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Do you expect the home buyer tax credit extension to contribute to a noticeable pick up in loan production?

Created By: Adam Quinones
  • Yes, I anticipate an increase in activity (26.9%)
  • Only a modest upturn in production (43.8%)
  • Nope. 2009 demand stole from 2010 demand (29.2%)

Federal Reserve MBS Purchase Program





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MBS ALERT: Falling From the Highs to the Lows

by Adam Quinones
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Looks like the short base has not be taken out in 10s yet...

The 10yr note yield just rose to 3.54%. Hopefully we get some short covering there and a reversal. Unfortunately this is having negative effects on "rate sheet influential" MBS coupons.

The FN 4.0 is now -0-01 at 98-12 and the FN 4.5 is trading -0-03 at 100-31 after hitting an intraday high of 101-16.

Look how steep the yield curve is now...this is getting rediculous. Buy the curve already!

IF YOUR LENDER ALREADY PUBLISHED PRICING, A REPRICE FOR THE WORSE MAY OCCUR

 

10:15 UPDATE: The FN 4.0 is now +0-03 at 98-16 yielding 4.156%. The FN 4.5 has recovered from the lows of the day and is now trading +0-03 at 101-05 yielding 4.356%. The secondary market current coupon is 4.276%. The current coupon is +75/10yr TSY and +58/10yr swap. Tighter on the day....with the yield curve continuing to move steeper, one has to be speculative of spread widening. (Supply/demand dynamics overriding widener at the moment).

 

REPRICE FOR THE WORSE ALERT OVER...FOR NOW.

Data provided by Thomson Reuters
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David Gaffin  |  Contact or Connect with this Member
on
Talk about finding something floating in your soup. I was looking forward to a tasty day of locking. Will have to wait a bit. Adam do you think this turnaround this AM is looking inside the numbers at the downward revision of losses in Sept and the fact that we are below 200K? That is a psychological number. They seem to have shrugged off 10.2 pretty quickly. Is this in anticipation of we have just hit the worst we will get and we will sustain 10.2-10.4 for a few months and then improve? I still don't see jobs or housing improving for 12-18 monts. Option ARM resets/defaults are going to be hitting hard in 2010-2011.
Bobby Downey  |  Contact or Connect with this Member
on
Wow talk about a reversal.....somebody is making some money on these swings and it ain't me..... I just have townder how bad off would we have been if the numbers came in lower....from the looks of this it would have been a meltdown.... Seems like 3.5 is where the number has to stay regardless of the market.....
Edgar  |  Contact or Connect with this Member
on
Who else is shaking their head going, what are they smoking? Clearly the theory of unemployment being a lagging indicator is in full affect. It doesn't matter that unemployment was a leading indicator going into the downturn, it doesn't matter that unemployment continues to rise in economy that is 70% consumer based, it doesn't matter that more than 17% of American's dont have a job or a job that can cover their bills....what matters is how good your companies accounting staff is. Fannie needs another 15 bill, delinquency rates are significantly worse today then this time last year, commercial real estate is a disaster but people think since we've seen a small earnings bounce, a bounce in GDP everything is good. And David makes a good point-nasty defaults will continue into 2010 but with some serious accounting banks will be fine. "What'a country" Where is Yakov?
Glen W. Spencer  |  Contact or Connect with this Member
on
Banks holding onto Foreclosure inventory because the Asset is NOW treated like a liquid asset, and the asset is valued at 2005-2007 levels. Why put the house on the market when you can show (ON PAPAER) that it is worth 30%-50% more than actual value. The banks are not holding onto inventory to protect from flooding the market. They are holding the inventory becase the assets is more valuable in the portfolio and it protects against the banks leverage. ALSO;Banks making phone calls to every boorrower to get verbal agreement to make payment each month-if the bank talks to you, their accounting department counts the monthly payment on the books before they receive the money. Just like Edgar said: a good accountant can hide a lot of bad news..... Haven't we been down this road before (and not that long ago). Wall Street has completely removed itself from Main Street. I don't think Main street matters anymore.
Bobby Downey  |  Contact or Connect with this Member
on
AQ see what I mean by pessimistic? Hahaha.... It will turn out to be a good day and if it looks to be getting bad I am just going to go play golf and worry about it on Monday!!!!
Glen W. Spencer  |  Contact or Connect with this Member
on
Bobby, remember a Fifth of Whiskey holds 18 shots. Try to keep it below 5 times that.
Edgar  |  Contact or Connect with this Member
on
Bobby I like to think of it as being: Openly realistic to the variations of specific gyrations within a set model that dictates various complex statements which compound the long term objective of our investors. Overall we are as strong as ever. I got that from my accounting staff.
Julius Barrutia  |  Contact or Connect with this Member
on
AQ- Obama is supposed sign off on the tax credit extension sometime today. Once official, will it give us the boost we need today or have most investors already positioned themselves expecting the bill to pass?
Bobby Downey  |  Contact or Connect with this Member
on
Julius I would not count on more government spending giving us any kind of boost.......more debt means more supply which means more auctions.... Even the cookie monster gets full eventually....
Frank Ceizyk  |  Contact or Connect with this Member
on
Talking heads on financial shows have been warning of 10% + unemployment for awhile so perhaps this isn't as earth shattering as we would have hoped. What I'm wondering is if the wage number being higher than expectations portends a hint of wage inflation? Surprised to see so much exasperation about lack of facemelter given trader's world we've lived in 1/2 the year now...fundamentals still don't appear to have the muscle to break through the technical trading that continues rule our world...I just wonder what the catalyst will be for a break out--technically or macroeconomically--or should we just be thankful that there is some degree of predictability with the range trading we know is at hand??
Edgar  |  Contact or Connect with this Member
on
I just heard from my legal staff and we would like to amend the following stement: Overall we are as strong as ever. We are amending that to: Overall we believe the importance of being strong is a vital part of our strong long term strength as we build upon our strong foundation to seek strong new ventures with in the contaxt of a strong business model developed by our strong management team. If there is one word I would like to make sure get's heard is that we are focused on being STRONG. Please buy our strong stock so we our strong management team can their shares.
Stephan Loesevitz  |  Contact or Connect with this Member
on
Rate sheets show rates down now after unemployment numbers.
Adam Quinones  |  Contact or Connect with this Member
on
I dont expect the tax credit extension to have a major impact on housing demand. While we might see home buying front end loaded in the first half of the year, underlying demand fundamentals remain weak as there are still MUCH bigger issues the housing market must overcome. Overall its a net positive but not enough to solve our problems. In terms of the impact on MBS valuations...some dealers may increase prepayment speeds...but not enough to warrant a huge move down in coupon. There is no reason to stop the UP IN COUPON trade when the Fed can sell their loans from their seasoned portfolio to help protect MBS investments from prepayment risk.
Bobby Downey  |  Contact or Connect with this Member
on
So any guesses on where we end up today? I am going to say that the ten year ends up at 3.45... Any other STRONG educated estimates?
Julius Barrutia  |  Contact or Connect with this Member
on
Thanks Bobby and Adam! I wasn't expecting the extension to be an overall problem solver but was rather looking for any factor that may help MBS today......been floating some loans that need to be locked asap.
Frank Ceizyk  |  Contact or Connect with this Member
on
Adam--you think the NAR has any real concept of the challenges borrowers will face with continued tightening of guidelines as they trumpet the success of the their FTHB extension lobbying efforts? How many 'buy up' homebuyers will really be able to take advantage of the $6500 if their current home is valued at original purchase price or underwater now. We've seen on CNBC videos features on MND that another 10-15% decline is possible into 2010 for existing homebuyers? Isn't the fantasy of the tax extension saving the homebuying world going to collide (as George Constanza would say) with the reality of tighter guidelines, dropping values, higher employment, and rising rates if the up in coupon trade gets some legs?
Adam Quinones  |  Contact or Connect with this Member
on
1. The Up in Coupon trade has not lost any of its luster. 2. I do not expect any noticeable increases in new loan production supply that might warrant an exit from the UIC either. 3. Less supply in the MBS market makes it easier for whoever assumes the role of the MBS liquidity provider (Fed/FN/FRE/GN) to keep spreads from gapping out too much. 4. The NAR's Lawrence Yun has been appropriately skeptical of momentum in housing lately, plus he commented on HVCC....so I believe he has an understanding of the roadblocks faced in the mortgage industry 5. I have not seen many projections for the effect the tax credit extension will have on home sales...but I would say the tax credit's Nov.30 expiration likely stole some housing demand from 2010. 6. The extent to which the tax credit adds new demand in 2010 is a function of home prices (higher or lower) and the labor market. Does that help? Glad you noticed the videos I publish.... I have posted the housing bulls too! :-D
Raymond J Ruddy III  |  Contact or Connect with this Member
on
From Zerohedge. After digging around and sifting through the things both said and not said, I have come to the conclusion that what we are seeing are the likely effects of a rescue operation. By this I mean a large injection of stabilizing cash to one or more parties, possibly related to the recent large bankruptcies. Two of my friends who have been actively trading for more than 20 years between them threw in the towel this week as their patterns and methods are no longer working. Their conclusion is the same as mine; this market is not trading like it used to. It is trading chaotically, counter intuitively, and as if there's some sort of distorting influence involved. First we might just wonder if this isn't the impact of a rogue firm with entirely too much power moving the market for its own benefit. When we examine the results of Goldman's latest quarterly trading results, obviously we have a strong suspect.
David Whitley Jr.  |  Contact or Connect with this Member
on
Raymond, I have been thinking the same thing. Seems like everything they touch turns to...well...Gold. I am not buying that they are that much smarter than everyone else.
Tom Bangert  |  Contact or Connect with this Member
on
Raymond, you and your trading buddies have hit the nail on the head with the Goldman results. The market is trader rich. None of this makes any sense and I think most of these reports are half-truths also. Money just seems to move from bonds to stocks and back again with the active 'big boys' making the commissions.
Frank Ceizyk  |  Contact or Connect with this Member
on
Adam-thanks-answers provide more clarity. Videos great way to track what is moving the herd--but when I want the outside the box or the inside the inner box analysis you and Matt never disappoint. Thanks for all you do--4 fundings today that were locked at the price highs...lot to give thanks for the rest of the month....
Adam Quinones  |  Contact or Connect with this Member
on
:-D thanks Frank...that's great ending to a busy week for me
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