The mortgage industry injection

Well, Quantitative Easing II is here! The FED announced 600-800 billion in securities purchases through Q2 2011 at the most recent Fed meeting which concluded on Wednesday Nov. 5th. There was not much point in commenting at the time, because in addition to the market worthy event, we had an election and results to deal with. Now that everything has slowed down and the markets have had time to digest the "results", it time to take a look at how we in the rate watching industry have been affected.
To start, as was forecast, rates are hovering at all time lows. By specifically acknowledging the future purchases of financial securities, the FED has, for all intents and purposes, thrown their weight(and considerable where-with-all) behind the saving of the economy. The intended effect is to keep borrowing costs low to stimulate an economy that is barely trudging along. To that end, it would appear to be working. There is no denying that the FED is playing its last hand(they already lowered the borrowing rate to effectively "zero%"). There is not a lot of wiggle room if the latest purchases don't do enough to stimulate the economy. In addition future considerations about impact on inflation have yet to be measured.
Don't let your eyes stray from the prize though......Interest rates look to stay low for the foreseeable future. At this juncture, it is more important to note that one of the hopes of the latest round of QE is to relax the lending standards of the banks. To date, it would be offensive not to admit the banks are hoarding cash right now, and with the federal reserve explicitly backing the securities market, it would be nice to see banks make the money more accessible to consumers while we see these historic low rates.
The time is past to sit on the fence. This "event" is the one we have been waiting for. QE may or may not be good for the economy, but at the very least, in the short-term it is a boon for those well qualified to take advantage of the lowest rates ever offered.

Calm and quiet before election and FOMC results

Not much to report this morning as we are seeing low volume trading.. Rates are still higher than the close of last week but holding steady from Monday. We don't expect to see much movement either today or tomorrow morning till the FOMC announcement Wednesday afternoon. The stock markets have been rallying in the expectation of a major decision concerning Quantitative Easing II. This could have very positive influence on lowering interest rates in the weeks to come. Stay Tuned! As the saying goes "play the range till the range plays you".

Interest Rates Waiting Period

Happy Halloween for all our readers out there, I hope you all had a nice holiday, your dentist is certainly excited to see you all and your children soon!

The scares and frights should be over now...we are closing in on election day and more importantly the FOMC meeting which concludes on the 3rd. That is the date that this author thinks the FED will introduce their next round of Quantative Easing. This event is expected to drop borrowing costs back to record lows, and we should see rates dip down to 3.75%range in the coming weeks.

A few weeks back when the FED first menitioned the possiblity of another round of QE, the bond market got way ahead of itself and we saw rates fall dramatically, since then the exuberance has subsided and we have seen rates steadily climb. Remember, this is a traders market and a trader is always looking to make some profit. The over-enthusiasum led to a pickup in day trader momentum and led to a short term trend of rising rates....

Moving forward all eyes are on what exactly the FED will do this coming Wednesday. There is no reason to believe that they will not introduce another round of QE, to what extent and in what manner is the question. Till our "d-day" keep your eyes and ears open and hopefully you work with a skilled Loan Originator who has his finger on the lock trigger in the case that the FED pulls a fast one on us.

Housing Report

The NAR or National Association of Realtors just released the September existing home sales data...Although it points to persistent weakness in the Real Estate Market, there is some silver lining to report. Below are the published figures.

RTRS-US SEPT EXISTING HOME SALES 4.53 MLN UNIT ANNUAL RATE(CONS 4.3 MLN) VS AUG 4.12 MLN (PRV 4.13 MLN)

RTRS-US SEPT EXISTING HOME SALEXS +10.0 PCT (CONS +4.0 PCT) VS AUG +7.3 PCT (PREV +7.6 PCT)

RTRS-US SEPT INVENTORY OF HOMES FOR SALE -1.9 PCT TO 4.040 MLN UNITS, 10.7 MONTHS SUPPLY

RTRS-US SEPT NATIONAL MEDIAN PRICE FOR EXISTING HOMES $171,700, -2.4 PCT FROM SEPT 2009

RTRS-US NAR SAYS 35 PCT OF US SEPT EXISTING HOME SALES WERE DISTRESSED SALES VERSUS 34 PCT IN AUG

RTRS-TABLE-U.S. SEPT EXISTING HOME SALES ROSE 10.0 PCT

Rates are still holding steady in the 4-4.25% for the most qualified borrowers. Rates have the chance of falling further, but not until the FED solidifies their stance on quantative easing. This week should give guidance to rate direction. Stay tuned and keep that finger over the "lock" button!

What to expect for Rates?

If any of you have been following the mortgage market with us, one would realize that this is a very volitile market we are dealing with. With that said, we have seen falling rates as the trend for the last month or so. Why may you ask? In this authors opinion, it would be a combination of a couple things, but most importantly a result of the impending election, the fact the economy is faltering badly, and the possibility of another round of quantitative easing being introduced by the FED.

To be sure, in any election year we see politicians going out of their way to maintain status quo. They certainly don't want anything drastic occuring in the runup weeks to election day to derail any platforms they may be running on. This applies to all facets of the government, sorry to say.

The economy is in the dumps...far be it for this author to state otherwise...Interest rates are at historic lows in the hopes of stimulating borrowing...spending...investing. Labor costs and material costs have been rising, unemployment is approaching 11%. Even with the astronomical amount of money being pumped into the economy, we are still flirting with deflation. The world markets are in the same disrepair and the exit still looks years away.

Enter the FED. At the most recent FOMC meeting, the verbiage specifically left open the option for further intervention by the FED into the markets in the form of quantative easing. For those of you who are unfamiliar with the term, a central bank(FED) first credits it's own accounts with money it creates "ex nihilo"(out of nothing), then goes out and buys financial assets including, but not limited to; government bonds, mortgage backed securities, agency debt, and corporate bonds from financial institutions in what is referred to as open market operations. In other words, the FED cranks up the printing presses and "pumps out the benjamins" to purchase other institutions debt in the hopes that by refilling the coffers of said institutions this will stimulate the economy.(think more loans and monies available for consumers, small business etc...)

Will it work? Who knows what the future is going to hold. What we can assume is that rates will remain very competitive for at least the near future. Currently the best qualified borrowers are commanding 4% on 30 year mortgages for conforming(<417,000) loan amounts. We have seen some lenders in the past week post 3.875% on their rate sheets, but unless you are quite savvy and/or work with a broker who has realtime mortgage feeds, your timing will need to be impeccable. Best of luck grabbing one of these historic low rates before they dissappear!

Caveat....After Nov 3, all bets are off. There will undoubtedly be changes in policy moving forward from that point....as I mentioned earlier, none of the politicians wants to rock the boat right now.

Mortgage Rates Fall again!

If you have been paying attention to the market, you don't need us to tell you that we have hit historic lows. In an unprecedented week of falling rates, this author doesn't know what to say anymore. There was a sell off at the closing bell today so we weren't able to pocket all the gains, but that probably was more of a hedge by the investors heading into the long Columbus day weekend than anything else. In summation, the teetering economy has the FED on point with the possibility of quantitative easing at the ready. The employment numbers have seen a sharp decline in the private sector. The Mortgage Backed Securities that support interest rates have seen their prices go through the roof while the yields have fallen. All in all a perfect storm for the lowest rates on record. If you have been sitting on the fence waiting for the rates to bottom out, do not hold off anymore. 30 year fixed conforming loans have par rates at roughly 3.875 for 30 day locks....thats right 3.875%.....Enjoy the weekend, and hopefully we see this continue into the coming week!

Market rates update

Another day of gains! Please forgive us as we transition our blog to our new web platform, it has been a work in progress and we will soon enough have it sorted! To cut to the short, we have been enjoying an extended period of exceptionally low rates. Market support for the coupons backing mortgage interest rates have been trading at all time highs in price. This is very good for the market. It not only demonstrates there is an appetite for fixed income products, but also provides support for rates to remain low in the near future. Add to this the Fed's stance on the possibility of injecting more assistance in to the economy in the form of quantitative easing, and we can see why these low rates are available! As of this writing, the 4.5% FNMA coupon is up almost 10 ticks to 104 22/32. Fixed 30 year rates for a well qualified conforming borrower are in the 4.0-4.25% while ARM rates are as low as 2.95%. Stay tuned for a more in depth analysis as the week proceeds!

A Positive Breakout

If you've been reading, you know that 104.00 has been a strong point of resistance for the mortgage backed securities market. Today, we are experiencing a strong breakout pulling our market far beyond this level of resistance which should help to turn this 104.00 price point into support; working for us rather than against us.

Okay, I admit that was a complicated sentence. the bottom line, the MBS markets have broken through to new territory which will lead to even lower interest rates on future rate sheets. even though we are happy to see our market in new territory, the water here is definitely deeper and we have to recognize that posting record highs provide a serious incentive for the sale of MBS coupons.

Our last strong run above 104.00 led to a sell off that floored us well below 103.31. It took a week or so for our market to recover from this sale. Another sale could force our market lower again (my primary concern is the Fed selling its position) and is our only real identifiable threat. Sure a stock market rally could hurt us, a fast rise in treasury yield would hurt us, but these instances seem unlikely considering the overall health of our economy. Right now I think these low rates are here to stay for at least a short period of time, and will remain low through the incumbent election (after which all bets are off).

Take while the takings good.

Back In Action....

Apologies to all my loyal readers, and fanatic fans out there that missed me last week. I was called away on some personal matters that required my full attention. In my absence I am pleased to report that the market behaved and remained constant, with no true gains or losses that would influence rates and pricing dramatically. We'll start with a five day graph (below)


We see a couple of things here. First, it's clear the market is trading in a pretty consistent range, with the price point of 104.00 at the heart of the matter. All the bounces at the top end signify resistance. The sharp sell off and fast recovery in the middle (Friday afternoon/Monday morning) suggests true support. For these reasons it appears as thought rates are currently in equilibrium and will be holding. In fact I expect this range to trade for a little while, as investors and markets (in general) are reassessed.

Currently we are up one tick on the day... not bad, but as you can see we are off our highs. Volatility is picking up, clearly, but considering we are over the 104.00 price point and the 10 year yield is over 3.000% yield. Clearly long term markets are the investor trend and for this reason it seems as though rates are safe, at least for the time being.

It is a traders world, is the motto a friend of mine has coined and it is in a truism that cannot be argued.

Keep an eye on things and stay tuned. I'll be back tomorrow and the following with updated information.

A Conspiracy Theory

Okay, if there are any readers out there that don't like conspiracy theories, perhaps today's post isn't for you, because I can't necessarily prove that this is what is going on... but it really feels like this is what's going on. So here it is...

To our right this mornings graph... Notice that at the beginning of the day we saw nice gains. In fact we were up three ticks. Treasury yields were low (and continued to trade normally), the stock market was down and flailing - things seemed to be as they should this fine Monday morning. Then BOOM... we walk straight off a cliff, and fall a full 6 ticks resulting in our being down 3 on the day. The market paused... and then continued to trade down another three ticks.

Finally we rebounded, but have been trading lower all day and are now down 8 ticks on the day.

Here's the conspiracy behind today's losses... It takes a massive investor to shift the market and produce a drop like we saw this morning. Clearly it was profit taking... the question is who is in a position to sell mortgage backed securities for a profit and create that large of a shift? The answer... the federal reserve does. They did after all buy 1.25 trillion over a two year period which ended about three months ago. It would make sense they are now offloading and selling a portion of this position.

If I am right, we have our government and their monetary policy to thank for these losses and the worse pricing that is to result. This is a troubling fact because it raises the possiblility that the Fed Could be continuously ordering the sale of small positions (and larger should the market climb further) around the 104.00 price point. Doing so would keep rates around the current levels, and is straight market manipulation. The Fed definitely has a large enough position to execute this type of strategy and curb lowering rates, but this tightrope walk could end in a serious fall if investors get wise to this plan and start selling themselves. That's when these low rates end. Let's hope I've simply had one too many cups of coffee and am reading too far into this sell off.

Strong Friday leads to Better Rates this Weekend

Rates have improved yet again as our market posted positive gains providing excellent rates moving into the weekend. Monday will be important. If we manage to post gains on Monday we will be providing support to the 104.00 price point, a point we have struggled to get over.

Difficult to say whether or not we will have a positive day come Monday or if investors will take this opportunity to capture some profit by selling off. If your nervous and have escrow closing soon, locking is a wise play.

Another positive day

It was another strong day of trading today in the mortgage backed securities market. Moreover, we saw the ten year treasury yield fall back below 3.000% which is a very good indicator for our market's future.

Pricing right now is as good as it has ever been. For this reason I am very busy and do not have a whole lot of time to spend writing today. If you're happy with today's rate sheet, locking is not a bad idea so long as you will not be subject to extensions. If you have some time floating could led to better pricing.

There is support in our market right now... even if we hold at current levels, a 15 day lock will have better pricing than a 30 day... working towards this shorter lock period is an admirable goal. Just be prepared to lock at a moments notice. Firesales are nasty and can erode pricing faster than you can say "dummer."

Strong Day of Gains

It was a strong day in the mortgage backed securities market, evidenced by the graph to our right. Curiously however, reprices were slow to come, some not at all from lenders that you would have expected improvement from. If you are currently approved with a lender that did reprice, take a good look at the rate sheet, if you're approved with a lender that didn't reprice, holding off until tomorrow's opening may prove to be the smart play.

We have to play close attention to that treasury yield (yellow) which is rising slowly but surely. This will put pressure on our market should it continue.

Additional considerations include longer underwriting turn times at the most favorable lenders. As a result most are either floating in open market for a longer period of time, or forced to take a 45 day lock to ensure they will not need extensions at the time of closing.

Considering this fact, it would be wise to begin paperwork and submit as soon as possible if you are considering taking advantage of these rates.

Don't Panic....

Yes, this is kind of a scary picture... but it is not as intimidating as you think if you know the fundamentals behind the movement represented in this graph. The free fall our market experienced yesterday at close is due to settlement which is the transition of the current note into the future note... in other words, yesterday the July coupon rolled into the August coupon. Futures 99% of the time trade lower than the current market coupon. Consequently when settlement occurs we see a fall in pricing.

As I mentioned this happens every month, so lenders are prepared of this revelation. As a result rate sheets this morning are not too off from yesterday's pricing, and at some lenders we have seen better pricing than yesterdays close despite this slide.

Regardless the fact we are two ticks down is not a good sign. Typically after settlement we see the market rally. Today our being two ticks down is a little unnerving. This is probably due to the rally occurring in the stock market today, and the treasury yield climbing.

Should this continue we may have cause to worry, in the meantime if you are floating be vigilant.

Below is a snapshot of the yearly... as you can see we are still enjoying highs, despite the slide due to settlement.

All things considered the next couple of days will be important to our re-establishing the upward trend. A rally today will prove difficult considering the markets are focused on earnings of publicly traded companies. We'd need to see some seriously week numbers moving forward for today's direction to turn.

I am looking for support today. Support today can lead to gains tomorrow.

The Makings of a Breakout...

It's too early to go counting our chickens, but can count our eggs... and this Monday morning, has brought gains to our market which, should they hold, will lead to better pricing later today.

We have a couple of things going for us this morning. First the stock market as a whole is trading lower today. Moreover about two thirds of all stocks are trading down. This broad downtrend (although we really should be careful using the word "trend") suggests overall weakness in our economy which entice investors into our market.


You'll notice on the daily snapshot that the treasury yield has taken a strong turn down, which as expected has lead to better pricing in our market. This is the converse relationship between treasuries and MBS at work. With that said, because spreads are so large, we do have some room to move on the other side. In other words, we can afford minor gains in the treasury yield without our seeing the mortgage backed securities sell off. This explains why our market held over the last few days as treasuries sold off and their yield rose back above 3.000%.

We are back trading at the highest levels the mortgage backed securities market has posted on record. All things considered, this afternoon's rate sheet should be very attractive. If you are in the market and still floating, take a hard look at it. If you are not already in this market, now would be the time to give us a call and get started. 760.730.5040

Hmmmm....

My post title sums it all up. This snapshot of our market is a little unnerving. Here we are holding, near record highs, as the treasury yield sits above 3.000%, testing higher levels. What is interesting is the mortgage backed securities market appears to want to remain at these high levels despite treasury activity.

Just look at the climb in the treasury yield... but mortgage backed securities have barely flinched. The typical inverse correlation between the MBS and treasury market is not active right now.... why???

There is talk among the informed that attribute this to low volume trading. Others to the massive spreads between MBS and treasury right now, which offers a bit a a cushion for losses... whatever the reason, one thing is for certain, this will not continue forever, and if the treasury yield does continue to rise, we can expect to start seeing sell offs in the mortgage backed securities market.which would lead to higher rates.

All things considered, right now moving into the weekend, it appears as though our market will hold for another day. All eyes on treasuries... yields must remain low for our market to hold.

Up and Down Trading... Tomorrow Will Be Telling...

It was a wild ride today... with traders favoring our market over treasuries today, we were fortunate. With that said the 10 year treasury yield did creep above 3.000%, which is not good for our markets.

Which brings us to tomorrow. Will investors see this as a bargain opportunity and buy buy buy, sending the treasury yield back down thereby fueling a buying frenzy in the mortgage backed securities market? Perhaps, investors will see the rising yield, reevaluate and sell off slightly, as others follow the same formula, the seemingly minor sell off could gain steam turning into something a little more cataclysmic leading to substantial losses.

Both of these possibilities are well within the realm of the real. All things considered, during uncertain times it can be very helpful to step back and look at the larger picture. Below is the one year graph for this very purpose.


Difficult call to make. I will leave it to you.

Sideways trading... be Cautious

Today we are seeing our market move sideways, with the bulls and bears fighting for authority over the final direction our market is to follow. It's clear we are still taking our cue from the 10 year treasury yield which is currently rising. This is putting pressure on mortgage backed securities and is probably a large reason why we are seeing resistance today.

Of course it could also be due to the fact that we are very close to breaking through the 104.00 price point on the 4.5% note. This price point seems to be serving as resistance. I find it highly unlikely that our market will break through this price point today; but we have been testing this resistance line for the last couple of days. Should the treasury yield retreat, we could see our market break through.

This needs to happen for rates to continue to go lower. In the meantime I anticipate we will see some horizontal days of trading. All things considered sideways trading is not a bad thing. It allows you to take advantage of being able to float into shorter lock period which will result in better pricing.

To reiterate this point, have a look at this one year graph below. We're sitting on top of the world. Not a bad plateau to be stuck on.

And We're.... Off!

It was a questionable start this morning, when the opening bell sounded and traders found themselves back at their desks after a long weekend. As you can see our market is currently enjoying gains and is up about 9 ticks on the day. This will lead to slightly better pricing than what was available at the close of last week. With that said lenders have not priced these gains into their rate sheets yet, and are hedging against possible market shifts.

With the improved pricing, we have hit new highs which will lead to better pricing. With that said we have to be mindful of settlement, which is approaching and will curb our market somewhat. All things considered however, this is not something you should be too concerned over unless you are looking to lock your loan and close in the next couple of weeks. If you have time, settlement will come and go as it does every month and is business as usual.

We can thank the low treasury yield for these currently favorable rates. Keep a close eye on this indicator if you want to know the future before it happens. Should the yield on the 10 year treasury raise above 3.000%, you can expect interest rates for mortgage to go up. As long as the ten year remains below 3.000%, we will enjoy these incredibly low rates.

Rates Holding ... Happy Fourth

It's Fourth of July Weekend. Banks are closed Monday so this pricing is going to be good through the long weekend.

30 year fixed conforming 4.25% (APR 4.446%)
30 year fixed jumbo conforming 4.5% (APR 4.671%)

These are absolutely fabulous rates. If you have been actively tracking the market then you know we have been hovering around this level for the last week or so. I know many of you may be thinking, rates could go lower, I'm going to wait. Yes... I suppose they could go lower, but considering they are as low as they have ever been locking makes sense.

It has been an interesting day in trading. The jobs report came out and was negative... shedding 138,000 jobs, the most since last October. This supports investors moving to long term markets and supports those already here. Another major indicator that helped support our market were factory orders, down 1.4% which is huge, suggesting our economy is not in recovery mode, and is in fact sliding the other way. Bad news for our economy, good news for rates.

As you can see our market is currently consolidating, evidenced in our short term graph; and as you can see in the long term (below) we are still able to take advantage of this opportunity.

Have a great weekend all, any preapprovals needed for new home purchases and offers being submitted this weekend. We are available, our contact information can be found through our website... www.homeloanorg.com

Volatile Trading... Tomorrow is the BIG Day

Take a look at those chompers. The teeth on that mortgage backed securities graph speak to just how volatile our market is. People are running to safety from short term markets, only to find our market is at all time highs, leaving their flight to safety riddled with risk. Turn on the news, and only person is telling you now is the time to by stock, while another is screaming run for the hills.

Meanwhile, Obama in his State of the Union at the beginning of this year vowed to focus on jobs... but focuses on immigration reform, and health care. All the while our national debt creeps to the highest levels ever recorded. Spend more... cut back on spending... Our economy is at odds, and this graph represents this fact.

Tomorrows jobs report is what everyone is waiting on. Expectations are grim, which is interesting because the market may have already priced in a poor report. Any way you look at it, it isn't good for our economy. The only beacon are the low rates this storm is producing. Rates are still at record lows despite the minor sell off yesterday.

Today it seems we have found support again, despite the chopatility evidenced here.

Sell Off...

What goes up must come down is the unfortunate truth this morning. The mortgage backed securities market is in the midst of a sell off. Currently down 7 ticks on the day, there is concern that this sell off may have legs, and continue - becoming something more serious.... leading to higher rates.
The treasury market is our best indicator at this point in time. Currently the 10 year treasury is producing a yield that is still under 3.00%. Should the yield rise back above 3.000% (which is definitely possible) this sell off will continue.

Yes this will mean higher interest rates, but we do have support in our market despite this bad news. If you look at our market, and current trading patterns it is clear that it will take a substantial headline to curb the long term investors recent craze for long term bond products. Inflation would do it.... but this does not seem to be a real concern, at least in our immediate markets.

All things considered, if you are looking at closing inside 30 days, locking right now may be the smart decision. If you are more flexible on your closing deadline and open to risk, you may want to ride out the week, and see where we are on Monday. I risky play, but something I am be no means against. With proper market assessment, floating into a shorter lock period may prove to be the right play. Evaluate your tolerance to risk before answering this question about locking or floating.

Mind Blowing Rates

Conforming 30 year fixed: 4.000% (APR 4.231%)
Jumbo Conforming 30 year fixed: 4.375% (APR 4.510%)

Conforming 15 year fixed: 3.625% (APR 4.169%)
Jumbo Conforming 15 year fixed: 4.25% (APR 4.396%)

Jumbo 30 year fixed: 6.000% (APR 6.229%)

I've taken the time today to quote some specific rates for people that are interested in what a historic 30 year fixed rate looks like. It's so unfortunate because this week when you hear the news report on the new lower record rates - they will be somewhere around 4.5 or 4.6% - my guess.


What so many people do not realize is they are quoting rates for retail operations. When you look to wholesale the rates are even better. Below you will see a snapshot of our market that has forced interest rates lower. I am optimistic that there is support, however whenever we reach a high point as we have (seen on the long term graph), sell offs are not uncommon. Locking is not a bad decision. Floating, I hope you have a strong stomach - flip a coin and you'll have your answer whether to float or lock.


For an immediate evaluation, contact us now.

Rates Recover Moving Into Weekend...

Yesterday was a little nerve racking considering the sell off was following a developing downtrend, and treasury yields ran into the identified danger zone. Have to admit, it was difficult to stay sleep this morning known our markets opened at 5am.
Finally a 5:30, I couldn't take it anymore, got up and logged in to see where our market was trading. Problem with this is as soon as you're up and have the market open, it is incredibly difficult to walk away, in the early morning low volume tends to have more of an influence over pricing than it perhaps should - and when larger players manage to make it into their office and begin trading corrections often occur in the opposite direction the low volume was trying to establish.

So, it was an early morning. Thankfully, our market has held strong today, and made back what we lost yesterday. All things considered rates are very attractive still, with pricing in the low fours still available for 30 year fixed rates and credit worthy borrowers.

This weekend would be an excellent time to start work on your refinance. Difficult to say how long these low rates are going to last. It would appear as though we are starting to see some resistance.

Resistance this morning...

Rates are the best they have ever been this morning... on a conforming 30 year fixed the base par rate is currently 4.25% paying .100 in rebate on a 15 day, and coming at a cost of .15 on a 30 day lock (4.493% APR).

What is interesting is until today off sheet pricing began after the 4.25% rate on a conforming 30 year fixed; today rate sheets are publishing rates as low as 3.875% on a 30 year fixed. This infers lenders may be preparing for even lower rates, although I must admit there is nothing substantiating this, it is pure speculation.


In fact if we look at our market, it seems as though we have plateaued. The snapshot of our market below highlights this point. Opening at 103.11, we posted early gains and have trickled back down to today's opening price levels. We have seen some support here, but the real fate of our market lies in treasuries.

As you can see the 10 year treasury yield is very close now to 3.000%, currently at 3.03% This 3.000% yield is acting as support for the 10 year. For our market to move higher we will need this support level to be broken and the yield to fall further if we are going to see additional gains in our market. Conversely, if we see treasury yields rise into the "danger zone," I anticipate we will see a sell of in our market leading to higher rates.

Right now the market could swing either way and will be looking to headlines for guidance. The jobless claims figures definitely suggested our economy is far from stable, and the fed comments yesterday support the fact that our economy is anything but healthy. Keep a close eye on the market moving forward.

Best Home Loan Rates Ever

That should be the headline every major news syndicate should be running with this morning. Unfortunately the news, is always about 48 hours late with their revelations on home loan interest rates, and if you wait to hear what they have to say, you've probably missed the boat.

Current 30 year fixed rates: 4.25% is coming at a base cost of .239 on a 15 day, and .490 on a 30 day lock (APR 4.519%)

These low rates are starting to bring borrowers out of the woodwork, which has forced turn times for underwriting review up. Currently 4 days for receiving packages, 8 days for underwriting. This is something you must factor into your plans. A longer closing will require either a long lock period or a longer period of time floating which does expose you to more risk in the form of market volatility. This is the reality of the situation... nothing we can do but plan accordingly.

With this knowledge the question is will these low rates hold. The Fed meeting today will inevitably comment either directly or indirectly on our market. This is where our focus is today... on the Fed comments.

If you are looking for financing, or have been waiting for low rates... now is the time to take action. Look at the long term graph I have posted specifically for the fence sitters. Keep in mind the high points represent the lowest offered rates... on this one year graph I think it is clear that interest rates are as low as they have ever been... and there is no better time to refinance or secure new financing then when rates are low as they are now.

Carpe diem.

Market Breaks Through Resistance - Rates Improve Yet Again

Rates are great this morning... 4.25% currently coming at a base cost of .319 on a 15 day lock, and .570 on a 30 day lock.... (APR 4.528%) this is some of the best pricing if not the best pricing all year. What brought rates down this morning?

Yesterday we successfully broke through the 103.00 resistance we were facing; and this morning those gains were supported with new profits bringing our market up an additional five ticks. Today is far from over, but considering today is a soft day in the equities markets, and the treasury yields are behaving and staying low, it would seem today will end profitably.


I am optimistic this week and expect rates to stay low and may even fall a little lower. Despite this sentiment, considering where we are, we must acknowledge that a sell off can ensue at any point in time... be prepared to lock.

Very Volatile this Morning...

Pricing is slightly off this morning in comparison to Friday's rate sheet due to a poor start in our market. base pricing for 4.375% 30 year fixed conforming is currently (.050) on a 15 day lock. Assuming a 417,000 dollar loan, we would be looking at an APR of 4.593% for this quoted rate. This is a great rate, but considering where our market was when rate sheets were published there is a chance of our getting better pricing later today should our market hold or continue to improve.

With that said it is clear that right now our market is very volatile. If you are happy with this rate, and are able to lock, now would be the time to act... if you are still waiting for a reason to begin the process. Now would be a good time to be proactive. Let's take a look at some pictures, to demonstrate where we are.

As you can see in this graph, our market has recovered nicely this morning, however we are still subject to the 103.00 resistance which we are approaching. I anticipate us bouncing off this resistance point again a few more times, before we successfully break through - that is, if we break through. Headline news will play a large roll in whether or not this happens. So will the stock market. Although I anticipate this will not be a good trading week for the stock market for the follow reasons, " Today (Friday) was quarterly "quadruple witching" day, or the simultaneous expiration of four kinds of options and futures contracts. That brought heavy trading volume. The week that follows the June expiration is often a losing one for investors. The DOW has posted a loss during that week for the past 11 years, according to the stock traders almanac." This out of an email from my business partner. If the stock market suffers this week as history suggests it will, this should act as support for mortgage backed securities which typically benefit when the stock market suffers.

The concern I have is the possibility of a sell off if our market does not introduce new gains. This long term graph on our left demonstrates why this is a strong possibility. If you were an investor looking at the following chart, hitting the sell button and taking some profit is probably an enticing idea. If we hover at this high point for a long period of time, we are essentially sweetening the pot by suggesting the market is not going any higher. We are in a great place right now as far as rates are concerned, but we must understand the risk associated with our position as well.

And finally we have our five day graph which helps illustrate our current range. I did not draw in the lines, with the two graphs before, and the above explanation of our market, it is clear that we have been operating in a sideways trajectory for the last couple of days or so. Consolidations typically lead to breakouts.

I am hopeful for a positive breakout leading to better rates, but think it will probably be a negative breakout considering where we are currently trading. Be mindful of where you are in relation to closing, inside fifteen days, you should be locked, in escrow... be prepared to lock and possibly take a 30 day, if you see a large slide... you can always renegotiate if the market improves warranting such action.

103.00 Resistance

We've hit the proverbial "wall" in our market, or so it would seem. There is serious resistance at the 103.00 price point which is currently controlling our market. Fortunately there seems to be support as well. When resistance and support converge, we often times refer to this as consolidation. Market consolidations typically result in breakouts for better or worse.

With that said, this does not feel like we are gearing up for a breakout in any particular direction. I do not expect our market to move off of this price point today. Friday's are typically slow trading days, and it seems like investors are content with where our market currently stands. This may change on Monday. All things considered, it feels like we are going to trade along the 103.00 resistance line for a little while. If I am right and we do sit on this resistance line for any significant period of time (significant being a matter of days in our market), then we should expect a sell off. If we see breaks testing this line of resistance consistently during this period of horizontal trading, it may be a sign of future buying.

Right now our market is in the hands of headlines... poor economic indicators will help keep rates low. Signs of recovery either in the States or internationally could lead to a sell off.

Rates Improve... up 13 ticks on the day

Finally, just what the doctor ordered... a solid day of gains during a developing downward trend. These new gains will most certainly lead to better pricing and interest rates, that is of course if they hold and levels are sustained. Considering where we are, trading just below 103.00 and 103.00 is truly a high point for this note in the MBS (the 4.5 coupon)... it will probably take a large headline to move us above this psychologocial resistance point.

But as long as our market holds, and these rates continue to be available, there are I'm sure going to be a lot of happy campers out there. I don't want you all to think it nothing but sunshine. There are storm clouds forming. Fannie and Freddie after all were just downgraded and removed from Wall Street. That's right these billion dollar entities are pink stocks which speaks to their credibility and may come into the minds of some traders when they look to execute the buy order on mortgage backed securities. Time will tell as to whether or not this becomes an issue.

For now, let's just enjoy these gains.

Pricing Better but Will it Hold

Interest rates have improved slightly today as the market posts gains early this morning. The question is will these gains hold. It seems investors are taking cue from the short term markets right now which are currently showing support at well established support levels... namely 10,000 for the DOW, currently trading around 10,350... and 1,100 for the S&P, which is now trading around 1,110. It will be difficult for us to break through our recent resistance levels without these support levels being broken.

There are signs that our economy is not as strong as many would like us to believe. Point in fact numbers released to day on Reuters demonstrate this point quite clearly.

08:30 16Jun10 RTRS-US MAY HOUSING STARTS -10.0 PCT VS APRIL +3.9 PCT (PREV +5.8 PCT)
08:30 16Jun10 RTRS-US MAY HOUSING STARTS 593,000 UNIT RATE (CONSENSUS 650,000) VS APRIL 659,000 (PREV 672,000)
08:30 16Jun10 RTRS-US MAY HOUSING PERMITS -5.9 PCT VS APRIL -10.9 PCT (PREV -10.9 PCT)
08:30 16Jun10 RTRS-US MAY PERMITS 574,000 UNIT RATE (CONSENSUS 630,000) VS APRIL 610,000 (PREV 610,000)
08:30 16Jun10 RTRS-US MAY HOUSING COMPLETIONS -7.4 PCT TO 687,000 UNIT RATE VS APRIL 742,000
08:30 16Jun10 RTRS-US MAY HOUSING STARTS DROP LARGEST SINCE MARCH 2009, RATE LOWEST SINCE DEC 2009
08:30 16Jun10 RTRS-US MAY HOUSING PERMITS RATE LOWEST SINCE MAY 2009
08:30 16Jun10 RTRS-US MAY SINGLE-FAMILY HOUSING STARTS -17.2 PCT, LARGEST DECLINE SINCE JAN 1991
08:30 16Jun10 RTRS-TABLE-U.S. May housing starts fell 10.0 pct

This is important data that effects nearly all sectors of our economy, the commodities used to build are in less demand, resulting in a low demand for work in all these different sectors - too many to name, but take a moment and think about what goes into new construction... then think about what made our country great... building did.

All things considered, I do not think our market is going to slide much further down, although the recent headline news that just broke about TBW being charged with mortgage fraud and the misappropriation of one billion dollars in funds may compromise our market slightly.... after all they were involved in issuing and writing the vary notes that are being bought and sold on the mortgage backed securities market. The questions this new indictment brings may cost us in pricing.

Interest Rates Worsening

It's been an up and down day today, with this morning posting gains only to have them taken (and then some) this afternoon. All things considered today could have ended worse, then again it definitely could have ended a whole lot better.

We've captured a daily snapshot of our market including the 10 year treasury yield which seems to be the real market factor this trading day. As you can see the 10 year yield and our mortgage backed securities market are inversely related, when treasury yield goes down, the mortgage backed securities market improves, when treasury yield goes up, the MBS market sells off. Sometimes this can be an incredibly frustrating relationship.

Regardless the traders make the rules, and we must live by them. And as fate would have it, today we are looking at higher rates, and the forming of a downtrend. That's right, a downtrend... which I have not illustrated because I am in denial (well, not really). If tomorrow we see more of the same, I will officially slap a line on the graph illustrating the trend in lowering pricing.

Considering this, I have to recommend those looking to close escrow soon should lock their rates immediately. If you have been considering a refinance, you are behind the curve and need to get paperwork rolling as soon as possible if you are looking to capture these low rates.

Housing Price Index...

This is well worth the review... a monthly housing price index which as you can see suggests the state of CA is beginning to see real estate stabilize. This is important data. I look forward to reviewing this information once the tax credit is no longer influencing to data.

Low Volume Monday... Selling

It's never fun writing about days like today... not because I fear losses or rising interest rates, although I'd think it fair to say these are not my two favorite things in the world... but simple fact is, there just isn't really going on in our market. Yes we're down, yes, this will lead to slightly higher pricing associated with rates, yes, that sucks... but honestly this is another day of business. Volume is light today, the treasury market is up in yield, and consequently the players that are trading are doing what they do best, following the treasury indicator which is currently whispering "sell."

With volume this low, we can't really look at today as a true indicator as to the direction of our market. I do not expect us to make these losses back today, although a turn in the treasury pricing would turn our market.

Moving forward we have to look to tomorrow for major price shifts - better or worse. That is not to say we shouldn't continue to pay attention to this afternoons trading. If you are currently in escrow and floating, you may want to cut your losses and lock right now. If you do choose to float you should do so with a finger over the lock button. Coming off historic highs we could see a true sell off ensue, and if we do, you'll want to lock quickly.

My clients currently are all locked in if closing inside 15 days, those outside of 15 days are working as quickly as possible to reduce the remaining time left before closing so we can take advantage of a 15 day lock. With that said, every one currently floating does have a specific point at which we would cut our losses and lock. Do you have an action plan for this volatile market?

We are happy to discuss terms with anyone looking for professional advice on home financing.

Sell off Leads to Worse Pricing

The unfortunate truth about all markets investors invest in is what goes up will eventually come down, and yesterdays sell off was an example of just that. There were many reason this took place, which we'll discuss today - then we'll talk about our market moving forward.

Considering the mortgage backed securities market broke record highs when it closed last Wednesday, and considering the recent two month trend we've enjoyed has raised the price of mortgage backed securities a full three and a half points - we were due for a sell off. More importantly we were faced with settlement which is when this months coupon rolls into the next months coupon - currently a future. Futures always trading lower than the current market coupon - consequently when roll occurs our market immediately falls to the future coupon price and begins trading. It is no coincidence this sell off occurred right before settlement, which is evidenced by the large drop off at the end of trading. Additionally the stock market managed to put on a good performance rallying despite a late sell off, and in international markets the Euro has begun gaining on the dollar, which may or may not have had something to do this the treasury yield rising to highs we have not seen in the last week.

Put all these things together and it not only makes for a great jambalaya recipe, but a terrible day in the mortgage backed securities market. But as I said, a sell off at the high point in the market is not uncommon. After all isn't that what investors are trying to accomplish, buying low and selling high? Yes I know it sucks for us, those looking to take advantage of the offered rates, but please be aware, not all is lost despite pricing being slightly higher today.

Moving forward. I am expecting our market to rebound and begin its recovery. We may see some gains today, come Monday the support for our market should re-establish itself at which time investors will return to mortgage backed securities.

As you can see on this graph our market is posting small gains this morning. I am not anticipating heavy trading but this is the support we are looking for.

Lenders will be slow to reprice this afternoon, if you plan on floating you're probably going to want to hang tight through the weekend and wait for Mondays opening.

Record Highs Lead to Sell Off...

Yesterday we broker through and set record highs for the mortgage backed securities market. Inevitably there have been profit takers this morning, bringing our market back down below recent resistance levels, the same levels we finally broke through yesterday.

Despite this rates are still very favorable. 4.25% is the conforming 30 year fixed rate today with an APR of 4.532%. Looking for a no cost loan, currently we're able to offer 4.875%, for a 30 year conforming with an APR of 4.875%

At first look this graph is pretty ugly... but considering where we are and where we have come from, a sell of of this magnitude is not the end of these low rates. In fact if you have been reading, you're well aware of settlement which is approaching quickly. Settlement which occurs Monday will roll offered rates into the July coupon, which is currently trading lower... investors recognizing this are cashing in on the expiring coupon and taking profits. This is business as usual, a point I make so no one panics. The red dotted line represents the current line of resistance which as you can see in still in effect... This daily snapshot looks a little ominous... let's look at a five day graph which puts things in better perspective. You will find it below.


This graph clearly represents just how healthy our market is right now. All things considered with our economy still teetering and investors looking for somewhere safe to keep their nest egg, we seem to be one of the favorite shelters.

With that said if this sell off continues you can expect reprices for the worse later today.

Auction Results in Better Rates

Despite our being down, and the incredibly likelihood of investors taking profit in a sell off, our market surged ahead today breaking through recent resistance levels on the coattails of the 10 year treasury auction.

Although we are currently only up 4 ticks on the day, the fact that we are breaking through recent highs, and old resistance levels are now acting as support is very significant. Point in fact the 4.5 coupon is trading over 103 right now, and 4.00 coupon is trading above 100. These price points suggest these low interest rates are sustainable at least for a short period of time.

Granted there will be market fluctuation, and I am still expecting a profit taking sell off, regardless investors and international players have made it clear, currently our long term markets is where the safe money is.

A reprice was just published offering 4.25% on a 30 year fixed with an APR of 4.5.10% WOW.... difficult to say if tomorrows morning rate sheet will trump these rates...

Home Loan Rates Break Record Lows...

Can anyone say 4.25% with an APR of 4.554% on a 30 year fixed mortgage... Rates have broken record lows... unfortunately markets don't wait for the headlines to catch up... I imagine you will here this news in the conventional media outlets probably tomorrow, which is unfortunate because our market is selling off right now, which will force rates up slightly in a reprice.

We have not seen on yet, because the result of the 10 year treasury auction will be out literally at any time now... no picture until my next post, a couple hours from now which will allow time for the 10 year treasury auction results to set in.... We will see, but if I had to make a prediction, reprices for the worse this afternoon. Hope I'm wrong....

Resistance

Interest rates on rate sheets this morning, are awesome... 4.25% at an up front cost of .469, and an APR of 4.554% is what you're looking at for a 30 year fixed conforming (417,000 or below) right now. How about 3.75%, at an up front cost of .257, and an APR of 4.203% on a 15 year fixed conforming. These rates are as good as I have seen.

Why are rates better despite the market not showing gains. Lenders have finally stopped hedging against the market. This is a lock opportunity. The signs are clear. Excellent rates, current resistance in mortgage backed securities - there is potential for a sell off. Despite this potential we have to recognize what is keeping our market at these all time highs.

Point in fact the 10 year treasury yield is incredibly low right now, currently 3.15%. A low yield currently looks sustainable considering the pressure in Europe... things appear to be getting worse, Hungary discussing the potential need for a bailout for example.

And of course you have the oil leak in the gulf. This is substantially worse than people are reporting and investors recognize this fact and are playing it safe - safe being long term markets - mortgage backed securities and treasury yields.

Let's talk about the gulf oil leak for a quick minute. Yesterday it was reported that 463,000 gallons of oil were captured, and the cap was still leaking substantially. They told us earlier that by cutting the pipe about 20% more oil would be spilling into the gulf. until they got the new cap on, and I think it is fair to assume BP is not sucking the oil out faster with this cap on. Why am I bringing up these numbers... take 20% out of 463,000 and we're left with 370,400 barrels. This is the amount (offset of course by what they are still not capturing) that had been spilling into the gulf each day. Multiply this by 46 days, and we get an idea of how much oil has actually entered the gulf about 17,038,400 gallons of crude (and counting). Is that a lot? To put in perspective the Exxon Valdez spill dumped an estimated 10,800,000 gallons of crude.

This spill is almost twice as big as Exxon and it is still leaking. Investors recognize this, and are playing it safe, which means long term markets with consistent and reliable returns.

All things considered, I am expecting a retraction sometime soon. Although I think we will find support quickly and could bounce off that support rather quickly. Whenever you are testing historic highs as we are right now you can expect reprices from lenders with small sell offs... locking is a wise decision, but I can understand floating into shorter lock periods, just be careful and work quickly. The five day suggests a rising trend, but as you can see whenever your crossing the historic highs some investors are going to take a little profit. Wouldn't you?

4.375% 30 year fixed

4.375% is the par rate on a 30 year fixed right now for prime borrowers with an APR of 4.601%. What a great rate... point in fact they may actually get a little better this afternoon. To the right you will see a snapshot of our current market. I anticipate these gains will hold today. If I am right I expect pricing to get slightly better due to lender hedging right now. Lenders definitely owe is better pricing right now (probably a quarter better or so) but have positioned themselves defensively. If the market continues to perform as it is right now they will have to reflect these gains in better (lower) pricing for interest rates.

Moving forward we'll be keeping a close eye on treasury auctions moving forward this week, and headline news from Europe. My recommendation right now is to lock.... there is far more that could compromise our markets than there is that could help it.

If you have questions or are looking to secure a fixed rate in the low 4s, contact us so we can get started immediately... 760.730.5040. Brokers are available and standing by to assist you.

Interest Rates Breakout for the BETTER!!!

Sometimes it feels great to be wrong. This my friends is one of those days. Yesterdays post was an analysis as to why interest rates were rising. The conclusion of the article was essentially lock now because the best rates are behind us. The fundamentals that supported this argument did not change and in fact still do support higher interest rates; investor sentiment however has quashed fundamentals leading us to some of the best rates in history. Here's a graph for those picture lovers out there.

So what fueled these gains, a weaker than expected non farms payroll (NFP) which is a jobs indicator and highly anticipated. Were expecting 513,000, got 431,000, most of which were public sector and census jobs. This weak jobs report essentially encouraged investors to take a hard look at long term markets where most have been investing hence the gains and lower rates.

So where does this leave us? It is Friday so I doubt lenders will be forthcoming in passing these gains along to the consumer. Expect some hedging in rates sheets this morning and perhaps even into the afternoon. Regardless it is a great day to lock. There are no guarantees that Monday or this afternoon even, do not result in a sell off ruining my good mood and your chances for an even lower rate. Currently 4.5% is paying a small rebate of about .125 and 4.375% is coming at a small up front cost of around .200... should our market hold or improve we will see reprices for the better... where secondary is 4.375% should be paying rebate, and 4.25% should be just next to available (definitely so if you're willing to pay some points up front).

In closing here is a look at a one year graph... notice the red dashed line running across the top of the graph... this is our historic low point. So close to setting history once again. You can be a part of it and secure your loan fixed rate. It is a phone call away... 760.730.5040

A MUST READ...

This is chalk full of good stuff that you'll want to be aware of... let's begin with a chart which you'll see on the right. This is our daily mortgage backed securities snapshot. In green you can see there is a clear downtrend right now in mortgage backed securities which will lead to higher interest rates. For reason I will discuss momentarily, I don't see rates getting better for at least another week, if ever.... but I'm getting ahead of myself. The yellow graph is the treasury yield, steadily climbing and fueling the sell off of mortgage backed securities. Should Europe continue to stabilize and the Euro find its feet, the treasury yield is most likely going to continue to rise bringing mortgage backed securities down further and interest rates higher. 3.500% was always our favorite resistance level for the 10 year treasury yield when rates have been at their lows. We're currently at 3.38%... well below; but climbing, and lest we forget it was not long ago that treasury yields were breaching 4.000%... but I digress.

Let's take a look at another graph... one year of mortgage backed securities...


This graph I think really puts things in perspective. As you can see recently we have returned to the highs of last year that brought the historically low interest rates. The circles I have added to represent an interesting point that many do not consider. Last year when these rates reached these lows, it was unprecedented. Consequently borrowers flocked to lenders looking to refinance. The demand forced underwriting turn times up to in some instances 30 days before case were even reviewed, but more importantly is allowed lenders to charge a larger haircut on the loans they were producing. Higher demand meant they could charge a higher premium for the product so the incredible pricing in the mortgage backed securities market was not passed wholeheartedly in their pricing. When pricing finally hit its high point demand was again incredible high so the best rates produced were stiffened by the demand for these rates. Fast forward to today, the vast majority of people that wanted to refinance did refinance. The demand is significantly down so the incentive lenders must include in their rate sheets (the haircut) is better. Consequently despite the mortgage backed securities market reaching the absolute peak in its trading history, the rates offered today are as low as they were when we were at this peak.

Moving forward however, indicators suggests these rates are rising... Below I have included a futures sheet of Mortgage Backed Securities trading. As you can see higher priced coupons are green (people are buying) while the lower notes are selling off. We must also pay attention to future months which typically trade lower than current months. In about a week we will experience roll. Roll refers to when the current month of trading turns over into the future month of trading. June will become July. As roll approaches investors have less incentive to invest in current coupons because they are about to turn over. Typically this will lead to pull back, and our July coupon is trading a full 12 ticks lower than its June counterpart. Here's a look at futures...


In addition we have to consider what is happening overseas in Europe. The LIBOR or London Inter Bank Offer Rate is currently rising. This means the interest rate banks loan money to one anther is rising. If the cost of their doing business rises you can be sure that they will pass that cost on to consumers and the easiest way for them to do this is through the interest rates they offer.

All of this information suggests rates are poised to move up in the coming months, and it there is no evidence right now that suggests they are going to come back down again should they go up.

Anyone with a adjustable rate mortgage should look at a fixed rate immediately. Those who are in contract to buy a home should look to lock their interest rate. If you are looking to buy and have not found a home, this may be a good reason to call your agent and step things up a notch.

Questions are always welcome, and if you need to contact us directly here is our website: http://www.homeloanorg.com