Mortgage Rate Intelligence & Market Updates

In an April post, using millions of homeowners’ insurance contracts matched with property-level exposure and disaster risk, we showed that although households are insured, they are still “on the hook” because deductibles and coverage limits leave homeowners responsible for part of a loss. Because insurers cannot perfectly observe how well homeowners maintain or protect their properties (a problem known as “moral hazard”), contract terms such as deductibles can play an important role in balancing risk sharing and incentives. By requiring homeowners to bear part of a loss, insurers can preserve incentives for policyholders to take actions that reduce damage risk. In this post, we quantify the cost of keeping homeowners on the hook. How costly is moral hazard in homeowner’s insurance? How much risk must households retain to preserve these incentives? And, importantly, who ultimately bears that residual risk? The short answer is that keeping homeowners on the hook costs insurers relatively little, but it leaves households with substantial risk, especially those least able to absorb a large loss.

Jensen offers her thoughts on the 2% upfront mortgage insurance premium, second appraisals and retirement planning use cases

Realtor.com report suggests move-up buyers will see more options and potentially softer prices, but first-time buyers will remain constrained by limited entry-level stock

Policymakers can lower frictions, but only new starter-home production changes the math

Quarterly testing can miss drift, lenders need continuous fair lending visibility

Mortgage rates are at 7.57% and demand softened more last week

Why Bonds Sold Off Despite Weaker Jobs Report

First off, read the AM commentary if you haven’t already. This recap doesn’t add much to that (but the video adds a lot). Bottom line, NFP was weaker, but that was the worst of the news. The unrounded unemployment rate barely budged and it would have moved LOWER (under 4.00%) were it not for the uptick in labor force participation. Higher oil prices contributed a bit to intraday weakness as did a recovery in French credit spreads. At the end of the day, this wasn’t the jobs report that sowed any seeds of doubt about cracks showing in the labor market.

Econ Data / Events

Average earnings mm (Sep)

0.1% vs 0.3% f’cast, 0.3% prev

Non Farm Payrolls (Sep)

29K vs 90K f’cast, 162K prev

Participation Rate (Sep)

61.8% vs — f’cast, 61.6% prev

Unemployment rate mm (Sep)

4.2% vs 4.1% f’cast, 4.1% prev

Market Movement Recap

10:06 AM Initially much stronger after NFP, but dialing back a bit. MBS up a quarter point and 10yr down 4.1bps at 4.198

02:31 PM MBS now down a quarter point and 10yr up 4bps at 5.28. Cooler heads prevail on jobs report reaction and EU credit spreads

Leadership changes, standardized concessions, and a 12–18 month systems rollout are central to the plan