Mortgage News Daily

HR 4581 Creates Inspector General Under FHFA to Oversee GSEs. Is this Progress?

Joe Murin — Tue, 09 Feb 2010 18:28:00 GMT

Recently US Representative Judy Biggert, the ranking Republican on the House Financial Services Committee’s Subcommittee on Oversight and Investigations committee, introduced H.R. 4581 in conjunction with H.R. 4450. The congresswoman’s proposal would create an Inspector General under the Federal Housing Finance Agency (FHFA) for the purpose of overseeing and reporting to congress on the actions of Fannie Mae and Freddie Mac. Rep. Biggert created the bill to “improve transparency and accountability” within the GSEs. The new IG will report on taxpayer liabilities, investment decisions, executive bonuses, fraud, investment securities, capital reserves and far too many other issues to list here. To this I say: DAH!! What has this committee being doing since the GSE takeover...(read more)

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MBS LUNCH: 3 Year Treasury Auction Results

Matthew Graham — Tue, 09 Feb 2010 18:27:00 GMT

Posted To: MBS Commentary

The Treasury has successfully auctioned $40 billion 3-year notes. The high yield was 1.377%, which was 1.6 basis points lower than the 1pm "When Issued" yield. The bid to cover ratio, a measure of auction demand, was 2.83 bids submitted for every one accepted by the Treasury. The 3 year note has seen an average bid to cover of 3.01 in the last 4 auctions Dealers took 38.7% vs. 35% average of last four 3-year auctions. Dealer Hit-Rate: Dealers take 20% of what they bid for vs. 17% norm Direct Bidders took 10.1% of the issuance. Last four average 11% Indirect Bidders were awarded 51.2% of the auction, vs 54% average. Indirect Hit-Ratio: Customers take 86% of what they bid for vs. 74% norm. Issued date Feb. 16, 2010 Maturity date Feb. 15, 2013 CUSIP number 912828MN7 YIELDS High 1.377...(read more)

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Cost of a Loan Repurchase; Budget Deficit; Financial Sector Peformance; MBA Headquarters; ResCap Earnings

C.M. "Corky" Watts, CMB — Tue, 09 Feb 2010 18:26:26 GMT

Posted To: The Garrett Watts Report

We asked you last week what your losses averaged on repurchases, and we got quite a few responses. Here is one: “A performing repurchase due to underwriting errors that can be refinanced into a new loan will cost about $10,000. A Non-performing repurchase that was originated in the last 12 months costs about 30 points to sell to a scratch and dent desk. A Non-performing repurchase that was originated over 12 months ago will cost 50 points as the value has most likely dropped 20% since original purchase on top of the 30 point discount in the scratch and dent market.” We’ll show you some more the next few weeks. Here are how some selected financial stocks fared last month. Cathay General ( CATY ): +19.2% Washington Fed ( WFSL ): -1.7% City National ( CYN ): +11.9% MasterCard...(read more)

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MBS ALERT: Reprice for Worse Possible

Matthew Graham — Tue, 09 Feb 2010 18:04:00 GMT

Posted To: MBS Commentary

High yield 1.377 pct, awards 26.75 pct of bids at high Bid-to-cover ratio 2.83, non-comp bids $156.7 mln Primary dealers take $15.42 bln of 3-year notes sale, indirect $20.37 bln We're down 6 ticks since the auction so far, and falling. Reprice risk is high at the moment...(read more)

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MBS MORNING: Choppy Price Action Ahead of Auction

Adam Quinones — Tue, 09 Feb 2010 16:22:00 GMT

Posted To: MBS Commentary

This morning I reminded that we are still operating in a trader's market. Technical price patterns and highly trafficked pivot points have a heavy influence over the directionality of stocks and bonds. These effects are expanded when data is minimal and the market is waiting around for more concrete headline news about Greece and Spain. The chart below paints a clear picture of the extent to which the market is dominated by professional traders and dealers. The S&P has rallied back to pre-sovereign debt panic levels, but further progress has stalled as the marketplace awaits useful guidance giving information. The S&P is still up 1.45% on the day.... While TSY auction results are issue numero uno for rates traders, the stock lever is having its way as well. TSY futures prices are...(read more)

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Jumbo Loan Delinquencies; BoA and Landsafe; Fannie Mae HomePath Incentive; Mortgage Pooling and Ratings Agencies;

Rob Chrisman — Tue, 09 Feb 2010 16:17:04 GMT

Posted To: Pipeline Press

No matter how much you push the envelope, it'll still be stationery. (I know, keep my day job.) Why wouldn't investors want to gobble up securities made up of jumbo loans? Well, how about delinquencies? In a story out of Business Week, "US prime jumbo mortgages at least 60 days late backing securities reached 9.6% in January from 9.2% in December, the 32nd straight increase for "serious delinquencies," according to Fitch Ratings." This is almost 3x the rate in 2008. Folks in the business know that non-agency securities don't have the guarantees/insurance of Freddie, Fannie or Ginnie Mae. So where do these beasts trade? According to the article, last March they hit a low of .63 (so a loss of almost 40 cents on the dollar versus the original principal balance)...(read more)

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MBS OPEN: Losing FTQ Progress in Slow News Environment

Adam Quinones — Tue, 09 Feb 2010 13:36:00 GMT

Posted To: MBS Commentary

Good Morning. The sky is once again gray and the ominous smell of another winter storm has settled in over the area. This spells trouble for a region that has already experienced at least 2ft of powder (more wet snow than powder actually). While many are still stuck in their homes, undoubtedly stir crazy by now, the thunder snow has served as an economic opportunity for others. Anyone with a plow, a snow blower, or simply an extra shovel could be out earning a few extra bucks. For many the opportunity cost is too high, for others this is an opportunity to make up lost ground on a years worth of scattered work and skimpy paychecks. The transfer of wealth that occurs in times of disaster and hardship is amazing. Think of it this way....at the moment, companies are paying between $250 and $300...(read more)

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The Day Ahead: Stock Markets Reversing Course?

Patrick McGee — Tue, 09 Feb 2010 13:25:54 GMT

Posted To: MND NewsWire

Stock markets may be reversing course after investors pushed down the Dow by 1.04% yesterday. Increased speculation that the European Union may bail out Greece is giving traders some optimism on what otherwise could be a slow day in news. One hour before the opening bell, the Dow is looking to open 66 points to 9,961 while futures on the S&P 500 Futures are up 9.10 points to 1,065. In another sign that risk may be back on the table, Crude oil is up 98 cents to $72.87 per barrel and Gold is trading $11.90 higher at $1,078.10. The US dollar, meanwhile, is trading lower. There’s not much in data that could sway markets one way or the other today. The only significant release is Wholesale Inventories, in addition to three auctions from the Treasury. Key Events Today: 10:00 ― After climbing...(read more)

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MBS CLOSE: Uneventful End To Uneventful Day

Matthew Graham — Mon, 08 Feb 2010 22:15:00 GMT

Posted To: MBS Commentary

Though MBS were not quite as thinly traded as treasuries (lowest volume since the first trading day of 2010), the picture wasn't much better. At least that which is at risk on low volume days--volatility due to the trading that actually happens comprising a larger portion of the total--was not present. Quite the opposite in fact, as the the same trend that began to emerge early this afternoon remained intact through the close. In MBS, the 101-07 to 101-10 range covered almost everything since 1030 AM. That's a quiet, boring day. I move a lower trendline down to 3.57 on the 10yr yield to show that we're going out today at an even lower yield level than Friday. So don't let the entire day of slightly worse readings fool you... The net effect for both markets was FLAT. And in the...(read more)

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Housing Needs Job Creation. What Sort of Jobs Though?

Jonathan Schonsheck — Mon, 08 Feb 2010 22:03:34 GMT

Posted To: Voice of Housing

Mr. O’Reilly (December 01, 2009) claims that the “new” root cause of the housing crisis is the (lack of) “jobs, jobs, jobs.” So the solution to the crisis must be (the creation of) “jobs, jobs, jobs.” I agree. But the next question is this: What sort of jobs? Consider a proposal for two, complementary jobs programs. The first is called the “Litter Scattering Brigades.” Workers are paid to strew trash along the nation’s highways. The second jobs program is called the “Litter Gathering Brigades.” Workers are paid to collect the trash strewn on the nation’s highways. The workers of the Scattering Brigade have jobs, and thus can afford a home. The workers of the Gathering Brigade have jobs, and thus can afford a home...(read more)

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Centralized Lock Desks Serve as a Gate Keeper. Source of Revenue

C.M. "Corky" Watts, CMB — Mon, 08 Feb 2010 20:54:00 GMT

Posted To: The Garrett Watts Report

This was the half time scene in Miami last night at Super Bowl XLIV... I am sure many watchers were thinking: Why The Who? Maybe some of us in our 60s and 70s need to be “put out to pasture” or start “whittling wood” on the front porch. However, as a boomer, I was inspired to see these guys still rocking and rolling. I enjoyed the music and hope they keep playing. Peter Townsend will go down as one of most brilliant musical writers of all time. That’s enough about The Who and dating myself. Lets’ talk about secondary market and locking loans. One of the areas we review during our FOCIS-plus Studies is whether a company has a centralized lock process. Centralizing the lock function means all lock requests and confirmations are managed by a “gate keeper”...(read more)

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MBS AFTERNOON: Narrow And Stable Heading Into The Close

Matthew Graham — Mon, 08 Feb 2010 20:32:00 GMT

Posted To: MBS Commentary

The market is duller than a Colts victory parade at the moment. We're dealing with a fairly standard issue "calm before the storm" that we often see on a data-limited Monday when the rest of the week contains the more significant events. The supportive trends we began to note in the last post have continued to foster a narrow range of prices with almost perfectly flat directional movement. In other words, the simple existence of a "narrow range" doesn't always mean prices aren't moving. We can see narrow ranges while still moving DIRECTIONALLY. For instance, even on a 16 tick rally, if the subsequent highs and lows are only a tick or two higher than their previous marks, the line on the chart would be fairly smooth yet still be very much higher at the end of...(read more)

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MBS LUNCH: Well Off Friday's Highs, But Holding Ground

Matthew Graham — Mon, 08 Feb 2010 19:06:00 GMT

Posted To: MBS Commentary

As AQ pointed out this morning, today's slightly downward trend in MBS price began in the final hours of Friday's trading. Both MBS and Treasuries put in their best marks of the day just before 2pm, and have moved steadily downward ever since. You may notice, however, that both markets appear to be losing that negative steam near current levels. For Treasuries, that looks to be around 3.60 and for MBS, around 101-08. At the moment, the Fannie 4.5 is a tick higher than that at 101-09, but is still 5 ticks lower from Friday's closing prices. All that being said, the more important trends to watch pertain to the generally supportive range for MBS that emerged even before Friday's boomy rally. AQ pointed this out as well, and it remains pertinent at the moment. You can see on Thursday...(read more)

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Short Term Direction of Mortgage Rates Dependent Upon Auctions and Stocks

Victor Burek — Mon, 08 Feb 2010 18:43:26 GMT

Posted To: Mortgage Rate Watch

Who Dat!!!! Congratulations to New Orleans on a well played and exciting Super Bowl victory. Mortgage rate moved a few basis points lower on Friday following the Employment Situation Report . While we have seen scattered day over day streaks of improvements, mortgages rates have failed to fall lower than 4.75% in 2010. To remind readers, as mortgage-backed securities prices move higher in price lenders are able to pass along better rates. After what seemed like a steady flow of important economic data and market moving headline news last week, the data schedule slows down in the days ahead, but headline news is always a possibility. In terms of scheduled events, no economic reports are being released today or tomorrow. On Tuesday we have the first of three mortgage rate influential Treasury...(read more)

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MBS MORNING: Testing the Staying Power of Friday's FTQ Rally

Adam Quinones — Mon, 08 Feb 2010 16:38:00 GMT

Posted To: MBS Commentary

DID I MENTION THUNDER SNOW ! By the look of the charts, it doesnt appear that we should be expecting any noticeable improvements in positive price momentum today. We are extending the downtrend that began midday Friday. The FN 4.0 is -0-08 at 98-08 yielding 4.169% and the FN 4.5 is -0-05 at 101-08 yielding 4.375%. The secondary market current coupon is 2bps higher on the day at 4.313%. The current coupon yield is 72.4 bps over the 10yr TSY note yield and 62.6 bps over the 10yr swap rate. MBS yields are moderately tighter vs. benchmark yields this morning. The 3.375 coupon bearing 10 year TSY note is -0-06 at 98-06 yielding 3.594% (+2.3 bps from 5pm marks on Friday). The 2s/10s curve is unchanged at the 280bp pivot. The dollar index is weaker vs. a basket of currencies....-0.37% at 80.145. The...(read more)

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MBA Takes Loss on Headquarters; CRA Loans; HAMP Servicer Updates; Prepay Speeds; Updates: GMAC, FAMC

Rob Chrisman — Mon, 08 Feb 2010 15:11:52 GMT

Posted To: Pipeline Press

I thought about taking today off from the commentary to celebrate, since yesterday I won all 4 quarters of my office's Super Bowl pool! And then I remembered that I was the only one in the pool, don't really have an office, and that the net effect of my $50 a square winnings was about the same as the US Government buying back their own securities. Oh well. Those dues that you pay to the Mortgage Bankers Association - where does the money go? Education, lobbying, etc., but some probably went into buying the MBAA its $90 million headquarters in downtown Washington which it sold last week for $41 million after 3 years. Ouch! CoStar Group, who is moving its headquarters from Maryland to DC, also received a $6 million property tax break - hats off to them. Not only did the MBAA's interest...(read more)

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MBS OPEN: Sideways Start. Searching for Guidance

Adam Quinones — Mon, 08 Feb 2010 13:56:00 GMT

Posted To: MBS Commentary

Good Morning. Congrats to the Saints. Here is a recap of my weekend.... We had a blizzard...32 inches of THUNDER SNOW . The driveway was defeated with snowblowers. This is only the first half of the driveway by the way.... The CAPS came from behind to beat the pens. Ovie had a trick plus the game winning assist in OT. Thats 14 in a row for the C-A-P-S CAPS CAPS CAPS. Troy saw his shadow. AH! Six more weeks of football. The Saints won....then my milkaholic ex-gf Lindsay came over. Phew. I am zonked. What a weekend. Stocks sold off in a panicky fashion last week as sovereign debt concerns grew over Greece, Portugal, and Spain's ballooning budget deficit and rising borrowing costs. If a coordinated global recovery is to remain on course, one has to assume some sort of financial intervention...(read more)

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The Week Ahead: Treasury Auctions, Retail Sales, The Fed's Exit, Consumer Sentiment

Patrick McGee — Mon, 08 Feb 2010 13:49:00 GMT

Posted To: MND NewsWire

The week ahead is a particularly slow one. The only major releases are the Trade Balance on Wednesday and Retail Sales report on Thursday. Plus, Friday will see February’s first measure of consumer confidence. With little fresh data to anticipate, the fear is that markets will continue on their downward path this week. Since January 19 the Dow has shed 5.6% while the S&P 500 has lost 6.9%. One hour before the opening bell, however, equity markets are looking stable. Dow futures are up 10 points to 10,012 and S&P 500 futures are up 3.08 points to 1,066. Meantime, WTI Crude oil is starting the week 15 cents higher at $71.34 per barrel and Spot Gold is up $1.90 to $1,068.20. The US dollar, by contrast, is lower against the majors after hitting the highest level since the summer of...(read more)

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MBS CLOSE: On The Doorstep Of A Brave "Old" World

Matthew Graham — Fri, 05 Feb 2010 22:16:00 GMT

Posted To: MBS Commentary

When something is on a doorstep--any doorstep--there are only two places it can be going: either back inside the metaphorical house, or back to the world outside. Bonds, as represented not by our namesake MBS, but by the 10yr Treasury note, find themselves in just such a dualistic state this evening. They too, are on a doorstep, their location being most perfectly defined neither by the "outside" or the "inside." when we are talking about outside versus inside, it's in reference to the range in which the 10 year treasury was trading between August 21 and December 14, 2009, "the brave old world." These four months represent a unique time in the economic history surrounding the financial crisis. it was a unique time in and of itself in that we were neither rising...(read more)

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Home Sellers Still See Conditions as Unfavorable. Perspective on Shadow Inventory

Jann Swanson — Fri, 05 Feb 2010 21:49:00 GMT

Posted To: MND NewsWire

A consumer survey conducted by Thomas Reuters and the University of Michigan indicates that it is sellers who are holding the housing market at low levels. In survey results released today, approximately 75 percent of homeowners who participated in the survey viewed current home buying conditions as favorable because of attractive home prices and low interest rates. However, nine out of ten of those home owners viewed the conditions for the sale of their own home as unfavorable, not because of lack of buyers, but because of price declines . The survey authors viewed these responses as predicting a long-term drag on the housing market for both economic and psychological reasons. There is, the report said, a significant barrier to purchasing a new home if the potential buyer's current home...(read more)

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MBS AFTERNOON: Massive Stock Rally Leaves Bonds Slightly Weaker

Matthew Graham — Fri, 05 Feb 2010 20:40:00 GMT

Posted To: MBS Commentary

After reaching as high as 101-20, MBS 4.5's are back down to 101-14. Its seems that layers of support are building at levels that would leave 4.5's at PAR after settlement next week. Far be it from me to suggest there's some sort of external force that continues to push 4.5's toward that 101-00 level, but it LOOKS that way on the chart at least. Meanwhile, stocks had recovered 100% of today's losses, though with the close still 20 minutes away, difficult to say where things will end. As for treasuries, the yield curve is reasonably unchanged on the day save for a little bulge in the belly (5's and 7's leading the pack by 2bps). All told, the stock lever did what we wanted it to do in the case of a stock sell-off today, and as stocks have rallied, little of what we...(read more)

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Housing Policy: The Message is as Important as the Mechanism

David Jeffers — Fri, 05 Feb 2010 19:37:00 GMT

Posted To: Voice of Housing

The nation’s capital is quickly shutting down, now that forecasters are calling for one to two feet of snow overnight. Local authorities warn residents to prepare to “shelter in place” for three days. Expect housing-minded Washingtonians to be hunkered down in their homes this weekend huddled around the fire reading the Obama Administration’s proposal for the future of Fannie Mae and Freddie Mac. Oh wait, that long-awaited plan didn’t materialize this week. ( READ MORE ) Already some folks are taking shots at the Administration for not coming through with new ideas as promised for how to deal with the two housing GSEs. But is that fair? Frankly, a reengineering of the secondary market is going to take some serious time . And brains. It’ll require some of...(read more)

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How Did The Employment Report Affect Mortgage Rates?

Victor Burek — Fri, 05 Feb 2010 19:21:34 GMT

Posted To: Mortgage Rate Watch

Mortgage rates improved a few basis points yesterday as panic set in on Wall Street. Headline news called attention to a developing crisis of confidence in the European Union where Greece, Spain, and Portugal all face ballooning budget deficits and rising government borrowing costs. Fear caused a global stock market sell off which led nervous investors to reallocate funds into what is considered to be the safest investment in the word, US Treasuries. This "flight to safety" into the bond market helped mortgage-backed securities prices move higher which allowed lenders to pass along slightly lower mortgage rates. While improvements were noted,many originators were expecting more aggressive loan pricing from lenders, but as has been the case over the past few weeks, 4.75% continues...(read more)

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MBS LUNCH: Bonds Soaring As 10yr Flirts With 2009 Ranges

Matthew Graham — Fri, 05 Feb 2010 18:54:00 GMT

Posted To: MBS Commentary

Even by the time of our last commentary, it was no mystery that we got our bond-friendly eventuality today after the jobs report. That's nice, of course, but somewhere between 3.55 and 3.57, chart watchers will notice that yields held under these levels for the majority of the 2nd half of 2009. It's probable that the short term chart below is picking some of that up in where it decided to offer resistance today. The question is: will Monday confirm this test? And of course we wouldn't talk about such important long term levels without refreshing our collective memory on their validity: In deciding how likely any sort of continuation of this bond rally might be, the stock market continues to suggest itself as a good indicator of bond movements. Sure, this can change from day to day...(read more)

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MBS MORNING: Prepayment Speeds Slow in January. EU Deficits Now in Focus

Adam Quinones — Fri, 05 Feb 2010 16:45:00 GMT

Posted To: MBS Commentary

The dust is starting to settle after the initial knee jerk reaction to the Employment Situation Report. Stocks are still dealing with yesterday's sovereign debt/jobs data/panic induced weakness. The S&P is currently -0.14% at 1060. The dollar is holding onto yesterday's FLIGHT TO QUALITY rally, currently +0.46% at 80.283. (Global debt fears sent funds into the safest currency yesterday...yeh THATS RIGHT..KING DOLLAR!!! Last time I quote Larry Kudlow, I promise) The 10 year Treasury note is trading above yesterday's levels. The 10yr futures contract has seen HUUUUUUUGE trading volume this morning. A nice level of support has been built in at 118-12. 118-12 is right about 3.60% in the cash market for 10 year Treasury notes. The 3.375% coupon bearing 10 year note is currently ...(read more)

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