UMBS down almost a quarter point early. Mostly from European hours as ECB made comments about the economy needing to slow down. Accelerated on the US open. Mostly gains taking and strategy for Powell speech and CPI on Thu. NFIB index dropped in December to 89.8, below all estimates.

The National Federation of Independent Business overall optimism index dropped to the second-lowest level in nearly a decade. Inflation continues to be the single most important issue.  Despite the overall gloom, there were some positive points in the survey. Inventories are back in balance, which means the supply chain issues of the post-pandemic period are largely in the rear view mirror.

December net job growth was 223,000, the weakest reading since 12/20, and wage growth pressure is clearly waning. But we have a long way to go. The unemployment rate is at a 50-year low, job growth is roughly double a sustainable pace, the labor force participation is essentially flat, job quits increased, and the underemployment rate set a new low. Rates go up by 25bps, maybe 50bps on 2/1/23.

Minneapolis Fed President Neel Kashkari wrote an article on inflation which discusses what the Fed missed in 2021 and lays out what it might do going forward. His point is that when prices rise, both supply and demand should adjust. Rising prices should decrease demand and increase supply. The problem is that supply hasn’t increased.

He likens it to surge pricing on ride sharing apps. When it rains more people would rather ride than walk. Prices rise. However what happens when every available driver is already working? Supply doesn’t increase. And that is where we are now. In economics terms, the supply curve is vertical. Increased demand just increases prices.

“A massive” mortgage credit report price increase is expected in 2023, according to a letter from the National Consumer Reporting Association (NCRA).   So Rocket and UWM are jockeying with initiatives to help brokers shield from the increases.  Fair Isaac Corp. (FICO) has grouped mortgage lenders into three tiers, according to a memo to lenders in November, “with a wholesale price increase of less than 10% for the top tier of approximately 46 lenders, about 200% for approximately six lenders in the middle tier, and more than 400% for all other mortgage lenders in the nation.”

Rocket Pro TPO, a wholesale arm of Rocket Mortgage, will be providing credit reports at no cost for brokers when closing loans through the Detroit lender.    Rocket’s competitor, United Wholesale Mortgage (UWM), recently announced a flat fee charge of $37.35 for brokers ordering credit reports for UWM loans.

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