MBS Live: MBS Afternoon Market Summary
MBS and Treasuries looked like they might have been drifting into slightly better territory in the first part of the afternoon.  But heading into the 3pm Treasury close, bond markets weakened somewhat, depositing Treasuries (with the exception of 30yr bonds, which got hit a bit harder) right at their earlier morning support levels (mid 1.92's) and MBS in the same old 2 tick range they'd held all day.  We saw a few brief ticks at 103-24, but 90% of today's action was 103-26 to 103-28.  That's really splitting hairs though...  a 4 tick range is as narrow as they come in terms of a daily range of production MBS prices.  With today's decreased market participation and NFP Friday looming, we're hoping to see a little bit of a ramp up in activity as the week progresses.  Europe is out tomorrow for May Day and there are more Asian holiday absences in the 2nd half of the week, so it might seem a bit subdued until Europe is back on Wednesday.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
103-27 : +0-04
FNMA 4.0
105-25 : +0-04
FNMA 4.5
107-02 : +0-02
FNMA 5.0
108-20 : +0-02
GNMA 3.5
105-11 : +0-04
GNMA 4.0
108-06 : +0-05
GNMA 4.5
109-12 : +0-02
GNMA 5.0
110-25 : +0-05
103-20 : +0-04
105-16 : +0-05
106-20 : +0-03
108-02 : +0-01
Pricing as of 4:04 PM EST
Afternoon Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this afternoon.

2:12PM  :  Fed's Loan Survey Asks New, Specific Questions Re: Mortgages
A set of special questions asked survey respondents about residential real estate lending policies at their institutions. Banks were asked to compare their willingness to originate a GSE-eligible 30-year fixed-rate mortgage loan intended for home purchase today with their willingness in 2006 for borrowers with FICO (or equivalent) credit risk scores of 620, 680, and 720, and down payments of 10 or 20 percent (for a total of six categories of borrowers).

A large majority of banks indicated that they were less likely to originate a GSE-eligible mortgage loan to potential borrowers with a FICO score of 620 and a 10 percent down payment than they were in 2006. Raising the down payment to 20 percent reduced the fraction of banks less likely to originate such a loan somewhat.

A moderate net fraction of banks were less likely to originate loans to borrowers with a FICO score of 680, regardless of down payment size. A modest net fraction of banks were less likely to originate loans to borrowers with a FICO score of 720 and a 10 percent down payment, although survey respondents indicated that they were about as likely to originate loans now as they were in 2006 if such borrowers had a down payment of 20 percent.

Most banks cited borrowers having higher costs for, or greater difficulty in obtaining, mortgage insurance coverage as an important factor contributing to the reduced likelihood of originating GSE-eligible mortgage loans. About as many respondents noted the higher risk of putbacks of delinquent mortgages by the GSEs as an important factor, and that factor was listed as the most important one by the largest number of banks.

Similar fractions of respondents pointed to less favorable or more uncertain outlooks for house prices or for the economy more broadly as factors. A majority of respondents reported as at least somewhat important factors greater concern about their bank's exposure to residential real estate loans; increased concerns about effects of legislative changes, supervisory actions, or accounting standards; higher servicing costs if mortgages were to become delinquent; the prevailing spread of mortgage rates over cost of funds being insufficient to compensate for risks; and borrowers having higher costs of greater difficulty in obtaining simultaneous second liens.
2:10PM  :  Flatness, on a Whole New Level: 16th Point Range For MBS!
If it's possible for things to be so far from exciting that they actually become interesting, the past few weeks have been leading up to today as the most interesting day... EVER!

Fannie 3.5 MBS, the coupon that gets by far and away, the lion's share of the origination volume, is trading in a 2 tick range, at maximum! 2 ticks (or 2/32nds = 1/16th of a point, hence the title). For most of that time and indeed with very few exceptions, the range has been merely 0.5 to 1.0 ticks (1/64 to 1/32 of a point).

10yr Treasuries have been similarly range-bound, holding within a 1.5% range all day. The only really safe bet for expecting this dynamic to change is Friday's NFP release, but certainly, it can happen sooner. Additionally, 10's have had a good bit of correlation with stocks today (stock prices moving with TSY yields), so pronounced weakness in stocks could coax bond markets into slightly stronger territory.

But the overriding moral of the story is that markets are thinly staffed, thinly traded, and uninspired at the moment.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.

Michael Tadros  :  "REPRICE: 3:45 PM - Interbank Worse"
Ira Selwin  :  "REPRICE: 3:27 PM - Chase Better"
Matt Hodges  :  "bottom line profit or loss add back depreciation"
Berton McLain  :  "Borrower has a rental property that shows a 19k loss. I normally add back taxes, insurance, interest, depreciation, and subtract net loss. does anyone do it differently?"
Matt Hodges  :  "if you give us the scenario, i'm *sure* we can all agree on how it *should* be u/w"
Berton McLain  :  "I am hoping I can get a clear answer on this one. Do lenders have different ways of qualifying borrowers based off of tax returns? i.e. adding certain items back in."
Matthew Graham  :  "sure Tom, be sure to send me something nice, within RESPA guidelines of course, for marketing assistance!"
Matthew Graham  :  "If the MBS buckets were like the gears in a car, it would be as if we're just barely going fast enough to shift to the next gear, but if we have any issues maintaining that speed, it will turn out to be a poorly chosen gear ratio and we'll fall behind in the race."
Tom Bartlett  :  "i like that MG. Can I copy and send?"
Matthew Graham  :  "there's a real challenge in getting rates much lower than current levels due to the liquidity constraints created by the coupon structure in MBS Markets."
Tom Bartlett  :  "I answered this way"If the 10 stays in this territory few more day’s, I expect the secondary dept’s will start feeling better about the stability and start forking over a bit more rebate. Any other tried and true idea's?"
Jason Adams  :  "give him the link to MBSLIVE :-"
Tom Bartlett  :  "I just had an e-mail inquiry from a financial advisor asking the following..."So how low does the 10yr have to get for us to hit the 3.75% no cost or very low? Any suggestions on how to respond?"
Tony Cardinal  :  "i think so, too. it's just a wild moving target everybody is trying to hit. Guess the govt is "trying to make it easier for the borrower," and in turn making it harder for the industry"
Timothy Baron  :  "I've had that same issue with LP. It looks to me like DURP values wil cause the same issue going forward."
Tony Cardinal  :  "thats what i am thinking tim, but i havent received any confirmation on that. i had a UW deny a file bc they cap at 125 LTV LP. got an appraisal done, 105 LTV. they decided not to use it, but rather the HVE LP issued and in turn put me above 125, and they wont do it now. had to move to a different investor willing to take 125+ on LP"
Timothy Baron  :  "Not sure if that had been mentioned before."
Timothy Baron  :  "DU doesn't require you to use their value, but investor overlays do. At least that's what I'm seeing out there."
Tony Cardinal  :  "@ RYAN: 18 Based on the standardized address, Desktop Underwriter estimates the value of the property at $145700.00. This estimated value was developed by internal proprietary models to help determine eligibility for a DU Refi Plus property fieldwork waiver. It is not the result of an appraisal, nor was it developed by a state licensed or certified appraiser. This estimate is intended to be used solely by the lender to underwrite the refinance of the borrower's mortgage loan. "
Matthew Graham  :  "" Banks were asked to compare their willingness to originate a GSE-eligible 30-year fixed-rate mortgage loan intended for home purchase today with their willingness in 2006 for borrowers with FICO (or equivalent) credit risk scores of 620, 680, and 720, and down payments of 10 or 20 percent (for a total of six categories of borrowers). ""
Matthew Graham  :  ""In response to the second set, banks reported that they were less likely than in 2006, to varying degrees, to originate mortgages to any borrowers apart from those with the strongest credit profiles.""
Matthew Graham  :  "http://www.federalreserve.gov/boarddocs/SnloanSurvey/201205/default.htm race to find it first"
Patrick Waldron  :  ""Top-notch credit" here being defined as...?"
Tony Cardinal  :  "ryan, yes i had the same thing happen this am. dont know what to make of it yet. i have 2 different ones. one says i need an appraisal but FNMA issued a value to use for the underwrite. another that accepts the value i used, giving the PIW verbage, however ALSO giving a "hve," which is lower than the estimated value i ran it at."
Ira Selwin  :  "https://www.efanniemae.com/sf/guides/duguides/pdf/current/rndodu83aprupd.pdf"
Ira Selwin  :  "Insufficient Information Message The following message will be issued on DU Refi Plus loan casefile where the subject property address cannot be standardized, or Fannie Mae's databases do not have sufficient information about the property to estimate a value: Based on the address and other information available to Desktop Underwriter, this property is not eligible for a DU Refi Plus property fieldwork waiver."
bfeigen  :  "only freddie gives the HVE value, DU does not..."
ryan beacham  :  "Has anybody ran the new DU 8.3 today? I ran it on a new file and now it just states that "this property is not eligible for a PIW". I thought if that was the case DU would give you the recommended value so that you would receive the PIW? "
Jason York  :  "ok, thanks"
Victor Burek  :  "my uw says use 5%..but might vary lender to lender"
Paul Carlin  :  "The undewritter and you should calculate a payback rate. I think is is someting like 5% of the balance"
Jill Statz  :  "5% JY"
Jason York  :  "when there is no payment listed"
Jason York  :  "anyone know the % to use for deferred student loans for a VA loan?"
Glenn Setzer  :  "then you can Manage your directory listings here: http://www.mortgagenewsdaily.com/AddOns/BusinessListing/Listing"
Glenn Setzer  :  "update your profiles here: http://www.mortgagenewsdaily.com/AddOns/UserProfile/Manage/Edit"
Matthew Graham  :  "FYI, you need to make sure your profile is fully completed if you want to show up on the directory (specifically the "location" part)"
Matthew Graham  :  "sleepy day all around."
Matthew Graham  :  "I read something about decent originations earlier in the day, but I haven't seen confirmation of that. AQ's "ZZZZ" would be what I would go on for now."
Victor Burek  :  "wouldnt bother me a bit"
Jeff Statz  :  "could be rangebound the whole day"
Jeff Statz  :  "how does volume look, MG?"

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