Weaker than expected economic data on the services sector of our economy lead to a brief rally in mortgage backed securities yesterday. However, as the day progressed however, ever-resilient stocks rallied off their morning lows leading MBS to close at their lowest levels since early July. A few lenders issued rate sheets while MBS were moving higher in the morning but once sentiment shifted, they quickly repriced for the worse. To remind readers, mortgage rates are set primarily by the trading of mortgage backed securities. As investor demand for MBS increases, the price of MBS moves higher which results in mortgage rates moving lower. Generally, the demand for MBS is higher during weak economic times as market participants move their money into the safety of the fixed income sector which includes MBS and U.S. Treasuries.
Tomorrow brings us the Employment Situation Report, one of the most important scheduled releases each month. Less meaningful, but still important to market movements is the Jobless Claims report that comes out every Thursday, which totals the number of Americans that filed for first time unemployment benefits in the prior week. It also provides continuing claims which measures repeat filings. Recent reports show declining claims, which supports the current recovery mentality. The U.S. Department of Labor reported that first time claims fell 38,000 from a revised 588,000(was 584,000) to 550,000 providing more evidence of improving conditions on the jobs front and beating estimates of 575,000. The continuing claims figure rose from a revised 6.241million to 6.31 million which was still better than expected by most economists.
On a sad note, our nation’s 12th largest mortgage lender and 3rd largest FHA lender shut their doors yesterday READ STORY. If your loan is submitted to Taylor Bean or has recently closed but not funded, you need to resubmit it to a new lender. In their announcement they stated that no loans, even loans that already closed but still in the rescission period will not be funded. This is a huge blow to the mortgage industry, especially brokers, as it further decreases the choices and flexibilities.
Another concern regarding the closing of Taylor Bean is with the appraisals that were performed. Under the HVCC guidelines, you are supposed to be able to transfer appraisals from one lender to another, seems simple but most lenders have conditions. The appraisal must have been ordered through an Appraisal Management Company that is recognized by the new lender. If that lender does not utilize that particular AMC you cannot transfer the appraisal and will now have to pay for a new one. Also, the appraisal must be transferred directly from Taylor Bean to the new lender. With the closing of Taylor Bean it is unlikely that they will continue to employ someone to do this task. In addition, even if they do have someone available for this task, there will be thousands of loans to go through which will make the process very difficult and time consuming. One major lender has announced that they will not take a transferred appraisal under any circumstance but they will lower their underwriting fee by the cost of the new appraisal. This will require that the consumer pay for a new appraisal up front. This illustrates one of the many bad aspects of the Home Valuation Code of Conduct. According to Congress who passed this law, appraisals are supposed to be portable from one lender to the next but that is not the case and hopefully Taylor Beans demise will draw attention to this matter.
Early reports from fellow mortgage professionals are indicating that mortgage rates continue to rise with the par 30 year conventional rate mortgage being in the 5.25% to 5.50% range for the best qualified consumers. In order to secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including one point loan origination/discount/broker fee. If your credit score is lower than 740, you can still secure a par interest rate but you will be required to pay additional fees due to the Loan Level Price Adjustment fees that were added by Fannie Mae and Freddie Mac earlier this year.