Mortgage Bond Quote 5-1-09

When I talk to people who are sitting and waiting for the mortgage interest rates to get better than they are today, I like to show them this graph of the mortgage bond markets current position vs. the past.   If you follow the market or rates in general, you will understand that bonds are close to all time highs which translates into the best rates we have had in 30 years.  See graph below.

Mortgage Bonds are trading lower today after failing to stay above support at the 25-day Moving Average.   A look at yesterday’s candle on the Bond Page shows both long upper and lower wicks, illustrating wild intra-day trading.  Prices bounced around, hitting both the 25-day MA ceiling of resistance, and support at the 50 and 100-day Moving Averages.

But so far this morning, although lower, Bond prices have successfully tested a triple layer floor of support, marked by the 50 and 100-day Moving Averages, as well as some previous lows.  This strong floor of support could help prices from getting much worse, but it is important to remember that there is a lot of influential news coming next week, along with huge supply of Bonds being auctioned, which could push prices below this strong floor.  And if prices do break beneath this floor, we will likely see another 75bp deterioration before the next level of support is found.  That said, we will Float for now, as we watch to see if this strong triple layer of support holds.

Secured Home Loans: a Haven for Yourself!

Shopping Around: Step One

Shopping for a home loan is a very important task that is not really talked about or taught.
Selecting a mortgage may be the most important financial decision you will make. Most likely, you will be paying off this debt for years, and after all, a small difference in the mortgage rate can make a big difference in monthly payments. We hope the following will help you shop for a mortgage most effectively.

First of all, if you plan on shopping around for a mortgage it is highly recommended that you take the time to order your credit report from all three credit reporting agencies and check it for errors. An inaccuracy you aren’t aware of could cost you thousands of dollars in extra interest or even cause a denial of credit; it is estimated that 50% of all credit reports contain errors significant enough for an individual to be denied a loan!

Secondly, tracking interest rate movements is recommended when shopping for a mortgage. Find out what current mortgage rates are and whether they are going up or down. Mortgage rates fluctuate frequently. One month they are up, the next, down. It is very rare that they remain constant for any lengthy period of time. There are many factors affecting rates and it is often difficult to accurately predict interest rates as the national economy itself, but an understanding of key economic indicators can provide clues to the future direction of interest rates.

Mortgage rates generally rise and fall along with yields on Treasury notes and bonds because those government securities reflect the overall direction of interest rates. By keeping an eye on Treasury market and mortgage market trends a borrower has a better chance of obtaining interest rate savings.

Thirdly, before you begin shopping for a mortgage, you should decide which mortgage program is the best for your situation. A mortgage is a major purchase, so it is important to know that you have the right program for you. Today’s market offers borrowers a tremendous choice of loan products and new opportunities that never existed before, so it pays to educate yourself on the different types of loan programs first.

Choosing the right type of mortgage requires you to review your financial objectives and ask a host of questions, such as:

* How long do you plan on staying in the house or with the loan?
* What amount of monthly payment can you comfortably afford?
* How much money do you have for a down payment?
* Is paying the mortgage off early important?
* Do you intend to make extra principal payments?
* Is your income projected to remain stable or increase?

Your personal expectation for the future of interest rates, your tax bracket and adversity to risk are also important factors to consider when choosing a mortgage loan.

Once you have decided to go with a certain loan program, and find out current interest rates, you can begin shopping interest rates among lenders. To find the best possible deal, you should do some research and compare the mortgages offered by several lenders before you commit to borrow. It isn’t always easy to compare loans because your mortgage rate is only one part of your mortgage loan. You should also compare points and other fees. There are a number of different fees involved in getting a mortgage that can add thousands of dollars to the cost of your loan, and some lenders have different names for them. One lender might offer to waive one fee and then add another one. Comparing what different mortgage brokers and lenders are charging you to get an interest rate is often the most difficult part of mortgage shopping.

Before deciding which mortgage to get, look at the whole product. Pay close attention to the terms of a loan including the type of the mortgage, the presence of prepayment penalties, low or high down payment, mortgage insurance requirements, payment schedule, lock-in period and many other features. Pick the loan with the rate and other terms that suit your situation best. For example, prepayment penalty clause can be very important if you are planning to sell your house or refinance in the next 3 – 5 years, or if you expect to prepay your loan.

Once you have decided to go with a certain lender (or broker), ask him to specify the documents you will be required to provide for the approval process. Find out also whether the loan application and the lock-in fees, if any, are refundable if your application is rejected.

4/3/09 Update

The numbers are in from the Labor Department, and the economy lost 663,000 jobs in March, close to revised expectations of -660,000, and pushing the total number of jobs lost since the recession began in December of 2007 to 5.1 million.  January’s numbers were revised lower by -86,000, from a previously reported -655,000 down to -741,000.  The Unemployment Rate rose to 8.5%, inline with estimates and up from 8.1% in February.

As we expected, the report was weak but there were also some reasons for hope…for the first time in a very long while, there were no downward revisions to a prior month’s reading, as February’s number came back with no change.  This, as well the actual losses for this month being less than January’s levels, and not much worse than expectations, could mean there is some level of stabilization at hand for the labor market.  Mortgage Bonds initially dropped on the news but have since improved slightly.

The New York Federal Reserve reported yesterday that it purchased $32B in Mortgage Backed Securities from March 26 through April 1, concentrating on the 4 – 4.5% coupons.  As we’ve discussed in articles and scripts for you, these coupons translate into conforming zero point loans which have rates in the neighborhood of 5 – 5.25%.  And as evidenced by the report, the Fed did not spend one dime on the 3 or 3.5% coupons, which are the levels needed to be purchased in order to bring rates down much further.  As we’ve been saying, this is another data point to share with your clients and referral partners that now is the time to get prospects into application and ready to lock, as any improvement in rates may be incremental.

Just one short day after mark to market was ruled to be relaxed by FASB, we are hearing stories of banks already saying they may not need to sell assets to raise capital, as they will no longer have to take massive paper losses by pricing their assets to the firesale comps that were created in some of the illiquid markets.  Capital ratios are now more in line for many institutions, which will also help their ability to lend – in turn helping consumers and businesses alike.  Yesterday’s ruling is a dramatic step towards unwinding the negative spiral created by mark to market, and we expect more good news to come from the financial sector by way of yesterday’s decision – in fact, the ruling on mark to market accounting could well go down in history as a turning point in the US financial crisis.

Mortgage Bonds have improved from their worst levels of the morning and we will cautiously float for now.

From MMGuide