After yesterday’s trading, mortgage backed securities (MBS) felt like the New York Yankees after a series with the Boston Red Sox, they got beat up.  In total they lost well over a half a point in price which increases consumer borrowing cost.  All lenders repriced for the worse, with some lenders increasing consumer costs by .75 in discount.   That means if a certain rate was costing you 1 point to secure, it would now cost 1.75 points.  If you would like to see a graph of the day’s action (WARNING!!!!, it’s ugly) Click here.  In early morning trading, MBS are continuing to move lower(as MBS move lower, rates move higher) but lenders should be able to offer par 30 year conventional rate mortgages in the 4.75% to 5% range.   

Today is Employment Situation day with the Bureau of Labor Statistics releasing the non farm payrolls report and the unemployment numbers.   The report showed that the pace of job loss is slowing with our economy losing only 539,000 jobs in the month of April versus economists’ expectations of  630,000 which is the least amount lost since October 2008.   The months of February and March were revised lower from previous reports by an additional 66,000 jobs lost.  It appears that the positive April numbers are being offset with the lower revisions to the prior two months.  In total since the start of the current recession, our economy has shed a mind boggling 5.7 million jobs!!!  The unemployment rate rose from 8.5%, coming in right on expectations at 8.9% which is the highest reading since September of 1983.  In total, there are 13.7 million Americans that are currently unemployed.   Right after the release of this report, we had a great deal of volatility but since things have settled down allowing investors to thoroughly review the report.   MBS continue to hold steady at closing levels from yesterday.

Many recent reports, from the jobless numbers to ISM index to consumer sentiment, have shown better than expected data, leading many to believe the worst of the recession is over.  This is tilting the flow of money away from safe haven  fixed income investments such as MBS and treasuries, to the higher yielding stock market(speculatively).   Currently the Dow is well over 8000 and pushing the 8500 level while treasuries have lost their flavor and have moved dramatically higher to a yield over 3.30%.  With treasury yields at these levels and moving higher, it will be difficult for MBS to rally moving rates to the low 4% range.  If you continue to sit on the sidelines in hopes of low 4.00% 30 year fixed rate mortgage, you might want to consider moving forward now before the boat has passed.  Many people want to wait until mortgage rates have bottomed out, but the problem with that strategy is you do not know the bottom until it has passed, then it is too late.  A bird in hand, is worth more than 2 in the bush.  Take advantage of the rates available today, they continue to remain at historic low levels.  I would love to hear from you.  Do you feel the end of the recession is in sight?  Do you feel optimistic about your own financial position and job security?

No other economic data will be released today.   Currently the stock market is moving off its highs of the day which is allowing MBS to move a little higher in price.  So as the flow of money leaves the Dow, it is finding its way to fixed income investments.   Let’s hope this trend continues.  Early reports from fellow mortgage professionals are showing par 30 year fixed rate mortgages at 4.75% for well qualified consumers.  To qualify, you must have a FICO credit score 740 or higher, a loan to value at 80% or less and be willing to pay all closing costs including 1 point loan origination/discount/broker fee.  Some lenders are offering incentives for clients with over 740 scores and loan to values under 60% which would place the par rate at 4.625%.  

For intraday updates, make sure you click over to the MBS Commentary blog.