Posts Tagged ‘mortgage rates’
RateWatch – Birthday Week
June 30th, 2009 | 
Author: Markets: Mortgage-backed securities are down 9bps, which is nothing. We were down 44 at one point today, but we’ve crawled back on the shocking news that most people think the economy is crap. Rates are still drifting down slowly. We’re in the low 5% range on most everything as long as you have good credit.
Analysis: What’s to analyze? It’s a holiday week. There are about 6 bond traders working, and all of them are taking off around noon. There’s no volume to speak of, and the volatility that usually accompanies light volume is being muted because all the economic data are conflicting with themselves. Yes, folks, “data” is a plural. No, really. Look it up.
Cj
P.S. Unless something truly wondrous occurs in the next couple days, you’ll next hear from me on Monday. Tomorrow is my birthday, Thursday is my son Crispin’s 13th birthday, and Saturday is some other birthday that I can’t remember. Has to do with barbecues, I think. 
But as always, if you have questions, I’ll be here.
Posted in 
RateWatch ALERT – Thanks for nothing, CreditSuisse!
Market: We got whacked today by a report out of CreditSuisse that speculates that the Fed will slow down its buying of mortgage-backed securities in order to conserve its cash, so that it can keep rates lower longer. This is speculation. I think they’re wrong. This doesn’t matter at all, because the markets spooked and bonds went in the tank. That will take rates up by as much as .25%.
Analysis: CreditSuisse has a lot smarter people on board than I am, so maybe they’re right. But here’s my question – if the government started out with a $750 billion buying plan, then felt the need to up it to $1.25 trillion (of which well less than half is spent), and did so without any difficulty, why on earth would it have any trouble doing it again if it needed to? Is the $1.25 trillion some sort of hard cap? Who made that the limit? Is there any evidence that President Obama would hesitate to write more checks if he wanted to?
For now, though, if you were waiting to tell me what rate you wanted, it might be smart to pull the trigger and call me (801-310-3407) or email me (chris@lehilender.com) or tweet me (@chrisjoneslehi). We could be in for a fun ride here.
Why Your Rate is Not on the Evening News
Quick Market Read: Flat and slightly up for mortgage-backed securities, reversing last week’s trend. Rates holding just under 5% for most programs. It’s a short week for bonds because of Easter, so they’ll only trade until Thursday. Fed buying is outmuscling the market, and there is no significant economic news this week.
Today’s Nugget: CNN and the talking heads will never be able to tell you your rate. First, your situation is unique to you, even if you broadly fit inside the A+ box. I have some people that get 5% and others that get 4.5%, and it’s hard to tell without the specifics which it will be. Second, even if CNN/CNBC are quoting data from a mortgage organization that purports to give the “average rate for the week”, what they are generally quoting is the coupon rate for the mortgage, which can bear some relationship to your actual interest rate, or possibly none at all. Depends. Finally, when the pundits are telling you we’re going to 4%, they’re guessing just like I am. My track record has been pretty decent, as those of you regulars can attest, and I’m a whale of a lot more likely to respond to your questions than Becky Quick is, even though she’s a lot better looking.
Just a Thought: Easter is about renewal. Even if you don’t subscribe to the idea that Jesus rose from the tomb, you certainly notice that your tulips are up again, even though you probably didn’t plant new ones this year. The earth goes through cycles of renewal, and so do you. If you get down, remember, you’re going to come back. And if you need help, holler. That’s what friends are for.
Cj
P.S. Having been a Tar Heel fan all my life, I gotta say, the sky is the appropriate blue today.
RateWatch FED Madness – Fed Gets Its Freak On
Yesterday the Fed announced a couple of things of critical import to the mortgage world. One, it is not doing much of anything with the Fed rate for the forseeable future. There is not going to be a rush to raise interest rates even if the economy improves dramatically, and there’s no reason to think that it will, not any time soon. Two, it is expanding its purchasing program of mortgage-backed securities from $500 billion (half is spent) to $1.25 trillion. With a “T”. Three, it is going to start buying back long-term Treasury bonds as well, $300 million worth.
For the technically inclined, here’s what this means: when Fed buys mortgage-backed securities, it is purchasing notes that are secured by mortgage contracts. Those contracts are the documents you sign at the closing table. Retail lenders – like me – originate mortgages and fund them, having usually pre-sold those loans to secondary lenders (this is called warehousing), which will bundle them up and sell them to FNMA/FHLMC (Fannie and Freddie). This flow is critical to what most people think of as the mortgage process. The mortgages back securities that allow banks to replenish their supply of cash to lend out again. If the Fed starts buying those securities, the flow increases in the pipeline and lenders can lend more money.
With the collapse of the credit markets, the flow has been severely restricted and that has made mortgage lending sort of like being in the middle of the ocean dying of thirst. There’s money everywhere, but we can’t lend it, because the secondary lenders have to restrict their flow to only the very choicest of loans, because those are the only ones they can securitize. That flow will free up at some point and those outside the top 10% of borrowers will once again be able to borrow money. In the meantime, the Fed action prevents the last trickle from freezing up as well. The buying pressure reduces risk in the MBS markets, raising their prices and lowering their yields. Since (in a circle, now) the yields on those MBS dictate to lenders what their risk is on mortgage lending, as those yields drop, rates drop with them.
Whew. Still with me?
Yesterday, because of the Fed announcement, bond prices exploded to the upside and yields dropped like a stone. That should (under ordinary circumstances) have meant a large drop in mortgage interest rates. But it didn’t.
Rates on mortgages took only a small dip yesterday. I say “small” because it was not nearly as big a move as would be expected from the way the bond markets moved. Why is this? Two reasons: one, refinance pipelines are choked, and I mean choked. Our staff starts work at 6am and finishes (last night, for instance) at midnight. The in-house underwriting staff at City1st is pulling 16-hour shifts and has been since roughly Christmas. Secondary market lenders are doing the same with their staff – remember, a LOT of people got laid off last year, and most lenders went very lean to try to stay in business. That means loans just can’t get through the pipe very quickly. To slow the flow, lenders keep their rates artificially high. Two, lenders know that most of their volume on these loans is coming from refinances of loans they already hold. They’re not getting new, high-performing loans without losing older, higher-interest loans at the same time, so this boom is not necessarily good for them. They’re being defensive about rates, and there are lots of good reasons for them to do this.
In light of this, what do I recommend? Same as always: if you have a deal that works, that pays for itself inside of three years, TAKE IT. Don’t try to time this stuff. It’s impossible. It’s also a major drain on your resources. The best thing you can do to make sure you get the rate you want is to get set up with us under the Mortgage Under Management program with a hard rate target. You’ll get your lock when the rate reaches your particular level without your having to be reading tea leaves. We’re professionals. We do this for a living. This RateWatch and the MUM program and all the other services you get here are part of what makes us the best. Use us, that’s what we’re here for. Hit me back with an email, and it will seriously take 10 minutes to get you set up.
Meantime, expect rates to be at 5% for FHA and slightly below for conventional, depending on about 100 different factors that could make your rate higher or lower. Call or email for specifics.
This is going to be a fun few months, folks. Stay with us, and keep your arms and hands inside the car at all times.
Cj
Chris Jones
City1st Mortgage Services
801-310-3407
chris@thechrisjonesgroup.com
RateWatch Friday Feb 6
Here’s the thing. Markets have displayed a huge amount of volatility over the past several months. Where once mortgage-backed securities (those things that actually control mortgage rates) would trade in a 35bp range on an average day in 2006, today we have 100 bp days all the time, and it’s not all that unusual. At least, that was true until the last three weeks. For the last three weeks, we’ve been trading sideways in very narrow ranges, almost always slightly down. It’s maddening, frankly. Rates are being ground higher a bit at a time, just a hair here and a hair there, until where once we quoted 4.75%, today we’re talking about 5.375%, and that’s only for those with 740 credit.
So the big question is: what’s going to happen next? Up or down?
And the answer is: who could possibly know? There are two wild cards here. One is Fed buying, which is still going on, but is probably being muted in its effect by Treasury selling of bonds, and the other is the “stimulus” package being argued over in Congress. Nobody knows what provisions that will contain, and until we do, no bank is going to be interested in lending money. Why bet your company in a game where the rules might change from one day to the next?
I’ll make a prediction, because you’d be disappointed if I didn’t. I predict that the stimulus package will pass by the end of next week, and give us a boost to the downside on rates for mortgages that will be powerful but brief, like two or three days brief. To take advantage of it, you’ll need someone with his finger on the trigger who can lock immediately, but who also can get the loan closed before the lock blows. Broker underwriting is averaging over 30 days right now. Our underwriting is 48 hours. We can – and do – close loans from application to fund in less than two weeks. The rally we get will be followed by more slow upward grinding, until the middle of this year, when rates will spike as the Fed runs out of buying power.
That’s the call. Put on your booties ’cause it’s cold out there today. It’s cold out there every day.