Let's play good news, bad news. Bad news first!
THE BAD NEWS: Rate watchers were sweating bullets up until about 2pm today because benchmark Treasury prices hadn't hit a ceiling and MBS prices hadn't found a floor. The entire bond market, mortgage rates included, repriced for the worse. Our float boats were not only taking on water, they were downright sinking. Yeh. Prayers were said.
THE GOOD NEWS: At 2pm the Federal Reserve Bank of New York released the first consolidated QEII asset purchasing schedule. This event sparked "bargain buying" in the bond market. A rally ensued. Some lenders even repriced for the better. This is the event we needed to restore the integrity of our float boatl! I will continue to update you on the status of our trip regardless of whether it's positive or negative. Once we reach our destination, which is only a matter of time, I will clearly communicate our arrival through loud alerts.
You better be ready.
OUTLOOK: I expect momentum to continue building in favor of mortgage rates moving back below 4.00%. If you are a fence sitter, get with an originator who straight up gets the J.O.B done. Make sure they have access to multiple lenders with aggressive loan pricing (see pricing quotes below). If you are refinancing, 30 days is an acceptable closing timeline, assuming you have been qualified. If you are purchasing, assuming the title is free and clear, your turn time should be faster than 30 days, also assuming you have been qualified. Make sure your originator is working with experienced appraisers who pay attention to detail and write thorough reports that hold up to an underwriter's magnifying glass. This is very important! Do not be shy. Ask questions if you need answers. You have to let the loan
officer earn their commission. That's how you "ride the float boat" in
this environment...make sure you have a damn good skipper. Plain and
TIMING: The bond market is closed tomorrow. That means we'll have to wait
until Friday to find out if the recovery rally is picking up steam or not. I think it will. This is playing the range and we've gone to an extreme. Once the rally does pick up momentum we'll be able to better gauge the loan pricing strategies of lenders.
This might seem unbelievable and loan officers are probably going to get mad at me for saying it but...even after two days of strong selling in the bond market, loan pricing hasn't gotten totally smashed. Again the mortgage market is very segmented but I'm still seeing 4.25% at no points. There are still lenders quoting 4.00% + points. This still applies....
The best conventional/FHA/VA 30 year fixed mortgage rates are STILL in the
4.000% to 4.250% range for well-qualified borrowers. 4.000% is STILL on the
board, but carries a more expensive price tag. 4.125% plus origination
points is available and it's STILL worth the extra closing costs if you plan on holding your mortgage for at
least the next 5 years. 4.25% is STILL widely quoted at no points. The best conventional/FHA/VA 15 year
fixed mortgage rates are STILL in a range between 3.375% and 3.625%. I STILL won't endorse
an ARM. And the more aggressive rate quotes are STILL generally only seen in the
broker/direct banker market.
Important Mortgage Rate Disclaimer: Loan originators will
only be able to offer these rates on agency conforming loan amounts to
borrowers who are have a middle FICO score over 740 and enough equity in
their home to qualify for a refinance or a large enough savings to
cover their down payment and closing costs. If the terms of your loan
trigger any risk-based loan level pricing adjustments (LLPAs), your rate
quote will be higher. If you do not fall into the "perfect borrower"
category, make sure you ask your loan originator for an explanation of
the characteristics that make your loan more expensive. "No point" loan doesn't mean "no cost" loan. The best
30 year fixed conventional/FHA/VA mortgage rates still include closing
costs such as: third party fees + title charges + transfer and
recordation + escrows (things like upfront MIP (if required), property
taxes, homeowners insurance, accrued interest)".
More details on the asset purchase program....
PLAIN AND SIMPLE: The Fed will conduct 18 open market asset purchases over the next 19 trading sessions. They will spend about $105 billion which works out to around $5.8 billion per operation. 9 of those operations will have a direct influence over "rate sheet influential" MBS coupons (red), with at least $45 billion allocated toward the belly of the curve. If you add in purchases that include the 5yr sector (green), which is a benchmark for many MBS hedgers, this total rises to 12 of the 18 operations and at least $63 billion with a max potential for $84 billion focused on our rate sheet influential benchmarks. This is great news for mortgage rates.
QEII is here. This is the event that will help mortgage rates move back below 4.00% again. Patience is counting down without blasting off.