Monday, June 29, 2009

Monday of a Short Week

Where does the weekend go? It seems if you blink, you miss it. For me, it goes to softball and baseball tournaments. Which really is a great way to spend a weekend, if the weather isn't hit record high heat. Our pool was the most inviting I think it has ever been, when we came home from Sunday's softball outing.
Bonds have done well over the last week, but are facing a strong ceiling of resistance. The floor of support is over 50 bp below, so any volatility could see big swings in value. It is a holiday week and for some reason with less trading comes more volatility. So we will need to watch the MBS market and see where we are headed.

Friday, June 26, 2009

Nice Reaction

The Federal Reserve Board decided to leave the Fed Funds rate unchanged. The comments released by the Board also made deflation less of an issue and put inflation out at a safe distance. The Mortgage Backed Securities (MBS) market ended Wednesday neutral and actually that was a very nice way to end a day with that much information. Thursday the market decided that the Fed had it right and MBS got a nice little lift above the 200 day moving average. Today we are watching the markets very carefully as much of the reports came in neutral. If the stock market decides to re-test and surpass the 200 day moving average for them, then bonds may pay the price. Volatility is still the name of the game and constant monitoring is all we can do.

Tuesday, June 23, 2009

Fed Starts Meeting Today

The Federal Reserve Board begins its first of a two day meeting today. They will make their announcements as to what they see the market doing and how they are going to continue to "help" the American Economy. The consensus is that the fed funds rate will be un-moved, but that the Fed will begin to buy more long term Treasuries. If that happens, it has the potential to move Mortgage rates down.
There are still other factors at work here, that we must remember. The Treasury auctions that start today at 1pm EST flood the market with investments that may look more attractive than bonds. This competition in the market can drive mortgage rates higher. Also remember if rates drop, more refinances will hit the market and then there is added supply there also. This added supply usually accounts for worse mortgage backed security trading and higher interest rates.
This will truly be a wait and see environment.

Friday, June 19, 2009

It's Friday

Happy Friday! This weekend should be pretty good, the weather is starting to feel like summer, families will get together to celebrate father's day, and I will hopefully have enough time to wash my windows. Glamorous I know. After the week we have had with Mortgage Backed Securities (MBS) , I will take window washing. Everyday was a learning experience as even the best days turned into down days. Interest rates are going to take awhile to recover from the hit that the MBS are taking. There is just too much supply and not enough demand. Even with the Treasury purchasing MBS, the supply is too great.
But let us put interest rates into perspective. A 30 year fixed conventional loan for a purchase with 20% down and credit over 740, we are still at 5.5%. This is not a rate to snub your nose at. There was a time (less than a year ago) that same mortgage would have been 6.5%. Since I started doing loans 12 years ago I have seen that rate as high as 9%. Talk to anyone in the mortgage market in the 70s and early 80s and they will quote you anywhere from 12-18%.
That being said if you are considering refinancing and have a rate of 6.5% or more JUMP off the fence now and do it! If you are a buyer, no one knows where the rates are going to go, but can you really justify not purchasing a home at 5.5%? Your landlord is probably paying more than that on his mortgage. There is no more time to sit on the fence, it is time for action.
One last rant before I log out...a moratorium on foreclosures just prolongs the inevitable. If someone hasn't made a payment in 6-12 months another 3 months isn't going to help. Let's move forward, help those who are not so far behind keep their homes and be done with this heinous market.

Thursday, June 18, 2009

Government Regulation

I understand that there are times that the government needs to regulate an industry. I also understand that the mortgage industry has been riddled with issues but the latest "blueprint" for regulatory changes places the blame on mortgage brokers and does not look to: investor greed, credit rating agency mistakes, Wall Street GREED, consumer negligence, Bond fund propagation of exotic mortgage products, not to mention that bank originators are encouraged (pushed) to sell the product that will make the bank the most money.
I am a trustworthy mortgage originator, I follow the rules, I care about my clients and I rely on my relationships to further my business. I don't think any originator needs to make 4 points on a loan, but I also think an originator making that kind of money will not stay in business very long. If the government would actually make all mortgage originators comply to the same rules and not have two sets for mortgage brokers and mortgage bankers, that would be a huge step in the right direction. Second step, utilize the current rules that protect consumers and don't make new ones that just make consumers pay more in the long run.
On a rate note, mortgage backed securities have hit another ceiling of resistance and with the Treasury issuing another round of supply next week, it would be prudent to lock now if you are currently in contract.

Wednesday, June 10, 2009

Elevator UP!

The recent climb of mortgage rates has everyone clamoring. Why though in a three week span can rates go from 4.75% to 5.75%? The reason is too much supply and not enough demand. The mortgage backed security market is made up of just that "mortgages." Rates have been so good for an unbelievable amount of time, that many of you who have owned for just 6 months, have been able to benefit from the new lower rates. That puts more supply because refinance loans become the mortgages in the mortgage backed security market. Figures came out yesterday stating that 70% of all transactions are refinances. That is up so much from this time last year. The government is also auctioning t-bills what seems like every other day. These factors have investors, wall street, main street, and the world now worried about inflationary risks.
What do we do? Maybe that is the problem, maybe everyone is doing too much to try and fix the problems instead of letting them correct themselves.
The past 4 years brought much to the forefront on laxed loan guidelines and interpretation of those guidelines. The government has made laws, to fix everything. They have said there shall be no more stated loans...the market got rid of stated loans six months prior to the ruling. The government, "to protect consumers and banks" has placed the HVCC into effect. It is a law that governs how appraisals can be ordered and who can speak to the appraiser. It is to help decrease pressure on appraisers to deliver appraisals that are above value or not disclosing certain issues with properties. Every lender I work with has a black ball list. If an appraiser is found to be fraudulent in any manner, they will no longer accept that appraiser's reports. The banks were self policing. Now we have this new rule, that is more expensive for consumers, and takes about 4 times as long to complete. If the government would let free enterprise do its jobs, the banks would have fixed it, because it is their bottom lines getting desimated, not the governments. But now that the government is in the business of big banking, I guess they want a safety net.
I am done ranting for today. Until the next new issue...or wave of crazy changes.