Very little has changed today vs yesterday with respect to the general flow of data and events. In both examples, the economic data in the morning was largely ignored, volume is largely small, tradeflows have been largely driven by Europe and Bernanke, and questions from Congress have been largely unnecessary political posturing. Given that Bernanke's prepared remarks are the same for both days, we naturally saw more movement at the inception of the testimony yesterday vs today. Additionally, the underlying environment has been more bond-market-friendly leading up to Bernanke, leaving bond markets in positive territory to the tune of about a quarter of a point in Fannie 3.0's.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
Pricing as of 11:09 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts
and updates issued via email and text alert to MBS Live subscribers
Live Video Link: Bernanke's Semi-Annual Report To Congress
Bernanke Begins 2nd Day Of Congressional Testimony:
HUD Taking Applications for Entities to Purchase Trouble Mortgages
Qualified entities interested in purchasing pools of severely distressed loans formerly insured by the Federal Housing Administration (FHA) can now submit applications for the Distressed Asset Stabilization Program, an expansion of an FHA disposition program that sells pools of defaulted mortgages headed for foreclosure and provides the opportunity for the purchaser and borrower to avoid a costly foreclosure. According to loan pool information released today, approximately 3,500 loans will be sold in four metropolitan areas that are among those hardest hit by the foreclosure crisis – Chicago, IL; Newark, NJ; Phoenix, AZ; and Tampa, FL – aligning with other neighborhood stabilization efforts to help those communities recover as quickly as possible. The program is part of the Obama Administration's broader strategy to encourage public/private partnerships to stabilize neighborhoods and home values in critical markets. Details on the Distressed Asset Stabilization Program can be found at www.hud.gov/fhaloansales.
“The housing market has momentum not seen since before the crisis,” said HUD Secretary Shaun Donovan. “But some metro areas are still under pressure and some FHA borrowers remain seriously behind on their loans and stand to lose their homes in a matter of months. As one step towards avoiding unnecessary foreclosures and further stabilizing communities, we are increasing the number of loans beyond our original goals of 5,000 per quarter to approximately 9,000 this quarter. Providing the opportunity for borrowers to potentially stay in their home under a new sustainable mortgage or other meaningful help not only benefits that homeowner but reduces the costs to FHA and ultimately benefits the entire community.”
Bond Markets Improve Overnight, Holding Gains After Data
In "The Day Ahead" post, we noted that Bernanke's cards are probably on the table in terms of potential market movers, and that any major guidance is more likely to come from Europe. That has indeed been the case as German Bunds sunk to new all-time lows in the overnight session, dragging US Treasuries along for the ride (incidentally, German 10's are currently trading under 1.20).
Little else besides Europe has had much of an impact this morning, including the better-than-expected Housing Starts figures (admittedly though, those were offset by the less rosy building permits, not to mention the high margins of error that render the whole endeavor of reporting Housing Starts nigh on inconsequential).
10yr yields have traded fairly directionally lower from the Asian open, starting at 1.51 and moving down now to 1.47's. MBS opened higher and are a few ticks improved in the first hour of trade. Stock futures are lower as well and added very slightly to overnight losses on the Housing Starts numbers (maybe everyone's disillusioned by the margins of error!).
The only other major events for the day include scheduled Fed Twist buying from 10:15 - 11:00am and Round 2 of Bernank v Congress beginning at 10am with the same prepared remarks as yesterday (but hopefully more intelligent Q&A...)
Resistance target is around yesterday's highs for Fannie 3.0's at 103-22 and mid 1.46's in 10yr yields. These are perfectly attainable if we rally and the next target in 10's would be the 1.442 all-time lows. On the weak side of possibilities, 1.509 is really the only significant ceiling that we'd not want to break today, but 1.49 is another 'first line of defense' pivot.
ECON: Housing Starts Up 6.9 Pct! (With A 13.3 Pct Margin Of Error)
The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residential
construction statistics for June 2012:
Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 755,000. This is 3.7
percent (±1.0%) below the revised May rate of 784,000, but is 19.3 percent (±1.8%) above the June 2011 estimate of 633,000.
Single-family authorizations in June were at a rate of 493,000; this is 0.6 percent (±0.8%)* above the revised May figure of 490,000.
Authorizations of units in buildings with five units or more were at a rate of 241,000 in June.
Privately-owned housing starts in June were at a seasonally adjusted annual rate of 760,000. This is 6.9 percent (±13.3%)* above the
revised May estimate of 711,000 and is 23.6 percent (±16.8%) above the June 2011 rate of 615,000.
Single-family housing starts in June were at a rate of 539,000; this is 4.7 percent (±10.1%)* above the revised May figure of 515,000.
The June rate for units in buildings with five units or more was 213,000.
Privately-owned housing completions in June were at a seasonally adjusted annual rate of 622,000. This is 2.6 percent (±12.5%)*
above the revised May estimate of 606,000 and is 7.2 percent (±13.2%)* above the June 2011 rate of 580,000.
Single-family housing completions in June were at a rate of 470,000; this is 1.3 percent (±9.8%)* above the revised May rate of
464,000. The June rate for units in buildings with five units or more was 134,000.
Live Chat Featured Comments
Victor Burek : "bofa is the only i know that will do that"
Victor Burek : "yes...it is on the payoff"
rford : "Anyone know if BofA net-funds payoffs (nets out the escrow balance form the payoff instead of sending that amount to the borrower after loan is paid off)?"
Victor Burek : "i agree because the no cost loan is more than likely the better call"
Mike Drews : "people rarely choose to pay fees when given all of their options"
Victor Burek : "plus, if you do a no cost loan, when rates fall further the client can refi again on another no cost, or maybe pay costs at that time to get the lowest rate"
Victor Burek : "both of which are better than current, but imo, the no cost higher rate is better option"
Victor Burek : "so if client is at 5%..they can go to 3.875 with no fees or 3.375 with about 5k fees"
Matt Hodges : "..which is different than net tangible"
Victor Burek : "i was comparing the no cost loan to the full cost loan..."
Clayton Sandy : "Right, but going back to VBs comment about recouping the fees in over 10 years. With NTB, it compare current payment vs new payment so it wasn't the best example. "
Victor Burek : "i agree..loan life is extending"
Brent Borcherding : "I believe that will be changing."
Victor Burek : "again..very few people keep a home for more than 10 years...very few"
Clayton Sandy : "Completely agree. Sorry, that is a question they ask so I run the numbers for people. "
Matt Hodges : "when it exceeds 5 years, i tend to agree"
Victor Burek : "i advise that if you dont break even in 5 years, you shouldnt do it..even if you think you are keepign home for more than 5 years..5 years is a very long time that many things can change in a persons life that changes their plans...like more children, divorce, job transfer, etc..."
Matthew Graham : "if someone told me that I would have to keep a house for at least 70 months in order to break even (at a zero rate of return), I'd probably take the higher rate and the liquidity"
Victor Burek : "again...at 200k payment is 940 at 205k the payment is 906..is it smart to roll 5k in if the payment is only 34 less...only if they keep home for 5000/34 or 142 months"
Matthew Graham : "average breakeven consideration is 40-70 months IMO"
B-C : "so you are saying they should pay a higher rate because they might move in 10 years?"
Victor Burek : "avg life of a loan is only about 6 or os years right now..that is gonna extend with where rates are now..but the avg life of a loan will never be over 10 years"
Clayton Sandy : "VB, some people just want the ability to say they have a 30 year at 3.375%. The interest saving is $20,000 over the life of the loan between the two rates. "
MMNJ : "B of A is now a 90 day turntime for CEMAs (and that's on a good day)"
Matthew Graham : "RTRS - BANK OF AMERICA CFO THOMPSON: MORTGAGE REPS AND WARRANTY CLAIMS EXPECTED TO INCREASE "
Adam Quinones : "I think that means theyre gonna start foreclosing at a faster pace...."
Matthew Graham : "RTRS - BANK OF AMERICA HAS HIRED MORE STAFF TO HANDLE DELINQUENT LEGACY LOANS-CFO"
Matthew Graham : "RTRS - BANK OF AMERICA CFO SAYS BANK AIMS TO REDUCE 60+ DAY DELINQUENT MORTGAGES BY YEAR-END "
Ira Selwin : "be thankful you dont do NY loans with the mortgage tax"
Victor Burek : "title insurance is expensive"
Matt Hodges : "your closing costs must be significantly higher in TX; i feel bad for those borrowers"
Victor Burek : "as rates have fallen, the spread between no cost and full cost loans is only .5..it used to be closer to 1%"
Victor Burek : "but a great example, assume a perfect borrower, conventional loan. 200k. i can do 3.875 with no costs.. gives them a payment of 940. if they want 3.375, they woudl pay close to 5k in cc..if you roll that in, the new payment is only 906..so for 5k, they are only saving 34 per month..thats well over 10 year breakeven point"
Bill Laffey : "most of the refi biz i'm getting is looking for no-cost. oddly, i'm finding more people are now, w/Dodd-Frank and lender credits, shopping the size of the lender credit vs. the rate."
Matt Hodges : "most clients like the lower rate and don't mind tucking cc into a new mortgage"
Victor Burek : "especially in Texas where closing costs are pretty high"
Victor Burek : " i find no cost loans are the better option right now"
Matthew Graham : "what's everyone's take on no-closing-cost refi's these days?"
Matthew Graham : "From the 'day ahead:' Domestic data could have a bit of pull as well, but it would necessitate Housing Starts crushing the consensus by more than the report's margin of error. If that happens, go buy lottery tickets, don't stand in rainstorms, and enter a blind-folded half court shot competition because winning the lottery, getting struck by lightning, and sinking a blindfolded 3 pointer are high probability events compared to Housing Starts "saying something" that can't be explained away by th"
Matthew Graham : "RTRS- US JUNE HOUSING STARTS RATE HIGHEST SINCE OCT 2008; SINGLE-FAMILY UNITS HIGHEST SINCE APRIL 2010 "
Matthew Graham : "RTRS - US JUNE HOUSING PERMITS 755,000 UNIT RATE (CONSENSUS 765,000) VS MAY 784,000 UNIT RATE "
Matthew Graham : "RTRS - US JUNE HOUSING PERMITS -3.7 PCT VS MAY +8.4 PCT "
Matthew Graham : "RTRS- US JUNE HOUSING STARTS 760,000 UNIT RATE (CONSENSUS 745,000) VS MAY 711,000 (PREV 708,000) "
Matthew Graham : "RTRS- US JUNE HOUSING STARTS +6.9 PCT VS MAY -4.8 PCT "