One topic of conversation at the MBAH conference is the quote making the rounds, “Marry the house, date the rate,” a nightmare for capital markets and servicing groups engineering hedging programs. On a larger scale, no central bank wants to engineer a recession, of course, but the press seems consumed with the idea of a recession in 2023 or 2024… which would mean a) we’ll hear about it for another year or two while many lenders are just trying to survive, and b) it would probably lead to lower rates. Household balance sheets are currently still in fine shape. Corporate balance sheets are as well since many companies that issue debt regularly refinanced their outstanding debt during the last few years, lowering their obligations… just like millions of homeowners did around the nation. What isn’t as good is the daily operating budgets, especially for companies whose only income is residential lending. The implied year-end Fed funds target is now around 3.60%, 75 basis points higher than what was expected at the end of April. (What will that do to your warehouse cost of funds?) The U.S. Treasury curve closed inverted last week on Monday though the 2- and 10-year ended Friday at +4 basis points; so if you are of the camp that believes a curve inversion foretells an economic slowdown you may now start your Recession Countdown Clock (historically speaking, it takes between 12 to 18 months tend to pass from inversion to recession.) Today’s podcast is available here and this week’s is sponsored by Candor. With Candor’s Machine as an Underwriter, lenders modernize their manufacturing infrastructure making them immune to margin, capacity, and staffing challenges forever. Today’s features an interview with interview with Candor’s Sara Knochel on “inflection points.”
Source: Mortgage News Daily