In another back and forth session prices
of mortgage backed securities ended up making some headway today. Yay!
FN30_________________________
GN30______________________
FN 4.5 -------->>>> +0-04 to 100-23
GN 4.5
-------->>>> +0-09 to 100-31
FN 5.0 -------->>>> +0-04 to 101-23
GN 5.0
-------->>>> +0-04 to 101-31
FN 5.5 -------->>>> +0-01 to 102-09
GN 5.5
-------->>>> +0-02 to 102-16
FN 6.0 -------->>>> +0-01 to 103-00
GN 6.0
-------->>>> +0-01 to 102-31
The Fed took the training wheels off
the MBS market today, their participation was reported to be relaxed at
best. Early in the session, as Fed money
sat on the sidelines, the Ninja reported that mortgage bankers were adjusting
their hedges by selling 4.5s and buying 4.0s. This sell off provided a little
early morning drama but bids improved as MBS prices cheapened. This has been and will remain the trend for the
time being...that's ok though these strategies have helped keep MBS bids stable
and rate sheets somewhat sensible. Trading volume was close to average.
Lock desks were shaken from their
slumber following some positive pricing pass-through's from lenders today.
Based on mortgage banker's buying and selling strategies recently we do not
believe they will wait long to protect their pipeline from interest rate risk.
That said we would anticipate a spike in originator supply to hit MBS markets
in the next few days. This means at some point in near future there will be a
sell off...we anticipate bargain buyers and day traders won't allow this anticipated sell
off to last long though...we however must stress that this does not mean rates will get
better. The recent behavior of the MBS stack will continue to be stagnant/back
and forth/up and down in a tight range as Fed intervention controls the yield
curve and day traders and bargain buyers battle it out. Always follow GUT-FLOP.
Yesterday Fannie Mae announced some
underwriting changes that are intended to "allow more
borrowers to take advantage of today's historically low interest rates"
Here
are a few excerpts...
I will leave the discussion up to you...HERE IS A FORUM POST TO CHAT ABOUT THE CHANGES --->CLICK ME
Starting April 4, 2009...
In
order to provide lenders with increased efficiencies for the origination and
underwriting of limited cash-out refinance transactions, and allow more
borrowers to take advantage of today's historically low interest rates...
Expanded Eligibility Criteria
The following
expanded eligibility guidelines will be applied to limited cash-out refinance
loan casefiles meeting the DU Refi Plus eligibility criteria noted above
(including the successful identification of the existing Fannie Mae mortgage
loan):
-
Loan casefiles with an LTV less than or equal to 80 percent will not be
subject to the minimum "representative" credit score requirement of 580.
- High-balance mortgage ARM loan casefiles
with an LTV less than or equal to 80 percent will not be subject
to the minimum "representative" credit score requirement of 680.
Reduced Employment Documentation Requirements
DU will offer
the following reduced employment documentation requirements on all DU Refi Plus
eligible loan casefiles:
- Salary/Bonus/Overtime:
one current paystub and a verbal verification of employment
- Commission/Self-Employment:
one year's federal income tax return
Updated
Property Fieldwork Requirements for Foreclosure or REO Properties
The recent increase in property
foreclosures has resulted in some real estate owned (REO) properties being
neglected and/or sitting vacant for an extended period of time before they are
sold to new homeowners. In these cases an exterior-only property inspection or
appraisal may not provide the most accurate assessment of the condition of the
property.
As a
result, lenders will now be required to obtain an appraisal based on an
interior and exterior property inspection for purchase transactions when the
transaction is the result of the sale of an REO property, or the last
transaction on the property being purchased was a foreclosure.
Doesn't it seem like all sectors of
mortgage world are trying their darndest to stimulate the housing market??? (with
the exception of servicers..they are lagging bc of delinquencies. Speaking of which...
The Federal Reserve spent $22.277bn
on MBS between January 29 and February 4. The Fed averaged $4.455bn purchases per day. Fannie Mae got 47.18% of
the bids, Freddies got 43.62%, and Ginnies were ignored. (kidding but you can do the math :-D )
36.58% of the purchases were
in 4.5s. 20.44% were in 5.5s. 17.86% were in 6.0s
At 830 AM tomorrow we get THE
employment report...The Employment Situation. This one has the potential to move
some money...
Nonfarm payrolls are expected to be
down 524,000 and the Unemployment Rate is expected to remain unchanged at 7.5%.
As far as the reports relation to MBS...if it is worse than expected...perhaps a
little FTQ (flight to quality) will help the entire fixed income curve. On the
other hand the Federal Reserve's participation in the mortgage market has
seemingly disconnected MBS from economic data in general. Plus the stack is
stuck in a relative value tug of war so at this point we are skeptical of the
effects this data will have on MBS.
Just a side note I like to flip to
the back of the Employment Situation Report. Specifically data table A-12
Alternate Measures of Labor Utilization. This table includes info such as "discouraged
workers"---these are workers who are not considered to be part of the labor
force and therefore not accounted for in the unemployment rate. This number can be startling..here is what it
looks like.....
http://stats.bls.gov/news.release/pdf/empsit.pdf
13.5% in December