Morning Report: Refinances up 80%

Vital Statistics:


Last Change
S&P futures 2778 -81.25
Oil (WTI) 33.00 -1.49
10 year government bond yield 0.71%
30 year fixed rate mortgage 3.37%


Stocks are after the Bank of England cut interest rates by 50 basis points. Bonds and MBS are up.


Coronavirus update: 120,000 worldwide, cases in the US breaches 1,000. A big pocked in the US centers around Westchester County in New Rochelle.


Washington is working on some sort of fiscal stimulus to support the economy while we deal with the Coronavirus. Republicans are pushing for a payroll tax holiday while Democrats want paid sick leave. They will probably come to some sort of deal. What politician doesn’t like to spend money in an election year, especially with an excuse as bulletproof as this?


Speaking of politics, Joe Biden is looking more and more like he will be the D nominee.


The MBA has raised its 2020 origination forecast to $2.6 trillion from $2.1 trillion. 2019 volume was $2.2 trillion. Refis are forecast to increase to $1.2 trillion, while purchases are expected to come in at 1.4 trillion.  “This month, our forecast is for mortgage rates to average around 3.4 percent for 2020, and we have revised our refinance forecast to a total of $1.2T for 2020 roughly double our previous forecast of $665B,” they said. “The revised refinance estimate is a 37 percent increase in refinance volume in 2020 relative to 2019. Additionally, we expect purchase originations to be stronger in 2020, showing an 8 percent increase for the year given the strength in new residential construction and in purchase applications to date. ”


Separately, mortgage originations increased 55.4% last week as purchases rose 6% and refis rose 79%. “Market uncertainty around the coronavirus led to a considerable drop in U.S. Treasury rates last week, causing the 30-year fixed rate to fall and match its December 2012 survey low of 3.47 percent,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Homeowners rushed in, with refinance applications jumping 79 percent–the largest weekly increase since November 2008. With last week’s increase, the refinance index hit its highest level since April 2009.”


The consumer price index rose 0.1% MOM in February and is up 2.3% on a YOY basis. Ex-food and energy it rose 0.2% MOM and 2.4% YOY. Of course with the Fed knocking on ZIRP’s door, the inflation numbers are completely irrelevant to the bond market.


Mortgage credit availability dipped in February. “Mortgage credit supply decreased in February, as both conforming and jumbo segments of the market saw a decline,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “There were also reductions in ARM program offerings, as well as in low credit score programs offered by investors. Last month’s activity was the calm before the storm. Mortgage rates dropped steeply in the last week of February and a large surge of refinance activity followed. Investors may adjust their future mortgage credit offerings based on the sudden upswing in demand.” With pipelines full, many mortgage bankers are simply saying no to new loans.

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