How Did The Employment Report Affect Mortgage Rates?

Posted To: Mortgage Rate Watch

It is the first Friday of the month and that brings us the official government report on the labor market: The Employment Situation Report. This release provides four headline measures on the health of the jobs sector. Nonfarm Payrolls: totals the number of jobs that were added to or cut from employer payrolls in the prior month. Consensus Forecast: -100,000 vs. -131,000 in July (Private payrolls increased 71,000 in July and +41,000 expected today) Unemployment Rate: the percentage of working-age, mentally able-Americans who are jobless. Consensus Forecast: 9.6% of the labor force vs. 9.5% last month Average Hourly Earnings: the average amount of earnings per hour of labor performed. Consensus Forecast: +0.1% vs. +0.2% last month. Average Work Week: average amount of hours worked by an employee...(read more)

All Signs Point to Higher Rates in Week Ahead

Posted To: MBS Commentary

NFP has come and gone, let's see where things stand.... The October delivery FNCL 4.0 is -0-09 at 102-15. In the chart below I called attention to a few technical inflection points. The ascending trend channel that helped mortgage rates hit new lows on Wednesday has broken down and FNCL 4.0s have made their way back into the range that moderated price action for the majority of August. The falling knife found support and bounced higher directly in the middle of that range. 10s flagged lower for the entire month of August (all summer really) and are now flagging higher. The 2.625% coupon bearing 10 year TSY note is off its session price lows (98-24) at 99-07 yielding 2.715% (+8.8bps). 10s are the worst spot on the curve followed by 7s (+8.6bps) and the long bond (+7.6bps). Volume was heavy into...(read more)

FHFA Establishes New Housing Goals for GSEs

Posted To: MND NewsWire

The Federal Housing Finance Agency (FHFA), conservator of Freddie Mac and Fannie Mae (the Enterprises) has established its final housing goals for the Enterprises in 2010-2011. FHFA is required by the Housing and Economic Recovery Act of 2008 (HERA) to set such goals for targeted segments of the mortgage market The new rules establish three goals for single-family, owner-occupied home purchases; one for low-income families, another for very low-income families, and a third for families living in geographical areas with lower-income populations, areas with high concentrations of minority residents, or federal declared disaster areas. The goal for disaster areas contains a sub-goal to ensure that the needs of lower-income and minority areas are addressed. A goal has also been established for...(read more)

Banks Prefer Cash Buyers in REO Sales; Freddie Mac Streamline Refi Program; Originator Capacity Constraints; Comments on Property Flipping

Posted To: Pipeline Press

If there's one thing that an investor will never let any originator off the buyback hook for, it's fraud . Not only that, but the penalties can go far beyond merely buying back the loan, and saying' "My bad." Just in the last few days, Laura-Jean Arvelo and Ronald O'Malley, a New Jersey mortgage broker and former head of the Bergen County Improvement Authority, was indicted by a federal grand jury on charges of preparing fraudulent mortgage applications. Both are charged with wire fraud, bank fraud and loan application fraud in order to take bogus documents and falsified applications to trick lenders into making mortgage loans and benefited from fees they received. Ryan Miller of Missouri was sentenced to more than 12 years in federal prison and pay $6 million in restitution for mortgage fraud...(read more)

Employment Situation Report: -54K Total Job Losses. Private Sector Adds 67k Positions. Bonds Sell

Posted To: MBS Commentary

THE EMPLOYMENT SITUATION – AUGUST 2010 – BETTER THAN EXPECTED From the Release... Nonfarm payroll employment changed little (-54,000) in August, and the unemployment rate was about unchanged at 9.6 percent, the U.S. Bureau of Labor Statistics reported today. Government employment fell, as 114,000 temporary workers hired for the decennial census completed their work. Private-sector payroll employment continued to trend up modestly (+67,000). The number of unemployed persons (14.9 million) and the unemployment rate (9.6 percent) were little changed in August. From May through August, the jobless rate remained in the range of 9.5 to 9.7 percent. The number of long-term unemployed (those jobless for 27 weeks and over) declined by 323,000 over the month to 6.2 million . In August, 42...(read more)

The Day Ahead: August Employment Data to Drive Markets

Posted To: MBS Commentary

Markets are roughly flat Friday morning ahead of the widely anticipated employment report for August, which at 8:30 eastern time is set to show that jobs declined for the third straight month. Ninety minutes before the opening bell, the S&P 500 is down 0.75 to 1,089.00. The 10 year Treasury note is -0-07 at 99-25 yielding 2.65% (+2.5bps) and the October deliver FNCL 4.0 is -0-02 at 102-22. The employment report is anticipated to show that 100,000 jobs were lost last month, though the decline relates to disappearing Census jobs rather than another dip. Still, private payrolls should increase a modest 41,000, according to economists polled by Reuters, and manufacturing jobs should be up by 10,000. “Unfortunately, whatever we see privately probably gets fully offset by other public sector...(read more)

Mortgage Rates Move Higher Before Jobs Data

Posted To: Mortgage Rate Watch

What a boring day in the markets! Stocks added to yesterday's gains and bonds added to their losses. This pushed mortgage rates marginally higher. The best 30 year fixed mortgage rates are still in the 4.125% to 4.375% range for well-qualified consumers, but less lenders are offering rates below 4.25% today. If your lender is still willing to offer a rate below 4.25%, your closing costs are about 25bps higher today (0.25% of your loan amount). AQ's comments from yesterday still apply... We're not panicking over this sell off. There has been no change in our fundamental economic outlook, we see no new reason to be optimistic about a rapid recovery. What we witnessed today was a technical adjustment, an adjustment that could reverse course on Friday morning if the Employment Situation Report...(read more)

Pending Home Sales Rebound from Record Low. What Might Boost Buyer Demand?

Posted To: MND NewsWire

The National Association of Realtors released the Pending Home Sales Index today. NAR's Pending Home Sales Index measures the number of home purchase contracts that were signed in the monthly reporting period. Once "pending" sales contracts are closed, they are considered an existing home sale. Because the Pending Home Sales index tells us how many contracts were signed, it is consider a forward indicator of existing home sales. A signed contract is not counted as an existing home sale until the transaction actually closes. Excerpts from the Release... Following a sharp drop in the months immediately after expiration of the home buyer tax credit, pending home sales have modestly risen. The Pending Home Sales Index, a forward-looking indicator, rose 5.2 percent to 79.4 based on contracts signed...(read more)

Fed Hosts Neighborhood Stabilization Summit

Posted To: MND NewsWire

Community organizers, state and federal government officials, and representatives from banking, research and educations institutions are currently meeting in Washington at a REO and Vacant Properties Summit sponsored by the Federal Reserve Bank. The two day conference is focused on examining the problems associated with vacant and abandoned property and to explore approaches to neighborhood stabilization. Governor Elizabeth Duke, Board of Governors of the Federal Reserve opened the summit on Wednesday. In her remarks she introduced the types of issues that are faced by communities with high rates of foreclosure and REO and highlighted some of the lessons learned in the last few years about neighborhood stabilization strategies. She pointed out that the impact of each foreclosure goes far beyond...(read more)

Pre-NFP Outlook Plus Loan Pricing Comparison

Posted To: MBS Commentary

What a rough morning! It appears my hard drive no longer wants to work. I tried to reach out for help, but no one answered. Then my gf called and reminded me that today is 9.02.10. This explains why Glenn is M.I.A, he's curled up on his couch watching re-runs of 90210! I think his favorite character is Dillon. Enjoy your day off Glenn! Oh well. I'm up and running again...... The day has not been so pleasant for originators either. Loan pricing is 2.9bps worse on average today. That doesn't sound too bad, but take a closer look. The largest rebate reductions were applied to the note rates closest to par. These are the rates most borrowers are hoping to be quoted. There is good news though, you can still lock in a rate below 4.25%! It's just gonna cost more at the closing table. The stock market...(read more)

Litany of Investor Bulletins: Mortgage Insurance, Appraisal Photos, Originator IDs, Incomplete GFEs, 203(b)'s, Reserve Requirements, No More ARMs

Posted To: Pipeline Press

It's good to know the jumbo market is alive and well! Alive and well for Tiger Woods who just got a residential construction loan for $54.5 million on Jupiter Island in Florida, which he agreed to pay back by January 2016. Of course, folks like pediatricians are having trouble finding an 80% loan for a few million, as are self-employed borrowers like architects, CPA's, or sail makers. But there is hope! (No, I don't know the lender or the terms) OK, here goes, in no particular order, the very recent investor changes (skip to the bottom if uninterested). As always, readers should examine the bulletins themselves, but this will give you a flavor for what is happening: Fannie Mae told servicers that it updated the allowable foreclosure time frames in the states of FL, MD, NV, and NY, is monitoring...(read more)

Eliminate Investor Credit Overlays by Selling Directly to the GSEs

Posted To: The Garrett Watts Report

I’ve been on the road for the past three weeks, mostly performing reviews of mortgage bankers for warehouse lenders. I am happy to report that all channels of origination are doing well. I’m no longer hearing the grumblings we heard earlier in the year as record low rates have sparked a mini-refi boom throughout the country and in certain areas the purchase market is also doing well thanks to record high levels of home affordability. If one is gainfully employed and has excellent credit, it is a great time to buy a home. Referral based retail and internet retail shops are generating impressive profits. Contrary to the naysayers, the broker business is thriving and wholesale lenders are quite busy. Everyone appears to have adjusted to the new RESPA regulations and companies are settling...(read more)

Expanding the Pool of Eligible Homeowners: Common Sense Underwriting Needed

Posted To: Voice of Housing

It seems our economy is unable to promote a significant level of consumer spending without some sort of Federal Assistance. Given that this is an election year where the outcome has the potential to be especially significant, it is reasonable to anticipate that lawmakers returning to Washington after their Labor Day recess will be motivated to enact legislation to stimulate economic activity. One idea being circulated is to re-authorize the recently expired Homebuyer Tax Credits. While that may seem like a step in the right direction, it is not. In fact, just talking about another homebuyer tax credit could slow sales in the here and now as consumers put off purchase plans in hopes they too will be able to benefit from such incentives. More importantly, we must stop attempting to apply short...(read more)

The Day Ahead: Jobless Claims, Pending Home Sales, Productivity

Posted To: MBS Commentary

Interest rates are modestly higher this morning after equities closed nearly 3% higher Wednesday. Ninety minutes before the opening bell, S&P 500 futures are just below yesterday's high at 1081.25 and the benchmark 10-year Treasury note is -0-04 at 100-09 yielding 2.593% (+1.3%). The October delivery FNCL 4.0 is -0-02 at 102-27. A busy economics calendar carries the potential to shift market sentiment in the day ahead. At 8:30, initial jobless claims are anticipated to rise 2k to show that 475,000 Americans filed for first-time unemployment benefits in the final week of August. The labor news comes one day before the official monthly numbers are released. The report should give further context to yesterday’s mixed data ? the ADP report showed 10k private jobs disappeared in the month...(read more)

New Mortgage Rate Lows Lost as Stocks Rally and Bonds Correct

Posted To: Mortgage Rate Watch

Mortgage rates had a great day yesterday. This is the message we communicated to readers... ATTENTION: Mortgage Rates Hit New Lows If you've been floating your loan or have yet to apply for a refinance because it just didn't seem worth the hassle, congratulations, mortgage rates hit new lows today, it's now worth the hassle! If you've refinanced in the last 20 months, there is a darn good chance your refinance option is back in the money, again! The best 30 year fixed mortgage rates have fallen into the 4.125% to 4.375% range for well-qualified consumers. Some lenders will even go as low as 3.875% if the borrower is willing to pay points. Although the 4.125% quote isn't being offered by the large retail banks (sorry retail L.Os), the smaller mortgage bankers and independent brokers do have...(read more)

Recap and Charts: July Construction Spending Data

Posted To: MND NewsWire

The Census Bureau today released Construction Spending data for July 2010. Residential construction spending includes remodeling, additions, and major replacements to owner occupied properties subsequent to completion of original building. It includes construction of additional housing units in existing residential structures, finishing of basements and attics, modernization of kitchens, bathrooms, etc. Also included are improvements outside of residential structures, such as the addition of swimming pools and garages, and replacement of major equipment items such as water heaters, furnaces and central air-conditioners. Maintenance and repair work is not included. The value of all construction put in place in the U.S. on an annualized basis was $805.2 billion compared to a rate of $813.1 billion...(read more)

Rising Refi Index Indicative of Pickup in Prepay Speeds on Recent Vintage MBS

Posted To: MND NewsWire

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending August 27, 2010. The MBA's loan application survey covers over 50% of all U.S. residential mortgage loan applications taken by retail mortgage bankers, commercial banks, and thrifts. The data gives economists a snapshot view of consumer demand for mortgage loans. In a low mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out a lower monthly payment. If consumers are able to reduce their monthly mortgage payment and increase disposable income through refinancing, it can be a positive for the economy as a whole (creates more consumer spending or allows debtors to pay down personal liabilities like credit cards). A falling trend of...(read more)

Another Review of Originator Compensation Regs; Loan Programs That Don't Require an Appraisal; JP Morgan Cuts Deal to Reduce Buyback Exposure

Posted To: Pipeline Press

Rates continue to trend lower, helped yesterday by the release of the FOMC meeting's minutes which alluded to the possibility of the Fed reinvesting in MBS's. (But heck, as one trader told me, low mortgage rates are helping agency-qualified borrowers, not others in the economy like renters who can't qualify, not those that don't have jobs or those that simply pay cash for houses .) "A few members worried that reinvesting principal from agency debt and MBS in Treasury securities could send an inappropriate signal to investors about the Committee's readiness to resume large-scale asset purchases," the Fed said in the report, referring to mortgage-backed securities. The minutes from the August 10 meeting made it clear that the Fed is far from ready to restart Quantitative Easing Round 2. It didn...(read more)

Bond Market Suffers as Investors Reallocate Funds into Riskier Assets

Posted To: MBS Commentary

Stocks are rallying and the bond market is taking a beating after a much better than expected read on the manufacturing sector. The August ISM Manufacturing Index came in at 56.3 vs. economist estimates for a read of 53.0. The "Prices" index rose 4 points to 61.5 from 57.5, quelling deflationary fears and giving bond traders a reason to fade the rally. Stocks were up before 10am data but didn't take flight until after ISM flashed. S&P futures are currently up 27 handles at 1075.25. The bull flattener is unwinding again. The 2s/10s curve is 9bps steeper at 209bps. The long bond is 14.7bps higher at 3.668%. The 7-year note is +12.5bps at 2.046%. The 10yr note is +12.3bps at 2.593%. Volume was heavy into the downtrade. Although production MBS coupons are performing much better than their benchmark...(read more)

Fed Leaves Door Open to Buy More MBS if Needed

Posted To: MBS Commentary

Production MBS coupon prices hit new record highs yesterday, pushing mortgage rates through the 4.25% barrier to new lows. "Rate sheet influential" MBS coupons were led higher by longer dated Treasuries, which benefitted from month-end allocations and a continued correction from the sell off seen last Friday. The new all-time price high for the front month FNCL 4.0's is 103-19. The October delivery FNCL 4.0 went out +0-10 at 103-07. Yield spreads ended the session wider (nominally) vs. duration adjusted benchmarks. The 10 yr note went out +0-17 at 101-12 yielding 2.47% (-6bps). The 2s/10s curve bull flattened back down to 200bps. It should be noted that Treasuries rallied regardless of a modest bid for equities. The S&P closed +0.03% at 1049.27. A hint of better pricing to come was offered...(read more)

The Day Ahead: Stocks Rally Ahead of Jobs, Manufacturing Data

Posted To: MBS Commentary

The first day of September looks to open strongly while investors await key data on employment and manufacturing. About ninety minutes before the opening bell, S&P 500 futures are up nearly 12 points to 1,060 and Dow futures are jumping 75 points higher at 10,081. Interest rates are moving higher in the wake of improved sentiment in equities. The 10 year Treausry note is -0-10 at 101-01 yielding 2.507%. The October delivery FNCL 4.0 is -0-02 at 103-05. European stocks are also about 1.5% higher and Asian markets finished stronger (a notable exception being China’s Shanghai index, which fell 0.6%). At 8:15, the ADP Employment Report is anticipated to show that 18,000 private jobs were created in August, according to economists polled by Reuters. Investors will be watching the numbers...(read more)

Lock Desks Buy Back Hedges. Potential Shift in Production Coupon Looms

Posted To: MBS Commentary

Yesterday we heard banks were buying back MBS hedges. This means lock desks were actively reducing their pipeline coverage (forward hedges) to account for an expected increase in fallout. More fall out = less deliverable loans = added hedging costs unless you replace the production with similar paper before settlement, READ MORE Looking back, this was a hint of strong pricing to come. Just in case you haven't seen the headline yet, this is what we told consumers today: ATTENTION: Mortgage Rates Hit New Lows I actually felt the need to apologize to retail L.Os in that post because I know those headlines might make their lives miserable. It is what it is though, the FNCL 4.0 hit a new price high and loan pricing reflects it. On average, rebate was 30.2bps better vs. yesterday. HERE is a full...(read more)

ATTENTION: Mortgage Rates Hit New Lows

Posted To: Mortgage Rate Watch

If you've been floating your loan or have yet to apply for a refinance because it just didn't seem worth the hassle, congratulations, mortgage rates hit new lows today, it's now worth the hassle! If you've refinanced in the last 20 months, there is a darn good chance your refinance option is back in the money, again! The best 30 year fixed mortgage rates have fallen into the 4.125% to 4.375% range for well-qualified consumers. Some lenders will even go as low as 3.875% if the borrower is willing to pay points. Although the 4.125% quote isn't being offered by the large retail banks (sorry retail L.Os), the smaller mortgage bankers and independent brokers do have access to loan pricing that will allow them to offer new rate lows. So this brings us full circle on the advice we offered consumers...(read more)

S&P/Case-Shiller: Home Prices Rise in June. Tax Credit Hangover Ahead

Posted To: MND NewsWire

The Standard & Poor's/Case-Shiller U.S. National Home Price Index was up 4.4 percent in the second quarter of 2010, more than recovering from the 2.9 percent loss that was suffered in the first quarter, but the index committee warned that recent housing indicators "point to more ominous signals as tax incentives have ended and foreclosures continue." On a month to month basis, the 10-city index improved 1.0 percent to 161.04 and the 20-city index rose 1.0 percent to 147.97. The year over year 10-City and 20 City Composite Indices for June marked the first time in 16 months that the increase in annual returns moderated, pointing to a possible deceleration in home price returns. In May the YoY increase in the 10-City Composite was 5.4 percent, in June it was 5.0 percent. The 20-City figure...(read more)

Production MBS Coupon Hits New High. Loan Pricing Noticeably Better as 3.5s Trade Forward

Posted To: MBS Commentary

While 2 of the 3 top tier data sets released this morning failed to improve on a month to month basis, 2 of those 3 were better than economists were expecting. Consumer Confidence perked up and beat consensus forecasts while Chicago PMI was a downer all around. Equity market seem to be focusing on the better than expected headlines vs. the month over month deteriorations, specifically the large uptick in Consumer Confidence. I say that because Consumer Staples and Consumer Discretionaries are leading the broader market higher. I would also point toward technical support at S&P 1040 as a reason to buy. This is where volume accumulated and stocks reversed course after a weak Chicago PMI print at 945am. S&Ps are currently +6.00 at 1051. Trading volume has already surpassed yesterday's...(read more)