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

Rates Worse this Morning...

Look at that treasury yield (yellow graph). It is the rising treasury yield that is ultimately encouraging investors to sell off mortgage backed securities this morning. With that said it should be noted that currently we are even on the day, but that does not change the sentiment of investors today which you can clearly see favors the bears. I would be very surprised if we rally into gains today, and expect us to sink further into the red. How low our market will fall today is difficult to say. It will depend primarily on treasury demand. Regardless expect worse pricing today for rates...

Moving forward... today is will most likely result in a new level of resistance for our market. In other words, today's pricing will be some of the best offered in the weeks to come. Lock.

The Jaws of Volatility

Even I find this a little scary. Look at those teeth. This market is not for the faint of heart. If this tells us anything it is our market is at ends with itself. Locking is a wise decision.

A very volatile day leads to better rates...

Its a crazy up and down day today in the secondary market, currently we are up on the day, but there are no guarantees that these gains will hold. With the stock market down this first day in June, I anticipate our market will follow the lead of the equity markets. The treasury market is currently cooperating producing a yield of 3.28 on the ten year.

This volatility suggests the secondary market is currently under pressure from both the bulls and bears. This will lead to consolidation which will result in a breakout in either direction. Which direction is difficult to predict but I am anticipating what we are experiencing now is the high point (highs lead to the lower rates). After consolidation we will see our market retract and higher rates will follow. Now is the time to lock your rate... See the snapshot of our market to the right.

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