With Democrats in power, will CRA be expanded to nonbanks?

WASHINGTON — The election of President Biden and turnover in leadership of the federal banking agencies not only means a new regulatory approach to implementing the Community Reinvestment Act. It could shine a brighter light on Congress potentially expanding the law to nonbanks.

A legislative effort led by Democrats to subject fintechs and other unregulated institutions that offer banking services to CRA exams would be an uphill battle, and some observers say lawmakers are not likely to focus on such a proposal anytime soon.

Yet Biden supported a CRA expansion during the presidential campaign to cover nonbank mortgage providers and insurance companies. A policy brief released by his campaign last February said the CRA currently “does little to ensure that ‘fintechs’ and non-bank lenders are providing responsible access to all members of the community.”

Just as the bank regulators weigh fundamental changes to the CRA exam process, industry representatives and community advocates have long argued for extending CRA standards to financial institutions other than banks. And some Democrats such as Sen. Elizabeth Warren, D-Mass., have pushed for legislative approaches expanding CRA to a broader array of companies.

“It’s time to look at how those entities can best demonstrate that they serve their entire communities,” said Krista Shonk, vice president of regulatory compliance and policy of the American Bankers Association.

Others say financial services companies that generally receive benefits from the government should be held accountable for their level of investment in their respective communities.

Jesse Van Tol, CEO of the National Community Reinvestment Coalition, said it is feasible that Biden and his Democratic allies in Congress may pursue some kind of legislative package focused on addressing racial inequities, and that the inclusion of CRA-like obligations for nonbank financial companies could be folded in alongside other initiatives.

“I think almost every financial services company is the product of, or in some way the beneficiary of, the government infrastructure that regulates them,” Van Tol said.

In the same way that the government can point to federal deposit insurance and chartering as exclusive government benefits for banks that warrant greater responsibilities, he said, the trillions of dollars distributed by the government to large companies in the wake of the pandemic could come with similar strings.

“There’s a lot of evidence that many financial markets, especially mortgage markets, are essentially propped up by the government,” Van Tol said. “That means a rationale is there for requiring something in return.”

Biden’s campaign said the then-candidate “will expand the Community Reinvestment Act to apply to mortgage and insurance companies, to add a requirement for financial services institutions to provide a statement outlining their commitment to the public interest, and, importantly, to close loopholes that would allow these institutions to avoid lending and investing in all of the communities they serve.”

However, with everything else on the policy agenda — including fighting the brutal economic effects of the pandemic — some aren’t holding their breath that a legislative overhaul of the CRA will happen anytime soon.

“I don’t think, realistically, that it will happen in the next couple of years” said Van Tol.

A legislative focus on CRA could be combined with broader policy questions about fintech regulation, including whether states or the federal government are better positioned to charter and supervise nonbanks that increasingly want access to the banking system.

But despite Democrats’ victories that gave them control of Congress, the margin in the Senate is razor thin with Vice President Kamala Harris holding the tie-breaking vote.

“You’ve got a really tight margin when you need every single Democrat voting for something,” Van Tol said.

And some Republican support is necessary for standalone bills that can be blocked by filibuster. Analysts also doubt a CRA bill could be attached to any must-pass budget bills that only require a majority in the Senate.

“In an ideal world, Congress would focus on the fundamental frictions with federalism and fintech, which would include a thoughtful consideration of everything from chartering to CRA requirements,” said Isaac Boltansky, director of policy research at Compass Point.

“Needless to say, we do not live in an ideal world and I am bearish on legislation via regular order,” he added.

Since the passage of the CRA in 1977, banks have been required to provide financial services to local communities with “low-to-moderate income,” a technical term based on Census data. But in recent decades, banks have lost significant market share of financial services to nonbanks, which advocates say has diminished the impact of the CRA nationwide.

Both times the law has been meaningfully reformed — first in the 1990s and most recently under the Trump administration — calls followed to expand the law’s obligations to nonbanks, including credit unions, mortgage lenders and most recently, fintechs.

Analysts say that the impact of such changes could be significant.

According to the Mortgage Bankers Association, the market share for mortgage originations among nondepository institutions grew from 24% to 58% between 2008 and 2019.

Between 1990 and 2018, the banking sector’s share of 1-4 family mortgages dropped from 40% to 24%, according to analysis by the Federal Deposit Insurance Corp. In that same period, banks’ share of multifamily residential mortgages dropped from 44% to 33%, and in consumer credit, the figure fell from 52% to 42%.

“We’re talking about how the financial services marketplace has evolved and is still evolving at a rapid pace,” said Shonk of the ABA. “We’re not limited to the days of having to go to the local bank, and more and more assets are being held by nonbanks of various sorts.”

Boltansky said despite the national focus on ending racial inequities, which could address strengthening the CRA, the still-simmering political divisions in Congress make legislation unlikely.

“The [Community Reinvestment Act] is clearly part of the broader economic justice conversation, and we should expect headlines and proposals,” said Boltanksy, “but I need to see a demonstrable thaw in our political discourse before becoming bullish on” such a plan moving forward.

Other challenges to expanding the CRA are structural and go deeper than political will. As written in 1977, the statute is a piece of banking law, analysts stress, making it difficult to simply drag and drop other industries into it.

“The CRA is built around the concepts of deposits and bank branches,” said Randy Benjenk, a partner at Covington. “When Congress passed the CRA, it was concerned that banks were taking deposits from low-to-moderate-income communities without lending back in. But mortgage and insurance companies don’t take deposits, and they don’t have branches in the CRA sense.”

“Without the concept of deposits, it’s not clear how you would measure CRA obligations. You can create a regime that doesn’t include those concepts or has a substitute, but you’d be starting from scratch,” Benjenk said.

Source: nationalmortgagenews.com

MBS Day Ahead: Defensive Shift is a Cause For Concern; Yields Struggling With an Important Floor

MBS Day Ahead: Defensive Shift is a Cause For Concern; Yields Struggling With an Important Floor

The GA senate election shift is old news.  It did the damage it was always likely to do, but bonds had a good show of support by the end of the following week.  That made good enough sense considering the pandemic is driving the market and the pandemic can’t be quickly defeated.  But it’s worth noting that the pandemic is also driving central bank policy, and when those policies are tweaked–even subtly–bonds can and will react.  This morning’s change to the ECB’s PEPP is the latest example.

If you didn’t click the link above, the nutshell version is this: the European Central Bank made a subtle change to its pandemic relief bond buying program that COULD mean it will buy slightly less than the maximum amounts.  When these programs are initially announced, markets account for a scheduled amount of bond purchases (good for rates).  If central banks say or do something to call those amounts into question, bond markets adjust their expectations accordingly (bad for rates).  That’s what we’re seeing this morning.

Additionally, ECB President Lagarde made several remarks during today’s press conference that weren’t entirely negative/downbeat.  Bonds reacted to those too.  

The net effect is a moderate amount of upward pressure in bond yields today.  While this isn’t the biggest day of selling we’ve seen recently (not by a long shot), it comes at an inopportune time.  10yr yields have been trying for days to break below 1.075%.  They’ve come within 1bp of that EVERY day for the past 6 days, and they’ve actually touched that level on 4 of those days–with the wee hours of this morning providing the most recent example.  The bounce was already in place before the ECB policy announcement and press conference, but those events added to the weakness.

20210121 open.png

NOTE: on the chart above, the simultaneous sell-off in stocks and bonds is a hallmark of a reaction to lower expectations from a major central bank (central bank bond buying is typically considered a rising tide that lifts all ships, i.e. good for stocks and bonds).

Another note on the chart above is that it was created at the worst point of the morning so far.  We’ve bounced a bit since then, which is reassuring in the short term.  In the bigger picture, however, let’s go back to that 1.075% level.  We have been a bit worried that the friendly bounce last Tuesday continually failed to materialize into a deeper, positive correction.  1.075% has quickly become the waterloo for said correction.  That’s the level to beat at the moment (and it has yet to be beaten).  The risk here is that yields are simply consolidating the recent weakness before another jump.  The longer we fail to break 1.075%, the greater the danger.

20210121 open2.png

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.


UMBS 2.0

103-04 : -0-03


10 YR

1.1130 : +0.0230

Pricing as of 1/21/21 9:54AMEST

Tomorrow’s Economic Calendar

Time Event Period Forecast Prior
Thursday, Jan 21
8:30 Philly Fed Business Index * Jan 12.0 9.1
8:30 House starts mm: change (%) Dec 1.2
8:30 Build permits: change mm (%) Dec 5.9
8:30 Housing starts number mm (ml) Dec 1.560 1.547
8:30 Building permits: number (ml) Dec 1.604 1.635
8:30 Jobless Claims (k) w/e 910 965

Source: mortgagenewsdaily.com

Ally’s diversification efforts starting to pay off

Ally Financial, which was spun off from General Motors in 2006, has long wanted to reduce its heavy reliance on the auto finance business.

The Detroit-based company hit some bumps along the way. In 2019, Ally ended a credit card partnership with TD Bank. Last summer, its $2.7 billion deal to buy a subprime card issuer was terminated amid the economic impacts of the COVID-19 pandemic.

But Ally, which operates a digital-only bank with deposits of $137 billion, is starting to gain some traction in two fledgling lending segments — mortgages and unsecured consumer loans.

Last year, Ally originated $4.7 billion in home loans, which was up 74% from 2019. The mortgage unit, which seeks to appeal to home buyers who want an online borrowing experience, reported pretax income of $53 million in 2020, up from $40 million the previous year.

Meanwhile, the unsecured lending segment had full-year loan origination volume of $503 million, which was up 75% from 2019. While the business is not yet profitable, Chief Financial Officer Jennifer LaClair said that is largely because new accounting rules require lenders to reserve for losses over the life of a loan, which makes it harder to achieve profitability during a period of rapid growth.

Ally’s digital brokerage platform, a third prong of the firm’s diversification strategy, has also shown strong customer growth, though its bottom line has been hurt by the rise of free online trading.

In an interview Friday, LaClair attributed the rapid growth of new consumer products largely to Ally’s 11-year-old digital bank, which she said offers depositors a gateway to additional offerings. Existing depositors account for more than half of Ally’s new mortgage volumes, and the same pattern holds for its new brokerage account holders.

“Our new businesses are scaling because of existing customers,” LaClair said in remarks that followed the company’s fourth-quarter earnings report. “We’ve been able to do that very efficiently through the digital deposit platform, and to the extent we can leverage that as a gateway, we have an incredibly low cost of acquisition for these other products.”

To be sure, Ally remains heavily dependent on auto loans, which account for around 60% of the company’s $176 billion of assets. Last year, residential mortgages and unsecured consumer loans made up about 9% of the balance sheet.

LaClair said Friday that she sees a clear path for Ally to quadruple its unsecured consumer loans, to $2 billion a year. The business segment, known as Ally Lending, grew out of the company’s $190 million acquisition of Health Credit Services in 2019. It offers point-of-sale loans in partnership with health care providers, home improvement contractors and retailers. Loans for home improvement projects have gotten a boost from changes in consumer spending patterns during the pandemic.

The home loan business, known as Ally Home, grew out of a partnership with the digital mortgage firm Better.com. Ally’s return to the mortgage business came several years after the demise of Residential Capital, a subprime mortgage unit of GMAC, as Ally was formerly known, which lost $9.2 billion between 2007 and 2009 and was later liquidated.

Still, it was the traditional auto lending business that drove profits in the fourth quarter of 2020.

Ally reported net income of $687 million, up 82% from a year earlier, thanks both to a smaller provision for credit losses and higher revenue. Ally has benefited from strong consumer demand for cars during the pandemic, which has propelled loan volumes and bolstered used-car prices, reducing the size of losses when loans go bad.

Source: nationalmortgagenews.com

Getting a mortgage without your spouse: What are the benefits and drawbacks?

Do you have to apply for a mortgage with your spouse?

Married couples buying a house — or refinancing their current home —
do not have to include both spouses on the mortgage.

In fact, sometimes having both spouses on a home loan application causes mortgage problems. For example, one spouse’s low credit score could make it harder to qualify or raise your interest rate. 

In those cases, it’s better to leave one spouse off the home loan.

Luckily, there are a wide range of mortgage programs including low- and no-down payment loans that make it easier for single applicants to buy a home. And today’s low rates make buying more affordable.

Verify your mortgage eligibility (Jan 22nd, 2021)

In this article (Skip to…)

Benefits of having one spouse on the mortgage

There a several reasons a
married couple might want to purchase a home in one spouse’s name only:
to protect the buyer’s interests, to plan their estate, to save money, or to
qualify for a mortgage.

Avoid credit issues on
your mortgage application

Serious mortgage problems can arise when one person
on a joint application has poor or damaged credit.

That’s because mortgage lenders pull a “merged” credit report with history and scores for each applicant, and they use the lowest of two scores or the middle of three scores to evaluate applications. The score they use is called the “representative” credit score.

Unfortunately with two applicants, lenders don’t
average out the representative scores. They discard the better applicant’s FICO
score completely and make an offer based on the lower one.

This could easily result is a
higher interest rate. Or, if your spouse’s credit score is low enough, you might
have trouble qualifying for a loan at all.

Credit scores below 580 will get
denied by most lenders. If one spouse has a score that low, the other should
think about going it alone.

Save money on mortgage

If one spouse has passable credit
but the other has exceptional credit, the higher-credit spouse might consider
applying on their own to secure a lower mortgage rate.

This could save you thousands on
your home loan in the long term.

A few years ago,
the Federal Reserve studied mortgage costs and found something
startling. Of over 600,000 loans studied, ten percent could have
paid at least 0.125% less by having the more qualified buyer apply alone.

In addition, another 25
percent of borrowers could have “significantly reduced” their loan costs
this way.

It may pay to check with your
loan officer. For instance, if one borrower has a 699 FICO and the other has a
700 FICO, they’d save $500 in loan fees for every $100,000 borrowed due to
Fannie Mae fees for sub-700 scores.

The main drawback to this
strategy is that the sole borrower must now qualify without the help of their
spouse’s income. So for this to work, the spouse on the mortgage will likely
need a higher credit score and the larger income.

Verify your new rate (Jan 22nd, 2021)

Preserve assets if one spouse
is debt-challenged

Your home is an asset which
can be liened or confiscated in some cases. For instance, if your spouse has
defaulted student loans, unpaid taxes or child support, or unpaid judgments, he
or she might be vulnerable to asset confiscation.

By buying a house in your
name only, you protect it from creditors. Note that if your spouse incurred the
debt after marrying you, this protection may not apply.

This also applies if you’re
buying the place with money you had before marrying. If you purchase the house
with your own sole-and-separate funds, you probably want to keep it a
sole-and-separate house.

Simplify estate planning

Having the home in your name
simplifies estate planning, especially if this is your second marriage. For
instance, if you want to leave your house to your children from a previous
union, it’s easier to do when you don’t have to untangle the rights of your
current spouse to do it.

Head off divorce battles

Of course, you don’t plan on divorcing when you
marry. But if the state of your union is a little shaky, and you’re the
one doing the heavy lifting on the purchase, you might want to maintain control
by buying in your name only.

Verify your loan eligibility as a single borrower (Jan 22nd, 2021)

spouse on the mortgage: Drawbacks

If both spouses have comparable credit and shared estate planning,
it often makes sense to use a joint mortgage application.

That’s because leaving a creditworthy spouse off the mortgage can
sharply decrease your borrowing power.

Less income means less
buying power

The biggest drawback of leaving a spouse off your mortgage is that
their income typically can’t be counted on the application. This could have a
big impact on the amount you’re able to borrow.

In simple terms, more income means you can afford a larger monthly
mortgage payment. This increases your maximum loan amount.

As a result, couples applying for a mortgage jointly can often
afford larger and more expensive homes than single applicants.

Potentially higher
debt-to-income ratio

Leaving a spouse off the mortgage can also affect your debt-to-income ratio (DTI).

DTI is a key number lenders use to determine how much house you can
afford. By comparing your gross monthly income to your monthly debts —
including student loans, auto loans, and credit card payments — lenders can
determine how much money is ‘left over’ in your budget for a mortgage payment.

The higher your income, and the lower your debts, the more house you
can afford.

If one spouse is going it alone on the mortgage application and they have high debts, they could have a harder time meeting a lender’s DTI requirements. Or they may qualify, but for a smaller loan amount than expected. 

Then again, if one spouse has a lot of debt and does not earn the bulk of the income, it might make more sense to leave them off the application as it could ease up on the other spouse’s debt-to-income ratio.

if one spouse has high income but bad credit?

What if one spouse had great credit but can’t afford the home one
their income alone — and the other spouse has good income but poor credit?

In this case, a good solution could be the HomeReady loan from Fannie Mae.

This mortgage program allows you to count extra household income
toward your mortgage, without adding the other person as a full co-borrower on
the application.

That means the spouse with good credit could apply for the home loan
on their own and supplement their income with a portion of their partner’s
income to boost their borrowing power. Since the low-credit spouse is not on
the application, their poor credit score would not affect the loan eligibility
or interest rate. 

The HomeReady loan requires a minimum FICO score of 620 and a 3%
down payment.

In addition, the couple must prove they’ve been living together for
at least 12 months prior to the application in order for the non-applicant’s
income to be counted toward the mortgage.

Check your HomeReady loan eligibility (Jan 22nd, 2021)

one spouse refinance a mortgage without the other?

If only one spouse is on the existing mortgage — for instance, if
they bought the home before getting married — that person is free to refinance
the mortgage in their name only. 

If both spouses are on the current mortgage, your options depend on
your refinance goals.

In situations where both spouses want to remain on a joint mortgage,
they must both apply for the new home loan, go through underwriting, and sign
the mortgage papers. It is not possible to refinance with only one borrower on
the application and still keep both your names on the mortgage.

Other times, a couple or divorced couple might want to refinance to remove one person’s name from the mortgage. This is possible, but the borrower being removed needs to agree to the arrangement.

It is not possible for one spouse to refinance a joint mortgage
without the other borrower’s knowledge or consent — that would be mortgage

In addition, the spouse remaining on the mortgage needs to be able
to qualify for the loan on their own. That includes meeting credit score,
employment, income, and DTI requirements. And the person on the loan will have
to pay closing costs, as well.

Verify your refinance eligibility (Jan 22nd, 2021)

one spouse be on the mortgage but both on the title?

If the main reason for
purchasing a house in your own name is to have a cheaper mortgage, or to
qualify for a mortgage, you can always add your significant other to the home’s
title after the loan is finalized. This would officially make you
“co-owners” of the home.

Just note, the person on the
mortgage loan is solely responsible for repayment.

The co-owner’s name listed on the title does not give them any legal responsibility to help with mortgage payments. And in the event of a foreclosure, only the spouse whose name is on the loan will have their credit damaged.

both spouses on the mortgage but only one on the title?

There aren’t
too many times when you’d want to do this, because you’re on the hook for the
loan without the protection of any ownership interest. But there are instances
in which it would be appropriate.

For instance, if you needed
the property in just your name for estate-planning purposes, but could not
qualify for a mortgage on your own, your spouse might co-sign on the mortgage
for you. Or you could both be co-borrowers, because legally, only one mortgage
borrower has to be on title to the property.

However, many lenders prefer
that all borrowers also take title. That’s because technically, a borrower not
on title is not a borrower — just a guarantor.

Guarantors are not legally responsible for making monthly payments. They are liable only for loan balances if the primary borrower defaults. Lenders have to take an extra step and sue the guarantor if the borrower defaults, and they don’t like this.

Taking title as your “sole
and separate property” means that you both still get to live in the house — however,
only you have an ownership interest. Only your name is on the deed.

But this arrangement is not
always 100 percent straightforward.

You will probably have
to “quitclaim”

In community property states,
just taking title as sole and separate is not enough. That’s
because it shows you intend
the home to be yours and only yours, but it
does not indicate your spouse’s

In community property
states, it’s assumed that anything acquired by either spouse during the
marriage is the property of both. That includes real estate.

A quitclaim deed, which your
spouse signs and you record with your county, identifies the grantor (the spouse
relinquishing rights to the property) and the grantee, who remains on title.

Community property states are
as follows:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

In other states, you may also
have to quitclaim, so you can’t secretly buy real estate without your
spouse’s knowledge. And many lenders also require it for the same reason.

loans in community property states

One advantage of having the
mortgage and ownership in your name only doesn’t apply in community property
states. If you get a government-backed loan like FHA, VA or USDA financing,
your spouse’s separate debts still count in your debt-to-income ratios.

For these mortgages, the lender
may pull the non-borrower’s credit report to verify their debts. However, that
person’s credit score doesn’t count toward the application.

HUD guidelines state:

“The Lender must not consider
the credit history of a non-borrowing spouse. The non-borrowing spouse’s credit
history is not considered a reason to deny a mortgage application.

The lender must

  • Verify and document the debt of the non-borrowing spouse
  • Make a note in the file referencing the specific state law that justifies the exclusion of any debt from consideration
  • Obtain a credit report for the non-borrowing spouse in order to determine the debts that must be included in the liabilities”

Fortunately, other loan
programs don’t necessarily carry this requirement.

What are today’s mortgage rates?

Today’s mortgage rates are
excellent for both home purchases and refinancing. And you may
be able to reduce what you pay by only putting the most qualified applicant on
the mortgage. Check all your options to see what makes the most sense for your new
home loan.

Verify your new rate (Jan 22nd, 2021)

Source: themortgagereports.com

How Long Can The Good Times Last For Housing and Rates?

While it wasn’t quite the biggest surprise of 2020, the strength of the housing market was one of the best. The just-released numbers for December keep the good times rolling.

Leading the charge was December’s Existing Home Sales report from the National Association of Realtors (NAR).  The annual pace wasn’t quite at the recent 15-year high seen 2 months ago, but it hasn’t really fallen since then.  No complaints.

20210122 NL2.png

If you want to see more 15-year records broken, you’ll have to rely on The Census Bureau’s New Residential Construction numbers.  While not a direct measure of New Home Sales, the correlation is high (we’ll get the official sales numbers next Thursday).  For now, we can bask in the warm glow of another long-term high in Housing Starts.

20210122 NL6.png

With sales and construction numbers like this, it’s no surprise to see builder confidence remain in record high territory.  The National Association of Homebuilders (NAHB) reported another slight drop in builder confidence for January. The silver lining?  If not for the past 3 months, January’s index would have been an all-time high.

20210122 NL3.png

Silver linings aside, do builders know something that the home sales data has yet to tell us?  That’s possible, but most of the drop was chalked up to higher costs for materials, and shortages of labor and lots.  In other words, the only thing the builder confidence numbers are telling us is that the housing market is a victim of its own success.

If we want to worry about the future of housing for more legitimate reasons, the most obvious candidate is the threat of rising rates.

Actually, there have been indications of upward pressure on interest rates for months.  That hasn’t been immediately apparent in the mortgage world because mortgage rates diverged from their normal benchmarks in such an unprecedented way in 2020.

Chief among those benchmarks is the 10yr Treasury yield, which has been conveying a slow, steady rise in rates since August.  Mortgage rates, however, moved mostly lower since then, largely because they still had a lot of catching up to do following 2020’s initial bond market shock.

20210122 NL1.png

Now that mortgage rates have been reunited with Treasuries, so to speak, we can expect to see bond market volatility have an easier time translating to movement in the mortgage market.  From there, to whatever extent we credit low rates for benefitting the housing market, there is indeed some cause for concern.

Are we talking about huge, immediate concerns?  Probably not.  The trajectory of rates depends heavily on the trajectory of the pandemic and its economic impacts.  It goes without saying that covid won’t be defeated overnight.  Moreover, progress may be uneven (2 steps forward, 1.X steps back?).  As such, even if rates continue trending higher, they would be hard-pressed to do so very quickly.  

The week of the Georgia senate election was an exception, and rates have already recovered significantly since then. As of this week, the average lender was almost all the way back in line with early January levels.

20210122 nl7.png

The week ahead brings more housing data with home price reports on Tuesday, New Home Sales on Thursday, and Pending Sales on Friday (a leading indicator for next month’s Existing Home Sales report).  In addition the Fed releases a policy statement on Wednesday.  Given what we’ve heard from Fed Chair Powell recently, it’s too early for investors to be looking for any major changes from the Fed, but hints about those changes will eventually be a big motivation for upward pressure in rates.

Source: mortgagenewsdaily.com

MBS RECAP: Calm Week Ends on an Even Calmer Note

It’s rare to see non-holidays Fridays in January be quite as underwhelming as today turned out to be.  Bonds remained locked perfectly inside prevailing trends.  That’s a good thing in this case as it meant moderate gains for both MBS and Treasuries.  Volatility risks increase next week with a bigger slate of economic data, but we’ll wait to get too excited about that until it actually proves capable of moving the needle.  Today’s video discusses what might be required for 10yr yields to break below 1.0%.

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • Existing Home Sales 6.76m vs 6.55m f’cast, 6.71m prev

  • Markit Composite PMI 58.0 vs 55.3 prev

Market Movement Recap

08:35 AM

Markets trading ‘risk-off’ heading into the weekend.  Modest correction in European bonds spilling over into Treasuries to the tune of a 2.5bp rally in 10yr yields.  MBS are up almost an eighth to start.

12:37 PM

Slow, quiet day so far.  Modest weakness early, but almost fully erased now.  MBS and Treasuries both back near day’s best levels.  Stocks are very gently lower.

04:15 PM

Might as well have been a holiday today.  Zero volatility.  Bonds remained perfectly inside prevailing trends.  That meant moderate strength in MBS with both 1.5 and 2.0 coupons gaining just over an eighth of a point.

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.


UMBS 2.0

103-09 : +0-05


10 YR

1.0870 : -0.0200

Pricing as of 1/22/21 4:22PMEST

Today’s Reprice Alerts and Updates

8:44AM  :  Bonds Moderately Stronger to Start The Day

Economic Calendar

Time Event Period Actual Forecast Prior
Friday, Jan 22
9:45 PMI-Composite (source:Markit) * Jan 58.0 55.3
10:00 Existing home sales (ml)* Dec 6.76 6.55 6.69
10:00 Exist. home sales % chg (%)* Dec +0.7 -2.0 -2.5

Source: mortgagenewsdaily.com

Trump commutes sentence for Lend America exec, Biden administration ramps up and more of the week’s top news

Rohit Chopra, President Biden’s choice to head the Consumer Financial Protection Bureau, is expected to hit the ground running at the CFPB by quickly undoing Trump administration policies and moving aggressively to protect consumers during the pandemic.

Chopra is seen as a strong consumer advocate who will push for fairness and financial inclusion for minorities, one of the Biden administration’s priorities.

“Rohit is a dynamic leader who knows the agency, understands the issues and will be ready to set a new course on day one,” said Michael Gordon, a partner at Bradley Arant Boult Cummings.

(Read the full story here.)

Source: nationalmortgagenews.com

Mortgage and refinance rates today, January 21, 2021

Today’s mortgage and refinance rates 

Average mortgage rates edged lower yesterday. It was a small drop but it inches them further toward the all-time low, though there’s still a way to go.

Key markets this morning are relatively quiet. And it’s looking as if mortgage rates today may again be unchanged or barely changed.

Find and lock a low rate (Jan 22nd, 2021)

Current mortgage and refinance rates 

Program Mortgage Rate APR* Change
Conventional 30 year fixed 2.75% 2.75% Unchanged
Conventional 15 year fixed 2.362% 2.362% +0.05%
Conventional 5 year ARM 3% 2.743% Unchanged
30 year fixed FHA 2.495% 3.473% +0.06%
15 year fixed FHA 2.438% 3.38% Unchanged
5 year ARM FHA 2.5% 3.226% Unchanged
30 year fixed VA 2.313% 2.485% +0.01%
15 year fixed VA 2.313% 2.635% +0.19%
5 year ARM VA 2.5% 2.406% Unchanged
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Find and lock a low rate (Jan 22nd, 2021)

COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

It’s been more than a week since mortgage rates last rose. But, before that run, it had been a week since they fell. If that sounds as if those rates are in a state of flux, that’s because they are.

The mortgage market is littered with Rumsfeldian known unknowns and unknown unknowns. And, right now, nobody can get a grip on the short-term direction of travel.

Further ahead, it’s highly likely that they’ll rise. Eventually, the economy should improve significantly as vaccination programs take effect — assuming no resistant virus strains emerge. And higher government borrowing is also probable. Both those should soon push these rates higher.

But how soon is soon? March? The third quarter? That’s unknowable. So I’m leaning toward caution.

And, for now, my personal rate lock recommendations, which are little better than hunches, are:

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • LOCK if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

Still, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So be guided by your gut and your personal tolerance for risk.

Market data affecting today’s mortgage rates 

Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time yesterday morning, were:

  • The yield on 10-year Treasurys held steady again at 1.11%. (Neutral for mortgage rates) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were mixed and mostly barely moving on opening. (Neutral for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices moved down to $53.07 from $53.64 a barrel. (Good for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices edged up to $1,865 from $1,863 an ounce. (Neutral for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower
  • CNN Business Fear & Greed index — Rose to 70 from 66 out of 100. Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones

*A change of less than $20 on gold prices or 40 cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Caveats about markets and rates

Before the pandemic and the Federal Reserve’s interventions in the mortgage market, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. The Fed is now a huge player and some days can overwhelm investor sentiment.

So use markets only as a rough guide. They have to be exceptionally strong (rates are likely to rise) or weak (they could fall) to rely on them. But, with that caveat, so far mortgage rates today look likely to remain unchanged or barely changed.

Find and lock a low rate (Jan 22nd, 2021)

Important notes on today’s mortgage rates

Here are some things you need to know:

  1. The Fed’s ongoing interventions in the mortgage market (way over $1 trillion) should put continuing downward pressure on these rates. But it can’t work miracles all the time. And read “For once, the Fed DOES affect mortgage rates. Here’s why” if you want to understand this aspect of what’s happening
  2. Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read How mortgage rates are determined and why you should care
  3. Only “top-tier” borrowers (with stellar credit scores, big down payments and very healthy finances) get the ultralow mortgage rates you’ll see advertised
  4. Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the wider trend over time
  5. When rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
  6. Refinance rates are typically close to those for purchases. But some types of refinances are higher following a regulatory change

So there’s a lot going on here. And nobody can claim to know with certainty what’s going to happen to mortgage rates in coming hours, days, weeks or months.

Are mortgage and refinance rates rising or falling?

Today and soon

Once again, I’m expecting mortgage rates to hardly move today. But, as always, that could change as the day progresses.

This morning’s new weekly claims for unemployment insurance weren’t quite as bad as last week’s. But, at 900,000, they’re still pretty terrible. And you’d normally expect mortgage rates to fall on the news.

However, investors are currently very aware of the extra government spending (and borrowing) that the Biden administration is proposing. And that’s so far putting a brake on appreciable falls. Indeed, at some point soon, it may well cause some rises.


Over the last several months, the overall trend for mortgage rates has clearly been downward. And a new, weekly all-time low was set on 16 occasions last year, according to Freddie Mac.

The most recent such record occurred on Jan. 7, when it stood at 2.65% for 30-year fixed-rate mortgages. But rates are now some way above the all-time low. In Freddie’s Jan 21 report, that average was 2.77%.

Expert mortgage rate forecasts

Looking further ahead, Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

And here are their current rates forecasts for each quarter of 2021 (Q1/21, Q2/21, Q3/21 and Q4/21).

Fannie’s were released on Jan. 15, Freddie’s on Jan. 14 and the MBA’s on Jan. 20. The numbers in the table below are for 30-year, fixed-rate mortgages:

Forecaster Q1/21 Q2/21 Q3/21 Q4/21
Fannie Mae 2.7% 2.7% 2.8% 2.8%
Freddie Mac 2.9% 2.9% 3.0% 3.0%
MBA 2.9% 3.1% 3.3% 3.4%

But, given so many unknowables, the current crop of forecasts may be even more speculative than usual. And there’s certainly a widening spread as the year progresses.

Find your lowest rate today

Some lenders have been spooked by the pandemic. And they’re restricting their offerings to just the most vanilla-flavored mortgages and refinances.

But others remain brave. And you can still probably find the cash-out refinance, investment mortgage or jumbo loan you want. You just have to shop around more widely.

But, of course, you should be comparison shopping widely, no matter what sort of mortgage you want. As federal regulator the Consumer Financial Protection Bureau says:

Shopping around for your mortgage has the potential to lead to real savings. It may not sound like much, but saving even a quarter of a point in interest on your mortgage saves you thousands of dollars over the life of your loan.

Verify your new rate (Jan 22nd, 2021)

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

Source: themortgagereports.com