Looking at Steep Losses In Loan Pricing. What's Extension Risk Again?
It sounds almost surreal, but the new best execution rate is 5.25%. We just blew
through 4.75% and 5.00% in less than a week. Volatility in loan pricing is absolutely huge. Extension risk for MBS investors was and still is absolutely huge. WHAT IS EXTENSION RISK???
But like I said...
ALERT: 5.25% IS NOW THE NEW BEST EXECUTION 30 YEAR FIXED MORTGAGE RATE
Note the brutaility in the WEEK OVER WEEK pricing delta column. 245bps erased on average. Anyone hoping for 4.75% is gonna have to pay at least 2 points to get it. And the buydown from 4.875 to 4.75 is getting more expensive everyday. (Signalling a delayed shift into 4.5's as production coupons).
EXPLANATION OF LOAN PRICING COMPARISON
Buydowns are the cost of floating down to the next lowest note rate. Buydown
costs are matched to the note rate in the same row. For example, the first
number in the buydown column is 0.514%, this is the cost to float down from
5.00% to 4.875%, as a percentage of the loan amount. This is important because
it helps an originator determine the best execution rate/points combination for
a borrower who has a good idea of how long they intend to live in their home
(breakeven on points paid vs. monthly payment savings). In the Buydown Delta
column, red is cheaper. Black is more expensive.
The pricing change column is a direct rebate comparison of pricing today vs.
pricing yesterday. Red is worse. Black is better.
BE v M column shows you how margin is changing. RED means more margin. Black
means less bps are baked into pricing.
To paint a clear picture of exactly why this is occurring with such violence, one need look only as far as a long term chart of the FANNIE 4.0 to see how the last few weeks adds up relative to the big picture...
But for today anyway, longer duration "stuff" like 4.0's vs 4.5's and 10's vs. 2's, seem to have found some footing and despite low volume, the charts show a bit of a relief rally, if such a thing can even be said to exist having only been in existence for 2 hours! Heck... you might even be getting reprices for the better!
FYI: GNMAs roll today. We're showing you the back month quote already......