The long end of the bond market sold off again Monday, and mortgage pricing went with it. Treasury's daily curve closed the 10-year at 5.31% Monday, up from 5.24% on October 1, and it is trading near 5.29% early this morning. Bankrate's conventional 30-year reads 7.55% this morning, up from 7.49% when yesterday's edition went out and now the top of its 90-day range of 6.54% to 7.55%. Mortgage News Daily's MBS recap described Monday as another selloff "without any satisfying explanations": shorter maturities of three years or less rallied, but those are too short to move mortgage pricing, while longer yields climbed even with oil lower and data in line with expectations.
Yesterday's edition was a catch-up day, and the item worth carrying forward is the bi-merge watch. Bloomberg reported last week that FHFA plans to let lenders pull two bureaus instead of three for Fannie Mae and Freddie Mac loans, possibly announced when Director Pulte speaks at a Chicago industry conference on October 12. FHFA's own newsroom still has nothing on it, so it remains a report, not a rule.
The two credit stories are converging. Pennymac said Monday it has deployed VantageScore 4.0 across all of its production channels, following the FHFA and HUD guidance that opened conventional and FHA lending to competing score models. National Mortgage News notes the three largest lenders now offer VantageScore, and cites a Bank of America Securities analysis that pulling two bureaus raises consumer scores regardless of which model is used. Two reads on this: HousingWire frames Pennymac's move as lenders acting on guidance already in place, while National Mortgage News puts it in the context of the bi-merge debate still to be settled. Either way, a borrower who sits just under a pricing tier may price differently depending on which model and which bureaus your investor uses.
For pricing, the move from 7.00% on September 15 to 7.55% today adds about $150 a month to the principal and interest on a $400,000 loan, from about $2,661 to about $2,811. Redfin's weekly take points out that last week's data lowered the odds of another Fed hike in October, yet mortgage rates still ticked up, which tells you the pressure is coming from the long end, not the overnight rate. The effective fed funds rate sits at 3.88%. The next scheduled catalysts: weekly jobless claims and Freddie Mac's rate survey on October 8, CPI in the October 10 to 15 window, and the Fed's October 27 to 28 meeting, which does not carry a dot plot.
On the industry side, Two Harbors countersued UWM, seeking the return of its $25.4 million breakup fee and alleging a merger breach. Vishal Garg regained control of Better's board after 52% of shareholders voted to remove five directors. Fitch downgraded Wells Fargo's servicer ratings after the bank cut balances and sold non-agency servicing. Freddie Mac reshuffled risk leadership as Anil Hinduja's employment ended October 1 and John Glessner stepped in. In Washington, FinCEN withdrew proposed rules on convertible virtual currency transactions, which touches banks and money services businesses rather than origination.
Ask your secondary or pricing desk which credit score models and how many bureau pulls each of your investors accepts right now, and flag every active file sitting within 20 points of a pricing tier. Those are the borrowers who could win the most from the right pull!