Mortgage rates hit their lowest levels in over a month yesterday after mortgage backed securities prices rallied to new 2010 highs. These improvements were triggered by a stock sell off which forced investors to reallocate funds into less risky assets like US Treasuries. Panic in stock markets was prompted by a proposal from the Obama administration which limits the size of banks and their risk taking/profit making strategies. While details have yet to be provided, the stock market did not react well to this news. Bank stocks sold off rapidly as market participants scrambled to make sense of the regulatory proposal. This event turned out to be very supportive of interest rates. As MBS price gains held into the trading session close, many lenders reissued rate sheets which lowered consumer borrowing...(read more)

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