so i dare ask...What are we waiting for so we can get back to the rates we had previously where bankers and brokers alike were singing Frank Sinatra songs at the top of their lungs... i have followed this site for awhile but seem to be confused as to what i am waiting for in order for rates to start down-trending again...

Adam, is there a certain level ( GN 4.5 @ 100-26 ) that indicates that there might be a price change for us? Lets say it goes to 101.12 or something near or higher, does that help our cause? Basically, where do YOU think it needs to be to bring some more yield our way? Thanks,

what we need is for the lenders to get caught up with all the files they have now, hire more staff to gear up for more files to come in. Hopefully one lender will do all of this and drop rates w/ysp and the rest will follow.

Jill: Since we are more then 2 months into hearing about the Fed buying MBS, how much longer do you think it will take lenders to hire people? I know if our company wanted to hire more people (from Ops to LOs) it may take a few weeks. I could be wrong, but I don't think this is a valid argument as to why rates are inflated especially (at least from what I am hearing) volume has seriously decreased the last few weeks. And I've heard from more then 1 AE that believes it's bs argument at this point. On another note; call me crazy but I think everyone (from the stock market to MBS) is waiting on the unemployment # tomorrow before making any moves.... I'm starting to see some people think we could be in 700k range with the Birth/Death adjustment. Pelosi thinks we have 500 million people lose their jobs every month!! ;)

It's really crazy when Lender's are trying to slow down their pipe by increasing rates. With the amount of out of work people that have the skills to work in this environment, it seems like a no brainer. Hire more people bring rates down, hire more people bring rates down further... The banks need to convert their bad debt to good debt and the sooner they do this the better the economy will be, if if they have to short sale it's still better then letting the property go into foreclosure.

Adam, I respect and appreciate your opinion. Being the ever Free Market Capitalist that I am, and watching all the political turmoil surrounding the banking/finance industries, my long term outlook isn't near as rosy as Pres Barak likes to spout off about. With that said could you articulate one theory I have. Our rate sheets are off due to the spread between treasuries and MBS. Right now our fearless (no pun intended) leaders are trying to push through (literal) a bill that could be in excess of 1TRILLION (including interest) that is from money that will be borrowed, not raised. With the benchmark on the treasuries on the rise thus creating the spreads, do you believe this is actually what they are trying to do and the stimulus money being placed in MBS is just an attempt to stableize the MBS market in the midst of a sever mortgage/housing crisis? It would make sense to me that higher yeilds in the treasuries are more attractive for our foreign buddies (and domestic partners as well). I appreciate your feedback.

Edgar...what are turn times right now...most lenders are still around 10-30 business days and most of the retail outlets are up to 90 day turn times. I have seen e-mails comes from my reps saying that need to get caught up and get the new people trained and we should start to see better rates. The Fed only started to purchase MBS this month...we just started hearing about it when all the talk about TARP started. The Fed right now is only keeping us steady...we still need the investors purchasing MBS. I do agree that there are many professionals from our industry out there that are qualified, but not all of them are trained underwriters that can just walk in and sit down at a desk and start to take over files...and even if they are they are more than likely at a new company and need to learn that companies guidelines.

On a political note, I would like to see us become more energy independent, but let's not force this stuff through now. We need to do that during better times. President Pelosi has us spending more on stuff that does not get to the streets. Let's get it to the people..

On a tangent with Jeffrey's post--I'm wondering if anyone has heard the theory that Treasury's could be the next victim of "short selling". A couple of guys I know in secondary had said that topic came up in a corporate meeting last fall about the possible route rates could take in the event an Obama presidency passed a trillion dollar "stimulus" package with massive bond issuance to fund it. I know there are many arguments about why oil/gas prices spiked last summer, but many of them put the blame on short selling. I don't exactly understand how that works, but could that at least partially explain this run up in Treasuries-especially if Jeff is right and the Treasury spike is designed to lure more foreign buyers??

Provident just posted .125 worse. Treasury is teetering into negative territory, lets hope this afternoon can pull back some gains from this morning

Lots of loans in underwriting due to EVERYONE thinking rates will go down. Not a whole lot of loans closing/funding right now due to the upward trend of rates. Anyone trying to refi, based on old rate quotes is not letting the broker talk them into a point or 2 now after they already were quoted ZERO points. The borrowers are in a hold pattern, with their files in UW, they just do not know it from their LO's yet. So here all these loans sit in UW and not closing/funding. That can not be good for the investor. Don't they need to fund them? Only way that happens is if YSP get's better and LO can lock!

Edgar. One of the top three participants in the MBS market published a formal research piece today on primary/secondary spreads and the major cause of the increase being lender staffing. They also mentioned the other factors we've been discussing here for two months almost word for word. If anyone doubts this, let me know and I will investigate our rights as far as sharing it.

George...I could not have said it better...You just described my life currently...Minus the naggy girlfriend ;)

Matthew: I understand there may be research to support the theory of rates are high because lenders are swamped. HOWEVER... common sense says different. Volume has dried up the last several weeks, especially this week with the constant 4% being pumped by the government. The industry knew back in early December the Fed was going to buy in 2009....what did they think was going to happen? Rates would go up? My question then at what point does the "we still hiring" argument end? While I believe the Fed will continue after July the program (on a smaller scale) are banks really going to be hiring a bunch of ops people to only have to fire them in July? While I can understand someone buying that argument now, I would laugh if it's still being made in March. If banks haven't hired by now, it's not going to happen.

Edgar, when the Fed plan was announced in November, this was right in the midst of lenders downsizing their operations. Chase had just shut down Chicago. Citi had shut down Des Moines. EverBank had shut down Des Moines and the list goes on and on. Lenders are underwriting significantly more files with less people. There is no way for a large corporation to staff up that quickly. This is still an issue that is validated by turn times. Most lenders are still running a week to underwrite and several are requiring 45 day locks. This is still a significant issue. As far as AE's go, most don't know what they are talking about and couldn't have an inteligent conversation on this website. Retail turn times at Wells Fargo here have been as high as 90 days. Last week retail pricing at Wells at 6.125% was 101.00. This issue has plagued retail and wholesale. MetLife's regional underwriting center is 600 units over capacity at a time when the are clearing 50 a day and receiving 20 new files. Their net gain against those 600 files was only 30 files per day. US Bank was also 600 units over capacity at one point. They have no incentive to price more agressively. Contributing even further to this issue was lock fallout and multiple submissions. Lock fallout is a huge issue that cost lenders a lot of money. So brokers who moved a file to make another quarter or just let locks expire are a big part of the problem. US Bank had 60% fall out in November. Other lenders didn't come out any better. So during this time, underwriters were spending time on files that were never closed, further clogging the system and lenders hedging losses went through the roof. Anyone will a large lock fall out, your wholesale relationships are in jeopardy. Anyone who read the Flagstar memo you know what I am talking about. US Bank and others are getting ready for some terminations and tiered pricing due to the extremely high fallout in November and December. Lenders will not improve pricing until they have staffed up and put policies in place to limit their exposure to lock fall out. To all, when Refi Round 2 comes (hopefully soon), don't lock your loans unless you plan to deliver the loan and send complete files. Imagine how efficient the system would be if all files were 1 touch underwrites? Mind you, that conditions these days have gotten a little silly in some cases, so a 1 touch is rare.

I know things you don't know. Feel free to email so we can go over them privately. Based on these things I know, I'd expect the "we're hiring" argument to expire in 2-3 months, but valid until then. Anyone who has worked for a wholesale lender will understand why.