Yesterday, mortgage backed securities (MBS) remained relatively stable until mid afternoon when they started to sell off which increased consumer borrowing costs by .25 in discount.  Most lenders did reprice for the worse.  So far this morning, the downward pressure continues as MBS have already moved lower increasing costs by another .125 in discount.   We should still continue to see par 30 year conventional rate mortgages in the 4.625% to 4.875% for well qualified consumers.  We have been seeing a few lenders offering 4.5% as par, but that is unlikely to occur today. 


I get many comments from readers asking about the rates I quote on the blog.  In order to qualify for the rates that I quote, a consumer would have to have a 740 FICO credit score, loan to value of 80% and pay all closing costs and 1 point.  Also, rates do vary by state and since I live in Texas I quote rates available in this state.  The difference between states is not large but they might vary by up to .25 to .375 in discount.  Meaning, if 4.625% costs 1 point for homeowners in Texas, it might cost 1.25 points in a different state.  This is one of the reasons why I give a range of rates and not one specific rate.


Citigroup announced this morning better than expected earnings.  This makes the 3rd financial institute to beat the streets estimate.  The MBS Commentary blog will go into more detail on this subject.   How does this affect mortgage rates?   Well, positive earnings from corporations will entice investors to buy stocks to take advantage of the higher potential yields they pay.  This leaves less investment dollars to buy fixed income investments such as MBS.  We typically refer to this as the flow of money. 


Today is extremely light on economic data with the only report being the release of the Reuter’s/University of Michigan’s Consumer Sentiment.  This report gives investors insight into future consumer spending.  If consumers are feeling positive about their own financial position and their view on the economy, they are more likely to spend.  A not so optimistic consumer is more likely to save.  When consumer spending increases, it can lead to inflation which is negative for mortgage rates.  The report shows consumer sentiment continues to move higher with a reading of 61.9 when economists were only expecting a 58.5.  Typically, this would be bad news for MBS but since the release we have moved off the lows of the day.  This reinforces the view that MBS are very detached from the rest of the market.


At 12pm eastern, Fed Chairman Ben Bernanke delivers the keynote speech at the Kansas City Federal Reserve Banks’ conference on Innovative Financial Services for the Underserved.  As always, investors will be tuning in to gather any hints on future US monetary policy and for his views on our current economic conditions.   We will post any relevant highlights of his speech. 


A big concern today for anyone buying or refinancing is the turn times at lenders.  With record low mortgage rates, lenders are so swamped with business that the length of time it takes to close a loan has increased dramatically.  One lender as of yesterday was underwriting loans submitted to them on March 9th.  That is 37 days in underwriting!!!!  I have found most lenders to be 2 to 3 weeks in underwriting.  I would like to hear from consumers and mortgage professionals on this subject.  One reader emailed me this morning saying that the credit union he is refinancing with has been underwriting the loan for 6 weeks and counting!!!  What turn times are you experiencing? 


Early reports from fellow mortgage professionals are showing par rates to be at 4.625% with the most aggressive lenders.   For intraday updates, click over to the MBS Commentary blog.