All Things in Moderation

Vital Statistics:

Stocks are higher as earnings continue to come in. Bonds and MBS are up small.

Mortgage applications decreased by 8.1% last week as rates rose. Refis decreased by 7% and purchases fell by 10%. “With rates 87 basis points higher than the same week a year ago, refinance applications continued to decrease,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Purchase activity slowed after the previous week’s gain. Both conventional and FHA purchase applications saw proportional declines, resulting in purchase activity overall dropping 10 percent. The average loan size again hit another record high at $446,000. Activity continues to be dominated by larger loan balances, as inventory remains tight for entry-level buyers.”

New Rez reported numbers yesterday which sent the stock up 7.4%. In anticipation of higher rates, New Rez has been building the servicing book. They are in a position now, at least according to their analysis that increasing rates will benefit financially – in other words, they think the increase in MSR valuation will more than offset the decline in origination that a 100 basis point increase in mortgage rates will be accretive to EPS by $0.11. Separately, New Rez announced some layoffs from the Caliber acquisition.

Mortgage bankers have been beaten up this year, especially United Wholesale and Rocket. New Rez has held up better than the rest. New Rez has a pretty decent dividend yield, so that might be helping.

Total household debt increased 2.2% to $15.58 trillion, according to the Fed. Mortgage debt increased a trillion last year. “The total increase in nominal debt during 2021 was the largest we have seen since 2007,” said Wilbert Van Der Klaauw, senior vice president at the New York Fed. “The aggregate balances of newly opened mortgage and auto loans sharply increased in 2021, corresponding to increases in home and car prices.” The biggest percentage increases were in student loan debt and credit card debt, however.

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