Yesterday mortgage backed securities gave back some of the gains we enjoyed on Wednesday. Most lenders repriced for the worse yesterday, with some taking away almost a full point in discount. Lenders rate sheets yesterday were all over the place, with the most aggressive lenders coming out at 4.5% par and others as high as 4.875% par. After the reprices, par rates increased by about .125%. So far this morning it appears that the selling pressure on mbs will continue. Hopefully all floaters took advantage of some nice looking rate sheets yesterday morning and locked especially people closing within the next couple weeks.
Today we get no economic data and about the only relevant event taking place is a speech by Fed Chairman Ben Bernanke on the financial crisis at the Independent Community Bankers of America’s National Convention. Investors will be listening to every thing he has to say as his words have the potential of moving all the markets.
The sell off we had yesterday in mbs did not support the amount of reprices for the worse we received from lenders. What appears to be happening is the same thing that happened in late December and January when rates dropped to current levels. Lenders came out with aggressive rate sheets, consumers and loan officers flooded lenders with locks. Keep in mind, 2008 was a tough year on banks so they cut back on staff. With the flood of lock commitments, they cannot handle the volume, so to slow down submissions they increase rates. Many consumers are under the impression that rates are going to 4% or lower, but I do not see that happening anytime soon. How could lenders handle the volume if rates went to that level? As I said yesterday, don’t sit on the sidelines for lower rates. Mortgage rates now are still at historic lows, take advantage of it. Contact a mortgage professional, have them do an analysis to see if refinancing makes sense.
As of time I am writing this update, no lenders have issued rate sheets. I suspect that par 30 year fixed rate mortgage will be at 4.625% to 4.875% depending on the lender; however, on Friday’s lenders usually are quite conservative with the rates they offer. This is due to the uncertainty of what can happen over the weekend, so I wouldn’t be surprised to see slightly higher rates offered.
I will get back to you later today with an update.