Kevin’s Famous Chili? 30Y Mortgage Rate Rises To 3.45% As 10Y Treasury Yields Rises To 1.869% (4 Rates Hikes By Fed Priced-in)

The 10-year Treasury Note yield rose to 1.869% this afternoon as Freddie Mac’s 30-year mortgage commitment rate rose to 3.45%.

And if you like The Fed Funds Futures data, it is pricing in 4 rate hikes by The Fed (March, June, September and December). For a grand total of … 100 basis points or 1%.

By keeping rates soooo low for soooo long, The Fed has committed a serious policy error. Or as Kevin Malone calls it, “The Fed’s Famous Chili!”

Mortgage Purchase Applications Rise 51.2% From Previous Week Despite Rising Mortgage Rates (Refi Apps Up 42.77%)

US mortgage purchase applications rose 51.2% from previous week, despite mortgage rates rising.

Of course, the first weeks of most years see large increases in mortgage purchase applications.

Mortgage refinancing applications were up 42.77% from the previous week.

Here is the MBA data.

So, the US housing market is off to a fast (and hot) start to 2022.

Mortgage Purchase Applications Plunge 10% WoW At End Of 2021 (But It Happens Every Year!)

The last mortgage purchase applications index from the Mortgage Bankers Association was released this morning. The headline is “Mortgage Purchase Applications Plunge 10% WoW (since the previous week). But this is called “Seasonality.” And it happens EVERY YEAR.

Here is a chart of mortgage purchase application (NON-seasonally adjusted). What will happen when the new year starts and purchase applications began rising?

Whether seasonally-adjusted or not, all number are down for the final week of 2021, except for the 30-year mortgage rate that rose 60 basis points.

On a seasonally-adjusted basis (aka, smoothed-out), we can see the impact of super-low mortgage rates on home prices.

Here is the data summary for the last week of December 2021. All indices are down … except for the 30 year mortgage rate which was up 60 basis points.

So let’s see what 2022 brings with The Fed threatening to shrink the balance sheet and raise their target rate 3 times. As Parks and Recreation’s Joan Calamezzo said, “We’ll see.”

Bad Santa! 10Y Treasury Yields Jump Above 1.60% as Expectation Of Fed Hikes Grows (Mortgage Rates Expected To Rise)

Happy New Year! And Treasuries are off to fast start with investors bailing on Treasuries and buying stocks. AND the expectation that The Fed will raise rates 3 times this year.

The 10-year Treasury Note yield rose above 1.60% this morning.

And the US Treasury 10Y-2Y curve rose to 80.601 basis points.

Fed Funds Futures data is showing 3 rates hikes in 2022. May, September and December.

The Fed Dots project is definitely showing an upward trend in the Fed Funds Target rate with FOMC member forecasting the median target rate to be above 2% by 2024.

Of course, Fed reverse repo activity grew to an all-time high (but it is expected to pare-back).

How about mortgage rates? I expect mortgages rates to rise over 2022 as the 10-year Treasury Note rises.

While The Fed has been acting like Santa Claus with monetary easing since 2008, they are predicted to act like Bad Santas in 2022.

6 months of telling inflation in transitory stories. Now you know why.

What do you say to the Fed Open Market Committee that has resisted raising rates while inflation is the highest in 40 years?

Cautionary note: The Fed is likely to protect economic growth and ignore inflation. So I expect FOMC will continue to reinvest prepayments into Treasury and MBS, pro-rata to the current portfolio.

Fed Talk,Talk! Mortgage Applications SURGE 56% WoW As Treasury Yields Tank (Purchase Apps Spike 28% WoW)

Despite the “Talk, Talk” from The Federal Reserve about balance sheet taper and rate “normalization,” we actually saw the 10-year Treasury yield fall from 1.6651% on 11/23/2021 to 1.343 on 12/3/2021. While the 30-year mortgage rate only fell from 3.31% to 3.3%, it is the SIGNAL that The Fed is sending that people should refinance their mortgages ASAP.

You can see the rise in mortgage refinancing applications of 56% week-over-week (WoW) (white line) with the drop in the 10-year Treasury yield (blue line) despite the relatively small drop in the Mortgage Bankers Association (MBA) tiny drop in their 30-year mortgage rate index.

Ditto for the MBA mortgage purchase application index. The drop in the US Treasury yield (blue line) resulted in a 28% WoW increase in mortgage purchase applications.

Here is the table of MBA data for the week of 12/03.

Please note that the 10-year Treasury yield have jumped since 12/03 indicating that mortgage application activity for the week of 12/10 will be lower.

Here is the MOVE bond volatility index and the US Treasury 10-yield chart. Can you spot the COVID outbreak??

Here is a video of Fed Chair Jay Powell doing “Talk, talk” about tapering.

Renter Misery Index At 17.42% With Traditional Misery Index At 10.80% (Biden Says $5 TRILLION “Build Back Better Boondoggle” Will Relieve Inflation Over 10 Years)

Renters in the US are getting clobbered by inflation.

The US Zillow Rent Index All Homes YoY + CPI YoY is one measure of renter misery.

The classic misery index (CPI YoY + U-3 unemployment rate) is 10.80%.

Then there is inflation in food prices, gasoline, heating oil, natural gas, etc.

While Biden is releasing the Strategic Petroleum Reserves (SPR) in order to mitigate the problem that he created by terminating the energy pipelines and oil/natural gas drilling permits in the name of “Going Green!” But on the announcement of tapping the SPR, crude oil futures actually rose.

But never fear! Biden claims that his $5 TRILLION Build Back Better Boondoggle (BBBB) will ease inflation … over 10 years. And he claims that “17 Nobel Prize winners in economics have said that my plan will “ease inflationary pressures.”” I sincerely doubt that any of them actually read the 2,500 page BBBB. Rather, they likely just read the White House talking points and said “Hey, that sounds good!” Mo money, less problems?

Here is Joe Biden breaking the legs of America’s renters. Or is that multi-millionaire Nancy Pelosi?

Covid Blues! 1.6 Million Loans Remain In Forbearance With FHA/VA Leading (Fannie Mae Reports $7.2 Billion In Net Income In Q2 Report)

The Covid epidemic hit the single-family mortgage market hard in early 2020, leading mortgage lenders and servicers to offer FORBEARANCE to borrowers who were having trouble making their mortgage payments due to loss of hours or a loss of job.

Black Knight offers an excellent summary of the forbearance data.

The good news? Active forbearance plans are much lower today than at their peak after the Covid epidemic struck in early 2020 with active forbearance plans peaking in May 2020.

Forbearance plans are due to expire in

What is forbearance, you ask? Forbearance is when a mortgage servicer or lender allows a borrower to temporarily pay their mortgage at a lower payment or pause paying your mortgage. The borrower will have to pay the payment reduction or the paused payments back later.

Despite forbearance, Fannie Mae still reported $7.2 billion in net income in Q2 2021. Notice the difference between single-family SDQ and the SDQ rate without forbearance. Freddie Mac reported $3.7 billion in Q2 2021 net income.

Here is a look at Fannie Mae’s net income over the past year and SDQ rates.

Under the existing seller/servicer eligibility requirements, the Agency SDQ Rate is defined as 100 multiplied by (the UPB of mortgage loans 90 days or more delinquent or in foreclosure for Fannie Mae, Freddie Mac, and Ginnie Mae/Total UPB of mortgage loans serviced for Fannie Mae, Freddie Mac, and Ginnie Mae). Beginning with the financial quarter ending Jun. 30, 2020, the Agency SDQ Rate will include an adjustment for mortgage loans in a COVID-19-related forbearance plan that are 90 days or more delinquent and were current at the inception of the COVID-19-related forbearance plan. The UPB of such mortgage loans shall be multiplied by .30 and added to the UPB for SDQ mortgage loans for the purposes of determining the numerator in the calculation of the Agency SDQ Rate.

Mortgage Rates Rise to 2.87%, Reaching Highest Level Since July

Mortgage rates in the U.S. surged to the highest level in a month.

The average for a 30-year loan was 2.87%, up from 2.77% last week and the highest since July 15, Freddie Mac said Thursday. Mortgage rates have been below 3% since the beginning of July.

Such a small increase in mortgage rates should have little impact on home purchases, but it will dampen mortgage refinancings.

Or dampen the home price bubble.