Morning Report: Mortgage Credit Tightens

Posted on May 7, 2020 by Brent Nyitray

Vital Statistics:

 

Last Change
S&P futures 2876 43.1
Oil (WTI) 26.27 2.29
10 year government bond yield 0.69%
30 year fixed rate mortgage 3.36%

 

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

 

Initial Jobless Claims fell to 3.2 million, taking the COVID total of job losses to 33.4 million.

 

Challenger, Gray and Christmas reported 671,000 job cuts were announced last month.

 

Productivity fell 2.5% in the first quarter, which was better than the expectations of a 5.5% drop. While next quarter will be the big test, it certainly looks like businesses are figuring out a way to work around COVID restrictions.

 

I was listening to Fannie Mae’s Q1 conference call, and their baseline scenario for forbearance is 15%. Their baseline scenario is a second half recovery, with overall negative GDP growth for 2020 and massive growth in 2021.

 

Mortgage Credit Availability fell to a 6 year low in April according to the MBA. “The abrupt weakening of the economy and job market – and the uncertainty in the outlook – drove credit availability down in April for the second consecutive month,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The overall index fell to its lowest level since December 2014, and the sub-indexes pointed to tightened credit supply for all loan types. The decline was largely driven by lenders dropping many low credit score and high-LTV programs, as well as further reduction in jumbo and non-QM products.”

To be honest, I was expecting worse. Given the issues with forbearance and cash-outs, it probably will get worse.

 

MCAI

 

Treasury is celebrating the sequel to Top Gun by reviving the 20 year bond, last seen when aviator glasses, leather jackets, and Val Kilmer having a career.

 

 

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