MBS Live: MBS Afternoon Market Summary
Today had a very "weird" feel to it, for lack of a better term.  A lot of the price action, in Treasuries especially, seemed overly random, with a higher-than-normal degree of price/volume spikes that seemed to defy the normal avenues of causality, down which we might chase them.  In other words, it's not uncommon for us to see markets make a move in a seemingly random direction and random manner, but backed by enough volume that we infer that there must be something behind the move, only to uncover the truth in the following minutes, and sometimes hours.  But several of those random moves left market watchers guessing today as volume was strong and volatility elevated, but with many of the moves lacking good explanation.  MBS expressed some solidarity with our frustration at this randomness.  Instead of chasing it around too much, they huddles close to the narrow range established in the morning, following Treasuries only as much as they had to.  Overall, MBS were much less choppy and serendipitous.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
104-21 : -0-09
FNMA 4.0
106-05 : -0-04
FNMA 4.5
107-05 : -0-01
FNMA 5.0
108-09 : +0-06
GNMA 3.5
106-24 : -0-09
GNMA 4.0
109-04 : -0-04
GNMA 4.5
109-26 : -0-01
GNMA 5.0
110-20 : +0-01
104-14 : -0-09
105-26 : -0-05
106-21 : -0-01
107-18 : +0-07
Pricing as of 4:04 PM EST
Afternoon Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this afternoon.

3:06PM  :  ALERT ISSUED: MBS Trying To Hold Ground After Earlier Scare, Some Damage Done
Certainly "something" happened at 2:31pm that caused a big spike in futures volumes and a moderate spike in Treasury yields, but with no block trades being reported, we're not seeing clear causality. That said, MBS did chase the movement initially with 3.5's falling to their lows of the day breaking beneath 104-20 for the first time since 6/6. That was enough for at least one of the "early-to-act" lenders to reprice for the worse.

But now as we cross the 3pm Treasury close, we find Fannie 3.5's back at 104-21. 10's have bounced back slightly, but it's more of a "ground-holding" at the highs of the day than a pronounced turn-around. This puts the reprice outlook in a bit of a precarious position as it would be easier to assume more reprices were in tow if MBS were at the lows and falling or if Treasury cues looked increasingly ugly. The bottom line is probably that risk remains, but is somewhat less urgent than it might have been in the past half hour.

We'd keep an eye on 104-21 in Fannie 3.5s and if prices are below there and falling, risk is increasing. Treasury cues would come from crossing a line in the sand at 1.666. Bottom line, we might not be out of the woods yet, but the woods might not be totally as scary as they looked at first.
2:33PM  :  ALERT ISSUED: Potential Negative Reprices (EARLY Warning)
Seeing a BIG spike in Treasury futures volumes right now and 10yr futures moving lower in price, higher in yield. We don't know what's behind the move yet as it JUST happened, but fear some leakage into MBS. Thus this would be a super early reprice alert. It's fully possible that things bounce back and we end up with this being a non-event. But considering MBS are in line with their lows of the day and we're seeing unexplained sharp movement in TSY futures, we wanted to give you a heads up of potential further losses.
1:26PM  :  ALERT ISSUED: Weak 3-Year Auction Spooks Longer-Dated Treasuries, Or Does It?
The 3yr Note auction normally isn't that much of a market mover though today's was apparently weak enough that we are seeing a bit of a reaction farther out the yield curve where 10's have retested their high yields of the day. But looks can be deceiving...

Although the movement in 10's does indeed follow closely on the heels of the 3yr auction, the auction itself is not the market mover here. It's effects on 10yr Treasury futures had come and gone by 1:07pm and were minimal if noticeable at all. 1:11 is when volume spikes occurred both in Treasuries AND equities (our first clue that we're dealing with something besides the 3yr auction considering stocks wouldn't normally move in concert with bonds just after an auction unless something else was motivating both).

At first glance, the only news we have hitting at the same time as the market movements is Mexico's Felipe Calderon saying he sees an "important advance on the question of Europe" at this weekend's G20 meeting.

10yr yields broke their highs of the day and MBS production coupons moved from their highs closer to their lows. This has only been about a 4 tick loss in 3.5's and 6 ticks in 3.0s, but considering the absence of earlier positive reprices, the distance between current levels and rate-sheets this morning is even smaller. So from a logical standpoint, we'd have to see MBS shed a few more ticks before negative reprices are justified.
12:46PM  :  MBS Relatively Stable On The Day, Near Highs As Volume Wanes
It's been sort of an odd trading day so far... Volume was good overnight and we might even say it was strong in the first few hours of the domestic session. For instance, 10yr Futures saw 150k, 190, and 224k contracts traded in the hours ending at 9am, 10am, and 11am respectively. 560k contracts in the first 3 domestic hours of trading is above average, yet the movement associated with those hours has been surprisingly below average in terms of ground covered. There's clearly either a lot of push and pull on both sides of the bond market, a lot of indecision and hesitation ahead of the weekend's Greek elections and next week's FOMC, or some of all of the above.

MBS have responded by being even more narrow in range with Fannie 3.0's hovering within 3 ticks of 102-05 pretty much all morning. Fannie 3.5's have been centered on 104-25, ± 3 ticks. The economic data was passed over without so much as a disinterested 'hmmph...' and we find ourselves now continuing to drift sideways as lunch-time volumes set in, albeit closer to the highs of the morning's range than the lows. 3.5's are currently down 3 ticks on the day at 104-27 and 3.0's are down 6 ticks on the day at 102-08. 10yr yields are 4bps higher at 1.627, but had been as high as 1.647 earlier.
11:47AM  :  Wells To Discontinue Non-Wells Serviced FHA Streamlines
Wells Fargo Wholesale Lending will no longer accept non-Wells Fargo serviced FHA streamline refinance transactions. Wells Fargo is committed to helping borrowers nationwide with their mortgage financing needs, and this decision will help us accomplish that by focusing on borrowers in our existing servicing portfolio.

This policy applies to each of our origination channels across Wells Fargo Home Mortgage.

Wells Fargo Wholesale Lending will continue to accept FHA Regular Credit Qualifying Refinances including Rate and Term and Cash out Refinances provided they meet FHA’s definition of a Regular Credit Qualifying Refinance with an appraisal. This includes loans not currently serviced by Wells Fargo, and loans currently serviced by Wells Fargo.

Effective with registrations on or after June 19, 2012, Non-Wells Fargo serviced FHA streamline refinance transactions will not be accepted.
Live Chat Featured Comments
A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.

Michael Tadros  :  "REPRICE: 3:16 PM - Provident Funding Worse"
Chip Harris  :  "REPRICE: 3:00 PM - Interbank Worse"
Aaron Buyside Meyer  :  "remember the FICO score leaves out the 2 most important pieces of info: income & assets. Now granted a 640 is a 640 for a reason most of the time"
Dennis Lykins  :  "depends on the 640 individual. capacity, payment shock, layered risk. "
Ira Selwin  :  "Do you really want to do under 640 if historically they dont perform?"
Adam Quinones  :  "HARP 2.0 uses AVM in DU ---which helps."
Adam Quinones  :  "HARP 1 required the servicer to verify that the current home value isnt below the original appraised value (obtain new appraisal)"
Adam Quinones  :  "1. Freddie relief is only for loans >80%"
Andy Pada  :  "how is that any different than any new loan for the seller/servicer?"
Andy Pada  :  "new reps and warranties based on the DU documentation underwriting requirements"
Adam Quinones  :  "that is why we dont see many servicers HARP-ing borrowers who arent already their clients"
Adam Quinones  :  "new servicer has to provide full reps and warrants on the new loan"
Andy Pada  :  "preexisting fraud goes back to the original lender, correct?"
Andy Pada  :  "AQ, what exactly is HARP 2.0 rep. and warranty waiver"
Adam Quinones  :  "welcome to the era of finger pointing...where no one is willing to be held accountable for their actions and everyone else is left to absorb the fallout"
Chris Kopec  :  "That's the issue."
Adam Quinones  :  "those pesky reps and warrants!"
Chris Kopec  :  "They should just allow rate/term appraisals at current rates (with a modest LLPA) without appraisals.....problem fricking solved."
Andy Pada  :  "I think they are going to have to open up the eligibility date for HARP just so we can refinance those loans that had all the overlays reflected in rate."
Tony Cardinal  :  "there you go, then. They do have adjustments for ea1, ea2, ea3...i think it's .5,1,1.5 respectively"
Steven Bote  :  "Interesting and yes, I have the PIW"
Tony Cardinal  :  "Steven, AFR will go up to EAIII, but you need PIW"
Steven Bote  :  "Anyone know of any lenders taking EA/III-Eligible DURPs?"
Ira Selwin  :  "They figure if they have the loan already, then that's riskl they will take. I'm surprised they haven't doner this awhile ago."
Ira Selwin  :  "Some investors don't allow non-credit qualifying streamlines due to the default rate."
MMNJ  :  "Andy, your presumption that those lenders should use "logic" is your first misstep....:)"
Andy Pada  :  "What is the rationale behind the big lenders only doing their own streamlines (FHA or HARP)? Doesn't rep and warranty relief induce the big lenders into capturing even more market share?"
Jason Sheaffer  :  "It was just announced to retail a few minutes ago steven"
Curt Sandfort  :  "got the email from my AE, the announcement says it is across "all origination channels""
Steven Stone  :  "JS is that a broker announcement? I dont see that on the lender side"
Ira Selwin  :  "Streamlines are risky, they don't want them unless they already have them. Makes sense to me."
Justin Bayle  :  "Seems like a giant servicer working the system"
Jason Sheaffer  :  "but wells says they will do full refinances on non-WF serviced FHA loans....doesn't that seem counterproductive?"
Justin Bayle  :  "Just in time for the new streamline guides"
Justin Bayle  :  "Wells no longer accepting FHA streamlines for non-Wells serviced loans"
Jason York  :  "regardless of LTV"
Jason York  :  "so does SunTrust, if your LTV is under 80%, but they also allow escrows to be waived on a HARP loan if the customer currently has their escrows waived"
Darren Costa  :  "If you're looking for the actual bill for Escrow accounts try http://thomas.loc.gov/cgi-bin/cpquery/?&dbname=cp111&sid=cp111fShsa&refer=&r_n=hr094.111&item=&&&sel=TOC_502632&"
Charles Tadros  :  "regardless of LTV. "
Charles Tadros  :  "And FYI FS allows to waive escrow on harp loans if currently waived"
Charles Tadros  :  "Client wants info on the "regulation""

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