Posts Tagged ‘market’

Realtors® attending the National Association of Realtors (NAR) mid-year legislative meetings and trade expo in Washington heard a panel of housing experts lay out the several solutions for housing finance reform.  

The six panelists discussing Fannie Mae & Freddie Mac: Obama Options and Beyond were Steve Brown, 2011 NAR first vice-president nominee; James Parrot, senior advisor for housing at the National Economic Council; Susan Wachter, a professor at The Wharton School, University of Pennsylvania; Mark Calabria, director of Financial Regulation Studies at the Cato Institute; David Katkov, executive vice president and chief business officer at The PMI Group, and Ann Grochala, vice president at the Independent Community Bankers of America.

Scott Brown laid out the official NAR stance on reforming the housing finance system and the future of the two government sponsored enterprises (GSEs) Freddie Mac and Fannie Mae.  NAR believes that reform is required and taxpayers must be protected from losses, he said.  The federal government must continue to play a role in the secondary mortgage market to ensure a steady flow of mortgage liquidity in all markets under all economic conditions.

Brown said "As the leading advocate for home owners, NAR is concerned that eliminating the GSEs without a viable replacement is not a reasonable option and will severely restrict mortgage capital and result in higher fees and costs for qualified borrowers.  Reform of the secondary mortgage market needs to be comprehensive and undertaken methodically."

James Parrot reviewed the Obama administration's recommendations which include varying levels of government backing. The Administration is looking at both the near-term and what steps should be taken to reduce taxpayer risk and make the housing market more stable but also to frame the discussion regarding the government's long-term role in housing finance.

"The government's large presence in the housing finance is unhealthy and needs to be scaled back; however, the steps we take over next few years to reduce the government's role and increase private capital will have a tremendous impact on the housing market and economy as well as the availability and affordability of mortgages," Parrot said. "The objective isn't to turn away from housing, but to make the housing finance market stronger so that families and their most important asset are better protected."

Mark Calabria restated the position of the Cato Institute which he has presented to at least one congressional committee: the government should have a very limited role in the secondary market.  He told the NAR attendees that the private capital market has the funds and capacity to absorb Fannie Mae and Freddie Mac's market share and that increased government support in the past few decades have only slightly increased America's homeownership rate. Homeownership rates in other countries, he said, are higher despite their government's limited involvement. Calabria did acknowledge that some government backstop was essential in the future, since the housing and finance markets are sensitive to booms and busts.

David Katkov countered that it would be naïve to move to a purely private market simply because it's been successful in other countries, adding that the U.S.'s housing finance system dwarfs that of other countries and is far more complex.  Ann Grochala also expressed concern that a purely private market would work against small lenders and community banks because of the heavy competition from the big banks.

Susan Wachter agreed that private capital needs to return to the housing finance market, but that most likely won't happen until the market has stabilized. "There needs to be more accountability and transparency in the secondary mortgage market," she said, "so that private investors can best assess their risk and safely get back into the market."

READ MORE FROM THE REALTORS: Existing Home Sales Still Hindered by Uber Tight Lending Regs

Builders who specialize in home remodeling are seeing a better market than they have in years according to the National Association of Home Builders' (NAHB) Remodeling Market Index (RMI) released on Friday.  The index rose to 46.5 in the first quarter of the year from 41.5 in the fourth quarter of 2010.  The current RMI is the highest the index has been since the fourth quarter of 2006.

The RMI is based on builders' perceptions of current remodeling activity and on indicators of future activity such as calls for bids.  In addition to the RMI there is an index reflecting each of its two components.  Any score of less than 50 indicates more respondents view the market activity as lower (compared to the prior quarter) than report that it is higher.

Current market conditions increased from 43.3 in the fourth quarter to 46.1 while future market indicators jumped to 46.8 from 39.7.  

"Remodelers report a jump in activity so far this year and have been receiving more calls for work and appointments," said NAHB Remodelers Chairman Bob Peterson. "However, many home owners are still slow to commit to remodeling due to feeling uncertain about the economic recovery and difficulty obtaining loans."

There were indications of market growth in three of the four regions.  The RMI rose from 38.8 to 46.1 in the Northeast and from 39.7 to 46.1 in the West.  The South had a marginal rise from 45.8 to 46.1 and the Midwest, while still scoring higher than the other regions dropped substantially from 54.3 in Q4 to 47.1.

All current indicators of types of remodeling increased: major additions to 50.3 from 48.6, minor additions to 48.0 from 43.9, and maintenance and repair to 39.5 from 37.0. Future market indicators also improved across the board: calls for bids rose to from 47.2 to 53.1, appointments for proposals to 52.4 from 43.1, backlog of remodeling jobs to 49.7 from 42.6, and amount of work committed for the next three months to 32.1 from 25.9.

NAHB asked an additional special question of remodelers in this survey cycle: why did they think prospective customers are holding back from remodeling their homes?  Ninety-percent of the builders cited the difficulty of obtaining financing while 81 percent noted that customers had lost equity in their homes and 74 percent mentioned economic uncertainty.  Other reasons given by builders include their reluctance to invest in a home that might not hold its value (67 percent), negative information from the media (62 percent) and inaccurate appraisals which leading to difficulty in getting financing (54 percent.)

"Home remodeling continues to slowly increase and continued growth through the year is expected." said NAHB Chief Economist David Crowe. "The fact that some indicators are breaking 50 means remodelers are seeing improving activity in their markets. While credit scarcity and economic uncertainty continue to weigh down remodeling, signs of increasing consumer interest are promising."

The Federal Reserve has released the Beige Book

 The Beige Book is a compilation of anecdotal information and data on current economic conditions across the country. They call it the Beige Book because its Beige. Shocker! The findings are NOT THE VIEWS OF FEDERAL RESERVE OFFICIALS...instead, each Federal Reserve bank interviews key business contacts, economists, market experts, and other sources in their specific district.

Here is the Reuters Quick Recap...

RTRS-U.S. FED'S BEIGE BOOK SAYS U.S. ECONOMY CONTINUED TO IMPROVE SINCE LAST REPORT IN EARLY MARCH
RTRS-FED SAYS MANY DISTRICTS DESCRIBED IMPROVEMENTS AS ONLY MODERATE, BUT GAINS WERE WIDESPREAD ACROSS SECTORS
RTRS-FED-MANUFACTURING CONTINUES TO LEAD RECOVERY; EVERY DISTRICT CITED EXAMPLES OF STEADY IMPROVEMENT, OFTEN WITH INCREASED HIRING
RTRS-FED-WAGE PRESSURES MOSTLY SEEN AS WEAK OR SUBDUED, BUT HIGHER COMMODITY COSTS PUTTING INCREASING PRESSURE ON PRICES
RTRS-FED-BUSINESSES MOST OFTEN CITED HIGHER ENERGY PRICES, BUT SAW RAW MATERIALS COSTS AS AN INCREASING AREA OF CONCERN
RTRS-FED-MANUFACTURERS SEEING LESS RESISTANCE TO PRICE INCREASES THAN RETAIL, CONSTRUCTION SECTORS
RTRS-FED-CONSUMER SPENDING PICKING UP MODESTLY, BUT SOME DISTRICTS REPORTING WEAKER RETAIL SALES; AUTO SALES UP IN MOST DISTRICTS
RTRS-FED-HOUSING MARKETS WERE WERE LITTLE CHANGED FROM LOW LEVELS OR CONTINUED TO WEAKEN ACROSS ALL DISTRICTS
RTRS-FED-LOAN DEMAND SEEN UNCHANGED OR SLIGHTLY IMPROVED SINCE EARLY MARCH, WITH CREDIT STANDARDS UNCHANGED OR SLIGHTLY TIGHTER
RTRS-FED'S BEIGE BOOK PREPARED BY RICHMOND REGIONAL BANK BASED ON DATA COLLECTED BEFORE APRIL 4
RTRS-U.S. economy improving but energy costs weigh -Fed

Here are a few excerpts from the Release....

On Real Estate and Construction: "Real estate markets for single family homes for the most part either were little changed from low levels or continued to weaken across all Districts. Residential construction was described by Chicago as subdued and the spring building season is likely to be slower than previously anticipated. Market activity was still declining in the St. Louis and Minneapolis Districts, while activity in the New York, Cleveland, Kansas City, Dallas, and San Francisco Districts remained weak. Atlanta characterized the market as mixed, with Florida brokers providing most of the signs of improvement. Both Philadelphia and Atlanta noted that brokers expected the market to improve, and builders in the Cleveland District were more optimistic than in the past several months. A few Districts found pockets of improvement. For example, Philadelphia reported that agents were seeing a pickup in inquiries, showings, and traffic, although there was little increase in sales or construction. Boston noted higher activity in just the last few weeks, due in part to improved weather, and Richmond said that the market for lower-priced homes improved. The multifamily markets strengthened in several Districts, including Chicago, Dallas, Minneapolis, and San Francisco, both in terms of leasing and construction activity."

POSITIVE: "Reports from the twelve Federal Reserve Districts indicated that economic activity generally continued to improve since the last report. While many Districts described the improvements as only moderate, most Districts stated that gains were widespread across sectors"

NEGATIVE: "Real estate markets for single family homes for the most part either were little changed from low levels or continued to weaken across all Districts."

POSITIVE: "Manufacturing continued to lead, with virtually every District citing examples of steady improvement, often with reports of increased hiring."

NEGATIVE: "Wage pressures were described by most Districts as weak or subdued, but higher commodity costs were widely reported to be putting increasing pressures on prices. Energy prices were cited most often, but raw materials in general were an increasing concern of businesses. The ability to pass through cost increases varied across Districts, with manufacturers generally finding less resistance to price increases than either retail or construction (where weak demand was a limiting factor)."

POSITIVE: "Most Districts reported that labor market conditions were generally stronger than in their last reports. New York, Richmond, Chicago, Minneapolis, Kansas City, and Dallas all noted increased employment activity, while Boston and Atlanta reported modest or gradual improvement. However, Philadelphia, Cleveland and San Francisco mentioned limited or delayed hiring, while labor market conditions were mixed in the St. Louis District. Boston, New York, Cleveland, Richmond, and Dallas cited noticeable improvements in the manufacturing sector, and Boston and Kansas observed increased labor demand in the technology sector"

MIXED PERSPECTIVE: "Consumer spending picked up modestly across most Districts since the last report. Consumers were shopping for necessities and looking for lower-priced options or promotional items in the Boston, Chicago, and San Francisco Districts."

UNCERTAIN: "Reports focusing on the near-term outlook were most often upbeat. Some Districts, however, also noted that uncertainties remained high. Boston, Philadelphia, Richmond, Atlanta, Chicago, Minneapolis, and Dallas all noted actual or expected disruptions to sales and production as a result of the tragedy in Japan."

Plain and Simple: A mixed bag of positives and negatives.  Housing is clearly the weakest link in the recovery while emerging economies continue to keep our manufacturing sector busy. Consumer spending isn't picking up fast enough to excite anyone but it isn't contracting at a rapid pace either. It's not hard to see that rising food and energy costs are squeezing consumer balance sheets and reducing disposable income on Main Street.  If wages were rising this wouldn't be an issue, but they're not. The labor market appears to be gaining traction but we'll need to see something more than "moderate growth" if the recovery is to gain momentum.  The recovery is going to be choppy...

We've been harping on the negative impact of rising food and energy prices. We view the economy as being extremely sensitive to even short-term shocks. $3.75 to $4.00/gallon gas prices are certainly a shock, even if they're "transitory".

READ MORE: THE MARGIN SQUEEZE

Home loan borrowing costs inched modestly higher today. Best-Execution mortgage rates didn't budge.

As noted on several occasions, the broader bond market has generally moved sideways inside a well-defined, yet wide range this year. There have been periods of volatility, but on the whole, directional trends haven't lasted long without a return to the middle of the recent rage. This is why 4.875% has generally prevailed as the conventional Best-Execution 30-year fixed mortgage rate. 

The risks associated with this range go back to the concept of "stored energy" in the bond market.  Think of it this way: the longer the market stays in limbo,  the faster rates will travel when the levee breaks and stored energy is released. That means if you are floating when stored energy is released, you are running the risk of losing your current quote.

CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate is still 4.875%.  For those looking to permanently buy down their rate to 4.75%, this quote carries higher closing costs. The upfront fee to permanently buy down your rate  to 4.75% is not worth it to every applicant, we would generally only advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 10 years.  Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is 4.75%. 15 year fixed conventional loans are best priced at 4.125%. Five year ARMS are best priced at 3.50%.

PREVIOUS GUIDANCE:  The longer we go without getting a clear sense of market direction, the higher the risks involved in floating.  It's not that a longer waiting period automatically pressures rates higher, it just means the longer rates stay sideways, the more energy they store for their next movement up OR down.  Considering that the costs for a 5% loan (for example) have only been lower a few days this year (see last week's CHART OF CLOSING COSTS broken down by available rates), our guidance is unchanged: If you can't afford or don't want to take a risk, lock now because it might not get any better from CURRENT MARKET again.  If you've got time, flexibility, or otherwise are not in any particular rush or pressing need to lock your loan, we still think it's possible that rates make one more run lower in the months ahead. 

CURRENT GUIDANCE: Even though borrowing costs moved more than average today, we're still in a sideways range.  The longer we go without getting a clear sense of market direction, the higher the risks involved in floating.  It's not that a longer waiting period automatically pressures rates higher, it just means the longer rates stay sideways, the more energy they store for their next movement up OR down.  Our guidance is unchanged: If you can't afford or don't want to take a risk, lock now because it might not get any better from CURRENT MARKET again.  If you've got time, flexibility, or otherwise are not in any particular rush or pressing need to lock your loan, we still think it's possible that rates make one more run lower in the months ahead. 

What MUST be considered BEFORE one thinks about capitalizing on a rates recovery?

   1. WHAT DO YOU NEED? Rates might not recover as much as you want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not recover as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready for MORE VOLATILITY in the bond market.

"Best Execution" is the most efficient combination of note rate offered and points paid at closing. This note rate is determined based on the time it takes to recover the points you paid at closing (discount) vs. the monthly savings of permanently buying down your mortgage rate by 0.125%.  When deciding on whether or not to pay points, the borrower must have an idea of how long they intend to keep their mortgage. For more info, ask you originator to explain the findings of their "breakeven analysis" on your permanent rate buydown costs.

Important Mortgage Rate Disclaimer: The "Best Execution" loan pricing quotes shared above are generally seen as the more aggressive side of the primary mortgage market. Loan originators will only be able to offer these rates on conforming loan amounts to very well-qualified borrowers who have a middle FICO score over 740 and enough equity in their home to qualify for a refinance or a large enough savings to cover their down payment and closing costs. If the terms of your loan trigger any risk-based loan level pricing adjustments (LLPAs), your rate quote will be higher. If you do not fall into the "perfect borrower" category, make sure you ask your loan originator for an explanation of the characteristics that make your loan more expensive. "No point" loan doesn't mean "no cost" loan. The best 30 year fixed conventional/FHA/VA mortgage rates still include closing costs such as: third party fees + title charges + transfer and recording. Don't forget the intense fiscal frisking that comes along with the underwriting process.

Home loan borrowing costs inched modestly higher today. Best-Execution mortgage rates didn't budge.

As noted on several occasions, the broader bond market has generally moved sideways inside a well-defined, yet wide range this year. There have been periods of volatility, but on the whole, directional trends haven't lasted long without a return to the middle of the recent rage. This is why 4.875% has generally prevailed as the conventional Best-Execution 30-year fixed mortgage rate. 

The risks associated with this range go back to the concept of "stored energy" in the bond market.  Think of it this way: the longer the market stays in limbo,  the faster rates will travel when the levee breaks and stored energy is released. That means if you are floating when stored energy is released, you are running the risk of losing your current quote.

CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate is still 4.875%.  For those looking to permanently buy down their rate to 4.75%, this quote carries higher closing costs. The upfront fee to permanently buy down your rate  to 4.75% is not worth it to every applicant, we would generally only advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 10 years.  Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is 4.75%. 15 year fixed conventional loans are best priced at 4.125%. Five year ARMS are best priced at 3.50%.

PREVIOUS GUIDANCE:  The longer we go without getting a clear sense of market direction, the higher the risks involved in floating.  It's not that a longer waiting period automatically pressures rates higher, it just means the longer rates stay sideways, the more energy they store for their next movement up OR down.  Considering that the costs for a 5% loan (for example) have only been lower a few days this year (see last week's CHART OF CLOSING COSTS broken down by available rates), our guidance is unchanged: If you can't afford or don't want to take a risk, lock now because it might not get any better from CURRENT MARKET again.  If you've got time, flexibility, or otherwise are not in any particular rush or pressing need to lock your loan, we still think it's possible that rates make one more run lower in the months ahead. 

CURRENT GUIDANCE: Even though borrowing costs moved more than average today, we're still in a sideways range.  The longer we go without getting a clear sense of market direction, the higher the risks involved in floating.  It's not that a longer waiting period automatically pressures rates higher, it just means the longer rates stay sideways, the more energy they store for their next movement up OR down.  Our guidance is unchanged: If you can't afford or don't want to take a risk, lock now because it might not get any better from CURRENT MARKET again.  If you've got time, flexibility, or otherwise are not in any particular rush or pressing need to lock your loan, we still think it's possible that rates make one more run lower in the months ahead. 

What MUST be considered BEFORE one thinks about capitalizing on a rates recovery?

   1. WHAT DO YOU NEED? Rates might not recover as much as you want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not recover as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready for MORE VOLATILITY in the bond market.

"Best Execution" is the most efficient combination of note rate offered and points paid at closing. This note rate is determined based on the time it takes to recover the points you paid at closing (discount) vs. the monthly savings of permanently buying down your mortgage rate by 0.125%.  When deciding on whether or not to pay points, the borrower must have an idea of how long they intend to keep their mortgage. For more info, ask you originator to explain the findings of their "breakeven analysis" on your permanent rate buydown costs.

Important Mortgage Rate Disclaimer: The "Best Execution" loan pricing quotes shared above are generally seen as the more aggressive side of the primary mortgage market. Loan originators will only be able to offer these rates on conforming loan amounts to very well-qualified borrowers who have a middle FICO score over 740 and enough equity in their home to qualify for a refinance or a large enough savings to cover their down payment and closing costs. If the terms of your loan trigger any risk-based loan level pricing adjustments (LLPAs), your rate quote will be higher. If you do not fall into the "perfect borrower" category, make sure you ask your loan originator for an explanation of the characteristics that make your loan more expensive. "No point" loan doesn't mean "no cost" loan. The best 30 year fixed conventional/FHA/VA mortgage rates still include closing costs such as: third party fees + title charges + transfer and recording. Don't forget the intense fiscal frisking that comes along with the underwriting process.

Today, the U.S. Department of the Treasury announced that it will begin the orderly wind down of its remaining portfolio of $142 billion in agency-guaranteed mortgage-backed securities (MBS). Starting this month, Treasury plans to sell up to $10 billion in agency-guaranteed MBS per month, subject to market conditions. At the end of each month, Treasury will post on its website the total agency-guaranteed MBS sales it has made, broken down by coupon and agency.

“We’re continuing to wind down the emergency programs that were put in place in 2008 and 2009 to help restore market stability, and the sale of these securities is consistent with that effort,” said Mary J. Miller, Assistant Secretary for Financial Markets. “We will exit this investment at a gradual and orderly pace to maximize the recovery of taxpayer dollars and help protect the process of repair of the housing finance market.”

Treasury did not set a floor on how much MBS they can sell in a given month, but they did set a ceiling at $10 billion.  If investor demand warrants, expect Treasury to offer $10 billion a month. If MBS valuations (yield spreads) weaken significantly as Treasury tries to sell, they will back off and let spreads stabilize before resuming operations. We don't expect that to happen unless benchmark yields rise substantially because, for example, the Fed hinted at a rate hike (4.5s would fall off a ledge).  If necessary Treasury could halt this program all together, but $10 billion a month only adds $2.5 billion in loan supply per week. When you consider how slow a year it's been for new production MBS, we don't think it'll cause a major disruption. 

In terms of timing, it would behoove Treasury to sell their lowest coupons first, especially if Treasury thinks rates will rise in the year ahead. At the moment Treasury is holding mostly 4.5 30-year coupons ($45 billion). With TBA supply very muted at the moment, we don't see many barriers that might prevent Treasury from selling the full $10 billion per month. If rates do drop substantially and the MBS market moves "Down in Coupon", Treasury may run into a barrier as investors look to avoid MBS coupons with heightened prepayment risk like 5.0s and 5.5s. Then again the street has been burned repeatedly over the past year by automatically assuming lower mortgage rates would equal a big jump in prepayment speeds. It just didn't happen. Qualifying for a loan isn't as simple as it used to be...one 30-day late is enough to kill a deal these days. Plus in the past, when prepayment speeds did pick up, investors looked for protection in the specified pool mortgage market. These MBS are backed by loans that have demonstrated a consistent performance. Generally MBS investors are willing to "pay-up" to get their mits on this paper. A large portion of Treasury's MBS holdings will be sold as specified "pay-ups".

Plain and Simple:  We don't see this causing a major disturbance in the TBA MBS market. The general direction of benchmark rates will largely dictate the direction of mortgage rates. We don't think this is a hint of things to come from the Fed either. When the Fed is ready to finally start selling their MBS holdings, the market will have already pushed rates higher and the market for their holdings would be weak because the coupons on their balance would be trading at a sizeable discount. Thus the Fed will likely be forced to hold onto a large portion of their MBS portfolio to avoid shocking the market with too much duration.

Mortgage rates worsened today. 

The level of panic lessened overnight in Japan, and despite several somewhat alarming headlines, the overall panic in the markets was not on par with that seen yesterday and the day before.  The situation seemed dire enough for bond markets to move to territory that allowed an exploratory run of a 4.75% Best Execution rate yesterday, but on today's moderation, we're right back to the long-standing "stuck spot" at 4.875.  In short, markets began to reverse some of the flight-to-safety that had benefited rates over the past two days.

UPDATED CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate IS BACK to 4.875% after falling to 4.75% yesterday (not universally, but in some cases).  For those looking to permanently buy down their rate to 4.75%, this quote carries higher closing costs but given the recent availability of 4.75% as a Best Execution rate, these costs may be lower than they previously were.  Still, the upfront cost of permanently buying down your rate  to 4.75% is not worth it to every applicant, we would generally only advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 10 years.  Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is back to 4.75%. 15 year fixed conventional loans are best priced at 4.125%. Five year ARMS are best priced at 3.50%, but there is much more stratification in this sector with higher or lower rates making equally as much sense depending on the lender and on the amount of time you intend to keep the loan.

PREVIOUS GUIDANCE:  The loan pricing buydown barrier has been broken, but the bond market hasn't committed to a sustained rally (NEED 4.0 MBS COUPONS). A "flight to safety" help us get here, that means mortgage rates are still at the mercy of headlines and a constant "flight to safety". This move could be brief or it could be the start of a sustained interest rates rally. Wait and see....

CURRENT GUIDANCE:  Guess what!  We didn't have to wait long to see the potential move referenced above was indeed "brief".  There's still plenty of uncertainty that could cause rates to make another attempt to move down to a 4.75% Best Execution, but we feel that those sorts of gambits are best reserved for borrowers with longer term outlooks or who are otherwise less sensitive to rate movements and/or who may not be in an urgent need to refinance.  Any time rates are near their best levels in over a month, it's always advisable for short term outlooks or those who are sensitive to movement in rates and costs to favor locking.  We're still on a fence between where we've been and where we might be able to go, but getting there is uncertain.

Mortgage rates improved today as the situation in Japan deteriorated and a feeling of panic poured through global markets, spurring on another flight to safety in risk-averse government bonds.

UPDATED CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate HAS IMPROVED to 4.75%.  This quote is not widespread though. If you are not seeing this rate, your lender should at least be sharing closing cost credits for 4.875% (see disclaimer below).  For those looking to permanently buy down their rate to 4.625%, this quote carries expensive closing costs. The upfront fee to permanently buy down your rate  to 4.625% is not worth it to every applicant. We would generally advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 10 years.   Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30-year fixed "Best Execution" has improved to 4.625%. Some lucky borrowers may even see 4.50%, but those quotes are not widespread at all. They are actually "phantom".  If your FHA rate is still 4.75%, your lender should be offering closing cost assistance.  15-year fixed conventional loans are best priced at 4.125%, but some lenders may be quoting 4.00%. Five year ARMS are still best priced at 3.50%.

NOTE: The primary mortgage market is very segmented at the moment because of a pending shift lower in the production mortgage-backed security coupon (in the secondary mortgage market). Lenders were able to improve loan pricing today without a major hedging adjustments because of "Excess Servicing" values. If mortgage rate improvements are to be more consistent, lenders will have to hedge their loan pipelines with 4.0 MBS coupons. We are not seeing that yet.

CURRENT GUIDANCE:  The loan pricing buydown barrier has been broken thanks to excess loan servicing values, but the bond market hasn't committed to a sustained rally (NEED 4.0 MBS COUPONS). A "flight to safety" help us get here, that means mortgage rates are still at the mercy of headlines and a constant "flight to safety".

Plain and Simple:  This move could be brief or it could be the start of a sustained interest rates rally. Wait and see....

CURRENT MARKET: The "Best Execution" conventional 30 year fixed mortgage rate is still 4.875%.  For those looking to permanently buy down their rate to 4.75%, this quote carries higher closing costs. The upfront cost of permanently buying down your rate  to 4.75% is not worth it to many applicants, we would generally only advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 10 years. There are some lenders offering competitive closing costs on 4.75%, but those instances are few and far between.  Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is still 4.75%. 15 year fixed conventional loans are best priced at 4.125%. Five year ARMS are still best priced at 3.50%.

NOTE: Although Best Execution rates did not improve today, the closing costs associated with these quotes did decline. With the exception of conventional 15-year loans, borrowers who meet the requirements in the disclaimer below should receive closing cost help from their lender on Best Execution quotes.

CURRENT GUIDANCE: Although early trading seemed to suggest mortgage rates were in the process of becoming "UNSTUCK," an unfriendly correction ensued in the afternoon hours that led to losses which suggest bond markets are still not committed to a sustained rally. Yet.  This leaves us very much on a fence. Our intermediate outlook is for lower rates but short term decision makers must consider that mortgage rates are as aggressive as they've been all year.

Plain and Simple: We're going to need a sustained bond market rally to see "Best Execution" break through the 4.875% barrier. Otherwise this is as good as it gets.

You'll have to look closely in order to see a difference between the introductory paragraphs of today's commentary and yesterday's... 

Today's 30-year Treasury Bond Auction was a net-positive for mortgage rates... and while the best-execution 30-year fixed mortgage rate did not decline, the upfront cost to obtain that rate quote improved further. We are once again near one-month lows in mortgage rates. We've been here a few times over the past month though, it's where positive progress has stalled everytime the environment indicated lower rates were ahead. 

CURRENT MARKET: The "Best Execution" conventional 30 year fixed mortgage rate is still 4.875%.  For those looking to buy down their rate to 4.75%, this quote carries higher closing costs. The upfront cost of permanently buying down your rate  to 4.75% is not worth it to many applicants. We would generally only advise the permanent floatdown if you plan to keep your new mortgage outstanding for longer than the next 10 years.  Ask your loan officer to run a breakeven analysis on any origination points they might require to cover permanent float down fees. On FHA/VA 30 year fixed "Best Execution" is still 4.75%. 15 year fixed conventional loans are best priced between 4.125% and 4.25%, but 4.25% is more efficient in terms of the floatdown breakeven cost. Five year ARMS are best priced at 3.625%.

PREVIOUS GUIDANCE:  Today we see validation for the improved floating outlook mentioned yesterday (note: "improved" simply means it's better than it was, but not necessarily preferred or recommended).  Indeed, the general theme of the guidance remains unchanged: "floating this week is better than it was last week, but remaining defensive overall."  Anything can happen with tomorrow's bond auction and with Friday's economic data, so there's no harm in locking in now when rates are as good as they've been in over a month.  That said, those with the flexible time-frames and levels of necessity are justified floating, assuming that stop-loss points are set.

NEW GUIDANCE:  Today we see MORE validation for the improved floating outlook mentioned earlier this week. From: Mortgage Pricing Hits Wall. Loan Demand Declines...

Plain and Simple: We're going to need a sustained bond market rally to see "Best Execution" break through the 4.875% barrier.