MBSonMND: MBS RECAP
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FNMA 3.5
95-15 : -0-04
FNMA 4.0
99-24 : -0-08
FNMA 4.5
103-11 : -0-05
FNMA 5.0
106-05 : -0-03
GNMA 3.5
96-27 : -0-04
GNMA 4.0
101-22 : -0-06
GNMA 4.5
105-16 : -0-03
GNMA 5.0
108-10 : -0-02
FHLMC 3.5
95-05 : -0-09
FHLMC 4.0
99-21 : -0-08
FHLMC 4.5
103-05 : -0-06
FHLMC 5.0
106-00 : -0-03
Pricing as of 4:04 PM EST
Afternoon Market Updates
A recap of MBS Market Updates provided by MND Analysts and streamed live to the MBSonMND Dashboard .
3:54PM  :  Rate Movers: Econ Data, Trading Techs, Debt Ceiling Debate
Most folks would scoff at us if we said mortgages gave a strong performance this week. It doesn't seem possible when the Fannie Mae 4.0 MBS coupon dropped 46/32 in price. Well scoff away because here we are telling you that MBS buyers we're "waving 'em in" into lower price levels this week. That means we saw bargain buying, a push-back against rates profit takers and tighter yield spreads. That buying did little to stop steep price declines though. Rate sheets shed over 100bps when all was said and done. You can blame benchmark Treasuries for that, they led the way lower as risk-assets rallied. WHY? A multitude of factors including but not limited to: rally exhaustion (overbought technicals in bonds. oversold techs in stocks), Greece avoiding default (for now), the end of the Fed's QEII bond buying program, the end of the second quarter, and "not as bad as expected" June econ data. NOW WHAT? Well with Greece saved for the summer and the Fed out of the market, new economic data, the debt-ceiling debate, and trading technicals will take the lead in providing directional guidance for interest rates. Economists have already cut forecasts considerably for 2011, but did they over-do the downgrades? Leaving too much room for upside surprises. This is a concern of ours. We still think the economic recovery is lacking core ingredients like wage-growth, consistent payroll expansion over 200,00 jobs a month, and a bottom in housing, but the market is used to that by now. That's where trading technicals come into play. And after all the quarter-end "position squaring" that's occurred recently, bond traders are ready to make a move in either direction. Unfortunately the path of least resistance is higher until equities run out of steam. So, regardless of our weak econ recovery viewpoint, we’re defensive, especially when you add in the potential for political pandering in the debt-ceiling debate. Lock on application until we're able to confirm a reversal of this sell-off.
2:50PM  :  Borrower Education Tools: A Secret Data Resource
Nationally, housing faces a long road to recovery, but not all markets are equal. While areas with a high concentration of distressed properties are clearly stuck in a deflating environment, some communities will see price stability. It's all based on local and regional economies. Regional Economic Conditions (RECON) was originally designed to assist the FDIC in the examination process by providing economic information at the state, MSA (Metropolitan Statistical Area), and county levels. We believe that easy access to timely, high-quality information about economic conditions and risks could be of benefit to housing professionals and housing consumers. Using RECON, anyone with internet access is able to drill down to any state, MSA, or county to view standard graphs, tables, and maps depicting economic conditions and how they have changed over time. Use this data to educate borrowers about their local economy. Help buyers see where they want to live. Show them why. This is where the housing recovery can build momentum: http://www2.fdic.gov/recon/index.asp
2:21PM  :  Subprime Mortgage Index Soars as Fed Slows Sales
(WSJ) - A bellwether index of subprime mortgage bonds rallied Friday, a day after the Federal Reserve Bank of New York suspended further auctions of so-called Maiden Lane II securities acquired in the American International Group Inc. bailout. A slice of the ABX derivatives index that tracks highly rated subprime mortgages soared nearly four cents on the dollar Friday to a midmarket intraday price of 54 cents. That's the highest in about a month and up from 46.4 cents this time last week, according to data provider Markit. "There's been a big spike up as people took off their shorts with the Greece situation temporarily behind us, the Maiden Lane sales being shelved and a rally in other markets," said Jeffry Mullins, co-head of securitized products trading at CRT Capital Group LLC. The market shift followed an impromptu conference call by the New York Fed on Thursday afternoon in which the central bank told dealers it had no fixed time frame for unwinding the $20 billion in Maiden Lane II bonds it still owns. Since April, the New York Fed has sold about $10 billion of assets from the portfolio, which was created to hold mortgages AIG surrendered to the bank in exchange for a bailout in 2008. Dealers have been urging the Fed to slow, or stop, its auctions after the sales began to depress prices in May. Investor demand has also fallen since April because of rising bond losses, weaker-than-expected U.S. economic data and the lingering fears over the Greek debt crisis weighing on risky assets. At 54 cents on the dollar, the ABX.HE.AAA.06-2 has nearly doubled from its June 2009 low of around 29 cents, Markit data show. The index began falling from near par in June 2007.
2:03PM  :  Lower Loan Limits Coming: Muted Impact?
A study released by George Washington University reveals that the Federal Housing Association’s (FHA) current loan limits are larger than necessary to serve its targeted market of first-time and low to moderate income borrowers. The report, entitled “FHA Assessment Report: The Role and Reform of the Federal Housing Administration in a Recovering U. S. Housing Market,” concludes that the FHA still could serve 95 percent of its historic targeted market even if the maximum FHA loan limits were reduced by nearly 50 percent. To serve its target population, the report concludes that FHA only needs a market share of somewhere between 9 to 15 percent of total mortgage originations. Current estimates by the Administration put its market share at approximately 30 percent of originations. In 2006, the FHA could insure loans of up to $362,790 in the higher cost markets. In response to the 2008 housing crisis, FHA loan limits were revised to insure loans of up to $729,750 in these high cost markets. Recently, the Obama Administration has proposed allowing current law to lapse in October, causing a modest decrease in these limits to $629,500. In order to address this problem the report recommends that Congress and the administration take the following actions in the below order: 1. Reduce FHA’s loan limit in the lowest cost markets from the current $271,050 to $200,000. 2. Return the FHA loan limit in high cost markets from $729,750 to $363,000. This would be achieved by reversing the current policy that allows FHA to guarantee loans of up to 125 percent of the median home price in high-cost markets. 3. Return to using current area median home price in calculating the local loan maximum, moving away from the 2008 median home price estimate. FULL REPORT: http://business.gwu.edu/creua/research-papers/files/FHA2011Q2.pdf
1:39PM  :  New Mortgagee Letter: Condo Approval Process
The Federal Housing Administration (FHA) and HUD have published updated condominium policy guidelines and instructions that clarify the approval and recertification process and policies for condo projects. FHA’s latest mortgagee letter includes a Condominium Policy Guide and a matrix that briefly describes new policy requirements specified in the Guide as well as the associated implementation dates. “This guidance formalizes and expands the policies we put in place in 2009 and lays the groundwork for a more formal rulemaking process going forward", said FHA’s Acting Commissioner Robert Ryan. The effective date is 60 days from the ML release for all project approvals. That puts new guidelines in action by September 1st. Expect lenders to announce new policies sooner. HERE is the ML: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/11-22ml.pdf. HERE is the guide: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/11-22mlguide.pdf. HERE is the matrix: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/11-22mlatch.pdf
1:03PM  :  Bad Week for Loan Pricing. Over 1-Point Erased
It was a very bad week for loan pricing, especially for note rate below 4.75%. On average, since hitting the best rates of the year last Friday, rebate is 100.7bps worse. That's 1.07 points. More than enough to push Best Execution Mortgage Rates 0.25% higher. The "Best Execution" conventional 30-year fixed mortgage rate is now 4.625%, but fewer originators are readily quoting it after additional weakness was experienced today. More lenders are offering 4.75% instead (see extra margin in rate sheets). On FHA/VA 30 year fixed "Best Execution" is still 4.375% but just barely, 4.50% is more willingly quoted. 15 year fixed conventional loans are best priced at 3.875%. Five year ARMs are still best priced at 3.25%. Thanks to a technical breakdown and "flattening" of trader positions (not bearish. just less bullish), the path of least resistance is up for interest rates, at least in the short-term. That puts us in a defensive posture for the next 10 to 20 days and creates an uncomfortable lock/float environment. Rate watchers have two choices: 1) lock up and get out now or 2) try to capitalize on a correction. The former is the safe advice. With respect to the latter, there will be ups and downs no matter which direction rates are trending. And in the current environment, those swings can be BIG. For the thrill-seekers out there, or the longer-term, more flexible scenarios, we haven't change our outlook for lower rates by the end of the summer yet. BEWARE: This is guidance is speculative in nature. We don't have a crystal ball, we can't predict the future, we can only share our outlook.
12:33PM  :  New Mortgage Rate Watch Post
11:35AM  :  ALERT: Loan Pricing Suspended. Rate Sheets Worse.
Loan pricing will deteriorate this morning. Many lenders have already suspended rate sheets, presumably to take down new indications and reprice for the worse. With the bond market already acting increasingly illiquid as more and more investors run for an early exit, this is one of those days where secondary can pick up a few extra bps on poorly timed locks by baking extra margin into rate sheets.
11:24AM  :  New MBS Commentary Post


Featured Market Discussion
A recap of the featured comments from the Live Discussion on the MBSonMND Dashboard .
Adam Quinones  :  "AQ_MND: CC +18.1bps WoW @ 4.026%. MBS outperform: +83/10yT. +71/10yIRS. +223/5yT. Steep TBA price declines put a hurtin on loan pricing though...."
BVG  :  "I'm being told that I cannot increase my origination when switching from Lender Paid to Borrower Paid even though the borrowers want to buydown the rate and it was disclosed to them on anti steering form?"
Brent Borcherding  :  "Out at 3.1991? Are you kidding? Just inside the range."
Adam Quinones  :  "a little secret...this data is great if you are looking to do some local "data-based" marketing: http://www2.fdic.gov/recon/index.asp"
Victor Burek  :  "IBC will do 2nds on condos to 90%"
Ken Crute  :  "adam,maybe a dumb question, can you get a 10% 2nd? what is the owner occ ratio? call each MI company and ask what they allow"
Adam Dahill  :  "Thanks Bromi, Citi works for PMI, MGIC and I think one other. I usually bank but they are the only one that could get the waiver so I'm stuck using Citi and they only order the PMI when the file is CTC. Very frustrating to do the whole deal and have it fall apart at the last minute"
Victor Burek  :  "nexbank worse"
Bromi Krock  :  "AD, I sent an email out to my MI desk I will let you know what they say. Who are you going to for MI?"
Steve Chizmadia  :  "Ah, That's a tough one. Not sure of the MI guides on owner occupancy and delinquency in condo complexes"
Adam Dahill  :  "I have a condo with a great deal of renters. Citi granted a FNMA waiver but the clients are only putting 10% down. I'm afraid I'll have all stips cleared and PMI will come back and say no"
Steve Chizmadia  :  "you can go to a 45% Just did one at 43.5% at Pinnacle"
Steve Chizmadia  :  "Run it on Radian.biz and use 25% coverage"
Steve Chizmadia  :  "Your good. As long as the lender has radian"
Michael Tadros  :  "720"
Steve Chizmadia  :  "Radian will do that. FICO?"
Michael Tadros  :  "90% LTV with a 44% dti - any lenders issuing MI?"
Adam Quinones  :  "yes but not today. let's do that next week."
Curt Sandfort  :  "yes to the income question VB, but I had an u/w ask about a sched E from 2009 because it showed on the 4506T....nevermind that it didn't show on the 2010 return in the file...they still wanted to know if they owned a rental"
Steve Chizmadia  :  "AQ, should we be paying more attention to the 4.5 chart now?"
Victor Burek  :  "if DU asks for 1 year returns... wont they take 2010 plus ytd and divide for income?"
Adam Quinones  :  "Majority of Major European PMI Manufacturing data dips to 18-month lows : http://www.fxstreet.com/fundamental/analysis-reports/european-market-update/2011/07/01/"
Matthew Graham  :  "RTRS- GLOBAL MANUFACTURING PMI FALLS TO 52.3 IN JUNE FROM 53.0 IN MAY -JP MORGAN "
Christopher Stevens  :  "just rec'd chase reprice for the worse (USDA)"