Mortgage News Daily

We've been saying for a while that the longer end of the bond market really wants to see the Fed get serious about fighting inflation. This is why yields spiked on July 29th when the Fed held rates steady and Warsh said he'd let the bond market do the heavy lifting. Now today, we have back-to-back inflation reports that resulted in Fed Funds Futures pricing in a 90% chance of a hike at next week's meeting. Fed Funds Futures are the only thing that's unequivocally selling off this morning. 2yr Treasuries (heavily impacted by Fed expectations) are mixed, but the longer end of the curve is now rallying thanks to the expectation of the rate hike and the hope that it pushes back against inflation.

Most of us 30 years old and older have tales about where they were and what they did 25 years ago. Being in capital markets, and selling MBS, for over 40 years, I knew people who died in New York that day. That said, as an industry, we’re very good at looking forward to, and planning for, the future. Minority home ownership is something every major lender is witnessing. For example, on Monday, September 14, NAHREP and the Hispanic Wealth Project will unveil the 2026 State of Hispanic Wealth Report on Latino economic progress. More than 1.2 million Hispanic households have reached millionaire status, with total Hispanic household wealth more than tripling since 2014. Hispanic households drove all net U.S. homeownership growth in 2025, reaching a record 10.2 million owner-households; real estate remains the largest pillar of Hispanic wealth at 45.5 percent. “For the first time, the report devotes a full section to the risks federal policy changes from the current Administration pose to this progress.” (Today’s podcast can be found here. This week’s ‘casts are sponsored by NFTYDoor, the MLO's favorite HELOC platform. A broad buy box and hands-on mortgage expertise mean more loans close, faster, for banks, credit unions, and brokers. Clean files close in as little as zero days. Today’s has an interview with Agile’s Greg Vacura on connecting mortgage lenders and broker-dealers to make MBS trading faster, more efficient, transparent, and less reliant on phone-based processes.)

Mortgage application activity pulled back last week, with a sharp decline in refinancing more than offsetting relatively stable purchase demand as mortgage rates moved higher. The Mortgage Bankers Association (MBA) reported a 2.7% decrease in total application volume on a seasonally adjusted basis for the week ending September 4. Purchase applications were little changed, slipping just 0.2% from the previous week on a seasonally adjusted basis. On an unadjusted basis, purchase activity fell 3%, but remained 4% higher than the same week one year ago, earning it's spot as the one positive note for this week's report. Refinancing was a different story. The Refinance Index fell 6% from the previous week and was 25% below year-ago levels, reaching its slowest weekly pace since May 2025. Refinances also accounted for a smaller portion of overall mortgage activity, with the refinance share falling to 40.9% from 41.8% the previous week. Notably, this data was collected before this week's sharpest rate spikes, so this trend will likely accelerate next week. "Mortgage rates moved higher last week, driven by ongoing investor concerns over inflation and the federal budget deficit," said Joel Kan, MBA's Vice President and Deputy Chief Economist. Kan noted that the 30-year fixed rate reached 6.85%, its highest level since June 2025 and 36 basis points above the same time last year.

Existing-home sales slipped in August, falling below the 4 million annualized pace for the first time since June 2025, while a sharp increase in inventory gave buyers more options and pushed the supply of homes to its highest level in more than a decade. The National Association of REALTORS® reported a 2.0% decline in sales from July to a seasonally adjusted annual rate of 3.98 million, while sales were 1.2% lower than a year earlier.

Looked at in a vacuum, Friday was no better or worse than the average day over the past several months. Compared to yesterday morning's levels, the average lender was 0.01% higher--a small enough move to be effectively considered "unchanged."

This morning's paradoxical rally lasted 30 whole minutes. Bonds turned around at exactly 9am and proceeded to completely erase the AM gains. There were no compelling macro motivations for the reversal apart from a modest rise in oil prices. While oil price lows and highs perfectly matched bond yields in terms of timing, the bond selling was disproportionately larger. This is highly suggestive of short covering being a component of the morning rally. In other words, traders who had open bets on higher rates simply closed those positions quickly this morning. From that point on, the market was free to trade as it pleased. 2yr/10yr spreads remained mostly flat which suggests broad selling across the curve and no change in the paradoxical sentiment component of the AM rally. Bottom line: there were two rally motivations this morning, and one of them left the bond market open to correction.

Selling continues to be the path of least resistance for the bond market. Open interest data from Treasury futures suggests Friday's "short-covering" assessment may not be the only story. Reason being: open interest moved HIGHER (it would be much easier to conclude short-covering drove the move if open interest was lower). The counterpoint is that new short positions in the afternoon could have merely offset the AM short-covering. Heading into the current week, bonds did their best to hold flat overnight but have been increasingly pressured by fuel prices and technicals. Oil is up about $4 from Friday and there was additional technical selling when 10yr yields hit 5%. Bigger decisions will be made after Wednesday's Fed announcement--for better or worse.

Yes, the college game was amazing Saturday night here in Austin, but there’s also IMN’s HELOCs & Second Liens event. The markets know that it is a hot topic. Do “the markets” care about a $40 trillion U.S. deficit? Yes. Does any politician seem able to curb spending, or be elected to do it? Not really, and in fact over the weekend, House Speaker Johnson seems to have shifted other national priorities aside in favor of President Trump’s proposal to pay every adult $5,000 if the GOP proves victorious in November, at a cost of $1 trillion. “Rob, I’ve heard from politicians that the U.S. consumer is in great shape. Given my borrowers come from this pool, have you seen any credit card stats lately?” Yes: the Federal Reserve calculates that revolving debt is at an all-time high which can have a positive impact on lenders offering certain products. (More on debt and equity below.) For something else that impacts lenders, this Thursday at 1PM ET is Chrisman Demo Day: watch, for no charge, a loan move through the mortgage lifecycle… verification, POS, LOS, U/W & decisioning, secondary, the customer experience, and recapture offerings. Featuring live demos from Truework, MortgageFlex, nCino, Gateless, Agile Trading Technologies, TrustEngine, FirstClose, and Milo… Eight companies, 10 minutes each, one connected pipeline, free for viewers. (Today’s podcast can be found here. This week’s ‘casts are sponsored by FirstClose, which provides fintech solutions to HELOC and mortgage lenders nationwide. Their home equity lending platform accelerates the home equity lending process, reducing application-to-closing times from 45 days to less than ten. Today’s has an interview with mLoop’s Ellen Duncan on how data and AI can modernize LO–lender matching and what lenders must do to attract top producers.)

On average, the top-tier 30yr fixed mortgage rate moved up to another new long-term high today of 7.17%. You'd have to go back to January, 2025 to see anything higher. That said, there's more variability than normal today depending on the lender.

Monday wasn't too different from last Friday in that the bond market began the day with AM volatility that gave way to minimally changed yields by the close. The order was reversed, however, with the weaker trading in the AM and rally back to unchanged levels for the close. Another key difference was that the mid-day rally was clearly drew inspiration from measurable events (in this case, war-related newswires that helped oil prices recover most of the morning's increase. Shorter-dated yields underperformed as there was no meaningful improvement in Fed Funds Futures. In fact, rate hike odds increased ever-so-slightly as the day progressed. In the bigger picture, today and Friday speak to a leveling-off of negative momentum in the recent snowball selling trend. Unfortunately, this could be as simple as a circling of the wagons ahead of Wednesday's Fed announcement which is just as likely to cause another bearish breakout as it is to reinforce the technical ceiling.