Morning Report: The Fed changes its language regarding MBS purchases.

Vital Statistics:

  Last Change
S&P futures 4,401 6.2
Oil (WTI) 72.74 0.45
10 year government bond yield   1.28%
30 year fixed rate mortgage   3.02%

Stocks are higher after GDP missed. Bonds and MBS are down.


The advance estimate for second quarter GDP came in at 6.5%, which was below the Street’s 8.5% estimate. First quarter GDP was revised downward by 0.1% to 6.3%. Despite the tremendous lack in real estate, housing was again a drag on GDP.


Initial Jobless Claims came in at 400k, higher than expectations.


Yesterday’s FOMC announcement was largely uneventful, however the language regarding asset purchases changed.

Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals, and the Committee will continue to assess progress in coming meetings.

This statement about making progress (bolded and italicized) is new and indicates that the Fed is beginning to think about tapering. MBS spreads have been widening in anticipation of this event over the past quarter, so at least some of the adjustment has been made already.


Ex-MBA President Dave Stevens penned an article discussing the new Ginnie Mae proposal for increased capital requirements. This capital proposal basically imposes Basel capital requirements for non-banks. It would impose a 250% capital requirement on Ginnie Mae mortgage servicing rights, which would push lower-capitalized non-bank Ginnie Mae servicers out of the business of Ginnie Mae servicing. The government’s use of the False Claims Act in the aftermath of the financial crisis pushed a lot of banks out of the FHA business, and now the government wants to chase non-banks out of FHA servicing.

The punch line is that this missive is going to whack Ginnie Mae MSR valuations, which is only going to make FHA loans more expensive. If the government wants to see more credit extended to first time / marginal borrowers, this is a strange way to go about it.


Pending Home Sales decreased 1.9% in June, according to NAR. “Pending sales have seesawed since January, indicating a turning point for the market,” said Lawrence Yun, NAR’s chief economist. “Buyers are still interested and want to own a home, but record-high home prices are causing some to retreat. The moderate slowdown in sales is largely due to the huge spike in home prices,” Yun continued. “The Midwest region offers the most affordable costs for a home and hence that region has seen better sales activity compared to other areas in recent months.”

22 Responses

  1. Totally reasonable.


    • Does he have any evidence whatsoever to say that Georgia’s laws were made with the intent to discriminate?

      Of course not. Because it is bullshit.


      • I think these lawsuits, or threats thereof are just service to the base. I don’t think he expects them to go anywhere. I do, at least up until the Appeals level.


      • When cornered, some will even sort of admit the bullshit.

        “ezra klein

        So something you’ll hear on the right is that all these liberals — like me, frankly — have their hair on fire about Georgia, we’re attacking Georgia’s voting laws. But there are all these blue states that have similar or worse laws on the books.

        So, for example, Georgia’s being attacked for limiting no-excuse absentee voting, but if you look at Connecticut, you look at New Hampshire, you look at New York, all of them currently block no-excuse absentee voting, which is a kind of broad mail-in voting, altogether. Georgia has 17 days of early voting. Connecticut and New Hampshire don’t have any. Some other blue states only have 10. That infamous provision, you just mentioned it, banning third parties from giving away food and drink within 150 feet of a polling place, you can see it in New York too.

        If liberals were just worried about access to the vote, the argument goes, they’d be just as hair-on-fire about a bunch of these blue states that have very, very restrictive voting laws too, but they’re not. So why?”

        To ask the question is to answer it.


  2. So happy Substack exists:

    “Media Promotes Fake “Vaccine Hesitancy” Narrative To Justify Coercion And Scolding

    Michael Tracey”


  3. Damn all those Republicans working in the federal government!

    “Biden’s planned vaccine rule meets resistance from large groups of federal workers

    Groups representing law enforcement, postal workers, and IRS managers all issue statements raising concerns about a government mandate”


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