MBS Live: MBS Afternoon Market Summary

Production MBS have closed flat or higher for 8 straight sessions until finally pulling back today.  Not that MBS necessarily telegraphed a broader "risk-on" move in other markets, but this exhaustion began showing yesterday as Fannie 3.0s had trouble sustaining a break over the 106-00 price level even though Treasuries rallied fairly well.  We can look at the pull back one of two ways: either as the rally having run it's course in the short term, or a legitimate event-based bounce on Spain's fiscal reform promises.  How many times have we seen <insert troubled Euro zone country here>'s fiscal reform promises only to see them as a stall tactic (whether intentional or not) later on?  As is sometimes the case, we don't really have to decide which one of these two scenarios should get most credit as we can say that the bond market rally was probably ready for a well-earned day off and the Spanish news provided a great opportunity for bond markets to tag out and give stocks a go.  On a final note, we also noted the importance of Employment-related data earlier this morning and would point out that Jobless Claims were the only stronger-than-expected report this morning.  So between these three factors, we have more than enough justification for the stall.  Now to see how it plays out in the following days to determine which aspect deserved the most attention.

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.

Afternoon Reprice Alerts and Updates

Below is a recap of instant Reprice Alerts and updates issued via email and text alert to MBS Live subscribers this afternoon.

1:21PM  :  ALERT ISSUED: Despite Decent 7yr Treasury Auction, Bond Markets Struggle

12:33PM  :  ALERT ISSUED: Tricky Bit Of Weakness Here. Potential Negative Reprice Risk

Live Chat Featured Comments

A recap of the featured comments from the MBS Live Dashboard's Live Chat feature, utilized by hundreds of industry professionals each day.

Jeff Statz  :  "the Freddie Mac LP Open Access has been ridiculously challenging to get an Accept."

Jeff Statz  :  "the fannie and freddie disputed trade lines is still affecting a lot of people"

Ken Crute  :  "borrowers with multiple rentals, needing current mortgage statement (which clearly shows escrow payment) BUT still need HOI & TAX BILL "

Ken Crute  :  "on top of the DTI jump "

Ken Crute  :  "how about having to verify that the land is free and clear "

Ethan Brizzi  :  "borrower owns land and didnt disclose since it didnt have a loan on it - DTI jumps, ineligible"

Ken Crute  :  "borrower disputed a late on his Sears card 3yrs ago ...."

Jeff Statz  :  "undisclosed 401k loans. that's a big one, thanks."

Christopher Stevens  :  "We have found a lot of our clients have taken loans from their 401k's and have not told the LO's. U/W looks at pay statement and sees payment coming out and all of a sudden higher DTI makes the loan a decline. "

Ryan Kelly  :  "didn't kill the deal luckly"

Ryan Kelly  :  "I had a file that ended up he did own the property it was left to his wife and her sister and since they don't use it, they forgot about it"

Jeff Statz  :  "ah yes, good. that fraudguard part can be a nuisance too. thanks"

Ken Crute  :  "CBR reporting different dates on Address history, needing an LOX on that "

Jeff Statz  :  "In your verification process, what are some challenges that come up for you? An example would be abnormal deposits or misreporting credit accounts."

Jeff Statz  :  "I have my ideas, but welcome yours. "

Jeff Statz  :  "The piece is about the "challenges that LO's face in the due diligence process.""

Jeff Statz  :  "Hey everyone, I have an interview with a reporter this afternoon."

Jeff Anderson  :  "I like the Frontier Bucket. To Boldly go where no L.O. has gone before......."

Matthew Graham  :  "The fact that more lenders dipped into the high 2's y'day tells you that if broader markets slow their roll in current territory that 2.5's would soon be more liquid, but my ongoing point is that doesn't matter. All we'd know is what we already know... Rates are in the high 2's/low 3's. No new news there, and no guarantees of rates holding that range if bond markets in general move higher. "

Matthew Graham  :  "I totally get where you're coming from, it's almost like there's an imaginary tipping point, beyond which lenders have committed sufficiently to a certain bucket and are then somehow predisposed toward offering more rates that fill that bucket. Unfortunately, it only really works that way to prevent rates from moving lower as opposed to "encouraging" rates to move lower to "fill the empty interest rate slots" of 2.5% coupon rates (i.e. 2.75-3.25)."

Matthew Graham  :  "the "frontier bucket" concept has more to do with resistance toward moving lower past a certain point. Once it's opened, it's the same sort of linear relationship that would exist in a more liquid range of coupons. This is a VERY good question by the way, and not far out of line with how I was thinking about 3.0s last year, but markets quickly educated me."

Justin Dudek  :  "REPRICE: 2:21 PM - Everett Financial Worse"

Alan Kramer  :  "I suppose so - I saw (through this board) the floodgates open below 3.75% and get to 3.25% (pretty much where we are today) and I am wondering what lag you typically see between a singificant number of oans being locked into the next-lower range and when you have to update your dashboard to start showing the next lower coupon (and starting to see some real volume in it)"

Matthew Graham  :  "This isn't a BAD or WRONG assumption by the way, just trying to understand"

Matthew Graham  :  "like a certain threshold is reached and then, because of that liquidity, you're hoping the full range of rates within that coupon will be explored?"

Matthew Graham  :  "what is the significance you're inferring from that scenario? If the egg cracks, you expect an omellette?"

Alan Kramer  :  "MG: what is the typical lag between a significant number of mortgages (20%?) being closed in the next-lower range and the coupons starting to trade with any sustainable volume? 3 months? 6 months?"

Janette Oliveros  :  "REPRICE: 2:15 PM - 360 Mortgage Worse"

Janette Oliveros  :  "REPRICE: 2:15 PM - Pinnacle Worse"

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