Posts Tagged ‘secondary mortgage market’

Home loan borrowing costs today recovered a portion of the increases they experienced on Monday and Tuesday.  Once again these slight cost improvements came amidst a volatile backdrop. These are generally not favorable conditions for rate watchers as volatility in the secondary mortgage market puts lenders in a more defensive position than usual. That means we're not seeing aggressive loan pricing strategies on rate sheets.  Mortgage rate movements have gone stale.

CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate is still 4.50%. Some lenders may be quoting 4.50% with increased closing costs in the form of origination fees. Some lenders may also be quoting 4.375%, but those offers will definitely carry additional closing costs.  These costs could be worth it to applicants who plan to keep their new mortgage outstanding for long enough to breakeven on the extra upfront costs.  On FHA/VA 30 year fixed "Best Execution"  is 4.25%.  15 year fixed conventional loans are best priced at 3.75%. Five year ARMs are best priced at 3.125% but the ARM market is more stratified and there is more variation in what will be "Best-Execution" depending on your individual scenario. 

PREVIOUS GUIDANCE:  "Volatility" in and of itself doesn't mean rates are more likely to get directionally better or worse, but it does mean lenders are more anxious about the potential for larger intraday loan pricing swings. This creates a defensive environment where rate sheets fluctuate in a wider range of offers.  If you can't afford (or don't want to afford) to risk what could be a meaningful increase in closing costs or even a .125% shift higher in rate, we're always in favor of protecting current offers, especially when rates are near their best levels in recent memory and high-risk, high-impact economic events are less than 24 hours away.  If you float through today into tomorrow, you're basically accepting any short-term rate/cost adjustments that take place following the market's reaction to those events.

CURRENT GUIDANCE:  As volatility continues in the secondary market, it's becoming apparent that lenders are pricing loans from a defensive stance.  Lenders are waiting for the secondary market to commit to a directional trend.  With today's high-risk event over, it might seem safer to float if lenders are pricing defensively by default.  And in fact, if you're able to act quickly and are somewhat flexible with respect to the risk of slightly higher closing costs, that can be a valid strategy here, but floating is best reserved for the longer term and most flexible scenarios here.  While there is potential upside even for short term outlooks, it's not likely to ratchet the Best-Execution rate down another 1/8th of a percent quickly enough to be worth the risk.

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

   1. WHAT DO YOU NEED? Rates might not rally as much as you want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready to make tough decisions?

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"Best Execution" is the most cost 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 buy down 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 fiscal frisking that comes along with the underwriting process

Home loan borrowing costs today recovered a portion of the increases they experienced on Monday and Tuesday.  Once again these slight cost improvements came amidst a volatile backdrop. These are generally not favorable conditions for rate watchers as volatility in the secondary mortgage market puts lenders in a more defensive position than usual. That means we're not seeing aggressive loan pricing strategies on rate sheets.  Mortgage rate movements have gone stale.

CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate is still 4.50%. Some lenders may be quoting 4.50% with increased closing costs in the form of origination fees. Some lenders may also be quoting 4.375%, but those offers will definitely carry additional closing costs.  These costs could be worth it to applicants who plan to keep their new mortgage outstanding for long enough to breakeven on the extra upfront costs.  On FHA/VA 30 year fixed "Best Execution"  is 4.25%.  15 year fixed conventional loans are best priced at 3.75%. Five year ARMs are best priced at 3.125% but the ARM market is more stratified and there is more variation in what will be "Best-Execution" depending on your individual scenario. 

PREVIOUS GUIDANCE:  "Volatility" in and of itself doesn't mean rates are more likely to get directionally better or worse, but it does mean lenders are more anxious about the potential for larger intraday loan pricing swings. This creates a defensive environment where rate sheets fluctuate in a wider range of offers.  If you can't afford (or don't want to afford) to risk what could be a meaningful increase in closing costs or even a .125% shift higher in rate, we're always in favor of protecting current offers, especially when rates are near their best levels in recent memory and high-risk, high-impact economic events are less than 24 hours away.  If you float through today into tomorrow, you're basically accepting any short-term rate/cost adjustments that take place following the market's reaction to those events.

CURRENT GUIDANCE:  As volatility continues in the secondary market, it's becoming apparent that lenders are pricing loans from a defensive stance.  Lenders are waiting for the secondary market to commit to a directional trend.  With today's high-risk event over, it might seem safer to float if lenders are pricing defensively by default.  And in fact, if you're able to act quickly and are somewhat flexible with respect to the risk of slightly higher closing costs, that can be a valid strategy here, but floating is best reserved for the longer term and most flexible scenarios here.  While there is potential upside even for short term outlooks, it's not likely to ratchet the Best-Execution rate down another 1/8th of a percent quickly enough to be worth the risk.

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

   1. WHAT DO YOU NEED? Rates might not rally as much as you want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready to make tough decisions?

----------------------------

"Best Execution" is the most cost 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 buy down 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 fiscal frisking that comes along with the underwriting process

Home loan borrowing costs continue to hover near the best levels we've seen all year. Activity in the secondary mortgage market is getting more and more restless though as investors await an update from the Federal Reserve tomorrow and new developments in the Greek debt crisis. Intraday volatility has picked up as a result. This is important because lenders tend to price loans more defensively when volatility is a problem.

CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate is still 4.50%. Some lenders may be quoting 4.50% with increased closing costs in the form of origination fees. Some lenders may also be quoting 4.375%, but those offers will definitely carry additional closing costs.  These costs could be worth it to applicants who plan to keep their new mortgage outstanding for long enough to breakeven on the extra upfront costs.  On FHA/VA 30 year fixed "Best Execution"  is 4.25%.  15 year fixed conventional loans are best priced at 3.75%. Five year ARMs are best priced at 3.125% but the ARM market is more stratified and there is more variation in what will be "Best-Execution" depending on your individual scenario. 

PREVIOUS GUIDANCE:  There's a weird feeling in the air. Stocks are teetering on a major technical breakdown and bonds smell fear but are waiting for new guidance to be offered. If stocks fail to mount a recovery rally in the near future, we could be looking at another leg lower in Best Execution mortgage rates. While this "feeling" ties together well with our long-term outlook, it's still speculative in nature and largely driven by headline news. We say that because the timing of such news headlines,  positive or negative,   is "at any moment". And until it the market is given new information, stocks are gonna put up a fight. This "scratching and clawing" in equities implies the potential for loan pricing volatility remains high. Remember, it was only last week when Best Execution Mortgage Rates were teetering on a shift higher because stocks had put together a decent intraday rally effort. We may have dodged a bullet, but we're not out of the woods yet. The past few days provide a perfect example of how quickly unfriendly fluctuations can occur in the mortgage market.

CURRENT GUIDANCE:  "Volatility" in and of itself doesn't mean rates are more likely to get directionally better or worse, but it does mean lenders are more anxious about the potential for larger intraday loan pricing swings. This creates a defensive environment where rate sheets fluctuate in a wider range of offers.  If you can't afford (or don't want to afford) to risk what could be a meaningful increase in closing costs or even a .125% shift higher in rate, we're always in favor of protecting current offers, especially when rates are near their best levels in recent memory and high-risk, high-impact economic events are less than 24 hours away.  If you float through today into tomorrow, you're basically accepting any short-term rate/cost adjustments that take place following the market's reaction to those events. ECON CALENDAR

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

   1. WHAT DO YOU NEED? Rates might not rally as much as you want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready to make tough decisions?

----------------------------

"Best Execution" is the most cost 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 buy down 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 fiscal frisking that comes along with the underwriting process

"The Wall" absorbed a direct hit today. A sizeable crack is now visible in the metaphorical structure that stands in the way of lower mortgage rates. And while the damages inflicted are not yet viewed as irreparable, "The Wall" is indeed on the verge of toppling over. This is an encouraging development for intermediate to long-term rate watchers.

Intraday price appreciations in the secondary mortgage market were large enough to warrant multiple reprices for the better from lenders. As a result we've updated our "Current Market" Best Execution Mortgage Rate quotes.

UPDATED CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate has fallen solidly to 4.625%. A few lenders are even quoting C30 loans at 4.500 with no extra closing costs.  If you are looking to move down from there, you'll be assessing the trade-offs between higher closing costs and lower monthly payments.  This could be worth it to applicants who plan to keep their new mortgage outstanding for long enough to breakeven on the extra upfront costs.  On FHA/VA 30 year fixed "Best Execution" is also a moving target roughly centered on 4.375% with several lenders offering 4.25%. 15 year fixed conventional loans are still best priced at 3.875%. Five year ARMs are best priced at 3.25% but the ARM market is more stratified and there is more variation in what will be "Best-Execution" depending on your individual scenario. 

PREVIOUS GUIDANCE:  There is still justification for floating if you have an intermediate to long-term scenario or a more aggressive/flexible stance and don't mind locking later, at a loss  if "The Wall" proves unbreakable.  But for short termers, the very existence of "The Wall" suggests locking is the smart decision, especially if you're on a 10-15 day timeline or are less flexible with respect to changes in closing costs or note rate.  Additionally, if you're being quoted the lower of the two Best Execution rates mentioned above in the "current market" section, floating is even more risky as those rates can vanish in one bad day, whereas it would take several days of uncommonly good performance in bond markets to get you down to the next rung on the mortgage rate ladder. 

CURRENT GUIDANCE:  A big step was taken in the right direction today. And while "The Wall" is still standing, there is now clear justification for borrowers looking to float their loan on an intermediate to long-term timeline. Further positive progress will however be slow and short term back-ups are to be expected. From that point of view, borrowers working on a shorter lock/float timeline should remain defensive of new "Best Execution" quotes. Your main goal is to keep that lower note rate offer.  Stay tuned for further developments. This is getting exciting!

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

   1. WHAT DO YOU NEED? Rates might not rally as much as you want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready to make tough decisions?

----------------------------

"Best Execution" is the most cost 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 buy down 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 fiscal frisking that comes along with the underwriting process.

Although borrowing costs rose today, the newly updated Best-Execution mortgage rate offering we discussed on Wednesday remains unchanged. 

While recent increases in borrowing costs are acting like spackle on "the wall" that had been preventing further rate improvements, trading in the secondary mortgage market today was encouraging.  It's too soon to tell if the newer, lower Best-Execution availbilities will become widespread or not.

CURRENT MARKET: The "Best Execution" conventional 30-year fixed mortgage rate is in a state of flux between 4.75% and 4.625%. Some lenders are already quoting C30 loans at 4.625% with no origination points.  If you are looking to move down from there or merely between the two, you'll be assessing the trade-offs between higher closing costs and lower monthly payments.  This could be worth it to applicants who plan to keep their new mortgage outstanding for long enough to breakeven on the extra upfront costs.  On FHA/VA 30 year fixed "Best Execution" is also a moving target roughly centered on 4.375% with adjacent rates being logical in some scenarios. 4.50% is a no-brainer for everyone on FHA 30yr loans though.  15 year fixed conventional loans are best priced at 3.875%. Five year ARMs are best priced at 3.25% but the ARM market is more stratified and there is more variation in what will be "Best-Execution" depending on your individual scenario. 

PREVIOUS GUIDANCE:  First of all, the possibility of an intermediate to longer term rates rally remains on the table for yet another day.  So for all the flexible or aggressive long term scenario people in the audience, you're excused for the day.  As for everyone else, loan pricing deteriorated today, leaving us feeling defensive about recent improvements in the short-run. You should be too.  We saw a good example today of the sorts of pull-backs that can come even in the midst of a predominantly bullish run in mortgage rates.  As we've said in the past, if you're seeing the lower of the two Best-Ex quotes mentioned in the Current Market section, the goal is to KEEP that rate rather than floating for the possibility of slightly lower closing costs.

CURRENT GUIDANCE: While we continue to see a longer term rally as a possibility, we're wary of short term pull-backs for shorter term or otherwise more constrained scenarios despite the strong showing made by bond markets in the second half of today's trading session.  As we've said in the past, if you're seeing the lower of the two Best-Ex quotes mentioned in the Current Market section, the goal is to KEEP that rate rather than floating for the possibility of slightly lower closing costs.

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

   1. WHAT DO YOU NEED? Rates might not rally as much as you want/need.
   2. WHEN DO YOU NEED IT BY? Rates might not rally as fast as you want/need.
   3. HOW DO YOU HANDLE STRESS? Are you ready to make tough decisions?

----------------------------

*"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 buy down 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 fiscal frisking that comes along with the underwriting process.

Two lawmakers have introduced bipartisan legislation that would eliminate Freddie Mac and Fannie Mae while still keeping a government presence in the housing finance marketplace.

HR 1859, "The Housing Finance Reform Act of 2011", is sponsored by Congressmen Gary Peters (D-MI) and John Campbell (R-CA).   According to the official release from Rep. Peter's office, the legislation would do the following:

• Ensure the availability of reasonably priced conventional mortgages.
• Provide incentives for private sector capital to support the secondary mortgage market.
• Limit the role of the government in the secondary mortgage market; and
• Provide for a gradual wind down of Fannie and Freddie.

Peters/Campbell have aimed this bill at overhauling the federal mortgage finance system and winding down the embattled mortgage giants, Fannie Mae and Freddie Mac, while establishing a new system of private mortgage associations - funded by private capital.  Sponsor's believe the legislation will ensure liquidity in the secondary mortgage market because mortgage investments would still be backed by a government guarantee, which the plan has mandated strict standards around to safeguard taxpayers.

The Mortgage Bankers Association quickly weighed in on the Peters-Campbell bill.  Michael Berman, the organization's Chairman said in a press release, "The bipartisan legislation introduced by Congressmen Campbell and Peters to reform our secondary markets closely mirrors the proposal of MBA's Council on Ensuring Mortgage Liquidity, which was the first to put forward a comprehensive blueprint for the future of our housing finance system. (This is) legislation that reforms our housing finance system in a way that encourages the return of private capital while also providing for a limited but explicit government role in backing the availability of affordable mortgage products through all market conditions."

HR 1859 authorizes the Director of the Federal Housing Finance Administration (FHFA) to issue charters for "Housing Finance Guaranty Associations" with the power to "deal in conventional mortgages only for the purpose of creating a secondary market for these mortgages, facilitating mortgage securitization, and supporting multifamily housing." 

These entities would not be allowed to discriminate against any originator, but the "Associations" could be formed for the general purposes of serving a particular mortgage market or category of mortgage lenders such as community banks.  The legislation does allow banking organizations to acquire an interest in such categories of lenders.

The housing finance guaranty associations would issue securities collateralized by conventional mortgages only and would establish a trust not subject to the claims of creditors in order to provide  for the sale of interests in mortgages pool and the accumulation of guarantee fees (Reserve Fund). The bill creates the Office of Securitization within FHFA to issue the federal guarantee, impose and collect the fee, and administer and service the FHFA securities.

The new entities will not be allowed to originate or service non-conventional mortgages, offer a guarantee for any security backed by a non-conventional mortgage, speculate or underwrite or sell insurance.  They will only be allowed to invest in conventional or government-backed MBS. Beyond the term "conventional mortgage" which will defined as a "qualified mortgage" as determined for the purposes of Dodd-Frank, the legislation limits the type of mortgage the guaranty associations can securitize as those with a loan-to-value (LTV) ratio of 80 percent and a loan amount not exceeding the larger of either 150 percent of the average U.S. home price or 150% of the median home price in the property's local area.  An association can purchase a mortgage with an LTV higher than 80 percent if the seller retains a 10 percent stake in the loan, agrees to repurchase the mortgage on the demand of the association or private mortgage insurance is used to cover the balance of the loan above 80 percent.

The associations would be supervised by FHFA which will conduct examinations at least once a year, set capital standards, and issue capital classifications.  FHFA will also establish standards for management and operation including management of interest rate exposure, market risk, asset and risk management, and maintenance of records.  The agency will also establish standard forms and contractual terms for the securities that will include details on the payment of interest and principal, address servicing standards and other terms.  FHFA's costs in managing the program will be covered by a fee charged to the associations.

The "Catastrophic Federal Guarantee" deems failure of an association to make timely payments of interest or principal as grounds for placing an association in conservatorship or receivership. That is the only way to trigger the federal guarantee.  The fee that supports the guarantee fund will be reevaluated on a regular basis and if the fund is depleted FHFA will impose a special assessment to recoup all its costs related to the guarantee.

The bill's "Transition Section" terminates the GSE's housing goals and requires Freddie and Fannie to reduce their asset portfolios to a maximum of $250 billion within 5 years and increase their guarantee fee over a period of three years to reflect the risk posed by the guarantee.   FHFA has six months to provide a transition plan to wind down the GSEs and must determine within one year after five associations have been chartered whether the GSEs can be safely placed into receivership, an event that must occur no later than three years after two associations have been chartered. 

One last note...

Unlike most of the informal proposals that have been floated, HR 1859 does not allow the temporary higher conforming loan limits to expire this fall but continues them as long as the GSEs remain in conservatorship