The number of jobs with lenders and brokers outside of the depot is increasing, but at a slower pace than in recent months. As broader employment growth also slows, the pressure on interest rates increases, which could revive credit activity and attitudes.
The total number of non-bank mortgages rose to an estimated 378,300 in March, up from 374,400 in the previous month and 314,900 a year ago, the Bureau of Labor Statistics reported on Friday. The relatively weak growth of 266,000 jobs to total employment in April fell short of forecasts. The broader wage numbers, reported with less lag than the mortgage industry breakouts, resulted in 10-year government bond yields below 1.5% for the first time since March at any time this week. This suggests that employment uncertainty, which could affect the ability of some borrowers to qualify for or pay for loans, could become an issue with lenders and brokers.
"This report suggests that the rate of improvement in the job market will be much less consistent than other indicators would show," said Mike Fratantoni, chief economist with the Mortgage Bankers Association, in a press release emailed Friday.
At 5.33%, the latest MBA figure for the quarterly mortgage default rate was 105 basis points above the historical average. The MBA defines a loan as any loan for which no payment has been made according to the original term of the mortgage. The US unemployment rate, which is often correlated with arrears, rose to 6.1% in April from 6% in the previous month. Before the pandemic, this rate was generally closer to its historic low near 3.5%.
Mortgage lenders are preparing for a year when loan volumes will be relatively good but not hit the record highs of 2020, especially in the more credit-sensitive government insured market.
"The most recent economic projections for origination in 2021 range from $ 3.3 trillion to $ 4 trillion, while the average forecast for origination in 2022 remains strong at $ 2.6 trillion," said Andy Chang, chief operating officer Officer of state lender PennyMac Financial Services, during the company's latest earnings call for the first quarter stuck Thursday. The company reported net income of $ 376.9 million for the first quarter of 2021, up from $ 306.2 million in the same period last year but down from $ 452.8 million in the prior fiscal year.