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Mortgage News Daily combines the expertise of some of the housing industry's leading minds with the power of social media to offer an always lively, constantly evolving web community. MND communicates breaking news, streams video, and provides expert opinion and commentary to a community of interested market professionals and curious consumers.Mortgage Rate Improvements Erased After Auction. Floating into Tomorrow
Mortgage rate watchers were treated to a rally in the fixed income market yesterday. While the rally started at the open of the session and picked up steam after the 3 year Treasury note auction, most lenders waited until the end of the day to reprice for the better. Even then not all lenders repriced for the better though, leaving some originators frustrated with their floating loans. However, after looking over rate sheets this morning, those lenders appear to have returned the favor today.
Today the economic calendar was once again relatively quiet.
The Mortgage Bankers Association released their Weekly Applications Index today. The MBA survey covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole. Furthermore, in a low mortgage rate environment, such a trend implies consumers are seeking out lower monthly payments which can result in increased disposable income and therefore more money to spend on discretionary items or to pay down other debt.
The release indicated, in the week ending January 8, 2010, purchase loan demand rose 0.8% off of a 12 year low while refinance activity posted an increase of 21.8%. To read more, check out the MND STORY.
At 1pm eastern, the Department of Treasury auctioned $21billion 10 year notes. This is where our day took a turn for the worse.
The auction went well but the market did not react as one might have expected. Following the release of the results, MBS prices were pretty stable, however about 20 minutes after 1pm MBS prices began to fall. AQ and MG tell me that while the 10 year auction was not bad, the fixed income market is nervous about tomorrow's auction of $13 billion 30 year bonds. We all do agree that there is still a good chance that the rates market rallies tomorrow afternoon after that auction though.
Moving on...
Soon after the auction, the Federal Reserve released the "Beige Book". This data outlines economic conditions around the United States and is used as a point of reference during FOMC meetings where our nation’s monetary policy is set. Here is a summary of what the Beige Book had to say:
- U.S. ECONOMIC ACTIVITY AT LOW LEVEL AS 2010 BEGAN BUT IMPROVING MODESTLY
- ECONOMIC IMPROVEMENT BROADENING, 10 OF 12 FED DISTRICTS REPORTED INCREASED ACTIVITY
- JOB MARKETS STILL WEAK, WAGE RISES MODERATE AND PRICE PRESSURES STILL SUBDUED
- CONSUMER SPENDING IN 2009 HOLIDAY SEASON SLIGHTLY STRONGER THAN 2008 BUT BELOW 2007 LEVELS
- CONSUMERS GENERALLY 'CAUTIOUS, PRICE SENSITIVE AND FOCUSED ON NECESSITIES'
- HOME SALES UP IN LATE 2009, ESPECIALLY FOR LOWER-PRICED HOMES, SALES PRICES UNCHANGED
- NONRESIDENTIAL REAL ESTATE MARKETS STILL SOFT, WEAKENING MORE IN SEVERAL DISTRICTS
- LOAN DEMAND DECLINING, CREDIT QUALITY DETERIORATING, LOAN DELINQUENCIES UP IN MANY DISTRICTS
It sounds like the Federal Reserve is feeling better about an economic stabilization but remains worried about prospects for future growth. We still have a long way to go on the road to recovery!
Following the release of the Beige Book, MBS prices fell a bit further which forced some lenders to reprice for the worse, erasing yesterday's gains and putting us back to square one again. One step forward, one back!
Reminder: as MBS prices fall, lenders are not able to sell their loans for as much income. To compensate for this lost profit, lenders are forced to increase mortgage rates. Lower MBS prices equal higher mortgage rates.
Reports from fellow mortgage professionals indicate lender rate sheets opened up the day with improvements, which were then lost this afternoon. The par 30 year conventional rate mortgage does remain in the 4.875% to 5.125% range for well qualified consumers though. 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 including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, you should expect a par interest rate in the 4.375% to 4.50% with similar fees.
All week I have been saying the best chance for mortgage rate improvements would be on Thursday (tomorrow), after the last Treasury auction of the week. While we did get a few unexpected improvements yesterday and this morning, I am sticking by this forecast. If you have not yet locked in anticipation of improvements towards the end of the week, hold steady, I am still hopeful for mortgage rate improvements tomorrow afternoon.
Have a great night!
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Mortgage Rate Improvements Erased After Auction. Floating into Tomorrow
Mortgage rate watchers were treated to a rally in the fixed income market yesterday. While the rally started at the open of the session and picked up steam after the 3 year Treasury note auction, most lenders waited until the end of the day to reprice for the better. Even then not all lenders repriced for the better though, leaving some originators frustrated with their floating loans. However, after looking over rate sheets this morning, those lenders appear to have returned the favor today.
Today the economic calendar was once again relatively quiet.
The Mortgage Bankers Association released their Weekly Applications Index today. The MBA survey covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole. Furthermore, in a low mortgage rate environment, such a trend implies consumers are seeking out lower monthly payments which can result in increased disposable income and therefore more money to spend on discretionary items or to pay down other debt.
The release indicated, in the week ending January 8, 2010, purchase loan demand rose 0.8% off of a 12 year low while refinance activity posted an increase of 21.8%. To read more, check out the MND STORY.
At 1pm eastern, the Department of Treasury auctioned $21billion 10 year notes. This is where our day took a turn for the worse.
The auction went well but the market did not react as one might have expected. Following the release of the results, MBS prices were pretty stable, however about 20 minutes after 1pm MBS prices began to fall. AQ and MG tell me that while the 10 year auction was not bad, the fixed income market is nervous about tomorrow's auction of $13 billion 30 year bonds. We all do agree that there is still a good chance that the rates market rallies tomorrow afternoon after that auction though.
Moving on...
Soon after the auction, the Federal Reserve released the "Beige Book". This data outlines economic conditions around the United States and is used as a point of reference during FOMC meetings where our nation’s monetary policy is set. Here is a summary of what the Beige Book had to say:
- U.S. ECONOMIC ACTIVITY AT LOW LEVEL AS 2010 BEGAN BUT IMPROVING MODESTLY
- ECONOMIC IMPROVEMENT BROADENING, 10 OF 12 FED DISTRICTS REPORTED INCREASED ACTIVITY
- JOB MARKETS STILL WEAK, WAGE RISES MODERATE AND PRICE PRESSURES STILL SUBDUED
- CONSUMER SPENDING IN 2009 HOLIDAY SEASON SLIGHTLY STRONGER THAN 2008 BUT BELOW 2007 LEVELS
- CONSUMERS GENERALLY 'CAUTIOUS, PRICE SENSITIVE AND FOCUSED ON NECESSITIES'
- HOME SALES UP IN LATE 2009, ESPECIALLY FOR LOWER-PRICED HOMES, SALES PRICES UNCHANGED
- NONRESIDENTIAL REAL ESTATE MARKETS STILL SOFT, WEAKENING MORE IN SEVERAL DISTRICTS
- LOAN DEMAND DECLINING, CREDIT QUALITY DETERIORATING, LOAN DELINQUENCIES UP IN MANY DISTRICTS
It sounds like the Federal Reserve is feeling better about an economic stabilization but remains worried about prospects for future growth. We still have a long way to go on the road to recovery!
Following the release of the Beige Book, MBS prices fell a bit further which forced some lenders to reprice for the worse, erasing yesterday's gains and putting us back to square one again. One step forward, one back!
Reminder: as MBS prices fall, lenders are not able to sell their loans for as much income. To compensate for this lost profit, lenders are forced to increase mortgage rates. Lower MBS prices equal higher mortgage rates.
Reports from fellow mortgage professionals indicate lender rate sheets opened up the day with improvements, which were then lost this afternoon. The par 30 year conventional rate mortgage does remain in the 4.875% to 5.125% range for well qualified consumers though. 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 including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, you should expect a par interest rate in the 4.375% to 4.50% with similar fees.
All week I have been saying the best chance for mortgage rate improvements would be on Thursday (tomorrow), after the last Treasury auction of the week. While we did get a few unexpected improvements yesterday and this morning, I am sticking by this forecast. If you have not yet locked in anticipation of improvements towards the end of the week, hold steady, I am still hopeful for mortgage rate improvements tomorrow afternoon.
Have a great night!
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