Yesterday was a pretty boring day for mortgage backed securities.  We closed right where we opened the day with a few peaks and valleys along the way.   With the Federal Reserve checkbook(remember they have promised to spend up to $500billion on mbs), each time mbs start to sell off, they can step in to buy keeping the price high.  The higher the price of mortgage backed securities, the lower the yield resulting in lower mortgage rates.  This is one of the big reasons for our float stance.  It appears that mbs will not sell off leading to higher rates with the Fed as a back stop to step in and buy each time they try to sell off, so rates should not move any higher from present levels.  Since rates cannot move higher, then that leaves only 2 directions for them to go, sideways and lower.  Thus, if you have a loan in processing, float the rate until you are ready to close.   

There are no major market moving economic reports released today.  We did get the release of Trade Balance or as I call it Trade Imbalance.  Economist’s where expecting a -$51.0 billion after last months -$57.2b, but the number came in much better at a -$40.4b.   Even though this is positive economic news, there has been no reaction in mbs trading but the Dow has come off its lows.  The rest of the week is full of big impacting reports, please check out yesterday’s blog for a list of the upcoming reports. 

It has also been our position that lenders are holding back on their rate sheets due to huge volume of business in their pipelines.  Today is the end of January settlement which basically opens up the pipelines of the lenders with fresh money to lend.  Lenders looking to fill their pipelines will hopefully pass along lower rates.  At the current price levels of mbs, we should be seeing rates in the mid to low 4% range.  If your lender is offering a rate in that range, locking might be a wise move.  Once the lenders pipelines start to fill up, they might raise there rates again to slow down the pace.  Rates constantly move in a wave pattern moving up then down, then up etc…..  The key is to lock your loan at the peak of pricing and float at the lows.  However, if you can lock a 30 year fixed loan at 4.5% or better, I suggest you lock and move on.  Rates could move lower but if you can lock in the mid 4’s how could you complain if they did drop lower?   

I will keep you posted throughout the day as trading warrants but currently and with no surprise, mortgage backed securities are unchanged on the day.  Float club remains in effect.