Mortgage world was busy today!!!  

Closing Marks...

APRIL FN30_______________________________

FN 4.0 -------->>>> +0-09 to 98-28 from 98-19

FN 4.5 -------->>>> +0-05 to 100-26 from 100-21

FN 5.0 -------->>>> +0-06 to 102-04 from 101-30

FN 5.5 -------->>>> +0-07 to 102-27 from 102-20

FN 6.0 -------->>>> +0-05 to 103-14 from 103-09

MARCH GN30_____________________________

GN 4.0 -------->>>> +0-08 to 99-08  from 99-00

GN 4.5 -------->>>> +0-06 to 101-15  from 101-09

GN 5.0 -------->>>> +0-02 to 102-25 from 102-23

GN 5.5 -------->>>> +0-02 to 103-13 from 103-11

GN 6.0 -------->>>> +0-03 to 103-24 from 103-21

Mortgages had another good day. Spreads were tighter throughout the day until late in the session when TSYs made an afternoon recovery. MBS trading volume was above average with flows tilted towards buyers (buyers outnumber the sellers). This has been the case of late as originator supply has faded a few billion per day. The Fed was again the lone buyer in the short side of the stack while fast money MBS buyers continued to meddle in fuller coupons. Up in coupon is questionable at this point but remains worth the risk when MBS prices cheapen.

Lets run down some of the mortgage specific news today...

 The Treasury Department released their monthly report of Receipts and Outlays today. This report tells us how much the Treasury Department is spending on a monthly basis. Press Release

For the month of February the Treasury Department spent $12.7bn on Agency MBS.

This is considerably less MBS purchasing compared to the $22.6bn that was spent in January, the $21.8bn that was spent in December, and the $23.2bn that was spent in November. The Federal Reserve began purchasing MBS in January and has recently ramped up their buying so this was not unexpected. All together Federal Reserve and Treasury MBS purchases have accounted for about $300bn of the total demand for MBS since November. Thank you for that Federal Reserve and Treasury!

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending March 6, 2009.

The Market Composite Index, a measure of mortgage loan application volume, was 723.4, an increase of 11.3 percent. 

The Refinance Index increased 13.3 percent to 3470.7 from 3063.4 the previous week

The seasonally adjusted Purchase Index increased 7.1 percent to 253.3 from 236.4 one week earlier. 

The Conventional Purchase Index increased 5.4 percent while the Government Purchase Index (largely FHA) increased 10.4 percent.

The refinance share of mortgage activity increased to 67.9 percent of total applications from 66.9 percent the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.96 percent from 5.14 percent, with points increasing to 1.16 from 1.05 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

From the perspective of MBS the first question that may arise in your head is....DOES THE INCREASE IN MORTGAGE APPLICATIONS HELP SLOW "UP IN COUPON????

Yes and No. It proves that borrowers are listening to headline news and applying for a new mortgage. It doesn't tell us how many of those borrowers actually locked their loan. The fact that supply of MBS has been relatively weak recently implies that many borrowers are submitting applications but not totallly commiting until rates go lower.Perhaps this will help...

BORROWERS: This contract rate for 30 year fixed rate mortgages is the second lowest in the history of the survey, with the record low being 4.89 percent for the week ending January 9, 2009.

It is however good that borrowers are showing more interest. On a side note I know of a few lenders that are implementing streamlined loan delivery programs. This will be very beneficial for smaller lenders who have lost one or two or several of their warehouse lines (funding lines). The automation of loan delivery is essential to an efficient mortgage operation. This is a big positive for the "operational efficiency" part of the "stars aligning".

Today JP Morgan Chase CEO Jamie Dimon was on TV trying to rally the troops (investors). In his comments he mentioned that mortgage world needed to be reformed (not exact quote in anyway).  We are all WELL AWARE that the mortgage industry is currently under a regulatory microscope. I believe that we are all expecting many CHANGES when this whole mess gets cleaned up.  Today we got a little "inside information" on some of the changes we should be expecting.

Sandra Braunstein, the Director of the Federal Reserve's Division of Consumer and Community Affairs, gave testimony on Mortgage Lending Reform today. Here is her prepared statement LINK.

Here are some notable excerpts...

The Federal Reserve's goal has been to craft clear rules that deter abuses while preserving responsible lenders' ability to meet the needs of traditionally underserved borrowers and communities.As with regulations, it is important that any new laws carefully target abuses without unduly restraining responsible credit. 

Our goal is to improve the content and format of disclosures for both closed-end loans and home equity lines of credit in order to make mortgage disclosures more useful.  The challenge is to strike a proper balance between providing information that is accurate and complete but not so complex as to create information overload

H.R. 3915 and the Board's HOEPA rules both set minimum underwriting standards that are designed to ensure creditors verify and document borrowers' ability to repay higher-priced loans.

H.R. 3915 would also provide consumer remedies for violations of the bill's minimum standards and consumers would be able to seek these remedies against creditors, assignees, and securitizers. In order for assignee liability to create more market discipline, the laws must be clear about what acts or practices are prohibited so that assignees can perform due diligence and detect violations before purchasing the loans. 

H.R. 3915 also seeks to establish a federal duty of care that would apply to all mortgage originators, although the bill would not create a fiduciary relationship between the originator and the consumer. 

Loan originators would be required to present a range of loan products for which the consumer is likely to qualify, and which are appropriate for the consumer's current circumstances.  The mortgage products presented to a consumer must be consistent with the consumer's ability to pay and provide a net tangible benefit. 

Because these standards are broad and originators would be liable for violations, we believe that the establishment of clearly defined safe harbors may be appropriate in implementing the law and that the statute should clarify that the rulewriting agency has sufficient flexibility for this purpose.

What I take from this....you can be held LIABLE. This means the Federal Reserve will know WHO originated every loan. This means you will have to register yourself as an originator if you are already not registered. If you have ever worked for a bank you know that you must keep up with you continuing education credits. Continuing Education = COMPLIANCE TRAINING. If you havent had to complete these courses yet...you will probably have to do so in the near future. Stay ahead of the game so you dont lose any business!

I'm done for the day!