Mortgage News Daily

The Day Ahead: Jobless Claims, Pending Home Sales, Productivity

Patrick McGee — Thu, 02 Sep 2010 12:27:11 GMT

Interest rates are modestly higher this morning after equities closed nearly 3% higher Wednesday. Ninety minutes before the opening bell, S&P 500 futures are just below yesterday's high at 1081.25 and the benchmark 10-year Treasury note is -0-04 at 100-09 yielding 2.593% (+1.3%). The October delivery FNCL 4.0 is -0-02 at 102-27. A busy economics calendar carries the potential to shift market sentiment in the day ahead. At 8:30, initial jobless claims are anticipated to rise 2k to show that 475,000 Americans filed for first-time unemployment benefits in the final week of August. The labor news comes one day before the official monthly numbers are released. The report should give further context to yesterday’s mixed data ― the ADP report showed 10k private jobs disappeared in the month...(read more)

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New Mortgage Rate Lows Lost as Stocks Rally and Bonds Correct

Adam Quinones — Wed, 01 Sep 2010 20:50:00 GMT

Posted To: Mortgage Rate Watch

Mortgage rates had a great day yesterday. This is the message we communicated to readers... ATTENTION: Mortgage Rates Hit New Lows If you've been floating your loan or have yet to apply for a refinance because it just didn't seem worth the hassle, congratulations, mortgage rates hit new lows today, it's now worth the hassle! If you've refinanced in the last 20 months, there is a darn good chance your refinance option is back in the money, again! The best 30 year fixed mortgage rates have fallen into the 4.125% to 4.375% range for well-qualified consumers. Some lenders will even go as low as 3.875% if the borrower is willing to pay points. Although the 4.125% quote isn't being offered by the large retail banks (sorry retail L.Os), the smaller mortgage bankers and independent brokers do have...(read more)

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Recap and Charts: July Construction Spending Data

Jann Swanson — Wed, 01 Sep 2010 18:31:00 GMT

Posted To: MND NewsWire

The Census Bureau today released Construction Spending data for July 2010. Residential construction spending includes remodeling, additions, and major replacements to owner occupied properties subsequent to completion of original building. It includes construction of additional housing units in existing residential structures, finishing of basements and attics, modernization of kitchens, bathrooms, etc. Also included are improvements outside of residential structures, such as the addition of swimming pools and garages, and replacement of major equipment items such as water heaters, furnaces and central air-conditioners. Maintenance and repair work is not included. The value of all construction put in place in the U.S. on an annualized basis was $805.2 billion compared to a rate of $813.1 billion...(read more)

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Rising Refi Index Indicative of Pickup in Prepay Speeds on Recent Vintage MBS

Adam Quinones — Wed, 01 Sep 2010 16:35:00 GMT

Posted To: MND NewsWire

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending August 27, 2010. The MBA's loan application survey covers over 50% of all U.S. residential mortgage loan applications taken by retail mortgage bankers, commercial banks, and thrifts. The data gives economists a snapshot view of consumer demand for mortgage loans. In a low mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out a lower monthly payment. If consumers are able to reduce their monthly mortgage payment and increase disposable income through refinancing, it can be a positive for the economy as a whole (creates more consumer spending or allows debtors to pay down personal liabilities like credit cards). A falling trend of...(read more)

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Another Review of Originator Compensation Regs; Loan Programs That Don't Require an Appraisal; JP Morgan Cuts Deal to Reduce Buyback Exposure

Rob Chrisman — Wed, 01 Sep 2010 16:14:30 GMT

Posted To: Pipeline Press

Rates continue to trend lower, helped yesterday by the release of the FOMC meeting's minutes which alluded to the possibility of the Fed reinvesting in MBS's. (But heck, as one trader told me, low mortgage rates are helping agency-qualified borrowers, not others in the economy like renters who can't qualify, not those that don't have jobs or those that simply pay cash for houses .) "A few members worried that reinvesting principal from agency debt and MBS in Treasury securities could send an inappropriate signal to investors about the Committee's readiness to resume large-scale asset purchases," the Fed said in the report, referring to mortgage-backed securities. The minutes from the August 10 meeting made it clear that the Fed is far from ready to restart Quantitative Easing Round 2. It didn...(read more)

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Bond Market Suffers as Investors Reallocate Funds into Riskier Assets

Adam Quinones — Wed, 01 Sep 2010 14:12:00 GMT

Posted To: MBS Commentary

Stocks are rallying and the bond market is taking a beating after a much better than expected read on the manufacturing sector. The August ISM Manufacturing Index came in at 56.3 vs. economist estimates for a read of 53.0. The "Prices" index rose 4 points to 61.5 from 57.5, quelling deflationary fears and giving bond traders a reason to fade the rally. Stocks were up before 10am data but didn't take flight until after ISM flashed. S&P futures are currently up 27 handles at 1075.25. The bull flattener is unwinding again. The 2s/10s curve is 9bps steeper at 209bps. The long bond is 14.7bps higher at 3.668%. The 7-year note is +12.5bps at 2.046%. The 10yr note is +12.3bps at 2.593%. Volume was heavy into the downtrade. Although production MBS coupons are performing much better than their benchmark...(read more)

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Fed Leaves Door Open to Buy More MBS if Needed

Adam Quinones — Wed, 01 Sep 2010 12:47:00 GMT

Posted To: MBS Commentary

Production MBS coupon prices hit new record highs yesterday, pushing mortgage rates through the 4.25% barrier to new lows. "Rate sheet influential" MBS coupons were led higher by longer dated Treasuries, which benefitted from month-end allocations and a continued correction from the sell off seen last Friday. The new all-time price high for the front month FNCL 4.0's is 103-19. The October delivery FNCL 4.0 went out +0-10 at 103-07. Yield spreads ended the session wider (nominally) vs. duration adjusted benchmarks. The 10 yr note went out +0-17 at 101-12 yielding 2.47% (-6bps). The 2s/10s curve bull flattened back down to 200bps. It should be noted that Treasuries rallied regardless of a modest bid for equities. The S&P closed +0.03% at 1049.27. A hint of better pricing to come was offered...(read more)

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The Day Ahead: Stocks Rally Ahead of Jobs, Manufacturing Data

Patrick McGee — Wed, 01 Sep 2010 12:21:00 GMT

Posted To: MBS Commentary

The first day of September looks to open strongly while investors await key data on employment and manufacturing. About ninety minutes before the opening bell, S&P 500 futures are up nearly 12 points to 1,060 and Dow futures are jumping 75 points higher at 10,081. Interest rates are moving higher in the wake of improved sentiment in equities. The 10 year Treausry note is -0-10 at 101-01 yielding 2.507%. The October delivery FNCL 4.0 is -0-02 at 103-05. European stocks are also about 1.5% higher and Asian markets finished stronger (a notable exception being China’s Shanghai index, which fell 0.6%). At 8:15, the ADP Employment Report is anticipated to show that 18,000 private jobs were created in August, according to economists polled by Reuters. Investors will be watching the numbers...(read more)

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Lock Desks Buy Back Hedges. Potential Shift in Production Coupon Looms

Adam Quinones — Tue, 31 Aug 2010 21:44:00 GMT

Posted To: MBS Commentary

Yesterday we heard banks were buying back MBS hedges. This means lock desks were actively reducing their pipeline coverage (forward hedges) to account for an expected increase in fallout. More fall out = less deliverable loans = added hedging costs unless you replace the production with similar paper before settlement, READ MORE Looking back, this was a hint of strong pricing to come. Just in case you haven't seen the headline yet, this is what we told consumers today: ATTENTION: Mortgage Rates Hit New Lows I actually felt the need to apologize to retail L.Os in that post because I know those headlines might make their lives miserable. It is what it is though, the FNCL 4.0 hit a new price high and loan pricing reflects it. On average, rebate was 30.2bps better vs. yesterday. HERE is a full...(read more)

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ATTENTION: Mortgage Rates Hit New Lows

Adam Quinones — Tue, 31 Aug 2010 21:18:00 GMT

Posted To: Mortgage Rate Watch

If you've been floating your loan or have yet to apply for a refinance because it just didn't seem worth the hassle, congratulations, mortgage rates hit new lows today, it's now worth the hassle! If you've refinanced in the last 20 months, there is a darn good chance your refinance option is back in the money, again! The best 30 year fixed mortgage rates have fallen into the 4.125% to 4.375% range for well-qualified consumers. Some lenders will even go as low as 3.875% if the borrower is willing to pay points. Although the 4.125% quote isn't being offered by the large retail banks (sorry retail L.Os), the smaller mortgage bankers and independent brokers do have access to loan pricing that will allow them to offer new rate lows. So this brings us full circle on the advice we offered consumers...(read more)

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S&P/Case-Shiller: Home Prices Rise in June. Tax Credit Hangover Ahead

Jann Swanson — Tue, 31 Aug 2010 19:52:00 GMT

Posted To: MND NewsWire

The Standard & Poor's/Case-Shiller U.S. National Home Price Index was up 4.4 percent in the second quarter of 2010, more than recovering from the 2.9 percent loss that was suffered in the first quarter, but the index committee warned that recent housing indicators "point to more ominous signals as tax incentives have ended and foreclosures continue." On a month to month basis, the 10-city index improved 1.0 percent to 161.04 and the 20-city index rose 1.0 percent to 147.97. The year over year 10-City and 20 City Composite Indices for June marked the first time in 16 months that the increase in annual returns moderated, pointing to a possible deceleration in home price returns. In May the YoY increase in the 10-City Composite was 5.4 percent, in June it was 5.0 percent. The 20-City figure...(read more)

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Production MBS Coupon Hits New High. Loan Pricing Noticeably Better as 3.5s Trade Forward

Adam Quinones — Tue, 31 Aug 2010 16:26:00 GMT

Posted To: MBS Commentary

While 2 of the 3 top tier data sets released this morning failed to improve on a month to month basis, 2 of those 3 were better than economists were expecting. Consumer Confidence perked up and beat consensus forecasts while Chicago PMI was a downer all around. Equity market seem to be focusing on the better than expected headlines vs. the month over month deteriorations, specifically the large uptick in Consumer Confidence. I say that because Consumer Staples and Consumer Discretionaries are leading the broader market higher. I would also point toward technical support at S&P 1040 as a reason to buy. This is where volume accumulated and stocks reversed course after a weak Chicago PMI print at 945am. S&Ps are currently +6.00 at 1051. Trading volume has already surpassed yesterday's...(read more)

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New FHA MIP Structure to Slow Streamlines; Appraisal Adjustments; GSE MBS Issuance in July; FDIC Transparency; Update on Non-Agency Paper

Rob Chrisman — Tue, 31 Aug 2010 14:50:11 GMT

Posted To: Pipeline Press

I was talking to a correspondent rep yesterday, and he said, "I just got the best question from a client. The client (not a mortgage banker or broker) asked, "Hey, we have a borrower that up until now has been using a social security number that was 'not issued by the Social Security Administration'. They now have a green card and a valid SS number - can we go back and transfer the old income on the invalid SS# for the last few years in qualifying the borrower for a new loan?" Ha - you just can't make this stuff up. I realize that it is almost September, but it is interesting to see what the agencies did for MBS issuance in July . Fannie Mae issued over $42 billion in MBS, up 6.4% from June, and the highest level of MBS issuance since February. Freddie, however, dropped slightly from June to...(read more)

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The Day Ahead: Home Prices, Consumer Confidence, FOMC Minutes

Adam Quinones — Tue, 31 Aug 2010 11:57:00 GMT

Posted To: MBS Commentary

Recap of Yesterday After experiencing a sizable sell off on Friday, the bond market spent the day yesterday in recovery mode. Prices of U.S. Treasuries rallied across the curve with the long end leading the way. The 10 year TSY note went out +1-00 at 100-26 yielding 2.53% (-11.6bps). The 7 year note was the star performer, rallying 25/32 in price to a yield of 1.969% (-12.3bps). Trading volume was below average and position squaring/short covering was noted. Trading volume in stocks was also apathetic, based on my records equity futures experienced their lowest volume day of the year on Globex. This is indicative of an indecisive market, something that should continue as we draw closer to the release of the Employment Situation Report on Friday. The day started slow in TBA land as dealers attempted...(read more)

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Mixed Rate Outlook Provides Perspective: Risk Greatly Outweighs Reward

Adam Quinones — Mon, 30 Aug 2010 19:56:00 GMT

Posted To: MBS Commentary

I sat down to write "The Week Ahead" last night and drew a blank. Not that it was a tedious task outlining the events that held the potential to move mortgage rates, that was the easy part. My frustrations arose when formulating an outlook. Allow me to think out loud for a moment... We've just come off a week that ended with a scary sell off, but that sell off wasn't exactly unexpected though. The "rate sheet influential" end of the yield curve was/is extremely overbought and positions skewed largely toward the LONGS . If not for pure position squaring purposes, Treasuries were due a correction and it happened. The bond market is clearly still searching for directional guidance though. This is evident via added chopatility around econ data, specifically at the price highs and lows. It is also...(read more)

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What Might Move Mortgage Rates in the Week Ahead?

Victor Burek — Mon, 30 Aug 2010 19:44:00 GMT

Posted To: Mortgage Rate Watch

Last week ended on a very sour note for mortgage rates... After a better than expected read on 2nd quarter GDP and a not so scary speech from the Federal Reserve Chairman, the 10 year Treasury note yield rose 16.6 basis points and mortgage-backed securities prices fell significantly. This forced lenders to reprice for the worse, which increased mortgage rates. Although consumer borrowing costs rose by about 10 basis points on the week (0.10% of the loan amount), the best 30 year fixed mortgage rates remained in a range between 4.25% and 4.50%. The economic calendar is quite busy this week. The most influential report will be released on Friday; the Employment Situation Report. Because this data provides an in-depth look at the health of the driving force behind consumer spending, the labor...(read more)

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HUD Secretary Tiptoes Around Another Tax Credit, Pushes Balanced Housing Policy

Jann Swanson — Mon, 30 Aug 2010 18:11:31 GMT

Posted To: MND NewsWire

In the wake of a full week full of bad economic news, especially housing indicators, Secretary of Housing and Urban Development (HUD) Shaun Donovan appeared on CNNs Sunday morning news and interview program State of the Union . Host Ed Henry prefaced the interview with July housing numbers - a 27 percent decline in existing home sales and new home sales at their lowest levels since 1963 . "Many analysts," Henry said, "believe that housing started this whole financial crisis. We saw some pretty grim headlines this week sparking some fears about a double dip recession." He asked Donovan, what he could say to reassure Americans that this will not happen. Donovan said that the dip in house sales in July was not unexpected because it would mark the end of the homebuyers' tax credit that had been...(read more)

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MBS Prices Recover from Friday Downtrade. Reprices for Better Possible

Adam Quinones — Mon, 30 Aug 2010 16:02:00 GMT

Posted To: MBS Commentary

Led by a corrective bounce in Treasury prices, rate sheet influential MBS coupons have rallied more than 8 ticks from where they opened at the session lows. This is not reflective of concentrated demand for agency MBS, as evidenced via wider production MBS coupon yield spreads, as much as mortgages are playing follow the leader with a bull flattening benchmark yield curve. Although it is normal for MBS to lag a TSY rally, there also looks to be some localized weakness in the MBS market as dealers are attempting to distribute the $3+ billion in new loan supply that was offered by originators on Friday. The October delivery FNCL 4.0 is currently +0-13 at 102-24. Bid wanted... Treasuries are retesting the Friday sell off. The September expiry 10 year TSY futures contract is +0-30 at 126-03. The...(read more)

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Conservator's Report: A Different View of the GSE's Demise

Jann Swanson — Mon, 30 Aug 2010 15:43:38 GMT

Posted To: MND NewsWire

The first Conservator's Report on the Enterprises' Financial Performance issued by the Federal Housing Finance Agency on Thursday makes an argument that the Government Sponsored Enterprises' role in the housing market was and still is vital. It also paints a picture of their fall prior to being placed in federal conservatorship in the fall of 2008. Some observers are already pointing to it as a map for the eventual reorganization of the two government sponsored enterprises. Another way of viewing the report is that is presents a strong argument for leaving the GSEs in charge. According to the report, in 2003, 62 percent of all mortgages originated in the country were conventional/conforming loans. Another 20 percent or so were FHA or jumbo loans; only 8 percent were subprime and...(read more)

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Originator Compensation Guidance Offered by Lender; Common Reasons for Buyback Requests; Servicer Rankings; Warehouse Line News; Investor Updates

Rob Chrisman — Mon, 30 Aug 2010 14:26:00 GMT

Posted To: Pipeline Press

Few people feel that mortgage banking is a non-profit proposition. And even though we still have seven months until the compensation rules change/may change, loan officer pay seems to be on the front burner for many originators . For example, Nationstar , a wholesale company calling on brokers, just told their clients that starting last week it will "cap the Broker's Net Yield Spread Premium (YSP) to the following: Fixed-rate loan products - 3%, ARM loan products - 2%. Nationstar is defining Net YSP as the following: Gross YSP less any and all investor and Nationstar price adjustors. If brokers want to credit fees for the borrower, the fees must be deducted from the broker's Max YSP of 3% on Fixed-rate loan products and 2% on ARM loan products." MND alluded to this HERE It...(read more)

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The Week Ahead: Busy Calendar Before Employment Situation Report

Adam Quinones — Mon, 30 Aug 2010 11:38:00 GMT

Posted To: MBS Commentary

Economic Calendar The first Friday of a new month is upon us, that means the official Employment Situation Report is just ahead. Because this data provides an in-depth look at the health of the driving force behind consumer spending, the labor market, investing sentiment is highly dependent on the findings of the two surveys that make up the Employment Situation Report: Non-Farm Payrolls and the Household Survey. With that in mind, leading up to the release the market will likely be hesitant to head too far in either direction without adequate confirmation and acceptance of that move. From Reuters : U.S. August payrolls and unemployment data on Friday. Payrolls are forecast to have fallen by about 99,000, according to Reuters polling, a smaller fall than the 131,000 in July. After the recession...(read more)

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Bond Market Hits Reset Button, Poor Econ Data Forecasting, Loan Pricing Review

Adam Quinones — Fri, 27 Aug 2010 20:22:00 GMT

Posted To: MBS Commentary

A brief market wrap and a few observations heading into the weekend... The October Delivery FNCL 4.0 went out -0-17 at 102-11. Rate sheet influential mortgages, which were trading at extreme oversold spread levels this week, performed well against Treasuries and swaps today, but huge price declines forced lenders to reprice for the worse, pushing mortgage rates higher. As would be expected, originator pipeline hedging picked up today. Over $3bn in new loan production was sold forward in the TBA market, mostly in 4.0 and 4.5 30 year paper. While the damage seems dramatic, after the dust settled, you can see the FNCL 4.0 has landed right back in the middle of it's month long range. Steep MBS price declines were a direct result of a correction in the long end of the benchmark yield curve....(read more)

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MBA: 30-Day Delinquencies on the Rise Again

Jann Swanson — Fri, 27 Aug 2010 17:12:00 GMT

Posted To: MND NewsWire

While it reported that most delinquency figures dropped substantially in the second quarter, the Mortgage Bankers Association's National Delinquency Survey also carried some dishearting harbingers of what might lie ahead. The report showed the seasonally adjusted delinquency rate for all loans at 9.85 percent, a drop of 21 basis points from the first quarter but 61 basis points higher than it was during the second quarter of 2009. Delinquency rate figures include all loans that are at least one payment past due, but do not include loans in the process of foreclosure. When those are added into the total the delinquency rate rises to 13.97 percent compared to 14.01 in the first quarter. Foreclosure actions were started on 1.11 percent of loans, down from 1.23 percent in the first quarter...(read more)

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ALERT: Bond Market Repricing for the Worse as Stocks Rally

Adam Quinones — Fri, 27 Aug 2010 15:16:00 GMT

Posted To: MBS Commentary

Stocks initially sold to the lows of the week after Bernanke's speech flashed across wires but buyers were quick to take advantage of cheap prices. S&Ps have turned around and are now testing yesterday's session highs. The bond market is repricing as risk markets rally. The 2s/10s yield curve is 11bps steeper as the 10-year TSY note has shed over 1 full point and is 13.2bps higher at 2.612%. After consolidating all week, stored energy has been released! Down volume is HUGE! While mortgages are trading well relative to benchmarks, rate sheet influential MBS prices are still deep in the red. The FNCL 4.0 is -0-12 at 102-16 and the FNCL 4.5 is -0-09 at 104-06. 102-16 was the sell off target yesterday.... I know many lenders have delayed pricing but when they do publish, rebate will...(read more)

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Bernanke: Recovery Slower Than Expected. Fed Prepared to Provide Additional Stimulus if Necessary

Adam Quinones — Fri, 27 Aug 2010 14:04:00 GMT

Posted To: MBS Commentary

In his speech, Fed Chairman Ben Bernanke did not venture too far from recent rhetoric. He addressed the slower than expected pace of economic recovery but called attention to the fact that the world is not coming to an end either. To boost investor confidence, he repeatedly reminded us that the Fed stands at the ready to implement emergency measures if economic conditions do worsen considerably, which he feels is an unlikely event. Overall I think we got exactly what we were expecting: THIS IS WHAT WE WERE EXPECTING Here is the entire speech. I called attention to important excerpts... The Economic Outlook and Monetary Policy The annual meeting at Jackson Hole always provides a valuable opportunity to reflect on the economic and financial developments of the preceding year, and recently we...(read more)

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