Archive for the ‘Industry Updates’ Category

Are Mortgage Rates Poised to Skyrocket?

Tuesday, September 29th, 2009
Are Rates Poised to Skyrocket?
Monday, September 28, 2009 -  By Staff Writer, Originator Times


WASHINGTON, DC - Last week, the Fed’s Federal Open Market Committee announced that they were leaving rates unchanged.  However, what wasn’t reported by main stream news organizations is the real story.

According to the statement released by the Fed, in an effort to “provide support to mortgage lending and housing markets” they will “purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt.”  Additionally, “they expect to gradually slow the pace of these purchases in order to promote a smooth transition.”

So just what does this mean for rates?  “In short - They are going to go up.  It’s simple supply and demand,” says Scott Messina, publisher of Mortgage Market Live.  “Just how fast remains to be seen, it really all depends on how fast the Fed turns off the spigot.”

This year in an effort to stimulate housing and the economy at large, the Fed began purchasing the oversupply of debt.  Without this “help” from the Fed, rates would have been forced higher to attract more investors.  Instead the Fed has been quietly buying this oversupply to keep rates artificially low.

“The problem of course, is once this helping hand is pulled back, rates have no where to go but up.” added Messina.  “The saving grace is that rates will likely be very volatile for the next several months. Originators should always remember that volatility can equal opportunity.”

“If you’ve watched rates over the last several weeks, there has been at least one day each week that was preferable for rates. Originators that knew which day to lock in their customers loans have saved their customers, on average over a quarter of a percent in rate.”

So how can an originator take advantage of the volatility?

Simple, just keep your eye on the Mortgage Backed Securities (MBS) Market.  After all it is the MBS market that directly effects mortgage rates, not Treasury securities.  But obtaining MBS data can get expensive.  In fact, some services charge upwards of $100 a month for access to this important information.

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Mortgage Market Update: Rates Pushing Higher

Friday, August 7th, 2009
At 8:30 good news for the economy; very bad news for the interest rate markets. The July employment report hit; non-farm job losses were expected to be -330K, they were down just 247K, the unemployment rate was expected to be up 0.2% to 9.7%, it hit at 9.4% down 0.1%. On the initial reaction the rate markets took a serious hit, down 22/32 on the 10 yr with its yield at 3.85%, punching out of its seven week trading range. Mortgage prices at 8:35 were trading down 23/32 (.78 bp). Average hourly earnings were also better, up 0.2%. Revisions in May and June added 43K back on improved data. The NFP jobs data, the best since August 2008; 6.7 mil job losses since the recession began. At 9:00 the 10 yr note -23/32 at 3.85% +10 BP; mortgage prices -17/32 on the session from yesterday’s close.
Payrolls at builders fell 76,000 after decreasing 86,000 in June. Financial firms decreased payrolls by 13,000. Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 119,000 workers after losing 220,000 the month before. Retail payrolls decreased by 44,100. Government payrolls increased by 7,000 after falling 48,000 the prior month.
Consumers are still not likely to increase spending; job losses may be coming down but not many new jobs are on the near term horizon. The outlook for employment, while momentarily looking better based on this morning’s data, remains negative. Tim Geithner and Larry Summers, both key Administration officials, continue to expect the unemployment rate to increase and not flatten until mid- 2010. Nevertheless the data this morning will keep pressure on interest rates and run stock indexes higher through the rest of the day.

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