Mortgage rates ticked lower yesterday after mortgage backed securities rallied on Tuesday. However, yesterday weakness in fixed income began to snowball and prices of mortgage-backed securities began to deteriorate. Unfortunately that weakness has carried over to today and mortgage rates have given back previous gains. If you are looking for a clear explanation of why mortgage rates have bounced around a volatile range... READ THIS
Activity on the economic calendar picked up today. First to hit the wires this morning was Weekly Jobless Claims. This report totals the number of Americans that filed for first time unemployment benefits in the prior week. Also included in this report is the continuing claims which totals the number of Americans that continue to file due to lack of finding a new job. Last week this data set reported surprisingly "better than expected" at 522,000 for first time claims while continuing claims fell 642,000 to a 6.273million. This better than expected improvement in claims came with a warning from the U.S. Department of Labor where they stated that the better the expected initial and continuing claims were affected by prior layoffs in the manufacturing sector, layoffs that are largely seasonal and that happened earlier than usual this year.
Today's report indicated that first time claims for unemployment insurance increased by 30,000 to 554,000 from a revised reading of 524,000 last week. This print is basically in line with economist's expectations. The continuing claims posted a small decline to 6.225 million following last week's revised reading of 6.313million which is slightly better than expected. This report came with a similar warning as last week's report leading most to believe that initial claims should approach the 600,000 level in the weeks ahead. The decline in continuing claims is also being affected by workers who have exhausted their benefits.
The last data set for the day comes from the National Association of Realtors with the existing home sales report. This report totals the number of existing homes that sold during the prior month. May's report indicated a 2.4% increase for the 3rd month in a row with increasing sales. The better part of last month's report was that the supply of homes available for sale fell to a 9.6 month supply from 10.1 in April. The report has shown continued improvement with a annualized pace of 4.89 million following last month's pace of 4.77million. This is in line with economist's expectations and no reaction from the markets. The NAR made special notes in the release, pointing out that HVCC was a major concern. READ FULL STORY
I have received some emails from readers regarding loan modifications. A loan modification is when a lender changes the term of your existing loan by lowering the interest rate, lowering the balance owed or both. Many consumers have taken advantage of this option. Most of the time, the consumer would have to be delinquent on payments but many consumers who were not behind on payments felt left out. So, the administration passed the Home Affordable Modification Plan which allowed homeowners that were not behind on payments to modify their current loan. Sounds good, right? One bit of information left out was what impact this would have on the consumers credit. Here is an article from Bloomberg that goes into this topic. If you have done a modification or are looking into one currently, you might want to consider the impact on your FICO score.
Because prices of mortgage-backed securities have continued to fall this morning, several lenders have already repriced for the worse. This puts the par 30 year conventional rate mortgage in the 5.000% to 5.250% range for the most qualified consumers. In order to qualify you must have a FICO credit score of 740 or higher, a loan to value of 80% or less and pay all closing costs including 1 point loan origination/discount/broker fee.
If you are considering locking vs. floating your interest rate. READ THIS BLOG POST for logical guidance.
Remember the entire marketplace is trading in a very volatile manner as participants are awaiting further direction. It is quite possible that sentiment could go in either direction, if the bias happens to not favor the fixed income sector, mortgage rates would move higher. Things can change quickly and past history has shown that each time rates have fallen below 5%, they did not stay there very long.
Matt and AQ will keep you posted on intraday mortgage rate activity on the MBS Commentary blog.