Anniemac
Inside Track

 

Daily Quote:  Make it a habit to tell people “thank you”. To express your appreciation, sincerely and without the expectation of anything in return. Truly appreciate those around you, and you'll soon find many others around you. Truly appreciate life, and you'll find that you have more of it.

Fun Fact Of The Day: What was the first restaurant ever?  The very first restaurant in the world was opened in Paris in 1765. A tavern keeper, Monsieur Boulanger, served a single dish -- sheep's feet simmered in a white sauce.

 

A Preview Of What MIGHT Be Coming

I am somewhat loathe to write about future potential interest rate rallies for fear of encouraging speculation by Originators making bet on locks…so here’s my caveat.  “This is not intended to be anything more than an opinion of someone who, if he really had some keen insight into the future of financial markets, would be running a hedge fund called AnnieMac Investments versus a mortgage company called AnnieMac Home Mortgage.”  Got it?!

Having said that the best managers always keep three paths in focus – the “Best”, “Base” and “Worst” case paths.  On rare occasions the Best Case path becomes a higher probability event than normal and therefore it makes sense to give it some attention.  So what is the best case path I’m referring to? 

  • New Lows:  If Brexit continues to instill fear and uncertainty into economies and markets, and if Friday’s Employment Situation Report (Jobs Friday) once again comes in weak, we could touch lows on the 10 and 30 year Treasury which make the lows of 2014 look like the 1980’s (You older folks know what I’m talking about!).  If this were to occur MBS would have a tough time keeping pace with Treasuries (look up ‘negative convexity’ if you have absolutely, and I mean absolutely, nothing else to do one of these days) but the current coupon would undoubtedly have to reset much lower in rate than it is today…especially if we come close to a 1% 10-year Treasury.
  • MIP Reduction:  Some adjustment to MIP by the Obama Administration is becoming more and more of a likelihood as I’ve mentioned in this missive before.  I believe we’ll get another read on the health of the MMI Fund at the end of the quarter and if Forward Mortgages exhibit the kind of positive behavior they’ve been showing (in terms of lower losses) this will put the reserve fund well above the 2% threshold…and it could possible breach 3% or higher.  That would give HUD all the ammo it would need to do something positive before an election year.  Since I’m guessing I’d say, at a minimum, we’d see some reduction of upfront MI for first time homebuyers designed to target minorities and millennials.  These are the folks who seem to have been hit worse by the previous recession and who deserve the chance at homeownership.  

 

What Does This Mean For Mortgage Participants?   

It means that if you’re behind in your business planning, your staffing or resource needs, or you aren’t focusing on your Vital Few you should snap to it.  Opportunity favors the prepared mind and while neither of the above might come to fruition, if it does your forethought and planning on how to tackle this increased purchase and refinance production will be rewarded.

 

Economic News/Activity:

No meaningful data today.