Fintech company Black Knight has released their latest review of mortgage delinquency and foreclose starts, and the news is very positive:
August’s 36,200 foreclosure starts made for the lowest single-month total since December 2000
The number of loans in active foreclosure inventory also fell; at 253,000, it’s the fewest since 2005
Prepayment activity – typically a good indicator of refinance activity – continues to press upward, increasing 5% from July to reach a three-year high
August’s prepayment rate was up 62% from the same time last year and 2.5 times the 18-year low hit in January
Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure): 3.45%, Month-over-month change: -0.15%,Year-over-year change: -1.49%
Total U.S. foreclosure pre-sale inventory rate: 0.48%,Month-over-month change: - 2.42%,Year-over-year change: -11.46%
Total U.S. foreclosure starts: 36,200 Month-over-month change: -7.65%,Year-over-year change: -23.14%,
Monthly prepayment rate (SMM): 1.50% Month-over-month change: 5.45%, Year-over-year change: 61.77%
Foreclosure sales as % of 90+: 1.81%, Month-over-month change: 3.20%,Year-over-year change: -6.80%
Number of properties that are 30 or more days past due, but not in foreclosure: 1,813,000,Month-over-month change: 6,000,Year-over-year change: 4,000
Number of properties that are 90 or more days past due, but not in foreclosure: 444,000,Month-over-month change: 0, Year-over-year change: -62,000
Number of properties in foreclosure pre-sale inventory: 253,000,Month-over-month change: -5,000,Year-over-year change: -28,000
Number of properties that are 30 or more days past due or in foreclosure: 2,066,000 Month-over-month change: 1,000Year-over-year change: -23,000
Mortgage backed securities (FNMA 3.000 MBS) gained +35 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move a smidge lower than the prior week.
Overview: As expected, the Federal Reserve lowered their key interest rate. However, mortgage rates were unchanged on Fed day. This was a very "hawkish" rate cut as the Fed stated strong economic growth and actually raised their economic projections. The biggest volatility of the week came on Friday on "news" that a Chinese Trade delegation would not be touring some American Farmer operations when they visit in October, the markets took that as a sign that negotiations were going poorly and caused mortgage rates to improve slightly on a flight to quality.
Taking it to the House: August Exiting Home Sales were stronger than expected with an annualized sales pace of 5.49M units vs expectations of 5.37M. The median sales price rose by 4.7% on a YOY basis and is now $278,000. Housing inventory at the end of August decreased to 1.86 million, down from 1.90 million existing-homes available for sale in July, and marking a 2.6% decrease from 1.91 million one year ago. Unsold inventory is at a 4.1-month supply at the current sales pace, down from 4.2 months in July and from the 4.3-month figure recorded in August 2018. Properties typically remained on the market for 31 days in August, up from 29 days in July and in August of 2018. Forty-nine percent of homes sold in August were on the market for less than a month. Weekly Mortgage Applications were basically flat at -0.1%. Purchase Applications jumped by 6.0% while Refinance Applications fell by -4.0%. August New Housing Starts were much stronger than expected (1.364M vs est of 1.250M). SFR rose 4.4% for a rate of 919K. Building Permits also beat out estimates (1.419M vs est of 1.300M). SFR rose by 4.5% to an annualized rate of 866K.
They also released their Economic Projections You can read the official release here.
Here is a summary of their action:
They lowered their Fed Fund Rate from 2.25% to 2.00%
They lowered their Interest Rate on Excess Reserves 30BPS to 1.80%
The vote was 7-3. With the 2 dissenting votes wanting NO rate change and 1 dissenting vote for a larger rate cut of 50BPS instead of the 25BPS.
According to the “dot plot chart” of individual expectations, five members thought the FOMC should have held its previous range of 2% to 2.25%, five approved of the 25 basis point cut but keeping rates there through the rest of the year (which means that 10 out of 17 "dots" see no more cuts this year), and seven favored at least one more cut this year.
The committee "hung their hat" once again on “the implications of global developments for the economic outlook as well as muted inflation pressures” as the primary rationale for the cut.
Members actually raised their expectations for growth since the last summary of economic projections in June. The committee now sees GDP rising at a 2.2% pace this year, compared with 2.1% in June, though the longer-run expectations remain at 1.9%.
Inflation projections were unchanged at 1.8% for 2019 and 2.5% over the longer run.
What to Watch Out For This Week:
The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.