Interest Rates: Improving Economy, Looming Fiscal Stimulus Boost Long-Term Rates

A better economy and the prospect of Congress passing a third stimulus package in March are pushing up 10-year Treasury note yields. Yields also ticked up this week when initial unemployment claims declined. But they have been on an uptrend ever since the second stimulus package in December. With razor-thin control of the Senate, plus the House of Representatives and the White House, Democrats are in a position to pass more stimulus legislation, such as $1,400 payments to individuals and aid to state and local governments. Any boost to economic growth tends to push up interest rates, as the demand for funds grows and inflation possibly rises, as well. Larger budget deficits will also raise rates as the supply of government debt offered to investors grows. The 10-year rate is currently around 1.5%. Expect it to rise to at least 2% by the end of the year.

The rise in the 10-year rate will also push up mortgage rates, from 3.0% currently to 3.5% by the end of the year. The upward drift may cause some panic home-buying, as buyers rush to lock in a low mortgage rate, giving an extra boost to rising home prices. Rates on long-term car loans should also bump up.

Short-term consumer loan rates such as home equity lines of credit will stay where they are. These tend to be tied to the federal funds interest rate, which is controlled by the Federal Reserve and which will be held constant for an extended period of time.

The Federal Reserve at its most recent FOMC meeting recommitted itself to keeping short-term interest rates near zero for the foreseeable future, which likely means into 2023 or 2024. The Fed is also continuing to purchase $80 billion of Treasury securities and $40 billion of mortgage-backed securities every month, adding to its balance sheet. The Fed is “all in” to do whatever it takes to support the economy. It has said that it will be willing to tolerate inflation levels above 2% for a time. That means that the Fed will not raise short-term rates even if inflation begins to pick up. But if inflation rises strongly later on, the Fed would likely respond.

Corporate high-yield bond rates have continued to ease, perhaps indicating greater business confidence. CCC-rated bond yields are at 7.2%, down from 11.7% at the end of October, and have closed the gap slightly with higher-rated bonds. AAA bonds yielded 1.9% and BBB bonds, 2.3%.

Source: Federal Reserve Open Market Committee


There’s no 2-minute warning for rate shocks, even with Fed at the zero bound

The mortgage industry is notorious for its use of acronyms and even acronyms inside acronyms (TRID, anyone?). However, there is an acronym that is highly relevant to the current rate environment: ZIRP, which stands for “Zero Interest Rate Policy.” As its definition implies, this term describes the Federal Reserve’ s current policy of holding the Fed funds rate at near 0% for the foreseeable future due to the economic challenges presented by the COVID-19 pandemic.

It may be easy for some to assume a locked-down Fed Funds rate means mortgage rates will remain at the historically ultra-low levels the industry has seen throughout the pandemic. Not only does history tells us this is not the case, but the recent uptick in interest rates due to the rise in the Treasury yield and increased economic spending provides even more current proof that rate swings are possible, if not inevitable during ZIRP. As such, lenders and their capital markets executives must be prepared for interest rate swings in either direction despite the current ZIRP.

The last time the Fed instituted ZIRP was following the Global Financial Crisis, which lasted for a span of seven years, from December 2008 to December 2015. In December 2008, the average note rate for 30-year mortgages was 5.14%, when ZIRP ended in December 2015 the par note rate was 3.31%. However, that lengthy seven-year span was not a gentle expressway ramp; it was riddled with both bull and bear markets for mortgage rates despite the continued Fed pledge of “lower for longer.” Despite a Federal Open Markets Committee (FOMC) target on short-term rates of 0.00% – 0.25%, mortgage rates experienced several violent swings.

During what was known as the taper tantrum (remember hearing that talk again earlier this month?), the market was afraid the Fed was going to taper off its purchases of Treasuries and mortgage-backed securities so mortgage rates went up over 100 basis points over 3 short months. During another span of only 9 weeks prices on the lowest-coupon mortgage-backed security declined by a whopping 800 basis points, from 101 all the way down to a 93 handle. All of this activity occurred more than two years before the Fed actually instituted the very tiniest bit of liftoff in their Fed funds rate policy.

Looking at the current environment, the Fed has indicated that it will not raise the Fed funds rate until at least 2023. However, as the industry has observed before, this does not mean that mortgage rates are going to languish around the same range they’ve been in for the last 10 months. In fact, it would not be unusual to see changes of even an entire whole percentage point up, or down, for however long this current ZIRP is in place. In fact, Fannie Mae and Freddie Mac have both forecasted moderate increases in interest rates in 2021 in anticipation of this inevitability, though rates could certainly head in the opposite direction given the right market conditions.

In these past few months, I’ve heard people say things like “The market’s not going anywhere for a few years. The Fed said so, and it’s already priced in, right?” While that may be the case for the Interest on Excess Reserves and Fed Funds, which the Fed has pegged at near zero, there will not be an alarm that goes off letting lenders know to lock the doors. Just because the Fed is staying put doesn’t mean that mortgage rates, and prices of MBS, are staying put as well. As history has shown us, shocks can — and do — come when markets least expect them.


Stock Market Today: Dow Marks New Highs, Tech Makes a Mess

Investors were put through the information wringer on Wednesday, and the major blue-chip indices finished the day with pretty disparate results.

The January retail sales report was, in the words of Barclays strategists, “significantly stronger than expected,” showing overall sales up 5.3% month-over-month following three straight months of declines.

“We had expected an overall improvement in January sales, after three months of declines,” says Pooja Sriram, vice president, US Economist at Barclays Investment Bank. “In particular, we expected the additional support to households from government pandemic-relief programs to support spending.

“Households started receiving the $600 per individual rebate check in January, as well as the federal unemployment assistance of $300 per week, under the COVID relief bill signed into law in late December.”

Another sign of economic resilience was rising U.S. wholesale inflation, which rose 1.3% month over month in January, reflecting strong domestic and export demand alike.

Interestingly, minutes from the January Fed meeting, released today, demonstrated worry about America’s path, with participants noting that “economic conditions were currently far from the Committee’s longer-run goals.”

“The minutes from the latest Fed meeting didn’t stray too far from the message Fed Chair Powell has been sending to market participants in his recent speeches where he indicated it’s not the right time to change policy,” says Charlie Ripley, senior investment strategist for Allianz Investment Management.

However, Bob Miller, BlackRock’s head of Americas Fundamental Fixed Income, says even the past few weeks since that meeting have “left that meeting’s minutes looking somewhat stale.”

“If we see vaccinations continuing apace, delivery of pending massive fiscal policy support and the arrival of warmer weather, we expect the resumption in spring of more ‘normal looking’ levels of previously shuttered economic activity. If accurate, the economy will be making ‘substantial further progress’ toward the FOMC’s goals – to use the Committee’s guidance for when they might no longer want to maintain the current pace of asset purchases.”

U.S. crude oil futures continued to climb amid supply disruptions in Texas, by 1.8% to $61.14 per barrel, pushing up the likes of Dow Jones Industrial Average component Chevron (CVX, +3.0%). The Dow managed to notch another record high, finishing up 0.3% to 31,613. However, a technology-sector slump sent the Nasdaq Composite 0.6% lower to 13,965.

Other action in the stock market today:

  • The S&P 500 slipped marginally to 3,931.
  • The small-cap Russell 2000 lost another 0.7% to 2,256.
  • Gold futures declined for a fifth consecutive session, falling 1.5% to $1,772.80.
  • Bitcoin prices, at $48,783 on Tuesday, shot 7% higher to 52,266. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)

stock chart for 021721stock chart for 021721

Out Now: Buffett’s Latest Picks

Yes, Chevron did have swelling energy prices on its side, but it also had a new ally: Warren Buffett.

The legendary value investor and CEO of Berkshire Hathaway (BRK.B) unveiled his latest transactions in a Tuesday evening 13F filing to the SEC, revealing that his holding company had taken a stake in the integrated energy giant during the final quarter of 2020.

And that was far from Uncle Warren’s only move.

Buffett, just like many retail investors, spent much of 2020 making wholesale changes to the Berkshire Hathaway equity portfolio. He was every bit as active during Q4, entering four new stakes, exiting five stocks outright, and tinkering with another dozen positions.

If you’re curious as to what the Oracle of Omaha is bullish on, or what has fallen out of his favor, read on as we examine each of Warren Buffett’s 21 latest portfolio moves over the most recent quarter:

Kyle Woodley was long Bitcoin as of this writing.


Differences Between Previous and Current FOMC Statements

The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. EconomicThe pace of the recovery in economic activity and employment havehas continuedmoderated toin recoverrecent butmonths, remainwith wellweakness belowconcentrated theirin levelsthe atsectors themost beginningadversely ofaffected by the yearpandemic. Weaker demand and earlier declines in oil prices have been holding down consumer price inflation. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis willcontinues continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-‑backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.


UMBS 2.0

103-17 : +0-04


10 YR

1.0130 : -0.0270

Pricing as of 1/27/21 2:00PMEST


MLO Jobs; Sales, Pricing, Processing, Correspondent, Products; LO Productivity Study; FHFA Disaster News

MLO Jobs; Sales, Pricing, Processing, Correspondent, Products; LO Productivity Study; FHFA Disaster News

While the Biden Administration waits for the Trump staff to tell them the Wi-Fi password in the White House, the government continues to occupy our thoughts. “The government should not vaccinate health care workers first. Because if it fails, we’re in trouble. They should try the vaccine on politicians first because if we lose a few of them, it really won’t matter at all.” That is an interesting take. I find the term stealth tax hike” interesting, especially in the coming years, because many of us are predestined to pay more in taxes by legislation already in place. Economists look at interesting things, like U-Haul rental truck movement to determine state or regional trends. Many companies are interested in what the post-pandemic work environment will look like. Design firm Gensler has some thoughts. Here’s an article on what an office furniture designer is seeing. (Subscription needed. Hint: tech companies are saying, “What offices? Glad to be done with them.” Financial companies are saying, “Back to cubicles and offices with no change.”)

Lender and Broker Services and Products

Ring in the new year by partnering with Axos Bank’s Warehouse Lending Division. You can benefit from residential lines ranging from $20MM to $175MM and diverse product offerings that include Agency, Government, Non-Agency and Axos Portfolio loans with bulk funding options available. Now is the time to schedule a call and learn more about how Axos’ warehouse program can help you maximize your revenue opportunities in 2021.

What is mortgage servicing’s greatest challenge yet? Making certain your organization is positioned to handle the impact of ongoing high delinquencies amidst concluding forbearance plans and sunsetting foreclosure moratoriums. Read our latest blog to see how the CLARIFIRE® application is your answer to pandemic delinquency preparedness. With first-hand experience and intelligent automated workflow, we deliver 24/7 self-serve relief alternatives to your delinquent borrowers. CLARIFIRE is changing the narrative for navigating delinquency in the ongoing pandemic. Start the new year with more than a plan. Choose proven technology and a trusted industry partner, CLARIFIRE. Future-proof your organization and boldly navigate delinquency in 2021.

“What could you do with more time to work on your business? Follow-up on leads? Network with real estate agents? We are wemlo and our goal is to create the best, most efficient loan processing experience for mortgage brokers. The first third-party mortgage processing network to include an all-in-one digital platform, wemlo has a sleek, easy-to-use dashboard. Our loan processing offers unparalleled service, security, and efficiency for your business. Sign up for a demo today and see how much time wemlo can save you on your next loan.”

It’s Double-Witching time for correspondents. Veteran staffers are overworked and overwhelmed. Sales and closing are the priorities (loss mit and QC, less so.) And there’s all the new hires, not all of whom are quite ready for prime time. You can see where this is headed: errors, buyback demands and scary trips to the scratch & dent market. But not for Plaza Home Mortgage Correspondents. Plaza’s Certified Loan Program can protect correspondents against big losses due to underwriting errors, loan defects and borrower fraud, with no upfront cost. Now, before you need it, is exactly the right time to learn more about Plaza’s Certified Loan Program’s Certified Loan Program.

Just in time for your 2021 planning: Maxwell’s new eBook reveals the top 6 places to invest in your business for the best ROI! Wondering how to spend your hard-earned cash from 2020? To deploy those funds as wisely as possible, it’s crucial to understand market trends, how changing politics will affect the industry, and business areas that will give you a competitive edge. Leading digital mortgage platform Maxwell’s newly released, completely free eBook digs into 6 places to invest your capital that are most likely to pay dividends—in revenue, employee retention, and customer satisfaction. NOW is the time to decide where to spend excess cash for sustainable business growth. Click here to read The Top 6 Areas Where Lenders Should Invest in 2021.

PollyEx, a provider of SaaS solutions for the mortgage industry, is excited to announce its partnership with ALM First’s pipeline hedging platform. The partnership and integration will provide Community Banks and Credit Unions an all-in-one platform to manage loan pricing, hedging and loans sales. PollyEx delivers efficient, customized pricing tools enabling Capital Markets and Secondary users to focus on driving revenue and efficiency. Key highlights of their Pricing Engine (PPE) include dynamic margin management, the ability to generate and distribute rate sheets in under 10 mins, real-time pricing, and full testing & version control functionality. To learn more or schedule a demo email Jacob Gerson or visit

He made the President’s Club while hospitalized! Here’s a true story about the power of Relationship Engagement: On a Mortgage Company’s Production Cruise in 2003 a winner slipped near the pool and landed on the back of his head. He was unconscious for 20 minutes, but when he woke up, he felt fine. Turns out he wasn’t fine. In fact, he almost died and spent a year in the hospital. The crazy thing is he did $12 million in production that year. How? He had great relationships, a great assistant, and his marketing was automated. His Realtors and clients had no idea he was even sick. They continued to get great service from his assistant and targeted, personalized marketing from Usherpa. According to the Loan Officer, “Without Usherpa, I’d be out of business.” For more tips on creating customers for life and exploding your business, download this free eGuide 3 Habits of Top Producing Loan Officers (You Can Duplicate).

Measuring LO Productivity

Lenders, how many originators did you hire in 2020? According to STRATMOR’s Originator Census® Study, the 2019 new hire rate for originators was 26 percent. Was your 2020 rate higher? If so, do you know how well those new hires performed compared to your veterans? What about compared to your peers? This is the type of data you should be looking at to understand how your sales staff will progress in 2021. Make sure you have the analysis of your sales team you need: participate in the STRATMOR Originator Census® Study.

Disaster and investor Updates

The pandemic is a disaster. And FEMA’s declarations trigger investor policies around the nation. But there are things you should be aware of.

FHFA issued a request for input on risks posed by climate change and natural disasters to Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the broader housing finance system. FHFA is soliciting public feedback in several areas, including identification and assessment of climate and natural disaster risks and potential enhancements to FHFA supervision and regulation as it relates to these risks. As the MBA points out, “FHFA is one of several financial regulators, at both the federal and state levels, that is increasing its focus on risk management associated with climate change and natural disasters.”

Lenders Compliance Group encourages you to conduct a collaborative review of your Business Continuity Plan with a subject matter expert to ensure compatibility with your business model. Lenders Compliance Group’s Business Continuity Plan includes: Plan Structure, Crisis Management Process, Pandemic and Epidemic Response, Departmental Response Plan, Business Impact Outline, Backup Strategy, Recovery Strategy, Technical Environment, Disaster Recovery Organization, Disaster Recovery Process, Audits and Test Schedules, Roles and Responsibilities Executive Management Matrix, Crisis Response Team Table, Pandemic Response Team Table, and Employee Acknowledgement. They can help you create a plan specific to your company. Check out the new section they just added: Pandemic Response and Preparing for the Second Wave.

Recall that Jonathan Foxx of Lenders Compliance group opined on internet resources for employees to handle disaster recovery, business continuity, pandemic issues, and COVID-19 challenges. In addition to recommending LCG’s complimentary Business Continuity Plan Checklist (Includes COVID-19 Pandemic Response) and inexpensive Business Continuity Plan – Disaster Recovery & Business Continuity Plan (Includes Pandemic Response), he suggested keeping online information current, following basic hygienic guidelines and social distancing, and being aware of changes in federal and state responses to the coronavirus.

Fannie Mae updated the Servicing Guide to incorporate LL-2020-13, which extended automatic reclassification triggers from four to 24 months for most delinquent MBS mortgage loans and eliminated the requirement for reporting a delinquency status code for a disaster payment deferral if the mortgage loan is brought current. Policies on remote online notarizations for the purpose of servicing or modifying a mortgage loan have also been updated.

First Community Mortgage posted Disaster Announcement DA-20-8, Louisiana Hurricane Delta Update, DA-20-10 regarding Mississippi Hurricane Zeta, and Disaster Announcement DA-21-01 regarding Hurricane Zeta in Louisiana.

Due to the disaster in Mississippi and Alabama caused by Hurricane Zeta, Flagstar Bank will now require satisfactory re-inspections. See Memo 21001 for the effective date to determine if a re-inspection is required. And due to the recent disaster in Louisiana caused by Hurricane Delta, Flagstar will now require satisfactory re-inspections in the affected counties listed in the announcement. Please refer to Natural Disaster Procedures, Doc. #4915, for re-inspection requirements. Read Flagstar’s Memo 20106 for more information.

loanDepot Wholesale/Correspondent’s Weekly Announcement provides information on loanDepot Program Overlay Matrix, Louisiana Disaster Announcement, and another weekly Announcement includes Mississippi disaster information. This Announcement covers the Disaster Announcement Update for Louisiana. This loanDepot announcement provides updates to Alabama’s disaster announcement.

SunWest Mortgage posted FEMA’s Disaster Area update for Counties in Mississippi designated disaster areas: George, Greene, Hancock, Harrison, Jackson, and Stone. Access Sun West Seller Guide under HELP section in sunsoft. On January 12th, FEMA declared the counties of Jefferson, Lafourche, Orleans, Plaquemines, Saint Bernard, and Terrebonne in Louisiana as Major Disaster Areas. Sun West Partners are reminded to review its Seller Guide under HELP section in sunsoft for its Disaster Area Policy. Refer to Sun West Forward Mortgage Seller Guide (Section 404.07) and Sun West Reverse Mortgage Seller Guide (Section 3.23) for more details.

Capital Markets

The week began with investors reacting to headlines of small anti-lockdown protests around the world, some volatile earnings reports from the stock market, and Democratic hopes of passing the next fiscal stimulus bill by the middle of March. Eyes will now be turned toward the latest Fed rate decision tomorrow, with Day One of FOMC events underway today. Monday’s $60 billion 2-year Treasury note auction was met with solid demand, and by the close, Treasuries had rallied in curve-flattening fashion and the MBS basis ended the day wider.

After a light economic calendar yesterday, things pick back up today. We’ve seen that the Mortgage Bankers Association’s latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance increased 1 bp to 5.38 percent of servicers’ portfolio volume in the prior week as of January 17. According to MBA’s estimate, 2.7 million homeowners are in forbearance plans. In addition to day one of FOMC events, we have some housing data via the latest S&P Case-Shiller Home Price Index with its two-month look back, and results of a $61 billion 5-year Treasury note auction. And the Philadelphia Fed non-manufacturing survey for January (-19 to -14.3, the worst since May).

Later this morning brings Redbook same store sales for the week ending January 23, January’s FHFA Housing Price Index, Richmond Fed manufacturing and services for January, Dallas Fed Texas services for January and January Consumer Confidence. Today’s MBS purchase schedule by the Desk of the NY Fed on behalf of the Federal Reserve sees them conducting three operations for up to $6.4 billion maximum, with one in each of the three classes. We begin Tuesday with Agency MBS prices worse/down nearly .125 despite the 10-year unchanged from Monday at 1.04 percent due to heightened prepayment worries based on the chatter of lower MIP on FHA loans and no increases in FHFA LLPAs.


Jobs and Transitions

If you’re interested in joining a company culture that creates what’s next in the industry, visit Sierra Pacific Mortgage’s recruiting website. The One Sierra family focuses on promoting from within and recently announced that three of their female leaders will take on new roles in 2021. Susan Roy will become the EVP – National Operations and oversee both Liz Collins and Jennifer Folk who will assume SVP positions. In her new role as SVP/Division Manager Eastern Retail, Liz will be focused solely on helping Sierra grow its Retail footprint from the Midwest to the East Coast. On the TPO side, Jennifer will be the SVP, National TPO Fulfillment and help the company redefine their service and technology offerings for both the TPO client base and Account Executives. This leadership realignment will allow Sierra to take both their Retail and Wholesale service levels to new heights. Congratulation’s ladies!

Ever notice how a simple marshmallow makes a cup of hot cocoa so much better? It’s the same way with the Motto Mortgage network. Join a Motto Mortgage office and you get industry-leading LOS and CRM technology, training and support services, marketing tools and a wide selection of loan products to meet client needs. You’ve already got what it takes to be a delicious cup of cocoa… Let our network systems be your marshmallows. Cozy up to a delicious pairing of your industry knowledge and our industry support when you join the Motto Mortgage network of mortgage professionals. Motto Mortgage offices are recruiting nationwide, with specific need in AR, AZ, FL, GA, NJ, NV, OH, PA, TX, VA, and WA.

Intelliloan was recognized for being the top mortgage company to work for in 2020 by Mortgage Professional America. The award was based on results from an employee survey, evaluating their workplace for a number of relevant metrics. MPA took into account benefits, diversity, employee development, and work culture. It’s easy to see why Intelliloan took top billing. They offer an impressive list of perks and benefits, plus a work culture that their employees seem to love. “[We have] excellent training opportunities, great benefits, and work-life balance,” says Claudia Nelson, the COO of Intelliloan. In an industry known to have a lot of turnover, many Intelliloan employees have been with them for more than five years and several have been around for over 10 years. With over 27 years in business, it seems you can borrow, and work, smart at Intelliloan.

InterLinc Mortgage Services, LLC, a full-service mortgage banking firm, is pleased to announce that Gene Thompson III, who has served as President since 2010, has been appointed CEO. Jim VanSteenhouse, current InterLinc CEO and company founder, will now assume the role of Chairman of the Board.

With the acquisition of Assimilate Solutions LLC by SitusAMC, the co-founder of Assimilate, Amit Gujral, has joined SitusAMC as Vice Chairman in its residential business segment, where he will continue to be involved in the Assimilate business.

Mid America Mortgage, Inc. has hired Katherine Carlsen has joined the company as underwriting manager to “utilize her more than 30 years of mortgage industry experience to lead underwriting for Mid America.”



MBS Day Ahead: Friendly Bond Bounce Continues as 10s Target 1.0%

With 10yr yields breaking the 1.075% technical floor on Monday, the bond market added evidence to the case for a move back to 1.0%.  Today’s early gains make the evidence nearly overwhelming with yields less than half a basis point away at times.  With the Fed coming up this afternoon, it would only take a mildly stronger reaction to break the 1.0% floor

What happens after a break below 1.0% though?  The prevailing trend implies heavier resistance around 0.97-0.98%. Specifically, the lower boundary of the “trend channel” (yellow lines below) runs through .98 today.  It would require another fairly decent bond rally to get there, but it’s not outside the realm of possibility.

20210127 open.png

Such a move could be a blessing or a curse.  If the trend keeps doing what it’s been doing since August, a move to .97/.98 suggests a stronger possibility of another bounce, or at least another slow grind higher like the trading seen in Q4.

20210127 open2.png

The Fed announcement comes out at 2pm and Powell’s press conference begins at 2:30pm.  As far as the Fed’s current stance is concerned, we’re more likely to see/hear market movers in the press conference, if at all.  Markets want reassurance (again!) that the Fed isn’t even talking about tapering its asset purchases yet.

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.


UMBS 2.0

103-17 : +0-05


10 YR

1.0030 : -0.0370

Pricing as of 1/27/21 9:40AMEST

Tomorrow’s Economic Calendar

Time Event Period Forecast Prior
Wednesday, Jan 27
8:30 Core CapEx (%)* Dec 0.6 0.5
8:30 Durable goods (%)* Dec 0.9 1.0
14:00 FOMC rate decision (%)* N/A 0.125 0.125


How mortgage rates move when the Federal Reserve meets

Expect continued low rates in 2021

The Federal Reserve doesn’t control mortgage rates. But it’s had an outsized impact on them during the coronavirus pandemic.

The Fed has bought billions of dollars worth of consumer mortgages over the past year in a bid to keep rates low during COVID.

And it worked — mortgage rates have hit record lows 16 times since March 2020.

The Fed is set to continue this mortgage bond-buying program in 2021, along with its current low-interest-rate policy.

That means borrowers should expect to see low home buying and refinance rates throughout the year.

Check your mortgage rates today (Jan 28th, 2021)

In this article (Skip to…)

What happens at Federal Reserve meetings?

The Federal Open Market Committee (FOMC) typically meets every six weeks to discuss interest rate policy.

The FOMC is a rotating, 12-person sub-committee within the Federal Reserve, headed by Federal Reserve Chairman Jerome Powell.

The FOMC meets eight times annually on a pre-determined schedule, and on an emergency basis, when needed, as was required between 2008-2011 when the U.S. economy was staving off depression; and in 2013 when the U.S. government failed to raise its debt limit.

The FOMC’s most well-known role worldwide is as keeper of the federal funds rate. But how exactly does the fed funds rate impact your wallet?

The Federal Reserve does not control mortgage rates — usually

It’s a common belief that the Federal Reserve “makes” consumer mortgage rates. In fact, it doesn’t. Mortgage rates are made on Wall Street.

Here’s proof: Over the last two decades, the fed funds rate and the average 30-year fixed mortgage rate have differed by more than 5%, and by as little as 0.50%.

If the fed funds rate were truly linked to U.S. mortgage rates, the difference between the two rates would be linear or logarithmic — not jagged.

That said, the Fed does exert an influence on today’s mortgage rates.

After its scheduled meetings, the FOMC issues a press release to the public which highlights the group’s economic opinions and consensus.

When the FOMC’s post-meeting press release is generally “positive” on the U.S. economy, mortgage rates tend to rise. Conversely, when the Fed is generally negative with its outlook, mortgage rates tend to fall.

Economic news has been overwhelmingly negative this year due to COVID.

As a result, interest rates — including mortgage rates — have steadily declined.

Check your mortgage rates (Jan 28th, 2021)

How the Fed has impacted mortgage rate lately

Normally, the Fed’s impact on mortgage rates is indirect at best (as we’ll describe in more detail below).

But the Federal Reserve does have one avenue to directly impact mortgage rates.

That’s through “quantitative easing” (QE).

QE happens when the Fed injects money into the U.S. economy in order to keep rates low — and by extension, keep consumers borrowing money and dollars circulating.

Just look at what the Fed did in the early stages of the COVID-19 pandemic. Since March 2020, it’s bought billions of dollars worth of consumer mortgages on the secondary marketplace.

More capital in the secondary marketplace means lower rates for borrowers. Thanks to the Fed’s cash injection, mortgage rates hit — and stayed at — record lows for going on nine months.

The normal refrain you’ll hear from mortgage professionals — “the Fed doesn’t control mortgage rates” — is still true. Rates are still not directly tied to the Fed Funds rate.

But that statement now comes with a big asterisk, as it’s become clear what a big impact the Federal Reserve can have on interest rates when need be.

Check your mortgage rates. Start here (Jan 28th, 2021)

What does it mean when the Federal Reserve cuts interest rates?

The fed funds rate is the prescribed rate at which banks lend money to each other on an overnight basis.

When the fed funds rate is low, the Fed is attempting to promote economic growth. This is because the fed funds fate is correlated to Prime Rate, which is the basis of most bank lending including many business loans and consumer credit cards.

For the Federal Reserve, manipulating the fed funds rate is one way to manage its dual-charter of fostering maximum employment and maintaining stable prices.

Federal Funds Rate vs. Consumer Price Inflation, 1970-2018

Federal funds rate and Consumer Price Inflation, 1970-2018. Source: St. Louis Fed

However, a low fed funds rate creates wage pressure and promotes risk-taking, both of which can quickly lead to inflation (i.e. rising prices).

For this reason, the Federal Reserve ended its zero-interest rate policy in December 2015, raising rates by 25 basis points (0.25%) for the first time in more than a decade.

However, the Fed move did not lead to an increase in consumer mortgage rates. On the contrary, mortgage rates dropped more than 50 basis points (0.50%) after the Fed’s late-2015 move.

This is because U.S. mortgage rates aren’t set or established by the Federal Reserve or any of its members. Rather, mortgage rates are determined by the price of mortgage-backed securities (MBS), a security sold via Wall Street.

The Federal Reserve can affect today’s mortgage rates, but it cannot set them.

Verify your home buying eligibility (Jan 28th, 2021)

How Fed statements can impact mortgage rates

The Fed does more than just set the fed funds rate. It also gives economic guidance to markets.

For rate shoppers, one of the key messages for which to listen is the one the Fed spreads on inflation. Inflation is the enemy of mortgage bonds and, in general, when inflation pressures are growing, mortgage rates are rising.

The link between inflation rates and mortgage rates is direct, as homeowners in the early-1980s experienced.

The Fed doesn’t control mortgage rates, but the link between inflation and mortgage rates is direct.

High inflation rates at the time led to the highest mortgage rates ever. 30-year mortgage rates went for over 17 percent (as an entire generation of borrowers will remind you), and 15-year loans weren’t much better.

Inflation is an economic term describing the loss of purchasing power. When inflation is present within an economy, more of the same currency is required to purchase the same number of goods.

We experience inflation at the grocery store.

A gallon of milk used to cost $2. Today, it costs $3. More money is required to purchase the same amount of milk because each dollar holds less value.

Meanwhile, mortgage rates are based on the price of mortgage-backed securities (MBS) and mortgage-backed securities are U.S. dollar-denominated. This means that a devaluation in the U.S. dollar will result in the devaluation of U.S. mortgage-backed securities as well.

When inflation is present in the economy, then, the value of a mortgage bond drops, which leads to higher mortgage rates.

This is why the Fed’s comments on inflation are closely watched by Wall Street. The more inflationary pressures the Fed fingers in the economy, the more likely it is that mortgage rates will rise.

Lock in rates before today’s Fed announcement (Jan 28th, 2021)

Federal Reserve FAQ

What is the Federal Reserve? 

The Federal Reserve is the central bank of the U.S. It’s an independent body (not controlled by the government) tasked with managing the country’s currency and monetary policy, and keeping the economy stable. In more relatable terms, the Federal Reserve influences things like the interest rates you pay on a credit card or business loan. The Fed also has influence over the prices you pay for everyday goods and services, since it helps manage inflation.

What does the Federal Reserve do? 

In broad strokes, the Fed’s job is to keep American economic growth stable. It does this by managing U.S. currency, setting interest rates for lending, and keeping inflation in check through a variety of monetary policies. Overall, the Fed tries to keep inflation and interest low enough that consumer businesses and spending stay strong — but high enough that the economy doesn’t stagnate.

Why was the Federal Reserve created?

The Federal Reserve was created in 1913, with the signing of the Federal Reserve Act. In the Federal Reserve’s own words, it was created to “provide the nation with a safer, more flexible, and more stable monetary and financial system.” Put differently, the Fed uses its influence over monetary policy and banks to help ensure the economy doesn’t grow or shrink too quickly. The goal is to keep prices stable enough that consumers can afford to spend and borrow, and businesses can stay afloat and provide steady employment.

Why does the Fed raise interest rates?

Periodically, the Fed raises interest rates. More specifically, it raises the federal funds rate, which in turn impacts borrowers’ interest rates on things like credit cards and home equity loans, and, more indirectly, fixed-rate home loans. So why does the Fed raise interest rates at all? Because it helps keep inflation in check. When rates are too low, cheap borrowing can overheat an economy. Prices rise as demand for goods and services goes up. But the Fed can counteract inflation by increasing rates, thereby curbing consumption. Conversely, the Fed can fight deflation by lowering interest rates. Cheap money spurs spending and demand for goods, helping to increase prices in an economy.

What is the fed funds rate?

The federal funds rate or “fed funds rate” is the interest rate banks charge to lend money to one another overnight. Why should you care what rate banks are charging each other? Because the fed funds rate impacts consumer borrowing, too. Take the fed funds rate, add 3% to it, and you generally get the “prime rate” — which is the basis for setting rates on consumer credit lines like auto loans, credit cards, and home equity loans. Not all interest rates are in lock-step with the fed funds rate (mortgage rates are not, for example), but they are all influenced by it. 

Who controls the federal reserve

Importantly, no branch of government controls the Federal Reserve. It’s an independent body made up of a Board of Governors and 12 Federal Reserve Banks across the country. The seven board members, as well as a rotating cast of Federal Reserve Bank presidents, make up the FOMC (Federal Reserve Open Market Committee) — the Fed’s governing body. The FOMC meets every 8 weeks to evaluate interest rate policy.

What are today’s mortgage rates?

The Federal Reserve adjourns from its scheduled meeting on Wednesday afternoon.

Current mortgage pricing isn’t predicted to change, but there are no guarantees when it comes to interest rates.

Take a look at today’s real mortgage rates now. Mortgage quotes are readily available and you can start in minutes.

Verify your new rate (Jan 28th, 2021)

Compare top lenders