All Things in Moderation

Vital Statistics:

	Last	Change
S&P futures	3902	-6.3
Oil (WTI)	57.53	-0.34
10 year government bond yield		1.15%
30 year fixed rate mortgage		2.85%

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

Small business optimism fell below its historical average in January, according to the National Federation of Independent Businesses. “As Congress debates another stimulus package, small employers welcome any additional relief that will provide a powerful fiscal boost as their expectations for the future are uncertain,” said NFIB Chief Economist Bill Dunkelberg. “The COVID-19 pandemic continues to dictate how small businesses operate and owners are worried about future business conditions and sales.”

November 30 day delinquency rates rose to 5.9%, according to CoreLogic. This is an increase of 2 percentage points from a year ago. “The consistent decline in serious delinquency since August is a sign of growing financial stability for families. In addition to ensuring that homeowners stay in their homes, the decline in delinquency means fewer distressed sales, which is both a positive for individual households and the overall housing market.” Seriously delinquent rates rose from 1.3% to 3.9%.

The number of loans in forbearance fell last week to 2.7 million borrowers, according to the MBA. The forbearance percentage fell to 5.35% from 5.38% last week. “The share of loans in forbearance decreased at the end of January across all investor categories,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “Almost 14 percent of homeowners in forbearance were reported as current on their payments at the end of last month, but the share has declined nearly every month from 28 percent in May. While new forbearance requests increased slightly at the end of January, the rate of exits picked up somewhat but remained much lower than in recent months. We are anticipating a sharp increase in exits in March and April as borrowers hit the 12-month expiration of their forbearance plans.” By stage, 16.52% of total loans in forbearance are in the initial forbearance plan stage, while 80.98% are in a forbearance extension. The remaining 2.50% are forbearance re-entries.

Mortgage credit improved slightly in January, according to the MBA. “The growth in credit availability in January coincides with a housing market that is poised for a strong start to the year,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Improvements were driven by the conventional segment of the mortgage market, as lenders added ARM loans with lower credit score and higher LTV requirements. Despite ARM loans accounting for a very small share of loans applications in recent months, lenders are likely looking ahead to a strong home buying season by expanding their product offerings.”

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