Posted To: MBS Commentary
AHHHHHHH ALERT ALERT!!! MBS PRICES ARE TANKING!!!! HAHAHAHAAHA...sorry but I've been trying to squeeze that in for a long time now. The currently crappy rate environment seemed like the perfect time to remind you how mortgages trade. Too soon? Today is Class A Notification Day in the Secondary Mortgage Market. Class A MBS coupons consist of Fannie Mae and Freddie Mac 30 year loan notes. The September FN 4.0 MBS coupon has begun the settlement process and it looks like prices just plummeted. WHY??? The MBS coupons that determine rate sheet pricing are traded in the TBA MBS market. TBA = To be Announced In the TBA MBS market, at the time a trade is made, buyers and sellers agree to a few specific terms like what coupon, the issuing agency (Fannie, Freddie, Ginnie), size of trade, and a buy/sell...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: Mortgage Rate Watch
Mortgage rates had a bad day yesterday. Consumer borrowing costs started moving higher early in the session and never looked back. We had no relevant data on the calendar today and the marketplace was generally quiet as many investors and decision makers took time off for religious holiday. This left mortgage rates to take their directional guidance from related markets. Stocks drifted slowly higher after moving mostly sideways throughout the day, this did little to reverse recent weakness in the bond market, and interest rates rose for the third straight session. Consequently... MORTGAGE RATES HAD ANOTHER BAD DAY Lender rate sheets are worse again. The par 30 year conventional mortgage has risen into the 4.375% to 4.625% range for well qualified consumers. If you are seeking a 15 year term...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: The Garrett Watts Report
Not too many years ago I was consulting companies that were plagued with early purchase defaults and repurchase demands from investors. It was during the tail end of the subprime and Alt-A era that mortgage bankers were starting to see a dramatic increase in demands from investors. Between 2005 and 2007 everyone got caught originating products that shouldn’t have been offered to most borrowers. When we asked folks why they were doing it, a common response was, “ I know these products are not high quality, but if I don’t originate them, I’ll be out of business”. Many would add, “All my competitors are originating these loans, so it must be ok.” In the end, these folks and their competitors went out of business anyway. One of the issues I uncovered during...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MBS Commentary
Pricing got whacked today! Rebate is 41.6bps worse in the last 48 hours. Week over week isn't any better. Reductions are robust across the coupon stack. Note rates below 4.25%, those used to fill 3.50 MBS coupon buckets, are the biggest losers. 4.25% is still on the board, but it'll cost almost 50bps more at closing. Check out how expensive the buydown is from 4.375 to 4.25%. 4.125% is out there as some desks are still looking to fill 3.50 buckets, but those offers are not widespread as 3.5s are no longer liquid. This is not pretty, even for a Friday.... Mortgages had a terrible week in general. Prepayment speeds were faster than forecast, especially in recent vintage production coupons, which sent investors running to shorten the duration of their portfolio. Falling price levels also pushed...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MND NewsWire
The Treasury Inspector General for Tax Administration (TIGTA) has completed a study of IRS management of the evolving series of tax credits that were offered to homebuyers over that last two years and found that the IRS needs to "improve its capabilities to identify taxpayers who must repay tax credits for homes they purchased under the First-Time Homebuyer Credit program" The findings also provide an unpleasant surprise for a few people who took advantage of the credit, but good news to many more. In the first case, some homebuyers received what they thought was a gift of up to $8,000 which was actually a loan. In the second instance, homebuyers will not have to pay back money as they thought they would. In 2008 the Housing and Economic Recovery Act, the first attempt to stave off a looming...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: Pipeline Press
Today is Friday, the day of the week that smaller "on the bubble" banks dread most. What happens to the delinquent loans that the FDIC and its partner banks assume? They are sold - the most recent example being the sale of a 40% equity interest in a limited liability company (LLC) created to hold assets with an unpaid principal balance of 1,062 distressed properties for approximately $762 million from 20 failed bank receiverships. 80% of the loans are delinquent. Mariner Real Estate Partners , out of Kansas, was the winning bidder (out of 8) on this multi-bank transaction with a price of 30.93 percent of the unpaid principal balance. As an equity participant, the FDIC will retain a 60 percent stake in the LLC and share in the returns on the assets. The FDIC offered 1:1 leverage financing and...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MBS Commentary
Interest rates are on the rise again as equity futures inch higher ahead of a light day of economic data. President Obama’s mid-morning press conference on the economy may attract greater market attention than the only scheduled economic data release on the calendar, Wholesale Inventories. One hour before the opening bell, S&P 500 futures are up 3.00 points to 1,105.50 and the 10 year Treasury note is -0-10 at 98-18 yielding 2.792% (+3.3bps). Meanwhile in the secondary mortgage market, after a session of aggressive selling, the October FNCL 4.0 MBS coupon is -0-06 at 102-01. This is the bottom of the range we've been following... European equity markets are slightly weaker with the CAC -0.02% and the Dax down 0.23%. The FTSE in London is +0.02%. Markets in Asia closed higher including...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: Mortgage Rate Watch
Mortgage rates didn't have a chance today. Borrowing costs started moving higher early in the session and never looked back. As the day progressed, agency MBS prices fell further and lenders were forced to reprice for the worse. Par 30-year fixed 4.25% quotes are still on the board, but closing costs are at least 15bps higher (+0.15% of loan amount). That's really a best case scenario though. If you're a passenger on the float boat, your closing costs probably increased by about 0.25% today. 4.375% is almost the new par. But 4.25% is definitely still do-able for very well-qualified borrowers (no loan level price adjustments). Now 4.125%, that might be tough. That quote is costing perfect borrowers about 2pts. The culprit of this event? Well. We can't factor out a religious holiday: Rosh Hashanah...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MBS Commentary
MBS prices are officially 8 ticks below lender loan pricing marks. REPRICES FOR THE WORSE HAVE BEEN REPORTED The earlier you received your rate sheet...the more likely you are to see a reprice for the worse in your inbox....(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MND NewsWire
The Mortgage Bankers Association (MBA) has weighed in on the proposed framework for conservatorship and receivership operations for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks set forward by the Federal Housing Finance Agency (FHFA). In a letter to FHFA General Counsel Alfred M. Pollard, Esq ., MBA President and CEO John A. Courson and Chairman-Elect Michael D. Berman said their concerns about the framework are threefold: it is "overly theoretical;" it is unclear what the trigger would be for placing the entities into receivership, and third, the goals of any receivership are unclear. FHFA was established by the Housing and Economic Recovery Act of 2008 (HERA), replacing three other agencies with various responsibilities for regulating Fannie Mae, Freddie Mac (the Enterprises)...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MBS Commentary
Treasury just auctioned $13 billion 30 year bonds . Although the first two auctions of the week were non-events, this reopening did not go smoothly... Demand as measured by the bid to cover ratio was 2.73 bids submitted for every 1 accepted by Treasury. This is just below average but the lowest BTC in the last four auctions. The auction stopped out at high yield of 2.82%, which is 2.7bps above the 1pm "When Issued" yield. This implies the Treasury had a hard time finding willing buyers at current market yields....which explains why primary dealers got stuck with their largest takedown since last October! The street absorbed 55.6% of the auction. That is 10% more than average. Slopdog.. Directs were almost absent, taking down a meager 8.2% of the issue and only 34.6% of what they bid on, this...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MBS Commentary
We'll get the results of the $13 billion long bond auction in about 20 minutes. Ahead of issuance... Rate sheet influential MBS coupons are just off their session lows. The October FNCL 4.0 is -0-07 at 104-14. Benchmark Treasury yields are just off their session highs. The 10-year Treasury note is -0-19 at 99-05 yielding 2.721% (+6.7bps). The long bond is -1-04 at 101-17 yielding 3.79% (+6.2bps). S&P futures are a few handles off their high print (1112), now +6.75 at 1106. Although production MBS coupon prices are almost 25bps lower, reprices are not an issue at the moment because loan pricing was notably worse on first run releases. On average, rebate was reduced by 24.7bps on the open. Par note rates experienced the largest reductions. Volume has been light across all markets so far today...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: Pipeline Press
"Commercial paper" is used by businesses to finance their own working capital, meet payroll and pay suppliers, etc. From the third quarter of 2007 to that of 2008, GDP grew by 3.4%. Did commercial paper keep up?Heck no! Outstanding commercial paper fell by 25%, that works out to about $600 billion. Even worse...asset-backed commercial paper fell by 40%. If borrowing falls by a large percentage, but GDP remains constant, that is decent proof of a credit crunch. This week the amount of corporate debt being sold is unusually high. In a very basic sense, each dollar of corporate debt sold competes for investment dollars with Agency MBS, Treasuries, municipal bonds, etc. It appears that some companies are using the money they raise to expand, or feel that the financing costs are better than issuing...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MBS Commentary
Initial Jobless Claims and International Trade data has been released, the results were not bond market friendly. Here is a quick recap: 08:30 09Sep10 RTRS-US JOBLESS CLAIMS FELL TO 451,000 SEPT 4 WEEK (CONSENSUS 470,000) FROM 478,000 PRIOR WEEK (PREVIOUS 472,000) 08:30 09Sep10 RTRS-US JOBLESS CLAIMS 4-WK AVG FELL TO 477,750 SEPT 4 WEEK FROM 487,000 PRIOR WEEK (PREVIOUS 485,500) 08:30 09Sep10 RTRS-US CONTINUED CLAIMS FELL TO 4.478 MLN (CON. 4.45 MLN) AUG 28 WEEK FROM 4.480 MLN PRIOR (PREV 4.456 MLN) 08:30 09Sep10 RTRS-US INSURED UNEMPLOYMENT RATE UNCHANGED AT 3.5 PCT IN AUG 28 WEEK (PREV 3.5 PCT) 08:30 09Sep10 RTRS-TABLE-U.S. jobless claims fell in latest week 08:30 09Sep10 RTRS-US JULY TRADE DEFICIT $42.78 BLN (CONSENSUS $47.3 BLN) VS JUNE DEFICIT $49.76 BLN (PREV $49.90 BLN) 08:30 09Sep10...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MBS Commentary
Global markets were generally higher overnight and US equity futures are following on their coattails ahead of weekly employment data, monthly trade gap figures, and the start of the NFL football season. Ninety minutes before the opening bell, S&P 500 futures are +3.50 points to 1,102.75 while Dow futures are 26 points higher at 10,418. So far in September, the S&P has risen 34.3 points and the Dow has gained 236 points. Benchmark interest rates are on the rise as investors reallocate funds into equity markets. The 10-year Treasury note is -0-08 at 99-16 yielding 2.681% (+2.7bps) and the October Delivery FNCL 4.0 is -0-03 at 102-18. “The mood in global equity markets is generally positive,” wrote BMO Capital Markets in a morning note. They mentioned that investor sentiment...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: Mortgage Rate Watch
When economic data is thin the stock market tends to have a larger impact on the direction of mortgage rates. The session began with stocks moving lower yesterday. With no data on the economic calendar to reverse the market's direction, the bond market was able to rally all day (higher bond prices = lower bond yields). This allowed most lenders to reprice for the better. Like yesterday, the economic economic was quiet today. Two events influenced the marketplace... The Department of Treasury auctioned $21 billion 10-year notes today. Before the auction, the bond market made room for new debt supply by letting Treasury prices fall (cheapen). This pushed benchmark yields higher and led MBS prices lower. The issue must have gotten cheap enough because auction demand was strong. This led to a modest...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MND NewsWire
In March we learned that USDA Rural Housing funds were expected to run dry by the end of April . A month later, even though the legislation intended to provide the funding had not passed, USDA began issuing commitments for new loans, but there was a caveat: Loan approvals would be "subject to the availability of funds and Congressional authority to charge a 3.5 percent guarantee fee for purchase loans and a 2.25 percent guarantee fee for refinance loans." Finally, on July 29 Congress passed HR 4899 to reestablish the program as one that would no longer be subject to the annual whims of Federal funding but self-sustaining through a 3.5 percent guarantee fee paid by the borrower. Four weeks passed after the Congress did their job and appropriated unlimited funding for the USDA Rural Housing Program...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MND NewsWire
The Federal Reserve has released the Beige Book The Beige Book is a compilation of anecdotal information and data on current economic conditions across the country. The findings are NOT THE VIEWS OF FEDERAL RESERVE OFFICIALS ...instead, each Federal Reserve bank interviews key business contacts, economists, market experts, and other sources in their specific district. This report is published eight times a year. They call it the Beige Book because its Beige . This edition was prepared at the Federal Reserve Bank of San Francisco and is based on information collected on or before August 30, 2010. Below is a summary of the findings and a few excerpts on bank lending and housing. I called attention to some of the more important observations. Real Estate and Construction Activity in residential...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MBS Commentary
Treasury just auctioned $21 billion 10 year notes . Auction demand was healthy thanks to one group of bidders specifically. The bond market has responded favorably in post auction trading. The high yield was 2.67%, which was 1.5 basis points below the 1pm "When Issued" yield, indicating bidding was aggressive, mostly because the market was able build in a big pre-auction concession. The bid to cover ratio was 3.21 bids submitted for every 1 accepted by Treasury. This is the strongest btc ratio since the June auction. Primary dealers took down 38.3% of the competitive bid and 18.1% of what they bid on, both metrics are below average. This implies someone else was standing at the ready to support supply offerings. That someone else was indirect bidders! Indirects took home a whopping 54.7% of...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MND NewsWire
The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending September 3, 2010. The MBA's loan application survey covers over 50% of all U.S. residential mortgage loan applications taken by retail mortgage bankers, commercial banks, and thrifts. The data gives economists a snapshot view of consumer demand for mortgage loans. In a low mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out a lower monthly payment. If consumers are able to reduce their monthly mortgage payment and increase disposable income through refinancing, it can be a positive for the economy as a whole (creates more consumer spending or allows debtors to pay down personal liabilities like credit cards). A falling trend...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: Voice of Housing
The Federal Housing Finance Agency (FHFA), conservator of Freddie Mac and Fannie Mae (the Enterprises), has established its final housing goals for the Enterprises in 2010-2011 . FHFA is required by the Housing and Economic Recovery Act of 2008 (HERA) to set such goals for targeted segments of the mortgage market. As noted by MND last week : “The new rules establish three goals for single-family, owner-occupied home purchases; one for low-income families, another for very low-income families, and a third for families living in geographical areas with lower-income populations, areas with high concentrations of minority residents, or federal declared disaster areas. The goal for disaster areas contains a sub-goal to ensure that the needs of lower-income and minority areas are addressed...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: Pipeline Press
Lenders offering FHA products know that Mortgagee Letter 2010-24 eliminated the unlimited CLTV ratio, and reinstated the requirement that the total of any FHA-insured first mortgage and any subordinate lien may not exceed the applicable FHA loan-to-value and geographical maximum mortgage amount. (Only the FHA-insured first mortgage must be within the FHA maximum mortgage limits.) But lenders may also want to listen in to an FHA "Condo Recertification Industry Call" Q&A session today at 2PM EST . The dial-in number is: 1-877-941-1706 and the confirmation number is: 170410. Yesterday I discussed SRP's, and how it may behoove lenders to contemplate either servicing or subservicing these loans themselves since the market is not "adequately" compensating originators for the value. Obviously...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MBS Commentary
Recap of Yesterday Lost rate sheet rebate was restored yesterday as the bond market benefited from a reversal of demand for risky assets (stocks sold) and an onslaught of swapable corporate debt supply. Loan pricing was aggressive out the gate so not all lenders repriced for the better, but several of the mid-majors did recall and re-issue. While rebate did improve, less than $1.5 billion in new loan supply was offered by originators in the TBA market with the majority of hedges seen in 4.0 30-year paper, indicating the refi market has slowed since last week (or secondary is over hedged). The benchmark 10-year Treasury note went out +1-00 (32/32) at a price of 100-08 yielding 2.598% (-11.5bps) and the October FNCL 4.0 ended the session +0-17 at 102-31 yielding 3.566%. Swap spreads tightened...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: Mortgage Rate Watch
The week ahead is very light in terms of economic data, that implies we should expect the stock market to continue to provide mortgage rates with directional guidance. If stocks rally, look for mortgage rates to move higher. If stocks fall, look for mortgage rates to improve. The only economic reports on the schedule in the week ahead that have the potential to move mortgage rates will be released on Wednesday and Thursday. Tomorrow the Federal Reserve releases the Beige Book, named for the color of its cover. The Beige Book is a compilation of anecdotal information and data on current economic conditions across the country. The findings are not the views of Federal Reserve officials, instead, each Federal Reserve bank interviews key business contacts, economists, market experts, and other...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.
Posted To: MND NewsWire
Eric Rosengren, president of the Federal Reserve Bank of Boston, told attendees at a Federal Reserve sponsored conference on REO and Vacant Property Strategies for Neighborhood Stabilization last Thursday that there may not be a single solution for the housing market as the effects of financial crisis depend on the characteristics of each individual community. Framing the problem affects the solutions you propose, he said. If we assume we are trying solve a problem of foreclosures and REO rooted in the housing bubble, the solutions will tend to emphasize mitigating foreclosures, accelerating the disposition of REO, or advocating for reconsideration of the legal systems approach to personal bankruptcy and foreclosure. If the problem is viewed as being primarily about housing demand, then the...(read more)Forward this article via email: Send a copy of this story to someone you know that may want to read it.