Morning Report: Q1 was tough for independent mortgage bankers.

Vital Statistics:

Stocks are higher this morning on no real news. Bonds and MBS are down. Jerome Powell will be speaking at 10:00 am.

Bond yields have been climbing, much to the chagrin of mortgage bankers. Over the past week, the 10 year has tacked on 24 basis points in yield. Some of this is probably due to hawkish comments out of the Fed, but it appears to be global, with the German Bund, UK Gilt, and Japanese Government Bond all moving up in lockstep.

I suspect some people have been hoping that this increase was driven by debt ceiling theater and once we get a resolution yields will begin falling. That might not be in the cards unless the US hits a recession. Note the Atlanta Fed GDP Now model sees 2.9% growth in Q2, which is pretty robust. That said, the GDP Now model was consistently too high in Q1.

Independent Mortgage Banks lost $1,972 on each loan they originated in Q1, according to the MBA. This is an improvement from the $2,812 they lost in the fourth quarter.

“A net production loss of 68 basis points in the first quarter of the year is an improvement over the record 99-basis-point loss reported in the fourth quarter of 2022,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “Conditions continue to be challenging for the industry, with now four consecutive quarters of production losses and nine consecutive quarters of volume declines.”

Added Walsh, “One silver lining from the first quarter is that production revenues improved by 40 basis points. However, costs continued to escalate with the further drop in volume and reached more than $13,000 per loan despite substantial personnel reductions.”

The Index of Leading Economic Indicators declined again in April, according to the Conference Board. “The LEI for the US declined for the thirteenth consecutive month in April, signaling a worsening economic outlook,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “Weaknesses among underlying components were widespread—but less so than in March’s reading, which resulted in a smaller decline. Only stock prices and manufacturers’ new orders for both capital and consumer goods improved in April. Importantly, the LEI continues to warn of an economic downturn this year. The Conference Board forecasts a contraction of economic activity starting in Q2 leading to a mild recession by mid-2023.”

27 Responses

  1. Janet Yellen thinks we need more bank mergers

    That is gonna throw a turd in the left’s punchbowl


    • One bank to rule them all, one bank to find them, One bank to bring them all, and in the darkness bind them; In the Land of Washington where the shadows lie.


  2. Opps:

    “What happened? New polling from AP/NORC finds that few Americans are paying close attention to the standoff between Congress and President Biden over whether and how to raise the debt ceiling before the U.S. defaults on its debts. However, more than 6 in 10 Americans overall—including 58 percent of Democrats and 71 percent of Republicans—favor increasing the debt limit “only if lawmakers include reductions on the deficit” compared to less than one fifth who favor an increase “without conditions.””


    • Ezra tries to reset expectations:

      “Liberals Are Persuading Themselves of a Debt Ceiling Plan That Won’t Work”


  3. I’m sure they already have it but if they didn’t, or didn’t have the latest software updates, the Russians will have them now.

    Also, no way there won’t be US ground crews servicing them.


  4. Got to love the Post’s understatement here:

    “California’s reparations plan for Black residents faces uphill battle

    With the state facing a $32 Billion budget deficit, the path forward for direct cash payments to Black Californians remains murky

    By Emmanuel Felton
    May 19, 2023 at 9:26 a.m. EDT

    California’s history of state-sanctioned racism against multiple ethnic groups, including deporting thousands of Mexican American citizens during the Great Depression and banning Asian immigrants from owning land in the state, makes the politics of reparations more complicated, said Manuel Pastor, a professor at the University of Southern California.

    “It’s been racism Lollapalooza here in California against multiple groups,” said Pastor. “And there’s definitely not a sense that Asian and Latino folks benefited in the same way that White folks did from suppressing African Americans.””


  5. Nice one sentence summation:

    “The core belief of critical queer theorists is that homosexuality is not a part of human nature because there is no such thing as human nature; and that everything is socially constructed, even the body.”

    Obviously that’s Sullivan’s focus, but the truncated version is more on point:

    “The core belief of critical queer theorists is that there is no such thing as human nature; and that everything is socially constructed, even the body.”


  6. A lengthy discussion of the impact of social media on teens’ mental health that completely omits any discussion of the increase in transgender identification occurring during the same time period.


  7. Some good pieces on the ending of education reform as a national priority:

    TL:DR – Espousing “Closing the achievement gap” as a goal is now considered racist.


  8. Lol

    For hate’s sake I spit my last breath at thee.


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