Posted To: Mortgage Rate Watch

I hope everyone had a fantastic holiday weekend...now it’s back to work. Last week ended on a flat note with mortgage backed securities closing basically where they opened Friday morning. Bolume was extremely light but that was expected as the markets were only open for a half day. The data calendar is very light today with the only report being the Chicago PMI which is a survey of businesses conditions around the Chicago region. Readings above 50 indicate expansion while readings below 50 indicate contraction. Last month’s survey registered the first above 50 reading since the summer of 2008 with a reading of 54.2. Expectations called for this month’s report to come in slightly lower at 53.0. The release indicated that business conditions around the Chicagoland area continue...(read more)

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Posted To: MND NewsWire

The Federal Housing Administration (FHA) is moving to reduce risks to its single-family insurance fund through new regulations proposed today. The changes, announced by FHA Commissioner David Stevens, include increasing the net worth requirements of FHA-approved lenders from the current level of $250,000 to a minimum of $1 million within the first year after the rules become effective and to at least $2.5 million within three years of rule implementation. The changes would ensure that FHA lenders are sufficiently capitalized to meet potential needs so that FHA can mitigate losses from and risks to the insurance fund. Under a second proposed change, lenders seeking approval to originate, underwrite, or service FHA loans must meet the eligibility criteria for a supervised or non-supervised mortgagee...(read more)

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Posted To: MBS Commentary

The FN 4.0 is -0-01 at 100-09 yielding 3.98% and the FN 4.5 is currently +0-00 at 102-16 yielding 4.198%. The secondary mortgage market current coupon is now 3.96%. The CC yield is +73bps/10yr TSY yield and +63bps/10yr swap rate. "Rate sheet influential" yield spreads (over benchmarks) are marginally improved as Fed buying has easily eaten up modest originator selling, $700mm and even a few 6.0s...meanwhile fast money MBS day traders have focused their strategies "up in coupon". Price action has been sideways all morning with only 6,500 TBA MBS trades so far today. Below is the FN 4.5 two day...notice prices have held to a tight range all morning. Zooming out, you can how the rate of MBS price appreciations has slowed over the past three sessions. Lots of mortgage market...(read more)

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Posted To: Voice of Housing

Treasury is becoming impatient with servicer performance despite their investments and success with processing trial loan modifications. The program was/is targeted to help 3-4 million homeowners that were distressed or where imminent default within 60 days was likely. Treasury provided servicers with real economic incentive to aggressively pursue and negotiate loan modifications with the prospect of an up-front fee of $1,000 for each modification ($1,500 if the borrower was current) and $1,000 a year in which the borrower makes their modified payments. Consider that net income to servicers was $161 in 2008, per MBA Cost Study, and you’ve got one heck of an opportunity to make a lot of money while “doing good” as a servicer. Servicers have hired thousands of people over the...(read more)

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Posted To: MND NewsWire

HUD and the Treasury Department are taking another crack at moving its foreclosure prevention efforts from concept to reality. And now it is adding "shame" to its list of weapons. The Treasury Department announced today that it intends to increase pressure on lenders and servicers to move borrowers from trial loan modifications into actual restructured loans. The action comes amid reports that the administration's $75 billion Making Homes Affordable Program (HAMP) is floundering. While the government has been trumpeting the success of the trial modification program - some 650,000 troubled borrowers had entered the program by the end of October - only a very small percentage of those borrowers have transitioned into a permanent loan modification. It is estimated that November figures...(read more)

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Posted To: Community Commentary

Have any of you thought about why we refer to the day after Thanksgiving as Black Friday? The term "Black Friday" was originated in Philadelphia during the 1960's. It was used to reference the unusual amount of traffic that was observed on the day after Thanksgiving. More recently, merchants and the media have used it, instead, to refer to the beginning of the period in which retailers go from being in the red (i.e., posting a loss on the books) to being in the black (i.e., turning a profit). We get a fair amount of calls from brokers and small mortgage bankers about the idea of partnering with a community bank. Early in my career, I had the opportunity to partner with several banks. My team and I contributed the knowledge, systems and relationships. The bank provided the capital...(read more)

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Posted To: Pipeline Press

An uncle once told me, "I've had bad luck with both my wives. The first one left me. And the second one didn't." In a story from Reuters, both Deutsche Bank and France's BNP Paribas SA separately sued Bank of America last Wednesday , "claiming that the largest U.S. bank breached its obligations on a total of more than $1.7 billion of mortgage-related transactions." Both lawsuits relate to Ocala Funding LLC , a funding vehicle used by Taylor, Bean & Whitaker . TBW used Colonial Bank for warehouse lending, which Bank of America sued in August. Deutsche Bank accused BofA of breach of contract for failing to safeguard more than $1.25 billion of cash and mortgage loans from deals in 2007 and 2008. In the other lawsuit, BNP Paribas Mortgage Corp said BofA refused...(read more)

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Posted To: MBS Commentary

I can imagine that bonds stepped on the scale this AM much the same way as I did. Yes, the holiday's were good while they lasted, but things may be a bit too overweight this AM. If you weren't around for the rousing Friday that was, the main event was the Dubai Drama in which the country essentially couldn't pay it's bills on time. Given the billions of dollars on their tab, the debt markets sort of took notice--at least as much as they were able on a Black Friday. These next few longer term tsy charts show the flight to quality that ensued, among a few other things... 10 yr tsy yields Quite a lot of perspective offered here as we see the resistance and then THE RESISTANCE and though 3.0 feels a bit distant, perhaps it could then be THE RESISTANCE! In other words, yes, yields...(read more)

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Posted To: MND NewsWire

Across the board investors are worried. Equities are down, Treasuries are soft, crude oil is flat, the dollar is weaker and even gold is in sell-off.t Two hours before the week’s opening bell, Dow futures are off by 14 points to 10,278 and S&P 500 futures are down 2 points to 1,088. WTI Crude oil is up 2 cents to $76.07 per barrel and Spot Gold is $7.54 lower at $1170.09. “Uncertainty rules in financial markets to start the week,” said Sal Guatieri from BMO Capital Markets. “Equities are mixed, with emerging markets and Asian shares generally higher (led by a 3.2% gain in the Shanghai Composite index), but Europe down and S&P 500 futures slightly in the red.” “Black Friday” sales were up 0.5% compared to last year, according to the National...(read more)

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Posted To: MBS Commentary

So I have to be honest...I was unaware of the Dubai debt story until this morning. At 7:33pm on Wednesday November 25, this flashed across my news feed: I could have cared less about my news feed at 7:33pm on the evening before Thanksgiving. I had no position to manage because I was watching and waiting for a better signal from the market before regrouping and re-evaluating directionality...plus, it was the night before Thanksgiving! The fact that the event hit news wires at a time when so many were disconnected from the market, or just "could have cared less", does make me wonder if someone is trying to be sneaky, maybe hiding something? Then again, who can blame Dubai for picking such an opportune time to alert the masses of a pending "credit event" . H.H Sheikh Ahmed...(read more)

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Posted To: Mortgage Rate Watch

Mortgage backed securities continued to rally on Wednesday, closing within a quarter point of all time highs. As is typical during holiday shortened work week's, most lenders did not pass along the improvements; however, the rates we saw on Wednesday were still near record lows. The big news this morning comes out of Dubai, which announced they were not able to honor their debt repayment schedule. They are asking for a six month reprieve on debt payments. This is causing a flight to quality bid as many investors sell riskier assets and buy the safest asset there is, U.S. Treasuries. Since MBS tend to play folllow the leader with Treasuries, MBS prices are moving higher this morning. There are no economic reports being released today. The stock market will be closing at 1pm followed by the...(read more)

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Posted To: MBS Commentary

After the initial spikier responses to this AM's "Dubai Drama" prices are settling into a fairly logical range with recent highs and lows lying within highs and lows from the last two days. Even then, it wouldn't much matter if that range were catastrophically broken given the amount of liquidity and volume in play on Black Friday. 4.5 MBS are up 1 tick at the moment at 102-11. 4.0's are up 6 ticks at 100-03. The 10yr tsy is up 9 ticks, dropping the yield to 3.23. The S&P is almost halfway back to unchanged on the day at 1095+. We'll get back to you one more time before the early close today......(read more)

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Posted To: Voice of Housing

Fannie Mae’s rise in delinquencies spells trouble for housing values and the economy overall. As unemployment rises and investor confidence continues to waver, we likely face an economic stall that will require further government intervention. That won’t be easy politically, given that the American people are clearly expressing their bailout fatigue....(read more)

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Posted To: Community Commentary

First things first....I hope everyone had a great Thanksgiving. Every year 300+ mountain bikers ride a 4.5 mile, 2000 foot climb up the Kennedy Trail in Los Gatos, CA to share a Thanksgiving Day Picnic. It's a very steep, remote ride with amazing views of the entire Bay Area. This year I missed it, but HERE are some pics of the event: Ok, I stand corrected by a few readers who said, “ it’s all about the money ”. In other words, loan officers want to get a competitive split. While I agree, I also believe both the loan officer and the operation (branch manager) need to earn their fair share of income. Early this year I attended a loan production seminar in Lake Tahoe sponsored by C.O.R.E . Both loan officers and production managers were present at the event. I had two distinct...(read more)

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Posted To: MBS Commentary

The FN 4.0 is +0-09 at 100-06 yielding 3.989% and the FN 4.5 is +0-03 at 102-13 yielding 4.206%. The secondary market current coupon is 3.989% . I thought about adding the FN 3.5 into the current coupon blend, but there isn't much of a market for FN 3.5s so I am letting the FN 4.0 carry the entire weight of the calculation.The more important thing to note is that MBS are being outperformed by flight to quality benefited benchmarks. The CC is now +76/10yr TSY and +66/10yr swap...rate sheet influential yield spreads are wider. Stocks are weaker after Dubai's Supreme Fiscal Committee announced they would ask creditors of Dubai World, the emirates investment arm, to defer for six months at least some of $60 billion owed to them. The SHANGHAI closed -2.36%, HANG SENG -4.84%, TOPIX -2.24...(read more)

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Posted To: The Green Home

I'm more cranky than usual and already regarding red and green as the world's worst pairing since Jon and Kate. It must be Christmas. That gets the bah humbug out of the way - if only for the moment - so here are the first of our 2009 green (the red will be your bank balance) ideas for the upcoming holiday. Today's selections are for the sports and outdoor lover in your life. New Balance Trail 20 running shoes are the first green shoes in NB's line. The shoe is designed to reduce waste in manufacturing and the materials themselves are largely recycled. The outsole is rice husk rubber, the insert and upper are both natural and recycled. All synthetics on the shoe are made from recycled materials and the adhesives are water-based. The shoe is light weight (8.6 oz.) and available...(read more)

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Posted To: MBS Commentary

I was both happy and sad upon my nightly review of the most recent blog post. I like to read it even if I've written it, to assess what else might be needed on the day... I was sad to see there's not much left to discuss and I know that you'll all be sad to see me type less, but I was happy that AQ related the content exactly as I would, and that my Thanksgiving break could start that much earlier as I'd likely be able to finish up early. So if you haven't read MBS Afternoon , do it. That said, I'll just give whoever is interested a quick run down of my charts for the evening. Certainly some epic things happening, but plenty of counterpoints as well. Aren't there always?! 2 Day 4.5 MBS Other than the fact MBS closed at another multi-month high (albeit by a scant...(read more)

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Posted To: MBS Commentary

Last week the 10yr TSY note bounced around between 3.32% and 3.37%. Early on this week, that range was broken as 10yr note yields tested 3.42%. However, as positional support remained in tact, higher yields and lower prices drew out bargain buyers which quickly pushed yields back into last week's range. This is considered a range breakdown correction. Spurred on by momentum, traders pushed yields back to 3.32%, the lower limits of last week's range. This highly trafficked pivot point, which failed to break three times last week, was broken today. The 10yr TSY note is currently trading +0-11 at 100-30 yielding 3.264%. The question is now...will the range breakout fail just as the range breakdown did earlier this week? As the year draws nearer to a close, the long end of the yield curve...(read more)

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Posted To: MBS Commentary

YIELDS High 2.835 pct Median 2.750 pct Low 2.650 pct PRICE/ACCEPTANCES Price 99.463748 Accepted at high 87.98 pct Bid-to-cover ratio 2.76 AMOUNTS TENDERED AND ACCEPTED (dollars) Total accepted 32,000,045,800 Total public bids tendered 88,265,357,800 Competitive bids accepted 31,976,388,000 Noncompetitive bids accepted 23,657,800 Fed add-ons 960,931,500 Primary Dealer Tendered 57,753,000,000 Primary Dealer Accepted 8,922,950,000 Primary Dealer Hit Rate 15.45% Primary Award Overall Award 27.88% Direct Bidder Tendered 4,730,000,000 Direct Bidder Accepted 3,073,000,000 Direct Bidder Hit Rate 64.97% Direct Bidder Overall Award 9.60% Indirect Bidder Tendered 25,758,700,000 Indirect Bidder Accepted 19,980,438,000 Indirect Bidder Hit Rate 77.57% Indirect Bidder Overall Award 62.44% The initial reaction...(read more)

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Posted To: Mortgage Rate Watch

Rates rallied yesterday following a strong 5 year note auction. This helped pave the way for higher MBS prices and lower mortgage rates. By day's end MBS were testing historic price highs and lenders were repricing for the better. To remind readers, as MBS prices move higher, lenders are able to pass along lower mortgage rates. While the economic calendar is very busy today, this will be last the session of the week in which economic data is released as markets will be closed on Thursday and open for a half day on Friday. Because there was so much to absorb this morning, I am going to do a quick run through of all the data. This morning the Mortgage Bankers’ Association released their weekly applications index which tracks the weekly change in the amount of loan applications at major...(read more)

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