Mortgage News Daily

MBS CLOSE: Tumultuous Week Sees MBS Gain, Tsy's Lose

Matthew Graham — Fri, 06 Nov 2009 23:05:00 GMT

In a week that promised to be eventful, MBS played the volatility role with the rest of the market, but left it's benchmark's in the dust when all was said and done. The measure of the secondary MBS market that takes into consideration the prepayment speed weighted yields as well as the production mix of MBS volume and expresses that notional yield at parity fell to 4.258 (that's secondary market current coupon, btw...). With the 10yr yield ringing the 3.5 bell right on the nose, that brought spreads between MBS and Tsy's to an eye-wateringly tight 75.9bps! They started the week at an already tight 87.9bps... Though I could try, I'm not sure there's much I could do to convey just how tight these spreads are... Well, I guess a chart might do... This is the current coupon...(read more)

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MBS AFTERNOON: Like It Never Happened...

Matthew Graham — Fri, 06 Nov 2009 20:32:00 GMT

Posted To: MBS Commentary

In breaking news, it has been determined that today's NFP report was all an elaborate hoax that was never intended to have any effect on the markets beyond today. Or at least that's how the headline could read at the top of the list of "things that would not surprise us." What do I mean? Nothing more than this: After all the sturm and drang of AM volatility, the market continues in the exact same direction suggested by it's previous trends, which would have been for a reversal at 3.56 (yesterday) and a continuation of the rally into today depositing us somewhere in the neighborhood of 3.5... For MBS, just an extension of previous trends as well (yesterday we warned against perceiving the rally in MBS as an indication of reversing downtrends from the beginning of the week...(read more)

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Obama Signs Home Buyer Tax Credit Extension. Will It Be Effective?

Jann Swanson — Fri, 06 Nov 2009 18:43:33 GMT

Posted To: MND NewsWire

It is finally official. The homebuyers' tax credit has been extended to April 30, 2010. President Barack Obama approved the extension as part of a $24 billion economic stimulus bill signed Friday. The bill also includes an extension of unemployment benefits to the longtime jobless and tax credits for some businesses. The housing tax credit portion of the bill extends the $8,000 tax credit for home buyers who are purchasing their first home from the current November 30 deadline and expands the program to offer a credit of $6,500 to other homeowners who have lived in their current home for at least five years and are seeking to relocate. Another modification to the original legislation raises the income limits for program participation from $75,000 for a single purchaser to $125,000 and from...(read more)

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Fannie Mae Posts 3Q Loss; Asks Treasury for More Money

Jann Swanson — Fri, 06 Nov 2009 17:31:00 GMT

Posted To: MND NewsWire

Citing 22.0 billion of credit-related expenses, Fannie Mae Thursday night announced it lost a net $18.9 billion in the third quarter of 2009. Losses in the second quarter totaled $14.8 billion and $30 billion in the third quarter of 2009. The third quarter loss resulted in a net deficit of $15 billion as of September 30 and prompted the Acting Director of the Federal Housing Finance Agency (FHFA) to request an additional infusion of that amount from the Department of the Treasury. FHFA has asked that the $15 million be made available by December 31. The loss on a per share basis was $3.47, a substantial increase from the $2.67 loss posted last quarter, but a vast improvement over the $13 per share loss during the third quarter of 2008. Fannie reported net revenues of $5.95 billion in the third...(read more)

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MBS MORNING: MBS Settling Into The Green Groove

Matthew Graham — Fri, 06 Nov 2009 16:29:00 GMT

Posted To: MBS Commentary

We'd expect the wake of a much-anticipated NFP print to be volatile... That assumption isn't really a big leap of faith for most market watchers, and indeed that's what we're seeing. But as the volatility decreases, we're seeing suggestions of both stability and correction. Traders are preparing to cash in... So should you... Let's discuss the chart for a moment... Generally, today is a green one for MBS. I wouldn't even pay much mind to the outlying levels following NFP as those are merely the more violent death throws of the volatility that almost always peaks and begins to wane on the printing of this report. 101-00 looks reasonably supportive in a technical sense, and of course it always carries the "round number" psychological impact as well. Even...(read more)

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Risk Retention and Transparency in the Mortgage Market

Jim Russell — Fri, 06 Nov 2009 15:50:00 GMT

Posted To: Voice of Housing

The House Financial Services Committee’s systemic regulator bill, HR 1754 , is hung up this month on the proposed risk retention requirements. The proposal requires creditors to retain 10 percent or more of credit for securitized loans and let regulators adjust that level to between 5 percent and 10 percent. Financial institutions prefer a 5 percent base. The argument over the specific number will be resolved. The larger issue --- the need for “skin in the game” in the new mortgage lending paradigm --- no one disputes. Risk retention will establish a necessary sense of ownership and responsibility at the origination end of the home loan process. But any risk retention debate is incomplete unless policymakers give equal weight to time to the need for transparency. One doesn’t...(read more)

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Float Bias Back as Mortgage Rates Hold Steady After Jobs Data

Victor Burek — Fri, 06 Nov 2009 15:43:59 GMT

Posted To: Mortgage Rate Watch

Mortgage rates continued to hold steady yesterday as prices of mortgage backed securities slowly inched higher yesterday. AQ and MG were discussing the supply and demand dynamics of the MBS market yesterday, citing several reasons for the stable range being held by MBS coupons, even as benchmark 10 year Treasury rates held near recent highs. HERE is an explanation of the logic behind MBS stability. A few lenders who were pricing loans conservatively in the morning eventually repriced for the better by afternoon. Before we get into today’s data, I want to give a quick update on the First Time Home Buyer Tax credit. Two days ago the Senate passed a bill extending the credit and yesterday, yesterday the House of Representatives also passed the bill which in effect extends the tax credit...(read more)

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MBS ALERT: Falling From the Highs to the Lows

Adam Quinones — Fri, 06 Nov 2009 14:46:00 GMT

Posted To: MBS Commentary

Looks like the short base has not be taken out in 10s yet... The 10yr note yield just rose to 3.54%. Hopefully we get some short covering there and a reversal. Unfortunately this is having negative effects on "rate sheet influential" MBS coupons. The FN 4.0 is now -0-01 at 98-12 and the FN 4.5 is trading -0-03 at 100-31 after hitting an intraday high of 101-16. Look how steep the yield curve is now...this is getting rediculous. Buy the curve already! IF YOUR LENDER ALREADY PUBLISHED PRICING, A REPRICE FOR THE WORSE MAY OCCUR 10:15 UPDATE: The FN 4.0 is now +0-03 at 98-16 yielding 4.156%. The FN 4.5 has recovered from the lows of the day and is now trading +0-03 at 101-05 yielding 4.356%. The secondary market current coupon is 4.276%. The current coupon is +75/10yr TSY and +58/10yr...(read more)

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Foreclosure and Lending Regulation News from North Carolina. Updates from Fannie, Freddie, PMI, AIG; Tax Credit Extended

Rob Chrisman — Fri, 06 Nov 2009 14:43:17 GMT

Posted To: Pipeline Press

A co-worker recently asked me about "instant messaging". I told him that the only instant messaging that I do is with my middle finger. (Illustration not necessary.) In a move that other states may take note of, North Carolina, the N.C. Office of the Commissioner of Banks (NCCOB) is sending a message by announcing that it is proposing mortgage rules to help reduce foreclosures, to improve consumer protection and the functioning of the mortgage market, and to implement the S.A.F.E. Act. (North Carolina's NCCOB regulates state-chartered banks, thrifts, savings and loans, trust companies, and more than 875 mortgage lenders/servicers/brokers and 9,800 mortgage loan originators, as well as numerous consumer finance companies, check-cashers, and other financial services.) They are considering...(read more)

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MBS OPEN: Rates RALLY After Jobs Data

Adam Quinones — Fri, 06 Nov 2009 13:33:00 GMT

Posted To: MBS Commentary

Oct Non-farm Payrolls Worse than Expected at -190,000 vs. consensus -175,000 vs. Sept -219,000 (previously -263,000) Unemployment Rate: 10.2% vs. consensus 9.9% vs. Sept 9.8% (previously 9.8%). Highest unemployment rate since 10.2% in April 1983 August Non-farm payrolls revised to -154,000 from -201,000. July unrevised at -304,000 Average hourly earnings +0.3% vs. consensus +0.1% vs. Sept +0.1%, to $18.72 vs. Sept $18.67. Year-on-year average hourly earnings +2.4 % Average work week 33.0 hours vs. consensus 33.1 vs. Sept 33.0. Aggregate weekly hours index -0.2 % vs. Sept -0.5 % Below are the market's reactions to the data. Dont get comfortable yet, the market's initial reaction is not the best indicator of the day ahead. Give this a few minutes to set in... The 10yr.... The FN 4.5....(read more)

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The Day Ahead: Fannie Mae Needs Another Bailout; Markets Wait for Jobs Report

Patrick McGee — Fri, 06 Nov 2009 12:59:15 GMT

Posted To: MND NewsWire

Trading is cautious ahead of the month’s most important indicator. Equities jumped more than 2% on Thursday on optimism for the labor market and positive earnings from blue-chip companies, but sentiment is more cautious in the final hour before nonfarm payrolls. Dow Futures continue to dance around the 10k level while S&P 500 futures trade half a point higher at 1,064. WTI crude is back below the $80 per barrel mark, but Spot Gold is up more than $3 to $1,093.38. Meanwhile, the dollar is weaker against the yen, euro, and Aussie dollar, but stronger against the Canadian loonie. Outside of markets the news is that Fannie Mae has asked for a fourth dose of bailout funds from the government. The government-sponsored mortgage lender announced losses of $19 billion from July to September...(read more)

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MBS CLOSE: What The Curve Says About The "Bond" Market

Matthew Graham — Thu, 05 Nov 2009 22:34:00 GMT

Posted To: MBS Commentary

TOMORROW: NFP at 830AM Wholesale Trade at 10AM Consumer Credit at 3pm Ok... Of course anything can happen tomorrow, and probably will, but at some point in the reasonably near future, a "quantum of solace" should show up to the party... Not talking about your buddy bringing over their "Bond collection," but rather, our "collection of Bond" metrics is suggesting it's almost time to call our much anticipated FLATTENER (short term yields and long term yields become more similar) in as a missing person. What does all that greek mean? If short term and long term yields move closer together, either the long end goes lower, the short end goes higher, or something in between... And although there's plenty of overhead room in short yields that can push the 10yr...(read more)

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Despite Less MBS Purchases, Fed Still Helping Keep Mortgage Rates Low

Adam Quinones — Thu, 05 Nov 2009 22:04:00 GMT

Posted To: MND NewsWire

The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS). In the five trading days between October 29 and November 4, the Federal Reserve purchased a total of $16.00 billion agency MBS. In those five days the Federal Reserve sold no agency MBS coupons. The Fed's weekly net purchases totaled $16.00 billion. The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers. Since the inception of the program...(read more)

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MBS AFTERNOON: Fixed Income Winding Down As NFP Approaches

Matthew Graham — Thu, 05 Nov 2009 20:31:00 GMT

Posted To: MBS Commentary

The price action in the 10yr is like a coiling cobra at the moment. A range beset by yesterday's 3.56 snd this AM's 3.515 has gradually narrowed into what must consequently be wherever it is the market wants to be ahead of the NFP report... The cobra's extended body gradually occupies a smaller and smaller footprint as it prepares to strike out... Either direction is possible... It's also possible that he may not see a sufficient opportunity to strike and the movements that undo the coiled position will be less directional... Regardless of that snake in the grass, the supportive-week for MBS has been decidely, well, supportive... As AQ mentioned earlier, we're seeing an uncommon occurrence in that MBS are extending whereas the yield curve is steepening. In plainer and simpler...(read more)

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Homebuyer Tax Credit is Net Positive, But Not the Universal Solution

Tim Rood — Thu, 05 Nov 2009 20:10:00 GMT

Posted To: Voice of Housing

Following a 98-0 vote in the Senate, the House of Representatives has overwhelmingly agreed to pass legislation extending the home buyer tax credit until April 30, 2009. Next the bill will head to the desk of President Obama to be signed into law. No one argues the extension of the tax credit has value to the marketplace. But what other immediate steps must be taken --- either by government or industry --- to create a sustained housing recovery? It is universally expected that interest rates will rise next year when the Fed is expected to stop purchasing MBS next year. How high, how quickly is a matter for debate. What is not debatable is the negative impact of higher rates and an ever shrinking credit box. The extension of the Homebuyer Tax Credit will serve to soften these blows. However...(read more)

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House Passes Home Buyer Tax Credit Extension. Obama to Sign Friday

Adam Quinones — Thu, 05 Nov 2009 19:57:00 GMT

Posted To: MND NewsWire

The House of Representatives has voted to pass legislation extending the home buyer tax credit until April 30, 2009. Last night the Senate voted 98-0 to pass the legislation. Next the bill will head to President Obama to be signed into law on Friday. While the bill extends the $8,000 tax credit for first time home buyers, it also makes available a tax credit to homeowners who have lived in their current residence for at least five years. The credit for these buyers will be capped at $6,500. Income levels will be extended from the current limits of $75,000 for a single purchaser and $150,000 for couples to $125,000 and $225,000 respectively. Above those limits there are diminishing credits available. Housing interests, especially the National Association of Home Builders and the National Association...(read more)

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MBS LUNCH: Reprices for the Better Reported

Adam Quinones — Thu, 05 Nov 2009 19:04:00 GMT

Posted To: MBS Commentary

The 10yr TSY note continues to extend yesterday's range (wait and see mode. READ MBS OPEN )..... Meanwhile...."rate sheet influential" MBS coupons continue to out-peform their benchmark big brothers. In a thinly traded market, the FN 4.0 is +0-08 at 98-14 yielding 4.162% and the FN 4.5 is +0-06 at 101-02 yielding 4.371%. The secondary market current coupon is 4.298%. The current coupon yield is +76/10yr TSY and +60/10yr SWAP. As you can see in the chart below, FN 4.5 prices have recovered all their pre/post-FOMC price losses. Update on the shape of the yield curve. 2s/10s are steeper again! Now at 264 basis points.... If you are wondering...isn't it odd that the yield curve is steeper and "rate sheet influential" MBS coupon yields continue to outperform their benchmarks...(read more)

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Fannie and Freddie: Mortgage Rates Dip Below 5 Percent Again

Jann Swanson — Thu, 05 Nov 2009 19:02:38 GMT

Posted To: MND NewsWire

Mortgage rates once again slipped below 5 percent during the week ended November 5 according to data released today by Freddie Mac. Results from the weekly Primary Mortgage Market survey peg the average rate for the 30-year fixed-rate mortgage (FRM) at 4.98 percent, down from an average of 5.03 percent a week earlier. Fees and points averaged 0.7 both weeks. The 15-year FRM averaged 4.40 percent with 0.6 point compared to 4.46 percent also with 0.6 point last week. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) dropped 7 basis points from the previous week's average for an average of 4.35 percent. Fees and points were unchanged at 0.6 point. The one-year Treasury-indexed ARM was at 4.47 percent with 0.5 point. Last week the average was 4.57 percent with 0.5 point....(read more)

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Fannie Mae Launches Lease Program for Borrowers

Jann Swanson — Thu, 05 Nov 2009 18:36:13 GMT

Posted To: MND NewsWire

Homeowners who are facing foreclosure may soon be able to remain in their homes for up to a year under a 'Deed for Lease' program announced Thursday by Fannie Mae. Under the terms of the program qualifying homeowners who are not eligible for modifications to their mortgage may be able to sign a lease with the government sponsored enterprise and stay in their homes during a transitional period. Jay Ryan, vice president of Fannie Mae said that the program will help eliminate some of the uncertainty of foreclosure, keep families and tenants in their homes, and help to stabilize neighborhoods and communities. Borrowers who qualify for the program but are not eligible for other foreclosure avoidance programs can transfer their property to the lender through a deed in lieu of foreclosure...(read more)

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Mortgage Rates Hold in Range. Locking Still Favored Over Floating

Victor Burek — Thu, 05 Nov 2009 18:15:53 GMT

Posted To: Mortgage Rate Watch

The Federal Reserve released their statement on monetary policy and economic outlook yesterday. Although there were some changes to the text of the statement, markets got what they were expecting. The FOMC held the Fed funds rate at its current level and gave a cautiously optimistic outlook on the economy. After some early morning weakness. prices of mortgage backed securities improved after Fed statement and closed basically unchanged on the day. Unfortunately, falling prices early in the session led some lenders to reprice for the worse. However, some, not all, lenders repriced for the better later in the day. If you would like to read more on the Fed statement, check out AQ’s analysis. READ MORE . I also recommend reading the MBS OPEN for an in-depth discussion on how the Fed's...(read more)

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MBS MORNING: Explaining Yield Spreads and the Curve

Adam Quinones — Thu, 05 Nov 2009 17:26:00 GMT

Posted To: MBS Commentary

Lets do a quick recap of yield spreads... Debt issued by the US Government (Treasury bills, notes, and bonds) is considered to be the highest credit quality....also known as 'Risk Free'. These 'RISK FREE' securities (TSY bills, notes, and bonds) are the foundation for all other interest rates. This is why Treasury securities are called 'benchmarks'. All other debt issued is considered to be less quality than US Treasuries. To compensate for higher risk of investing, because other debt is considered lower quality than US Treasuries, all other debt trades at a premium over the 'risk free' rate. This is referred to as a 'yield spread' over a comparable benchmark. Comparable means: of similar maturity. For example you would compare the returns of a 10yr municipal...(read more)

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Jobless Claims Improve. Temporary Hiring Adds Volatility to Data

Adam Quinones — Thu, 05 Nov 2009 15:25:00 GMT

Posted To: MND NewsWire

The Department of Labor this morning released the Unemployment Insurance Weekly Claims report, also known as Jobless Claims. This data set tracks new filings for unemployment insurance benefits and the number of Americans who continue to receive state unemployment benefits (called continuing claims or insured unemployment). The fact that this data is released on a weekly basis makes it very appealing to traders and economists as it provides a week over week view into the health of the domestic labor market. Trader's and economists are looking for hints for answers to questions like: Are jobs being created? Are jobs being lost? Does the trend indicate more job losses ahead? Does the trend indicate firms are expanding and hiring more in the process? Consumers drive output of goods and services...(read more)

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Fed Funds Unchanged; Results from GMAC, Radian; Updates from Fannie, UBOC, USB

Rob Chrisman — Thu, 05 Nov 2009 14:47:34 GMT

Posted To: Pipeline Press

Yesterday was a special day. In the late afternoon I visited Costco, which some people feel simultaneously represents everything that is both bad and good about the retail channel. The change in time over the weekend had made it so the setting sun showed through the front entrance, illuminating the Samsung 46 inch plasma, the flannel shirts, AND the pre-lit Christmas tree boxes all at once. It was a tender moment. What are Fed Funds? These are cash balances held by banks with their local Federal Reserve Bank, typically involved in an "inter-bank sale" of a Fed fund deposit for one business day - overnight. And the Fed Funds Rate is the overnight interest rate charged by those banks with excess reserves on hand. Why would this impact the mortgage rate that James & Jen Borrower...(read more)

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MBS OPEN: Rates Sideways After Data. Wait and See Mode...

Adam Quinones — Thu, 05 Nov 2009 14:24:00 GMT

Posted To: MBS Commentary

Recap of Yesterday... ADP Employment Report: -203,000 jobs in October vs. revised for better -277,000 cuts in September. October read better than expected. Treasury Refunding Announcment: $81bn in TSY supply next week. $40bn 3yr notes, $25bn 10s, and $16bn 30s. 10yr note sales $1bn more than expected..TSY extending duration of portfolio Bankruptcy filings +8.9% in September vs. +4.1% in August. +27.9% year over year FOMC makes a few changes to statement, does not alter verbiage "for an extended period". I wrote lengthy discussion on what the text is telling us and how it relates to mortgage rates. READ MORE Senate Passes Homebuyer Tax Credit Extension 98-0. Goes to House for vote. READ MORE FHA delayes the release of their internal audit...says inaccuracies in study's econometric...(read more)

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The Day Ahead: Stock Futures Lower Before Jobless Claims and Productivity Data

Patrick McGee — Thu, 05 Nov 2009 13:08:00 GMT

Posted To: MND NewsWire

The US Senate OK’d an extension of the first-time home-buyer tax credit that was to expire at the end of this month. If the house approves the Senate bill, the incentive would expire six months into 2010. In addition, the program will allow homeowners who have lived in their current home for more than five years to receive a $6,500 tax credit to purchase a new primary residence. READ MORE The Senate bill also includes an extension of unemployment benefits for states with jobless rates of 8.5% or higher. In those states, individuals will be eligible for an additional 20 weeks of benefits. On to markets . . . After ending the day with mixed results yesterday, Thursday is set to open with similar sentiment. Equity futures are looking slightly down ahead of the weekly jobless claims report...(read more)

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