funds rate already appeared highly credible and longer-term interest rates were already low.

This is generally good news, at least for those that still cling to the idea that interest rates should be determined by a market. Still, the Fed and the US continues its “slouching towards Japan” strategy. Given the theory that increases in government debt as a percentage of GDP creates sluggish growth and low rates, not inflation (certainly borne out in Japan and Europe), low rates may be around for quite some time.

Mortgage Applications decreased 3.3% last week as rates rose. The purchase index rose by 1%, while refis fell by 5%. “Positive economic data reported last week on retail sales, as well as a large U.S. Treasury auction, drove mortgage rates to their highest level in two weeks,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “The rise in rates dampened refinance activity, but purchase applications continued their strong run and were 27 percent higher than a year ago – the third straight month of year-over-year increases.”

There were a lot of rumors going around that the GSEs are looking to delay the 50 basis point LLPA for mortgage refinances. The industry has been dead set against it, and we have seen bipartisan opposition to it. The industry’s main gripe is the short fuse: loans that were locked before the announcement but expected to close after would require the lender to eat the additional cost. A longer runway (say Jan 1) would prevent this. Another option is to apply the LLPA on locks after Sep 1. The word on the street is that the next shoe to drop will be investment properties, so we could see higher LLPAs there in the future.

Fannie CEO Hugh Frater and Freddie CEO David Brickman threw cold water on that idea in a blog post.

Contrary to much of the criticism we have received since making this announcement, this will generally not cause mortgage payments to “go up.” The fee applies only to refinancing borrowers, who almost always use a refinancing to lower their monthly rate…

Some have asserted that this price adjustment could impact borrowers by as much as $1,500—but this life of the loan estimate is a misrepresentation of how this cost would be applied. For an average refinanced mortgage, we estimate a reduction in savings of about $15 per month, meaning refinancing homeowners who were previously saving $133 on their monthly payments will now save $118 per month, on average.

This estimate also assumes lenders pass on the entire fee to borrowers. That is up to them. If they do not, the $15-per-month figure would go down, potentially to zero.

Does this sound like someone reconsidering the idea? It sounds more like “I am altering the deal. Pray I don’t alter it any further.”

Despite the economic gloom, renting households are making their rent payments, according to the National Multifamily Housing Council. Almost 87% of renters have paid August rent, which is down about 2% from a year ago. Note that NYC is bringing up the rear at a sub-80% rate. Writer James Altucher wrote an interesting essay about why this time is indeed different for NYC.

Morning Report: Builder sentiment close to record highs

Vital Statistics:

	Last	Change
S&P futures	3377	16.6
Oil (WTI)	42.64	0.02
10 year government bond yield		0.69%
30 year fixed rate mortgage		2.95%

Stocks are higher this morning on no real news. Bonds and MBS are up small.

The MBA is pushing Congress to rescind the “adverse market refinance fee,” which is the 50 basis point increase announced by the GSEs last week.

Requiring Fannie Mae and Freddie Mac to charge a 0.5% fee on refinance mortgages they purchase will raise interest rates on families trying to make ends meet in these challenging times,” Killmer said. “This means the average consumer will be paying $1,400 more than they otherwise would have paid. Even worse, the September 1 effective date means that thousands of borrowers who did not lock in their rates could face unanticipated cost increases just days from closing.

As many have pointed out, the irony of the Fed pushing down mortgage rates by buying mortgage backed securities in the market versus FHFA trying to raise mortgage rates via the fee is striking.

There isn’t a lot of market-moving data this week, although we have a good amount of housing data with the NAHB Housing Market Index, Existing Homes Sales, and Housing starts.

Homebuilder Sentiment is close to record highs, according to the NAHB. The index rose to 78 in August from 72. 50 is considered neutral. Take a look at the chart below, it looks like we are pretty much at the record highs of the late 90s. Those highs were then followed by a 50% jump in housing starts.

Home prices are rising across the board, but rural properties are seeing the biggest increases, rising 11%.

We’ve been speculating about increasing interest in the suburbs and rural areas since the start of the pandemic,” said Redfin economist Taylor Marr. “Now we’re seeing concrete evidence that rural and suburban neighborhoods are more attractive to homebuyers than the city, partly because working from home means commute times are no longer a major factor for some people. And due to historically low mortgage rates, interest is turning into action. There will always be buyers who choose the city because their jobs don’t allow for remote work or they place a premium on cultural amenities like restaurants and bars—which will eventually come back—but right now the pendulum is swinging toward farther-flung places.

New Home purchase applications are up 39% YOY, according to the MBA. That said, the COVID-19 pandemic has wreaked havoc with seasonal adjustments, so that number could be overstated.

Morning Report: New servicing guidance out of FHFA

Vital Statistics:

	Last	Change
S&P futures	2783	-23.1
Oil (WTI)	26.09	0.29
10 year government bond yield		0.63%
30 year fixed rate mortgage		3.36%

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

Initial Jobless Claims came in at 3 million last week. This puts the number of jobs lost to COVID at 36.4 million, or about 430 jobs per death.

The FHFA made an announcement yesterday which permits servicers to allow borrowers who enter forbearance to wait to pay back the skipped payments until they either refinance the loan or at maturity.

“For homeowners in forbearance due to COVID-19, payment deferral allows them to make up missed forbearance payments when they sell their home or refinance,” said FHFA Director Mark Calabria. “This new forbearance repayment solution responsibly simplifies options for homeowners while providing an additional tool for mortgage servicers. Borrowers who can pay their mortgage should, because missed payments remain an obligation that will ultimately have to be repaid.”

Servicers are required to evaluate borrowers for one of several repayment options, generally referred to as a “hierarchy” of repayment and loan modification options. The big question is whether the borrower can demand the servicer provide the option they want. Who has the final say on the repayment plan? The borrower or the servicer? Plus, since Fannie will reimburse the 4 months of advances immediately, does the servicer have any financial incentive to choose one plan or the other?

One of the biggest deterrents to taking forbearance was that you would be unable to refinance your mortgage until the missed payments are made up. But, since this contemplates paying it off on a refi, then I guess that isn’t the case? I am sure FHFA and the GSEs will provide more guidance.

Remember the huge Fannie and Freddie LLPAs for loans that go into forbearance before they are sold to Fannie Mae? Correspondent lenders are removing them. I haven’t seen anything official, but it looks like the government might have backtracked on that one.

While Jerome Powell was greasing the skids for a prolonged recession, that might not be what happens. Don’t forget, there was nothing wrong with the economy to begin with. No bubbles, no buildup of inventory and bad debt, no mal-investments to work off. The economy was put into a medically-induced coma. The real work of recessions – working off excess inventory, disposing of bad assets, trimming bloated payrolls, isn’t applicable here.

The stimulus dollars (along with people being free to not pay their mortgage for a year) will provide an immense jolt to the economy. Think of what you would do if you all of a sudden could just, stop, paying your mortgage for a year. And you didn’t have to pay it off until you refinance or move? That is a lot of additional disposable income.

Even with COVID-19, some of the hottest markets are still going strong. The Denver area is still going strong. FWIW, I was listening to the Equity Residential earnings call the other day, and the company noted that traffic and applications started off down 50% on a YOY basis in March when the government initiated the stay at home orders. Things have improved so much that traffic and applications are now flat YOY. Delinquencies? About 5%. While Equity Residential is mainly affluent renters, this is a pretty interesting data point. Note however that the Multifamily Housing Council reported that 20% of renters have failed to make their May payment as of May 6, so it isn’t all great. But so far so good.

Morning Report: Home Prices holding up

Vital Statistics:

	Last	Change
S&P futures	2863	30.1
Oil (WTI)	23.15	2.79
10 year government bond yield		0.66%
30 year fixed rate mortgage		3.43%

Stocks are higher this morning as earnings continue to come in. Bonds and MBS are down.

Despite the COVID-19 crisis, home price appreciation is holding up. Prices rose 1.3% MOM in March and are up 4.5% YOY. April might be a better read, but still… D.R. Horton mentioned on its earnings call that pricing is holding up, and while they are offering some incentives (free fridge friday), they aren’t cutting prices to move inventory.

Here are the cities with the biggest drop in new listings. Allentown PA, Milwaukee WI, Scranton, PA, Detroit MI, and Buffalo NY. The Northeast and Upper Midwest seem to have been hit the hardest.

If you look at the CoreLogic map, most of these areas are on the undervalued side.

Ex-MBA President Dave Stevens weighs in on how the CARES Act drove a massive tightening of mortgage credit. Comments from Mark Calabria about letting servicers fail and musing that borrowers might be better off with a bank servicer were unhelpful to say the least. The added LLPAs on first payment forbearance requests basically killed the cash-out market. He makes a point that Fannie has the liquidity (between its own net worth and the Treasury facility) to extend lines of credit. He makes a great point as well – Fannie was created during the New Deal to smooth the mortgage market during disruptions, and this one is probably the biggest since the New Deal days.

Morning Report: The Lehman moment?

Vital Statistics:

	Last	Change
S&P futures	2669	20.4
Oil (WTI)	23.86	0.49
10 year government bond yield		0.75%
30 year fixed rate mortgage		3.47%

Stocks are higher this morning the Trump Administration works to get the economy going again. Bonds and MBS are flat.

With the Fannie 2.5 over 104, the margin calls are back. The NY Fed needs to take a break.

The government is starting to work on getting the economy re-opened in the next four to eight weeks. The idea would be to start opening up areas which never really had too many cases to begin with, and slowly work everyone back in. Larry Kudlow said: “It’s the health people that are going to drive the medical-related decisions,” National Economic Council Director Larry Kudlow said in an interview with Politico webcast on Tuesday. “But I still believe, hopefully and maybe prayerfully, that in the next four to eight weeks we will be able to reopen the economy, and that the power of the virus will be substantially reduced and we will be able to flatten the curve.”

We will get the FOMC minutes out at 2:00 pm today. Usually the FOMC minutes are a non-event but today could be different. Of course MBS are marching to their own (NY Fed) drummer these days and are gently rising regardless of how the bond market is trading. At a minimum, it will make interesting reading.

Mortgage applications decreased 18% last week as purchases fell 19% and refis fell 12%. FWIW, pricing in the secondary market has been terrible for the past two weeks and that is flowing through to primary markets. Aggregators are pricing like they don’t want the business.

Mark Calabria said that no Fannie / Freddie servicing facility is going to be made available.

“Yes and no is the answer,” Calabria told HousingWire when asked whether FHFA has a plan similar to that of Ginnie Mae, which recently announced a program to aid servicers dealing with forbearance on loans backed by the Federal Housing Administration, Department of Agriculture, and the Department of Veterans Affairs.

“The yes is we continue to monitor Fannie and Freddie servicers,” Calabria said. “We are, at this point, comfortable with our ability to deal with any servicers that may be distressed so that we can either turn them into subservicers or transfer their servicing to other parties. And we believe at this point, given the number on uptake of forbearance, we’ve seen that we can transfer servicing in a way that’s not too disruptive.

“So, the yes is we have contingency plans and procedures put in place were this distress to happen,” Calabria continued. “So that’s the yes part. The no part is, do we have a liquidity facility that we will be providing via Fannie and Freddie? The answer’s no. We don’t have the resources at Fannie and Freddie to do that.”

Calabria is making a bet that forbearance requests will come in around 2% of servicing portfolios, noting the MBA said that 1.7% requested forbearance in a sample. Of course that was the first week, so it probably is premature to say that is the number. But he isn’t buying the 25% estimates some are throwing around, at least for non-Ginnie servicers. For Ginnie servicers, he can buy that number. FWIW, this kind of feels like a Lehman Brothers moment for the servicers.

Well, this news isn’t doing anything for servicing in the bulk market. I heard that Fannie Mae servicing trading at 1x- 2x. Freddie is 1x and GNMA is 1x to negative. In normal markets, Ginnie is a little south of 3x and Fannie is around 4x. I don’t know if theoretical marks are going to take such a dramatic hit, but if they do, bank earnings are going to take a hit next week.

The MBA sent out a statement urging FHFA to reconsider.

“The FHFA Director’s recent statements send a troubling message to borrowers, lenders, and the mortgage market. Servicers are required to offer borrowers widespread forbearance under a plan devised and approved first by FHFA and then codified by the CARES Act. Fannie Mae and Freddie Mac are contractually obligated for the payments to investors. Since Fannie Mae and Freddie Mac will eventually reimburse mortgage servicers for the payments they must advance during forbearance, Director Calabria should advocate for the creation of a liquidity facility at the Fed to ensure the stability of the housing finance market.

Finally, Anthony Hsieh had this to say on Linked In last night:

Morning Report: The Fed announces further stimulus measures

Vital Statistics:

	Last	Change
S&P futures	2323	34.4
Oil (WTI)	22.71	0.09
10 year government bond yield		0.76%
30 year fixed rate mortgage		3.84%

Stocks are higher after the Fed announced additional support measures for the markets. Bonds and MBS are up as well.

The NY Fed announced further measures to support the markets this morning. Essentially, the Fed will do whatever it takes to keep the financial market working properly.

Effective March 23, 2020, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to increase the System Open Market Account (SOMA) holdings of Treasury securities and agency mortgage-backed securities (MBS) in the amounts needed to support the smooth functioning of markets for Treasury securities and agency MBS. The FOMC also directed the Desk to purchase agency commercial mortgage-backed securities (CMBS).

The Fed expects to buy $75 billion of Treasuries and $50 billion of MBS every day this week. As of right now (pre-open), TBAs are up, but bid ask spreads are wide.

The chart below (courtesy of Reuters) shows MBS spreads, which is the difference between the yield on the current coupon mortgage backed security and the comparable duration Treasury. This represents the market’s reluctance to bid MBS and that flows through to rate sheets. Yes, the Treasury market yields are lower than February. Yes, the Fed Funds rate is lower than February. No, mortgage rates are not. Once those green bars get back to where they were in February we will be seeing lousy pricing in the primary market. The Fed’s $250 billion purchasing activity in the MBS market should help though.

The Fed is also extending credit to other parts of the economy, specifically the muni market and the corporate credit market. The Fed will start purchasing investment grade corporate loans, it will re-launch the Term Asset-Backed Lending Facility which lent money to investors who buy credit card receivables and other consumer debt. The Fed also plans to roll out a Main Street Business Lending Program which will lend to small businesses.

Late last week, pretty much everyone stopped buying non-QM loans, and it looks like jumbos will end soon as well. The securitization markets are halted. I have heard that some non-QM lenders are even refusing to honor locks they have already extended. Aggregators were also declining to buy MBS with rates below 3% as well.

Lenders are still waiting for guidance out of Fannie Mae regarding verbal verifications of employment and drive-by appraisals. So far, people have been closing loans in parking lots, but loans are getting done. The last thing Fannie needs is for the mortgage finance pipeline to stop, so I assume they’ll find a way to make things work. The FHFA website apparently contains an announcement that it directs the GSEs to grant flexibility for appraisal and employment verification, so something should be forthcoming.

Washington is set to vote on a relief bill today at noon. The Democrats are complaining about executive compensation and stock buybacks, though the bill does contain some limitations on those. Treasury Secretary Steve Mnuchin said the bill could help the Fed direct $4 trillion to the business sector. Companies that take the money will be required to maintain payroll “to the extent practicable.” Supposedly the portion of the loan that goes to maintaining payroll could be forgiven.

Interesting data point: Lennar reported good first quarter earnings, which pretty much was expected. Pre-Coronavirus, homebuilding was set to have the best year in over a decade. Their quarter ends in February, and the company said that orders were up 16% in the first two weeks of this quarter – i.e. the first two weeks in March. In most of their markets construction continues, and with interest rates as low as they are PITI payments are lower than market rents.

The deadline for filing taxes has been extended to July 15.

Existing Home Sales increased 6.5% in February, according to NAR. “February’s sales of over 5 million homes were the strongest since February 2007,” said Lawrence Yun, NAR’s chief economist. “I would attribute that to the incredibly low mortgage rates and the steady release of a sizable pent-up housing demand that was built over recent years.” Social distancing and economic uncertainty is expected to weigh on sales going forward, but the fundamentals of the housing market remain strong, with tremendous pent-up demand.

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: Fannie / Freddie sale by 2022?

Vital Statistics:

	Last	Change
S&P futures	3088	-6.25
Oil (WTI)	57.59	0.44
10 year government bond yield		1.83%
30 year fixed rate mortgage		4.00%

Stocks are lower this morning on weak overseas economic data. Bonds and MBS are up.

Initial Jobless Claims rose to 225k last week. We are still at extremely low levels historically. Jerome Powell will be testifying today at 10:00 am. Nothing earth-shattering came out of his testimony yesterday, although he pushed back on Trump’s suggestion that the Fed should cut rates below zero.

Inflation at the wholesale level came in a little hotter than expected, with the Producer Price Index rising 0.4%% MOM and 1.1% YOY. Ex-food and energy, it rose 0.3% MOM and 1.6% YOY. These readings are still well below what the Fed would like to see, which is inflation at 2%.

Mark Calabria said that Fannie and Fred could be ready to exit government conservatorship by 2022. “If all goes well, 2021, 2022 we will see very large public offerings from these companies,” Calabria said at an event sponsored by the American Association of Residential Mortgage Regulators and the Conference of State Bank Supervisors. “The consent decree will be able to give that window where they can go to market, do an offering and still operate under a way where we’ve got some prudential safeguards.” Fannie and Fred stock fell on the news. Fannie’s stock has been a trader’s dream, with plenty of volatility to play with.