by Victor Burek - Oct. 21 2009, 12:21pm
Mortgage rates fell a few basis points yesterday as prices of mortgage backed securities traded near the top of the current range. Helping benchmark yields and MBS prices improve was a weaker than expected read on the housing market and tame inflation data. At the open of trading this morning, MBS have given back all of yesterday’s gains as traders consolidate profits and re-evaluate the market's bias.
I speak often of range bound trading. This concept was explained yesterday on the MBS Commentary blog. Check it out.
We received more information on the housing sector this morning with the release of the weekly Mortgage Bankers’ Association Application Index. Today's report shows that the recovery progress in the housing market took another turn for the worse last week. Weekly purchase applications fell 7.6% while refinance activity dropped a whopping 16.7% This is the second week in a row of declining applications, hinting that demand for housing may be deteriorating as the expiration of the First Time Home Buyer tax credit draws nearer. On Friday we get another look at housing data with the release of Existing Home sales.
At 2:00pm the Federal Reserve will release the Beige Book. The Beige Book reports on economic conditions across the country. The information contained within this release is already known so it generally does not have a big effect on the markets. However, since this report is used at the FOMC meetings investors will still review it thoroughly for inconsistencies.
At 3:45pm eastern, Richmond Federal Reserve Bank President Jeffrey Lacker will speak to reporters following a journalism workshop. A little later Boston Federal Reserve Bank President Eric Rosengren opens a conference in Massachusetts with a prepared speech. Anytime Fed officials and voting members of the FOMC speak, market participants listen for their view on the economy which might give them a hint on future monetary policy decisions.
Reports from fellow mortgage professionals indicate lender rate sheets are slightly worse today. The conventional 30 year fixed par mortgage rate remains in the 4.75% to 5.00% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs with an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, you should expect a par interest rate between 4.25% to 4.50% with similar costs.
The data calendar picks up tomorrow with the release of weekly Jobless Claims, Leading Indicators report and Treasury announcement of the size of the upcoming offering of debt. All of these reports have not been friendly to MBS of late, so floating remains risky. Currently, MBS are in the middle of the recent trading range and the reports tomorrow could easily pressure prices fall which would increase mortgage rates. Because rates are not far from recent five month lows, there is more to lose from floating than to gain, so I am still advising my clients to lock in their rates.
Wednesday, October 21, 2009
Tuesday, October 20, 2009
News from Wells & GMAC; Discussing Reverse Mortgages; FTHB Tax Credit Extension; Commercial Sector
by Rob Chrisman
Posted Oct. 20th 2009 9:22am
"A woman in Great Britain has died after being hit in the back of the head by a golf ball, on the first hole. Her husband was so distraught he only played the front nine."
Stories like that are terrible, and it is hard for men to catch a break. It is also hard for reverse mortgages to catch a break. In talking to people who are involved in that field of lending, they say that sometimes they feel that the press is almost hoping that something goes wrong with that business. Really, any time you become involved with a senior citizen, or their money, alarm bells begin to ring and often times with cause. Here is one of the latest articles, here is an article highlighting top wholesale buyers of the product:
There was a story in Reuters yesterday saying that lawmakers have said they are considering extending or expanding the tax credit. Senate Majority Leader Harry Reid backs a bipartisan bill to extend the credit for six months. A Senate Republican plan would expand it to $15,000." As one can imagine, NAR, NAHB, and the MBAA are all lobbying strongly for some type of extension. As we have seen, the Federal government would rather continue to stabilize the economy rather than upset it, and taking away the credit would be a move toward "upsetting the apple cart".
In a move also seen as continuing to help the housing market, the Obama administration is unveiling a new program to provide support to state and local housing agencies. It is designed to support low mortgage rates and expand resources for low and middle income borrowers who want to buy or rent a home by implementing a new bond purchase program to support new lending by housing finance agencies, and a temporary credit & liquidity program to improve access by housing agencies to credit sources for their existing bonds. It will provide temporary support to local housing financing agencies and encourage them to return to relying on market sources for their capital as quickly as possible. At this point it does not appear to directly help small originators, but details have been a little sketchy.
And if you didn't know what a 4506-T was a year ago, you sure do now, unless you're selling stereos at The Good Guys. GMAC Bank Correspondent Funding reminded their correspondents that "all loans submitted to GMAC Bank for purchase, with the exception of FHA non-credit qualifying streamline refinances and VA IRRRLs, must contain a completed and signed IRS Form 4506-T, to obtain the borrower's tax return transcripts for the two years prior to the loan application date." The borrowers must complete and sign IRS Form 4506-T at time of application and at time of closing. An incomplete 4506-T will prevent a loan from moving into underwriting and eventually funding.
GMAC also clarified their Pre-Foreclosure/Short sale transaction policy, which occurs when the borrower sells the mortgaged property for less than the total indebtedness and the lender agrees to accept the net proceeds as satisfaction of the debt. In some cases, the lender may file a claim with the insurer for the difference or take out a deficiency judgment against the borrower.
After 10/26, Wells Fargo Wholesale Lending's verbal verification of employment (VVOE) policy for conventional loans to self-employed borrowers has been extended from 10 to within 30 days of the Note date. The requirement remains 10 days prior to the Note date for salaried borrowers. Wells' wholesale group also tweaked their MI policy for high LTV loans in declining markets, added some additional reviews for high-risk FHA loans, and came out with their policy for high balance loans IF the current loan limits are not passed (Purchase loans using the temporary loan limits must close and fund by Thursday, Dec. 31. Refinance loans using the temporary loan limits - including the Home Affordable Refinance Program - must close and fund by Monday, Dec. 28 to accommodate the right of rescission).
Later this week the FHA update of the current modification policy goes into effect. What does that mean? Basically, modifications will be somewhat harder to make, which has accounted for the big increase lately in FHA modifications, which in turn led to Ginnie Mae pools (especially higher coupon pools) being adjusted. I believe that up until the 23rd servicers can take advantage of the lenient modification policy, and purchase loans at 100 (par) and sell them back out higher after recapitalizing the amount in arrears. This has not had any impact on pools with conventional loans
By the way, trial loan modifications under HAMP (Home Affordable Modification Program) were up 41% in September compared to August according to the Federal Housing Finance Agency (FHFA).
We've had Citi, JP Morgan Chase, and Bank of America release their earnings. Wells Fargo's comes out tomorrow. The stock has done well recently, but watch out for their, and others, losses on commercial real estate holdings. Banks hold about 45% of commercial loans, and these continue to deteriorate. Banks have to put more money into reserves while reducing their loan portfolios which in turn leaves less money for lending - not a good scenario. And analysts say that reducing reserve requirements for our banks won't help, as it will not make them more willing to lend because they will keep their money back with the Fed and earn risk-free returns on their equity. Commercial loans are definitely a cloud on the horizon, with vacancies increasing and rents falling. Values have fallen as well, and Moody's estimates that prices are about 35% below their peak in October 2007.
"Things" actually seem a little quiet out there. Traders in mortgage-backed securities are saying that it is pretty quiet out there, and that origination volumes seem to have slowed. This is not hard to understand, given the traditional autumn slow-down, along with rates creeping up slightly. But with the Fed's continued buying of securities, the laws of supply and demand tell us that mortgage rates should continue to be ok.
It didn't help that there was no economic news yesterday. But today we had Housing Starts and Building Permits. New construction of U.S. homes, however rose by less than expected in September: Housing Starts were +0.5% and August was revised downward. (Friday we have the September Existing Home Sales data, expected to show a small improvement.) We also had the Producer Price Index, expected to be flat but instead dropping .6% in September, mainly because of a 2.4 percent decline in energy prices. For the year the PPI is down 4.8%. What inflation? After the numbers the yield on the 10-year Treasury note (which was 3.37% prior to the numbers) is 3.34% and mortgage prices are better between .125 and .250.
John and Helen met while on vacation and John fell head over heels in love with her.
After a couple of weeks in which John took Helen out to various dance clubs, restaurants, concerts, etc. he was convinced that it was true love. So on the last night of his vacation the two of them went to dinner and had a serious talk about how the relationship would continue.
"It's only fair to warn you, I'm a total golf nut," John said to his new found lady friend. "I eat, sleep and breathe golf, so if that's going to be a problem, you'd better say so now!"
Helen took a deep breath and responded: "Since we're being honest with each other, here goes.... You need to know that I'm a hooker."
"I see," John replied. "That's a problem, for sure."
He spent some time looking down at the table, deep in thought. Then he added, "You know, it's probably because you're not keeping your wrists straight when you tee off."
Posted Oct. 20th 2009 9:22am
"A woman in Great Britain has died after being hit in the back of the head by a golf ball, on the first hole. Her husband was so distraught he only played the front nine."
Stories like that are terrible, and it is hard for men to catch a break. It is also hard for reverse mortgages to catch a break. In talking to people who are involved in that field of lending, they say that sometimes they feel that the press is almost hoping that something goes wrong with that business. Really, any time you become involved with a senior citizen, or their money, alarm bells begin to ring and often times with cause. Here is one of the latest articles, here is an article highlighting top wholesale buyers of the product:
There was a story in Reuters yesterday saying that lawmakers have said they are considering extending or expanding the tax credit. Senate Majority Leader Harry Reid backs a bipartisan bill to extend the credit for six months. A Senate Republican plan would expand it to $15,000." As one can imagine, NAR, NAHB, and the MBAA are all lobbying strongly for some type of extension. As we have seen, the Federal government would rather continue to stabilize the economy rather than upset it, and taking away the credit would be a move toward "upsetting the apple cart".
In a move also seen as continuing to help the housing market, the Obama administration is unveiling a new program to provide support to state and local housing agencies. It is designed to support low mortgage rates and expand resources for low and middle income borrowers who want to buy or rent a home by implementing a new bond purchase program to support new lending by housing finance agencies, and a temporary credit & liquidity program to improve access by housing agencies to credit sources for their existing bonds. It will provide temporary support to local housing financing agencies and encourage them to return to relying on market sources for their capital as quickly as possible. At this point it does not appear to directly help small originators, but details have been a little sketchy.
And if you didn't know what a 4506-T was a year ago, you sure do now, unless you're selling stereos at The Good Guys. GMAC Bank Correspondent Funding reminded their correspondents that "all loans submitted to GMAC Bank for purchase, with the exception of FHA non-credit qualifying streamline refinances and VA IRRRLs, must contain a completed and signed IRS Form 4506-T, to obtain the borrower's tax return transcripts for the two years prior to the loan application date." The borrowers must complete and sign IRS Form 4506-T at time of application and at time of closing. An incomplete 4506-T will prevent a loan from moving into underwriting and eventually funding.
GMAC also clarified their Pre-Foreclosure/Short sale transaction policy, which occurs when the borrower sells the mortgaged property for less than the total indebtedness and the lender agrees to accept the net proceeds as satisfaction of the debt. In some cases, the lender may file a claim with the insurer for the difference or take out a deficiency judgment against the borrower.
After 10/26, Wells Fargo Wholesale Lending's verbal verification of employment (VVOE) policy for conventional loans to self-employed borrowers has been extended from 10 to within 30 days of the Note date. The requirement remains 10 days prior to the Note date for salaried borrowers. Wells' wholesale group also tweaked their MI policy for high LTV loans in declining markets, added some additional reviews for high-risk FHA loans, and came out with their policy for high balance loans IF the current loan limits are not passed (Purchase loans using the temporary loan limits must close and fund by Thursday, Dec. 31. Refinance loans using the temporary loan limits - including the Home Affordable Refinance Program - must close and fund by Monday, Dec. 28 to accommodate the right of rescission).
Later this week the FHA update of the current modification policy goes into effect. What does that mean? Basically, modifications will be somewhat harder to make, which has accounted for the big increase lately in FHA modifications, which in turn led to Ginnie Mae pools (especially higher coupon pools) being adjusted. I believe that up until the 23rd servicers can take advantage of the lenient modification policy, and purchase loans at 100 (par) and sell them back out higher after recapitalizing the amount in arrears. This has not had any impact on pools with conventional loans
By the way, trial loan modifications under HAMP (Home Affordable Modification Program) were up 41% in September compared to August according to the Federal Housing Finance Agency (FHFA).
We've had Citi, JP Morgan Chase, and Bank of America release their earnings. Wells Fargo's comes out tomorrow. The stock has done well recently, but watch out for their, and others, losses on commercial real estate holdings. Banks hold about 45% of commercial loans, and these continue to deteriorate. Banks have to put more money into reserves while reducing their loan portfolios which in turn leaves less money for lending - not a good scenario. And analysts say that reducing reserve requirements for our banks won't help, as it will not make them more willing to lend because they will keep their money back with the Fed and earn risk-free returns on their equity. Commercial loans are definitely a cloud on the horizon, with vacancies increasing and rents falling. Values have fallen as well, and Moody's estimates that prices are about 35% below their peak in October 2007.
"Things" actually seem a little quiet out there. Traders in mortgage-backed securities are saying that it is pretty quiet out there, and that origination volumes seem to have slowed. This is not hard to understand, given the traditional autumn slow-down, along with rates creeping up slightly. But with the Fed's continued buying of securities, the laws of supply and demand tell us that mortgage rates should continue to be ok.
It didn't help that there was no economic news yesterday. But today we had Housing Starts and Building Permits. New construction of U.S. homes, however rose by less than expected in September: Housing Starts were +0.5% and August was revised downward. (Friday we have the September Existing Home Sales data, expected to show a small improvement.) We also had the Producer Price Index, expected to be flat but instead dropping .6% in September, mainly because of a 2.4 percent decline in energy prices. For the year the PPI is down 4.8%. What inflation? After the numbers the yield on the 10-year Treasury note (which was 3.37% prior to the numbers) is 3.34% and mortgage prices are better between .125 and .250.
John and Helen met while on vacation and John fell head over heels in love with her.
After a couple of weeks in which John took Helen out to various dance clubs, restaurants, concerts, etc. he was convinced that it was true love. So on the last night of his vacation the two of them went to dinner and had a serious talk about how the relationship would continue.
"It's only fair to warn you, I'm a total golf nut," John said to his new found lady friend. "I eat, sleep and breathe golf, so if that's going to be a problem, you'd better say so now!"
Helen took a deep breath and responded: "Since we're being honest with each other, here goes.... You need to know that I'm a hooker."
"I see," John replied. "That's a problem, for sure."
He spent some time looking down at the table, deep in thought. Then he added, "You know, it's probably because you're not keeping your wrists straight when you tee off."
Friday, October 16, 2009
Mortgage Rates End Week Higher
by Victor Burek - Oct. 16th 2009 10:23am
Mortgage rates moved slightly higher yesterday but managed to weather the storm of better than expected economic data and earnings reports. Today, mortgage-backed security prices are mostly unchanged and mortgage rates are a few basis points lower. However, compared to last week mortgage rates are about 0.25% higher.
Bank of America and GE released earnings this morning. Bank of America had disappointing results last quarter with a larger than expected loss. GE beat estimates on earnings per share but failed to match total revenue expectations. The weaker than expected results moved stock futures much lower which helped the bond market avoid a continuation of recent selling.
The Federal Reserve released Industrial Production data today. This report gives us a look at how much factories, mines and utilities are producing. Last month’s report indicated a large increase, this month economists expected an increase of 0.2%. The report showed that Industrial Production improved more than expected last month, increasing 0.7%. Additionally, last month’s numbers were revised higher from a gain of 0.8% to a gain of 1.2%!
The final economic report of the week is a preliminary read on how the consumer is feeling. The University of Michigan’s Consumer Survey Center questions 500 households each month on their personal financial condition and attitudes about the economy. An optimistic consumer is much more likely to spend money while a pessimistic consumer is more likely to save. Since our economy is driven by consumer spending, the stock market usually benefits with optimism while the bond market benefits with pessimism. Today's preliminary read indicates consumers are losing some of the optimism they gained over the last few months. Expectations called for a 74.0 reading following last month’s 73.5, but the actual report indicated a much worse than expected 69.4
Mortgage rates moved slightly higher yesterday but managed to weather the storm of better than expected economic data and earnings reports. Today, mortgage-backed security prices are mostly unchanged and mortgage rates are a few basis points lower. However, compared to last week mortgage rates are about 0.25% higher.
Bank of America and GE released earnings this morning. Bank of America had disappointing results last quarter with a larger than expected loss. GE beat estimates on earnings per share but failed to match total revenue expectations. The weaker than expected results moved stock futures much lower which helped the bond market avoid a continuation of recent selling.
The Federal Reserve released Industrial Production data today. This report gives us a look at how much factories, mines and utilities are producing. Last month’s report indicated a large increase, this month economists expected an increase of 0.2%. The report showed that Industrial Production improved more than expected last month, increasing 0.7%. Additionally, last month’s numbers were revised higher from a gain of 0.8% to a gain of 1.2%!
The final economic report of the week is a preliminary read on how the consumer is feeling. The University of Michigan’s Consumer Survey Center questions 500 households each month on their personal financial condition and attitudes about the economy. An optimistic consumer is much more likely to spend money while a pessimistic consumer is more likely to save. Since our economy is driven by consumer spending, the stock market usually benefits with optimism while the bond market benefits with pessimism. Today's preliminary read indicates consumers are losing some of the optimism they gained over the last few months. Expectations called for a 74.0 reading following last month’s 73.5, but the actual report indicated a much worse than expected 69.4
Monday, October 5, 2009
30-year mortgage rates dip below 5 percent
First time in four months, average rate on standard fixed is 4.94 percent
Source Freddie Mac MSNBC Oct 1, 2009
Rates on 30-year home loans dropped below 5 percent for the first time in four months, but still remained above this year's record low, Freddie Mac said Thursday.
The average rate on a 30-year fixed mortgage was 4.94 percent, down from 5.04 percent last week, Freddie Mac said. The last time the 30-year home loan averaged less than 5 percent was the week ending May 28, when it was 4.91 percent.
Rates hit a record low of 4.78 percent hit in the spring, and remain appealing for people interested in buying a home or refinancing.
On Thursday, the National Association of Realtors said the number of signed sales contracts rose for the seventh straight month in August, as homebuyers rushed to take advantage of a tax credit for first-time owners that expires in November.
"Low mortgage rates are helping to stabilize home sales," said Frank Nothaft, Freddie Mac's chief economist.
But borrowers may want to consider the Federal Reserve's announcement last week that it is slowing down a program intended to lower mortgage rates and boost the housing market. Analysts say mortgage rates should remain low for now but could eventually move higher, and homeowners who want to refinance mortgages shouldn't delay.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
The average rate on a 15-year fixed mortgage fell to 4.36 percent from 4.46 percent last week, according to Freddie Mac. This week's rate on 15-year mortgages was the lowest since Freddie Mac started tracking it in 1991.
Rates on five-year, adjustable-rate mortgages averaged 4.42 percent, down from 4.51 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.49 percent from 4.52 percent last week.
The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac's survey averaged 0.7 point for 30-year mortgages, and 0.6 point for 15-year and five-year loans. The fee averaged 0.5 point for one-year mortgages.
Source Freddie Mac MSNBC Oct 1, 2009
Rates on 30-year home loans dropped below 5 percent for the first time in four months, but still remained above this year's record low, Freddie Mac said Thursday.
The average rate on a 30-year fixed mortgage was 4.94 percent, down from 5.04 percent last week, Freddie Mac said. The last time the 30-year home loan averaged less than 5 percent was the week ending May 28, when it was 4.91 percent.
Rates hit a record low of 4.78 percent hit in the spring, and remain appealing for people interested in buying a home or refinancing.
On Thursday, the National Association of Realtors said the number of signed sales contracts rose for the seventh straight month in August, as homebuyers rushed to take advantage of a tax credit for first-time owners that expires in November.
"Low mortgage rates are helping to stabilize home sales," said Frank Nothaft, Freddie Mac's chief economist.
But borrowers may want to consider the Federal Reserve's announcement last week that it is slowing down a program intended to lower mortgage rates and boost the housing market. Analysts say mortgage rates should remain low for now but could eventually move higher, and homeowners who want to refinance mortgages shouldn't delay.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
The average rate on a 15-year fixed mortgage fell to 4.36 percent from 4.46 percent last week, according to Freddie Mac. This week's rate on 15-year mortgages was the lowest since Freddie Mac started tracking it in 1991.
Rates on five-year, adjustable-rate mortgages averaged 4.42 percent, down from 4.51 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.49 percent from 4.52 percent last week.
The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac's survey averaged 0.7 point for 30-year mortgages, and 0.6 point for 15-year and five-year loans. The fee averaged 0.5 point for one-year mortgages.
Friday, October 2, 2009
Weak Jobs Data Helps Keep Mortgage Rates Near Four Month Lows
by Victor Burek - Oct 2 2009
Mortgage rates moved a few basis points lower yesterday after the bond market experienced what AQ and MG refer to as a "forced rally". Stocks were selling the dollar was stronger and the market was generally nervous about a weak Jobs report after Goldman Sachs revised their Non Farm Payrolls forecast for the worse. This equation resulted in a heavy flight to safety rally in the fixed income market which essentially snowballed as market participants looked to keep up with rapidly appreciating prices. As a result, mortgage backed securities prices closed at levels not seen since May. Following the rally in Treasury and MBS markets, lenders republished rate sheets for the better and consumer borrowing costs fell. There were even few lenders offering 4.5% for 30 year mortgages for consumers with exceptionally high FICO scores and low loan to values. This all occurred in anticipation of today...
The U.S. Department of Labor this morning released the monthly Employment Situation report. This data provides four key measures on the strength of the domestic labor market...
The first is a read on the number of jobs lost or created from the prior month. Recent reports have shown that job losses have begun to moderate since peaking in January 2009. Economists surveyed for this month’s report were calling for 175,000 job cuts following last month’s read of 201,000 losses.
The next measure is the official unemployment rate which was expected to post a increase from last month’s read of 9.7% to 9.8% in September.
The final two measures are the average hourly earnings and work week. Average hourly earnings was expected to post a 0.2% increase while the average work week was expected to hold steady at 33.1 hours. These final two measures are important because if wages are going down or if hours worked decreases, consumers will have less money to spend.
The Labor Department reported that our economy lost a worse than expected 263,000 jobs last month. The official unemployment rate came in right on expectations at 9.8%, which is a 26 year high. Average hourly earnings only posted a 0.1% increase while the work week shrank to 33.0 hours, matching a record low.
Mortgage rates moved a few basis points lower yesterday after the bond market experienced what AQ and MG refer to as a "forced rally". Stocks were selling the dollar was stronger and the market was generally nervous about a weak Jobs report after Goldman Sachs revised their Non Farm Payrolls forecast for the worse. This equation resulted in a heavy flight to safety rally in the fixed income market which essentially snowballed as market participants looked to keep up with rapidly appreciating prices. As a result, mortgage backed securities prices closed at levels not seen since May. Following the rally in Treasury and MBS markets, lenders republished rate sheets for the better and consumer borrowing costs fell. There were even few lenders offering 4.5% for 30 year mortgages for consumers with exceptionally high FICO scores and low loan to values. This all occurred in anticipation of today...
The U.S. Department of Labor this morning released the monthly Employment Situation report. This data provides four key measures on the strength of the domestic labor market...
The first is a read on the number of jobs lost or created from the prior month. Recent reports have shown that job losses have begun to moderate since peaking in January 2009. Economists surveyed for this month’s report were calling for 175,000 job cuts following last month’s read of 201,000 losses.
The next measure is the official unemployment rate which was expected to post a increase from last month’s read of 9.7% to 9.8% in September.
The final two measures are the average hourly earnings and work week. Average hourly earnings was expected to post a 0.2% increase while the average work week was expected to hold steady at 33.1 hours. These final two measures are important because if wages are going down or if hours worked decreases, consumers will have less money to spend.
The Labor Department reported that our economy lost a worse than expected 263,000 jobs last month. The official unemployment rate came in right on expectations at 9.8%, which is a 26 year high. Average hourly earnings only posted a 0.1% increase while the work week shrank to 33.0 hours, matching a record low.
Subscribe to:
Posts (Atom)
