Morning Report: Forbearances fall

Vital Statistics:

 

  Last Change
S&P futures 3666 28.3
Oil (WTI) 47.27 0.44
10 year government bond yield   0.91%
30 year fixed rate mortgage   2.78%

Stocks are higher this morning after the FDA said that Moderna’s vaccine is highly effective. Bonds and MBS are flattish.

 

The Fed begins its two day FOMC meeting today. The decision will be announced tomorrow afternoon.

 

In other economic news, industrial production rose 0.4% last month while manufacturing production rose 0.8%. Capacity utilization rose to 73.3%.

 

The fate of the GSEs will likely be left up to Biden, according to Steve Mnuchin. The idea of privatizing the GSEs during the lame duck session was always more of a fantasy than reality. GSE reform will likely require legislation and DC has been kicking the can down the road due to how difficult that will be. Personal opinion: the government is more likely to reinstate the profit sweep in order to compensate the government for COVID-related losses due to forbearance than it is to let the GSEs go. There is a reason why the 30 year fixed rate mortgage exists nowhere else in the world except for the United States, and that is due to the government backstop. Maintaining that product is the first priority, which means the Fan and Fred will have to maintain some sort of explicit government guarantee.

 

New home mortgage applications fell 16% in November, but are up 35% compared to a year ago. “November new home sales activity, both mortgage applications and home sales, ran at a pace considerably ahead of 2019, showing the ongoing strong growth in housing demand and new residential construction,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “However, MBA estimates that after climbing to a new survey high in October, the seasonally adjusted pace of new home sales declined in November. Signs of a slowdown in the economic recovery likely contributed to the expected monthly decrease in activity.” 

 

The number of loans in forbearance fell last week by 6 basis points to 5.48% according to the MBA. “The share of loans in forbearance decreased in the first week of December; however, more borrowers sought relief, with new forbearance requests reaching their highest level since the week ending August 2, and servicer call volume hitting its highest level since the week ending April 19,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “Compared to the last two months, more homeowners exiting forbearance are using a modification – a sign that they have not been able to fully get back on their feet, even if they are working again.”

 

 

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