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MBS CLOSE: FTQ LEAVES MBS IN DUST

by Adam Quinones

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A flight to safety rally in the Treasury market led "down in coupon" MBS bids higher today. TSYs outperformed MBS by as much as 10-20 ticks though (spreads wider). Originators were light sellers while the Fed easily ate up any excess production today. Asia remains steady support of GNs.

FN30______________________________________

FN 4.0 -------->>>> +0-18 to 99-04 from 98-18

FN 4.5 -------->>>> +0-18 to 101-04 from 100-18

FN 5.0 -------->>>> +0-09 to 102-09 from 102-00

FN 5.5 -------->>>> +0-05 to 102-27 from 102-22

FN 6.0 -------->>>> +0-01 to 103-13 from 103-12

GN30____________________________________

GN 4.0 -------->>>> +0-21 to 99-10 from 98-21

GN 4.5 -------->>>> +0-20 to 101-10 from 100-22

GN 5.0 -------->>>> +0-11 to 102-19 from 102-08

GN 5.5 -------->>>> +0-05 to 103-04 from 102-31

GN 6.0 -------->>>> +0-03 to 103-17 from 103-14

I noticed an above average amount of reader inquiries regarding lock or float today. Consider the following when making this decision...

Tomorrow we get the BIG KAHUNA jobs report...The Employment Situation!!! This is the market's primary focus and should have an effect on MBS.

Markets have baked in the worst..if the data is in anyway positive or just better than expected be prepared for the liquidation of Flight to Quality Treasury positions and an MBS sell off (spreads will tighten though). If the jobs data is as bad as expected or God forbid worse...FLIGHT TO SAFETY holds and MBS should benefit from yield curve stability.

Non-farm payrolls Consensus Estimate: -648,000

Unemployment Rate Consensus Estimate: -7.9%

Average Hourly Earnings Consensus Estimate: 0.2%

Hints: I know mandatory commitments are pricing out much better than usual...this tell us that investors are willing to pay for reliability right now. You should have noticed some aggressive (is your jpm pricing better?) pricing today....dont allow yourself to become apathetic to headline news...in other words dont get greedy...follow GUT-FLOP and be sure to consider the bearish sentiment in stock markets right now.

The MBS market did react in our favor to the housing plan by moving "down in coupon"... do not forget how quickly MBS market participants were to move back "up in coupon" after being burned for a second time following the announcement of the Housing Affordability and Stability Plan on Feb.10.

I am 80% complete with my analysis of DU REFI PLUS. It was a busy day and I am a little behind so I will do my best to post tonight. In the event I am unable to complete it tonight I promise I will post in AM.

Data provided by Thomson Reuters
Secondary Marketing Managers and Capital Markets Desks, if you are interested in subscribing to the same fixed income and mortgage market data we use:CLICK HERE.

Comments

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Adam Quinones | Contact or Connect with this Member

i hate when that happens

Fred Winograd | Contact or Connect with this Member

Your Server Down?

Nate Miller | Contact or Connect with this Member

Thanks Adam! Let's roll, jobless report will be worse than expected!

Sharon Corcoran | Contact or Connect with this Member

Wow, I was gonna say "Look at those Guidelines!"

Edgar | Contact or Connect with this Member

Anyone who can lock some loans today before tomorrow and doesn't is taking a BIG gamble. I think the # will be ugly, but it will have to be REALLY ugly to make the stock market move south and rates with it. If the number is not that bad, rates could snap back big. Follow GUT FLOP or you could get kicked in the GUT and FLOP to the floor tomorrow.....

Andrew Behneman | Contact or Connect with this Member

Thanks so much. I am relly looking forward to seeing how the DU Refi-plus affects brokers and how it can help us generate more business.

Dustin Brumley - Mortgages in Bellingham, Wa | Contact or Connect with this Member

The DU Refi Plus doesn't hold a candle next to the Refi Plus. Nonetheless, it will help us on some deals.

Anthony Kubes | Contact or Connect with this Member

Dustin, instead of making a useless conclusion -- How about enriching the board with your thought process on the statement and stress the exact factors why you came to that conclusion.

Adam Dahill | Contact or Connect with this Member

Asian Markets are down 185 just over an hour after opening. This should be good for MBS tomorrow morning.

Marc Elliott | Contact or Connect with this Member

I actually like the DU refi plus program because it offers a solution here in TX, where things are really not that bad. I agree that it will not help the number of people that they think it will. One glaring challenge I noticed is that any existing 2nd must resubordinate. Most of the 2nd mortgage lenders are not resubordinating if the balance on the first will exceed the original amount. This means in the case of an 80/20 originated a couple of years ago, this program won't help. Those of you who were originating then may remember 2nds at the time had rates about a point higher than the first. Therefore, it made more sense to do and 80/20 than pay MI. The payments always ended up cheaper on the 80/20( or 80/15/5 or 80/10/10). Thus I have a ton of 80/20 customer that this program does absolutely no good for. I do like the lower LLPA's. I think they are more appropriate and it would be awesome if they would apply them to all Fannie Products.

Dean Gorenflo | Contact or Connect with this Member

LOL....so AQ really is a computer. Someone give him a re-boot so he can finish the post!

Patrick McLafferty | Contact or Connect with this Member

I just have to point out the obvious for all the whiners and those that only read the headlines. #1 Refi Plus helps borrowers that are well on their way to foreclosure. None of us could help these borrowers due to credit issues. #2 DU Refi Plus is giving us a chance to help borrowers who would not qualify for our existing programs. Think about the business this can add for us instead of complaining that we won't get ALL of the business because of the servicers. Focus on the additional business and be thankful that we get a chance to participate. That's my 2 cents.

akaagassi | Contact or Connect with this Member

IMO, the problem with Refi Plus or DU Refi Plus, is that people don't want to pay - Obama-mites want their hand out and want their 2% or 4% rate for free...and when then find out that they have to pay costs and the LLPA add-ons, they'll be in for an eye opener.

Dan Clifton | Contact or Connect with this Member

Patrick, i agree, there are too many people who are looking for reasons "why it wont work" and "theirs is better" and "this wont work" There is opportunity here. Is it the greatest thing ever? No. But i can think of at least 10 clients in my data base that wanted to refi in the last 3 months but did not b/c appraised values put them at 90-95% LTV and either declining market guidelines wouldnt allow it or the MI killed the benefits. They have no MI now and under this program there woul be no MI for them at 105%. You bet i am calling them. they were all in rates ranging from 5.875% to 7.000%

Gary Powell | Contact or Connect with this Member

OK, I'm going to try to not be my pessimistic self here and ask two questions. 1. What does Refi Plus do for rates? Is it going to cause down in coupon movement by itself? 2. What happens to rates when there is a new flood of origination volume like we saw a few months ago and all lenders reprice higher to turn off the valve. I'm currently seeing very few lenders with turn times less than a week and I don't see that changing. The timing of this program, on top off all the first time buyers chomping at the bit to use their $8000 tax credit seems like it cause havoc in a system that is already highly strained. Your thoughts?

toddlipps1 | Contact or Connect with this Member

Making Home Affordable says loan limts are 729k... But conforming limits are still 417k? If the loans eligible for the PLAN are only ones which are fannie/ freddie loans, how is it possible that there could be a modification for a loan up to 729?