After ending last week on a three day losing streak, loan pricing made a total turnaround in the first three days of this week, mostly thanks to the outcome of the FOMC meeting on Tuesday. This led mortgage rates almost all the way back to record lows on Wednesday morning. However, soon after, MBS prices began to tick lower (from the top of the price range) which forced a few lenders to reprice for the worse. This put pressure on mortgage rates.

The data calendar picked up today with several economic releases, starting with weekly Jobless Claims. Released by the Department of Labor, this report provides three timely metrics on the health of the labor market:

Initial Jobless Claims: totals the number of Americans who filed for first time unemployment benefits in the previous week

Continued Claims: totals the number of Americans who continue to file for benefits due to an inability to find a new job

Extended and Emergency Benefits: totals the number of Americans who have exhausted their traditional benefits and are now receiving extended and emergency benefits.

Since our economy is driven by consumer spending, market participants track employment data to get a gauge on economic momentum. Higher jobless claims imply less consumers have jobs and therefore less money to spend. This is a negative for the overall economy but generally helpful in keeping consumer borrowing costs from rising. Since peaking in mid-August at 504,000 claims, initial claims for unemployment benefits have either held steady or improved in the past 5 weeks.

Here are the results:

Initial Jobless Claims: +12,000 to 465,000 vs. estimates for a read of 450,000. WORSE THAN EXPECTED. Prior week’s data was revised worse to show 3,000 more claims.

Continued Claims: -48,000 to 4.489 million vs. estimates of 4.460million.

Extended and Emergency Benefits: +208,000 to 5.17million.

This worse than forecast data was a positive for mortgage rates. Bonds rallied on the news and mortgage rates looked like they were set to correct.

Mortgage rates didn’t have a chance today.

Borrowing costs started moving higher early in the session and never looked back.

As the day progressed, agency MBS prices fell further and lenders were forced to reprice for the worse.

Par 30-year fixed 4.25% quotes are still on the board, but closing costs are at least 15bps higher (+0.15% of loan amount).

That’s really a best case scenario though. If you’re a passenger on the float boat, your closing costs probably increased by about 0.25% today. 4.375% is almost the new par.

But 4.25% is definitely still do-able for very well-qualified borrowers (no loan level price adjustments). Now 4.125%, that might be tough. That quote is costing perfect borrowers about 2pts.

The culprit of this event? Well. We can’t factor out a religious holiday: Rosh Hashanah. Many decision makers were out of office today, if not to celebrate their faith, at least to look after their kids who were enjoying a day off (public schools).

Combine that with an already apathetic investing bias plus a poor turnout at a Treasury bond offering…and the market got a little sensitive. Yes MBS had a very bad day today. But we’ve had bad days before. Yes loan pricing got dinged today. But we’ve seen loan pricing get dinged before.

We expected rates to move higher this week. If you’re floating, that means you’ve been doing so under the assumption that loan pricing was going to worsen this week. You knew to expect a period of volatility as the market searched directional leadership in a quiet environment. Rates could very well trend higher in the month ahead.

It was a really boring summer for return hungry investors, there is potential in the marketplace for stocks to rally on, even if the rally is built from glass. View it as professional traders attempting to spark some excitement. Profit Churning. If that makes you feel queasy, it’s not too late to lock up at a really really aggressive rate, especially if you’re closing in September.

But we never thought 3.5 MBS coupons would trade with enough liquidity to allow lenders to offer rates below 4.25%, but they did, albeit briefly. The economic and political environments are still clouded with uncertainty and muddled with assumptions based on assumptions. It’s hard to believe stocks could run too high without being spooked by a weak read on the labor market or another leg lower in the housing market.

Does this mean the lowest mortgage rates are behind us?

We might have seen the lowest rates we’re ever gonna see, if that is the case, then those rates are already behind us so it doesn’t mattter. No need to panic already. I think rate watchers with waiting time should sit back for now and see how this latest shift in benchmark yields plays out. If push comes to shove and we need to pull the emergency chute, we will alert. In the meantime, let’s see how the market reacts to higher yields. Play the Range Until the Range Plays You.

Courtesy of:

http://www.mortgagenewsdaily.com/consumer_rates/171091.aspx

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 and 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, the smaller mortgage bankers and independent brokers do have access to loan pricing that will allow them to offer new rate lows.
Wednesday was not so great…

After weeks of stagnation, stocks finally took their turn in the spotlight today. As money moved out of the bond market and into equities, mortgage-backed security prices fell and lenders were forced to reprice for the worse. Consequently, consumer borrowing costs are higher than they were yesterday afternoon. The damage was not terribly dramatic though…

The best 30 year fixed mortgage rates are still in the 4.125% to 4.375% range for well-qualified consumers, but fewer 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). Actually, borrowing costs are about 25 basis points higher across the board.

While a better than expected read on the manufacturing sector has been cited as the stock market’s prime motivation and the bond market’s sole source of weakness, we think other factors were at work.

Call it exhaustion, blame it on boredom, but it is a new month and market participants took advantage of an opportunity to try something different. The bond market rallied all summer and has been viewed as “overbought” by many investors for the last two weeks. Unfortunately, weak economic data has prevented the bond market from correcting itself. Better than expected manufacturing data, a sector the market views as weak, gave investors the chance to let that correction take place today.

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 fails to match economist expectations. It also an adjustment that could be built on if the employment report meets or surpasses forecasts. Either way, the market remains non-committal and fluctuations are expected to occur within a range. The overall outlook remains highly supportive of low mortgage rates.

Now that doesn’t mean we’re all aboard the float boat though. If you’ve been offered a rate at or below 4.25% and can still execute it, we think you should cash in your chips and lock your loan. If you’ve lost this quote and are back to square one, we think you can afford to float as long as you’re not on a deadline. Your borrowing costs might rise a few basis points in the near term, but we think you’ll have another opportunity to lock in at today’s pricing, and potentially yesterday’s pricing, sometime in the next month.

Remember this advice. This is extremely important!

The “best executed” lock/float strategy comes down to finding an originator who knows the loan market, studies underwriting guidelines, and just plain old gets the J.O.B done. You have to let the loan officer earn their commission. That’s how you “ride the float boat” in this environment…make sure you have a damn good skipper. Plain and Simple.

Information courtesy of:
http://www.mortgagenewsdaily.com/consumer_rates/170001.aspx

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The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending July 30, 2010.

Here is an excerpt from the report:

The MBA’s loan application survey covers over 50% of all U.S. residential mortgage loan applications taken by 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 purchase applications indicates a decline in home buying demand, a negative for the housing industry and the economy as a whole.

Plain and Simple: Refinance demand continues to bolster the mortgage market as purchases account for only 22% of new loan apps. Home buyers are utilizing the FHA for low downpayment home financing. This is no surprise given the massive destruction of wealth that has occurred over the last two years. Although mortgage rates are hovering near record lows, and will likely hit new lows in the next release as more lenders are offering 4.25% on rate sheets this week, refinance demand just isn’t what it was last spring. This proves the theory that the pool of qualified borrowers has shrunk right along with the industry, or is it the other way around?

HAS PURCHASE DEMAND HIT A BOTTOM YET?
It’s still too soon to say, especially because it’s supposed to be the summer buying season, but three consecutive weeks of index improvement is a start. We just have to hope purchase loan DENIALS don’t rise right along with the increase in purchase loan demand. That whole qualification thing should raise doubts around any uptick in Pending Home Sales.

To read the full report click the link below.
http://www.mortgagenewsdaily.com/08042010_stolen_loan_demand.asp

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