MBSonMND: MBS RECAP
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FNMA 3.5
102-30 : +1-09
FNMA 4.0
105-07 : +0-24
FNMA 4.5
106-19 : +0-11
FNMA 5.0
108-01 : +0-04
GNMA 3.5
104-20 : +1-02
GNMA 4.0
107-10 : +0-20
GNMA 4.5
109-03 : +0-06
GNMA 5.0
110-16 : +0-03
FHLMC 3.5
102-26 : +1-10
FHLMC 4.0
105-03 : +0-26
FHLMC 4.5
106-11 : +0-12
FHLMC 5.0
107-24 : +0-05
Pricing as of 3:59 PM EST
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
2:58PM  :  ALERT: Reprices for the Better Likely as FOMC Statement Rocks Markets
Bond markets got the "active" twist for which they were hoping when the Fed said today that it would sell $400 bln worth of 3month to 3yr Securities and reinvest them in longer maturities as follows:

- 32 % in 6-8 yrs
- 32% in 8-10 yrs
- 4% in 10-20 yrs
- 29 % in 20 to 30 yrs (surprisingly robust vs expectations)
- 3 % in TIPS

It's no coincidence that 10yr yields are in line with their lowest, most hopeful levels of the day as the FOMC announcement gave bond markets every bit of what they'd hoped for. This also confirms that the ramping up of intensity of Fed verbiage and action seen in the last FOMC statement was not a one-off deal.

Specifically, the recent widening of MBS spreads may have been effectively reversed today as our namesake made singular mention in the statement when the Fed committed to reinvesting proceeds from MBS payments and payoffs BACK INTO MBS as opposed to elsewhere in the fixed-income world. That's a huge boon for MBS vs Treasuries.

Bottom line, we think this confirms that it's safe to get into 3.5's as the dominant MBS coupon and the statement is the first indication that "it's only a matter of time. Fannie 3.5's are up 1 pt and 7 ticks on the day (39 ticks) to 102-29. The previous "concrete ceiling" was 101-25 and is now demolished.

Reprices for the better should be on the way this afternoon, but keep in mind that lenders can't just immediately adjust pricing to reflect changes in MBS. It will be a slower and more gradual process than some of us might expect, but average rates in the high 3's are on the way (probably!). And that should begin with some moderate reprices for the better this afternoon.
2:42PM  :  Fed: FOMC Statement Text
...To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013...

READ THE FULL TEXT HERE
1:34PM  :  ALERT: Volatility Swings Both Ways. Potential Reprice For the Worse Now
Hate to say it, but it's possible to see a panic reprice for the worse as MBS trade in an expanding range of volatile, low volume trading. If a lender is having second thoughts about recently releasing an aggressive rate sheet or about an aggressive reprice for the better near the highs, it's not out of the question that we might see a reprice for the worse.
12:40PM  :  Important Note on VOLUME (or Lack Thereof)
Rarely will you see half point moves in the price of 10yr Treasuries (currently up half a point, dropping the yield to 1.88) with LESS volume than has been seen this morning. less than 600k 10yr futures contracts have come across so far today, versus 1.5 mln last Thursday.

The low volume exaggerates the movement, likely drawing it's ongoing directional preference from the BofA downgrade after already rallying in preparation/expectation of a specific commitment by the Fed to purchase longer-dated Treasuries.

MBS are merely trying (and failing) to keep pace with 3.5's only 7 ticks better on the day at 101-28 and 4.0's up 10 ticks at 104-25. But both of these levels are slightly ABOVE the "concrete ceiling" that has capped every single trading session near historic highs for MBS. And the day is still young enough that MBS Prices might be back below those levels by closing time.

The bottom line is that there's likely a huge explosion of volume waiting in the wings after the FOMC announcement and it will be that volume and trading that determines whether or not the current rally has the right to stick around.
12:07PM  :  ALERT: Longer-Dated Treasuries, MBS Rally Ahead of FOMC
On most other days, current gains in MBS would be enough to see improvements in loan pricing across the board. We MIGHT see reprices for the better even before FOMC, but they'd be fairly minimal, both in terms of number of lenders participating and in the actual amount of improvement. Bottom line is that if you're planning on locking before FOMC, you might want to wait until closer to the announcement to see if your lender coughs up an eighth or two.
Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
John McClellan  :  "anyone seen any reprices?"
Jason Evans  :  "getting re-prices ranging from 45 to 65 bps better compared to 12:00ish reprices"
Dustin McAlister  :  "bbt too"
Dustin McAlister  :  "wells finally repricing"
Victor Burek  :  "flagstar has improved 1 full point from this morning at rates below 4.125"
Jeff Anderson  :  "My bank just gave us .5 better. Nice."
Ross Miller  :  "Sierra Pacific .3 better"
Matthew Graham  :  "WOW!!!!!!! RTRS - - NY FED SAYS ROUGHLY THREE QUARTERS OF SOMA HOLDINGS OF 3 MNTHS TO 3 YRS TREASURIES WILL BE SOLD "
Matthew Graham  :  "RTRS - Today 11:28 - NY FED WILL RELEASE SCHEDULE OF OCT OPERATIONS ON FRIDAY, SEPT 30 "
Matthew Graham  :  "AGAIN WITH DISSENTERS! : RTRS - - THREE FED OFFICIALS DISSENTED AGAINST ACTION: FISHER, KOCHERLAKOTA, PLOSSER, WHO DID NOT SUPPORT ADDITIONAL POLICY ACCOMMODATION "
Matthew Graham  :  "RTRS - Today 11:23 - FED SAYS TO REINVEST PRINCIPAL OF MORTGAGE DEBT IN AGENCY MBS !!!!!!!!!"
Matthew Graham  :  "RTRSToday 11:23 - FED SAYS INTENDS TO BUY BY END OF JUNE 2012 $400 BLN OF TREASURIES IN 6- TO 30-YEAR RANGE, SELL EQUAL AMOUNT WITH MATURITIES OF 3 YEARS OR LESS "
Matthew Graham  :  "RTRS- FED SAYS TO EXTEND AVERAGE MATURITY OF HOLDINGS OF ITS SECURITIES "
Ray J  :  "PF .25 better for the day"
Grant R. Menard  :  "Plaza Better"
Victor Burek  :  ".35 better at flag"
Victor Burek  :  "flagstar better"
Matthew Graham  :  "RTRS - MOODY'S SAYS BANK OF AMERICA DOWNGRADE REFLECTS LOWERED PROBABILITY THAT US GOVERNMENT WOULD SUPPORT BANK "
Matthew Graham  :  "RTRS- MOODY'S DOWNGRADES BANK OF AMERICA CORP. TO BAA1/P-2; BANK OF AMERICA N.A. TO A2, P-1 AFFIRMED "
Eric Leithliter  :  "They used a stove for heating. We had to show that the stove exhaust went directly outside so there is no health and safety. We also had to have a heating expert come in a certify that it was creating enough BTU's to sufficiently heat the area. "
Eric Leithliter  :  "Hey Justin. I had this issue with Wells Fargo last year'"
Justin Bayle  :  "anyone know the guideline on the heat source requirement in a home for a conventional loan? Borrower has an unconventional heating source and appraiser says he can't comment whether it will heat the whole home or not so Cit is declining the loan"
Victor Burek  :  "Dean..i think lenders have overlays making it impossible to get a fha loan after a short sale"
Ken Crute  :  "FHA says yes, but find an investor that will do it, that is the trick "
Peter Gladkin  :  "no Alan, you have to get the bank to agree to your walking away from teh equity...."
Ray J  :  "I think with the HAFA program, the deficiency is waived."
Peter Gladkin  :  "there you go CK... go FHA."
Dean Gorenflo  :  "http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-52ml.pdf"
Dean Gorenflo  :  "FHA’s current guidelines state that you can get an FHA loan immediately after a short sale, provided that you never missed a payment. If you were in default at the time of the short sale, then you have to wait 3 years before they will approve your loan"
Peter Gladkin  :  "If the government wanted to spur the housing market and home sales, that guideline should change... someone involved in a short sale with no lates should be able to qualify for a new home purchase immediately."
Ken Crute  :  "CK paying less than full balance will reprot as a M9 on CBR which = Short in lenders language "
Jeff Statz  :  "is the lender 1099'ing the haircut, or is he reaffirming the debt? my uw seemed to think that we could do a loan earlier than the regular waiting period if the debt was reaffirmed. (it actually happens sometimes)"
Ray J  :  "Thre is a HASP program I think now, the Home Affordable Short Sale. or HAFA, Home Affordable Foreclosure Alternatives, "
Steve Chizmadia  :  "It'll be a short sale essentially"
Alan Craft  :  "Agree"
Victor Burek  :  "yep"
Steve Chizmadia  :  "Gonna be 3-4 years before they can"
Steve Chizmadia  :  "Good luck CK"
Chris Kopec  :  "Wondering if anyone has run into this.....I have a client who is 0x30 on their mortgage, but has negotiated a short sale with their lender. The borrower is bringing money out of pocket as well. The lender has agreed to also take a haircut. The borrower was advised the account will read "paid in full for less than fulle balance". There will be no outstanding amount the borrower will owe. The transaction takes place in about 30 days. The borrower is interested in purchasing a new place.....*"
Ira Selwin  :  "Pretty good deal to get 1/4 off your rate on a Jumbo"
Adam Quinones  :  "Automated Clearing House (ACH) is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit payroll and vendor payments. ACH direct debit transfers include consumer payments on insurance premiums, mortgage loans, and other kinds of bills. Debit transfers also include new applications such as the point-of-purchase (POP) check conversion pilot program sponsored by NACHA"
Ira Selwin  :  "yes. 0.25 RATE reduction with auto payment from WF or Wachovia checking or savings account"
Adam Quinones  :  "@Wells."
Adam Quinones  :  "you seeing that ACH special on J30s Ira?"