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Jumbo program; more on short sales; news from Chase, SunTrust, DR Horton, GMAC; rates quiet...

The FN 4.0 is currently -0-02 at 99-08 and the FN 4.5 is trading +0-01 at 101-23. The range narrows...there isnt much room for further price appreciation in "rate sheet influential" MBS coupons. Mortgage rates will either go sideways or move higher. Lock....

In line with weak global markets, US equities are looking to open lower this morning. Two hours before the bell sounds S&P 500 futures are down 8.2 points at 1,086 and the Dow is off 68 points to 10,259. Following the trend, commodity prices are also weaker. WTI Crude oil is trading 52 cents lower at $77.53 per barrel and Spot Gold is down $4.95 to $1139.65. ...

Earlier in the day we discussed movement in MBS prices that brought 4.5's to their lowest levels of the session, but we mentioned some support for MBS as well as some support for tsy yields that had been weakening at the same time. By closing time, those ranges identified much earlier in the day held up, carrying us into tomorrow, a data-free options expirations Friday with little to no suggestion for directionality. Turns out that 101-21 was a pretty solid area for 4.5 support. And in 10's, despite a couple exploratory movements toward 3.36, 10's finished in better territory vs. their support. Volume was evenly distributed and nothing to write home about as we were mostly on par with yesterday's levels. To reiterate the sense of uncertainty going into tomorrow, today did nothing to alter the course of the longer term trends. Sorry about leaving the uptrend out of MBS... It's not that it doesn't exist, just that it didn't come into play today. With the collision of tsy yields to both the horizontal resistance at 3.31 and the trend of gradually higher lows, we should get a read on which of the two matter more over the next few days. If yields move higher tomorrow, MOVEMENT of yield gets the nod, but relatively unchanged and up to 3bps lower and 3.31 would ssteal some significance from other technical stops. In fact, we're pretty inclined to lean toward 3.31 being a touch layer of resistance in lieu of some game changing data. Reason? It coincides...

The Fed's weekly net MBS purchases totaled $16.00 billion, $2.5 more than the previous, holiday shortened week. The majority of Fed purchases were in 4.5 and 5.0 MBS coupons this week. These are called "production" or "current " coupons and represent loan supply being sold in the secondary mortgage market by loan originators. The Fed's purchases of production MBS coupons picked up this week because MBS prices tested record high levels which pushed mortgage rates to six month lows. Lower mortgage rates brought out more loan supply...and the Fed was there to provide liquidity for lenders. ...

The Mortgage Bankers Association reported that delinquency rates during the third quarter hit all time highs. Prime mortgages and FHA mortgages appear to be driving the increases while subprime loans problems may be leveling off....

Heading into the close, the FN 4.0 is trading +0-02 at 99-09 yielding 4.078% and the FN 4.5 is +0-02 at 101-24 yielding 4.286%. The secondary market current coupon (CC) is 4.13%. The CC is +78/10yr TSY and +67/10yr swap. As you can see in the chart below, after prices fell early in the week, "rate sheet influential" MBS prices haven't made much progress in either direction with most of the price action occurring between 101-26 and 101-20. This should continue into today's close. Again...lock!

This is one of those obligatory alerts where price action in context doesn't justify an alert, but MBS prices have touched their lows of the day. In addition tsy's have broken out of their trend of improvement on the day with the 10yr backing up 3.35. Will there be reprices? Tough to say, considering the nice, flat resistance going back to yesterday at 11am. That coincides with some internal support at just over 3.35 in tsys. So personally, I wouldn't be rushing to lock anything that wasn't locked already. However, given the lock bias of the hedge ratio, that might constitute a different swath of your pipeline... If you can risk it, roll with it and wait to see if 3.35 tsy's break or 101-21 MBS breaks. Some lenders will reprice for the worse, but many will not (not unless we move lower that is... and we'll let you know if that happens).

On Obama administration summit on strengthening credit flows to small businesses, Geithner said “We need banks to be working with us, not against recovery." At the very same time on Wednesday, an amendment from Reps. Brad Miller and Dennis Moore would allow the FDIC to impose a 20 percent haircut on all secured creditors, including the 12 Home Loan banks, when resolving systemically important institutions that fail....

Almost all short and long term mortgage interest rates fell during the most recent week with the 15-year FRM reported by Freddie Mac hitting an all-time low. Only Fannie's short term ARM increased during the week. ...

Reports from fellow mortgage professionals indicate that mortgage rates are unchanged from yesterday. The par 30 year conventional rate mortgage remains in the 4.625% to 4.875% range for well qualified consumers. To secure the 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 rate in the 4.125% to 4.375% range with similar costs. Mortgage rates are testing the lower boundaries of their range. Given the currently expensive prices of MBS, we don't see much room left for mortgage rates to rally. Still in lock mode. ...

Thursday's tend to be data-rich and today is no exception. After the "with us as always" jobless claims at 830, a concentrated dose of data and headlines hit at 10am. In the ongoing court case of Reality v. Stable Economic Recovery , Philly Fed survey served as chief counsel for the defense, topping expectations of 12.0 with a 16.7 reading. That was up from 11.5 reading in the prior month but did little to help already plummeting stocks. Philly Fed results did, however, give pause the the rally in bonds, but after a minor retracement, the LEI reading combined with the soothing words from Timayyy to bring bonds back to their strongest points of the past 2 days. Leading indicators printed down a tenth from from the .4, and the 0.3 actual was significantly lower than the previous 1.0. There was nothing organically beneficial in Geithner's testimony, but the lack of outright negatives took an unknown out of the equation. Additionally, Geithner's calls on banks to step up lending, coincided with legislation working it's way around the hill that altogether casts a bit of a shadow on supply. And of course, low supply of lending is usually favorable for rates, all things being equal. The net effect of on the bond-o-sphere has been a reasonably unchanged yield curve moving lower in yield. Other than laggard 10's and bullish 3's, the rest of the curve is 4.0-4.7 bps lower. Paradoxically, as 10's are underperforming the rest of the curve, previous weakness...

Short sale basics;MIDANET; Global Mortgage Standards; Lots of Investor Updates;...

WHILE THE RANGE IS STILL MODERATING TSY PRICE ACTION, RATE SHEET INFLUENTIAL PRICES ARE HITTING A CEILING (negative convexity). This implies rate sheet sheets are range bound at best. Still in lock mode.... ...

New 13-month peaks early in the week and now . . .hesitation. Ninety minutes before the opening bell, S&P 500 futures are off 10 points to 1,098 and Dow futures are 66 points lower at 10,338. With equities taking a dip, other assets considered risky are following suit. WTI Crude is trading 70 cents lower at $78.88 per barrel and Spot Gold is $10.87 lower at $1134.63. As President Obama warns of accumulating too much debt, he is also tapping into unused portions of the TARP funds, sending mixed messages to the market. Meanwhile, investors are concerned about the US housing market, trade relations with China, and the broad decline of the US dollar....