Mortgage Rates Flat To Modestly Higher, Long Term Sideways Trends Intact

Mortgage Rates moved slightly higher today but remained well within a narrow range resting on all-time lows.  Several lenders were actually unchanged day-over-day and others released improved rate sheets in the afternoon following strength in the secondary mortgage market.  Best Execution for Conventional 30yr Fixed Loans remains at 3.625%.

(Read More:What is A Best-Execution Mortgage Rate?)

The bond markets that underlie mortgage rates have essentially refused to move too far in one direction or another, seemingly in anticipation of Thursday and Friday’s EU Summit. The next two days also bring a slew of domestic economic data as well as the last two trading days in the month and quarter.  Month-end/quarter-end/year-end can garner additional attention and market movement for reasons not related to market fundamentals or technical trading levels.  

Just as was the case with the long stay at 3.875%, rates have been extremely sideways and borrowing costs have held an extremely narrow range around the current 3.625% Best-Execution rate.  This narrow range operates similarly to those seen in broader markets, building the sense that “everything” is sideways and not just mortgage rates.  The combination of the passing of month/quarter-end with the EU Summit could finally be the thing that nudges rates higher or lower.  

Keep in mind though, not only could we continue to go sideways, but at current levels of demand, lenders have limited incentive to cough up truly stellar improvements in the short term.  Depending on how large of a microscope you’re willing to use to measure victories, floating a rate right now makes less sense the shorter your time frame.  Some might argue that the nearness to all-time lows justifies locking regardless of one’s time frame.

Long Term Guidance: We’d continue to advocate against trying to “get ahead” of current market movements due to the high degree of uncertainty.  While it’s a reasonably safe assumption that European concerns will generally help rates stay lower than they otherwise would be, that “otherwise would be” part is very much a moving target.  Best bet is to focus on the fact that rates are at their all time lows, and can change quickly based on events that aren’t “scheduled” or able to be forecast.  Risk vs reward for floating vs locking looks a bit larger than we’d like, but not out of the question for those who understand the risks and have an exit strategy if things don’t go their way.

Loan Originator Perspectives

 

Matt Hodges, Loan Officer,  Presidential Mortgage Group

No purchase loans are floating at this point – only some refinances without specific close dates. Once we name down appraisal receipt and underwriting approval, I am advising clients to lock immediately.

Julian Hebron, Branch Manager, Loan Agent, RPM Mortgage

 

Borrowers who just got into contract to buy a home that’s expected to close within 30-40 days should lock their rate at these lows. As for refinance borrowers, they’re also well served to lock now. If they have strong reason to believe rates will drop further near to medium term, they can talk to their loan agents about no-cost refinances. A no-cost refi will have a slightly higher rate but if rates drop again, they can refi again and not have to worry about a second set of fees.

Ted Rood, Senior Mortgage Consultant, Wintrust Mortgage

New day, same scenario. Rates have been pretty rangebound for much of June, prompted by European economic disharmony. Am advising most clients to lock if we have pricing we need at time of loan submission. Bigger concern is the continuing trend towards servicers’ “risk off” attitude as they restrict taking on loans they don’t currently service. Could result in borrowers having less choices for refinances and higher costs since many won’t have the option of picking a new lender.

Bob Van Gilder, Finance One Mortgage

Rates remain favorable. If you are closing on a purchase in next 10 days- no harm/no foul in locking. If you are refinancing and have a tolerance for the unexpected (both upside and downside) float a bit. You MIGHT squeek out an extra eighth or additional credit towards closing costs.-

Victor Burek at Benchmark Mortgage

I continue to advise my clients to float til within 15 days of closing. That strategy has been quite succesful for the last couple months; however, we do have a high risk event coming tomorrow and Friday with the EU summit. If they pull some kind of rabbit out of their hat, the market could get very happy and drive rates higher.

Today’s BEST-EXECUTION Rates 

  • 30YR FIXED –  3.625%
  • FHA/VA -3.5% – 3.75%
  • 15 YEAR FIXED –  3.00%
  • 5 YEAR ARMS –  2.625-3. 25% depending on the lender

Ongoing Lock/Float Considerations 

  • Rates and costs continue to operate near all time best levels
  • Current levels have experienced increasing resistance in improving much from here
  • Rates could easily move higher or lower, but given the nearness to all time lows, there’s generally more risk than reward regarding floating
  • But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn’t always mean they’re done improving.
  • (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario.  There can be all sorts of reasons that your quoted rate would not be the same as our average rates, and in those cases, assuming you’re following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).

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Mortgage Rates Bounce Back From Three Day Rise

Mortgage Rates erased yesterday’s losses today, moving lower to fall in line with Tuesday’s levels.  This ends a rather abrupt 3-day rise from the lowest rates of all time, essentially getting us back near the middle ground of the week.   Even at their highest levels of the week yesterday, rates had not yet made it back to previously dominant Best-Execution level of 3.875%, opting instead for 3.75%.  That continues to be the case today, but some of the more aggressive lenders are arguably at 3.625%.  

(Read More:What is A Best-Execution Mortgage Rate?)

Today’s market movements were surprisingly calm given the high level of anticipation for Fed Chairman Bernanke’s congressional testimony.  Markets hoped to get clues to the likelihood of upcoming Fed policy changes, but generally were given nothing more and nothing less than they expected.  This left the bond markets that underpin the secondary mortgage market to drift mostly sideways, but at slightly stronger levels as yesterday’s uncertainty and anticipation no longer weighed prices down.  (When prices of mortgage-backed-securities are lower, rates move higher, and vice versa).

We spoke yesterday about the 10yr Treasury yield being useful during uncertain times with large potential shifts as a better big-picture indicator of “the bond market” than mortgages, and that it had just returned to a longer-term point of relative neutrality at 1.67% in preparation for today’s Bernanke speech.  With the speech failing to “spook” bond markets, everything has just sort of drifted back into lower-rate territory, but only slightly!  The more convincing thesis is that UNCERTAINTY REMAINS and it’s not likely get a major dose of clarity until next weekend’s elections in Greece and the following week’s official Fed Announcement, unless an unscheduled and probably European headline punches through the barrier of relevance in the meantime. 

The moral of the story is that today’s small victory provides a bit of breathing room for those inclined towards the higher-risk option of floating in the current environment, but the distance of that breathing room doesn’t necessarily mean tomorrow morning’s rates couldn’t be worse than yesterday’s, or that next week won’t be volatile within a range.

Long Term Guidance: We’d continue to advocate not trying to “get ahead” of current market movements as a high degree of uncertainty is pervasive.  While it’s a reasonably safe assumption that European concerns will generally help rates stay lower than they otherwise would be, that “otherwise would be” part is very much a moving target.  Best bet is to focus on the fact that rates are at their all time lows, and can change quickly based on events that aren’t “scheduled” or able to be forecast.  Risk vs reward for floating vs locking looks a bit larger than we’d like, but not out of the question for those who understand the risks and have an exit strategy if things don’t go their way.

Loan Originator Perspective With Rates At All Time Lows

 

Curt Sandfort, President of Premier Home Loans

We are still recommending a “lock” strategy at time of application. The risk/reward of floating at these levels is just not worth the gamble. Lock, be happy.

Jason York, Vice President of VA Operations at Prime Mortgage Lending, Inc

Today is a perfect example of how the market has been for quite a while. We’ve lost big the past few days, but today we made up for some of those losses. Same opinions still apply. If you have a shorter term, then I would lean more towards locking on a better day like today. If you have more time to see if tomorrow continues to get better, but have enough time to recoup if it doesn’t, then floating isn’t a bad decision either.

Ted Rood, Senior Mortgage Consultant,  Wintrust Mortgage

It’s like Groundhog Day in June, rates improve a little on economic turmoil. Never heard of anything like that before! Chairman Bernake’s testimony to Senate was well received by bond markets. If you’re floating might be time to look at locking. We’re recovered much of the ground lost since last Friday, not sure how much more room there is to improve further.

Mike Owens, Partner with HorizonFinancial, Inc.

Lock while we still have a chance. It’s only up from here.

Ethan Brizzi,  Branch Manager, Professional Mortgage Associates

It is all dependent on your scenario, but why take the risk? Trying to “time” the market is not an exact science – there are too many variables in play, pure data is no longer the driving force behind the rates. I am advising most of my clients to lock – either 30 or 45 days, depending on their scenarios – but as always, I can only give my perspective – its up to them to decide.

Jeff Statz, Mortgage Advisor, Network Funding LP

The mass volume locked earlier this week created a hefty supply that is slowly working its way through processing.  I posted optimism on Tuesday about pricing recovering from the large supply, and that’s what I believe we’re seeing. Slow and steady wins the race.

 

Today’s BEST-EXECUTION Rates 

  • 30YR FIXED –  3.75%
  • FHA/VA -3.75%
  • 15 YEAR FIXED –  3.125 edging down to 3.00%
  • 5 YEAR ARMS –  2.625-3. 25% depending on the lender

Ongoing Lock/Float Considerations 

  • Rates and costs continue to operate near all time best levels
  • Current levels have experienced increasing resistance in improving much from here
  • Rates could easily move higher or lower, but given the nearness to all time lows, there’s generally more risk than reward regarding floating
  • But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn’t always mean they’re done improving.
  • (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario.  There can be all sorts of reasons that your quoted rate would not be the same as our average rates, and in those cases, assuming you’re following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).

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Mortgage Rates Higher For Third Straight Day

Mortgage Rates moved higher again today, capping a 3 day run into significantly weaker territory.  While noticeably higher over that time, Friday’s rates were all-time lows, meaning today’s Best-Execution rates for 30yr Fixed Conventional loans has yet to rise back to it’s previously stable level at 3.875%.  For now, lenders remain closer to 3.75% for ideal scenarios, up from Friday’s 3.625%.

(Read More:What is A Best-Execution Mortgage Rate?)

Today’s market movements were slightly more aggressive than previous sessions this week and volumes were generally high as traders make last minute adjustments before Bernanke’s Congressional Testimony tomorrow.  Although this is not an FOMC policy communication, tomorrow’s speech is increasingly viewed as the market’s first good opportunity for a “sneak peek.”

The Fed’s monetary policy is very big deal not only for markets in general, but specifically for mortgages.  If markets get the impression that the Fed will renew/maintain their policy of reinvesting proceeds from their MBS portfolio back into new MBS purchases, it should be a net positive for rates.  However, Fed stimulus also benefits stock markets and the general acceptance of “risk.”  That can have a negative effect on broader bond markets even if MBS (the “mortgage-backed-securities” that most directly influence mortgage rates) are performing better by comparison.

This was the case today as the secondary mortgage market was “less bad” than US Treasuries in terms of rising rates.  Underlying Treasuries are immensely important to the mortgage market as they’re the best benchmark to assess big, broad shifts in the overall interest rate environment.  The month of June, with the last FOMC Announcement before Operation Twist expires, and Greek elections, is definitely one of those potential “big, broad, shift” moments in history.  It’s no surprise then, that 10yr Treasury yields, after having broken well below the previous all time lows at 1.67 returned precisely there today to wait for Bernanke tomorrow at 10am. 

We can look at the fact that yields went no higher than this as a positive indication that rates have topped out or simply the market’s way of seeking some sort of equilibrium ahead of a key event.  Rates could move in either direction tomorrow and still have completely reversed course by next week.  It’s a risky, volatile time, and Best-Ex is still below it’s recent long-standing 3.875% line in the sand.  

Long Term Guidance: We’d continue to advocate not trying to “get ahead” of current market movements as a high degree of uncertainty is pervasive.  While it’s a reasonably safe assumption that European concerns will generally help rates stay lower than they otherwise would be, that “otherwise would be” part is very much a moving target.  Best bet is to focus on the fact that rates are at their all time lows, and can change quickly based on events that aren’t “scheduled” or able to be forecast.  Risk vs reward for floating vs locking looks a bit larger than we’d like, but not out of the question for those who understand the risks and have an exit strategy if things don’t go their way.

Loan Originator Perspective With Rates At All Time Lows

 

Alan Craft, Loan officer at Integrity Home Loan of Central Florida

I hate to sound like a broken record, but my stance has been the same for weeks.  We are at all time lows and the likelihood of rate increases is far greater than for decreases.  Therefore, we are still advising all clients closing within 60 days to lock.

Ted Rood, Senior Mortgage Consultant,  Wintrust Mortgage

Rates up from Friday on stock market recovery and hopes of European progress.  That being said, we’re within a hair of best pricing in history.  Locked two loans today before prices worsened.  Can’t reinforce enough that anyone at 5.0% or above should look at refi options now, don’t continue to waste money daily!

Victor Burek, Mortgage Planner,  Benchmark Mortgage

Rate sheets have taken a beating the last few days, but I feel a bottom is in at this level.  As always lenders take much more than MBS price warrants.  If you have some time before closing i think floating will pay off.   Europe is still the driver and they are far from any kind of resolution to their problems.

Bob Van Gilder, Originator / LO,  Finance One Mortgage

Off of records lows at this point. If you didn’t lock 3.625% or 3.750%, a  3.875% rate ain’t too shabby either! (talking conforming conventional loan) —- A mortgage below 4%— who’d thunk it?

Matt Hodges, Loan Officer,  Presidential Mortgage Group

If you are closing in June, you should be locked and done.  Don’t look back – rates are great.  If you are floating and within 30 days of close, I’d suggest locking.  If you are between 30 and 60 days until closing and can stomach a sea of churning rates, discuss float/lock decision with your loan officer.  If you are floating, have a concrete plan to lock with your loan officer, if he or she can’t reach you and the market is volatile.

Kent Mikkola #353976, Mortgage Consultant,  M & M Mortgage, LLC #213677

Rates are still incredibly low.  Float at your own risk.

 

Today’s BEST-EXECUTION Rates 

  • 30YR FIXED –  3.75%
  • FHA/VA -3.75%
  • 15 YEAR FIXED –  3.125 edging down to 3.00%
  • 5 YEAR ARMS –  2.625-3. 25% depending on the lender

Ongoing Lock/Float Considerations 

  • Rates and costs continue to operate near all time best levels
  • Current levels have experienced increasing resistance in improving much from here
  • Rates could easily move higher or lower, but given the nearness to all time lows, there’s generally more risk than reward regarding floating
  • But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn’t always mean they’re done improving.
  • (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario.  There can be all sorts of reasons that your quoted rate would not be the same as our average rates, and in those cases, assuming you’re following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).

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FHFA’s DeMarco Announces Timothy J. Mayopoulos as Fannie Mae CEO

Statement of FHFA Acting Director Edward J. DeMarco On Appointment of Timothy J. Mayopoulos as CEO of Fannie Mae:

“I am pleased that the Fannie Mae Board of Directors has selected Timothy J. Mayopoulos to become President and Chief Executive Officer (CEO) of Fannie Mae.  Tim brings a breadth of knowledge and experience in housing finance and financial services that is vital at this important time for Fannie Mae and the nation’s housing finance system.  I look forward to working with him on the next phase of the conservatorship and the efforts to transition beyond.

“In January, Fannie Mae announced that Michael Williams had informed the Board of his plans to step down as President and CEO after 21 years of service to the company.  I would again like to thank Mike for his leadership at Fannie Mae. 

“We applaud the Board’s selection and welcome Tim to this new role where he will lead efforts to continue strengthening Fannie Mae and provide critical foreclosure prevention services as we build the foundation for the secondary mortgage market of the future.” 

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Community Lenders want Smaller GSEs Retained in Secondary Market Role

The Community Mortgage Lenders of
America
(CMLA) is urging policy makers to consider retaining the positive aspects
of Fannie Mae and Freddie Mac
in any future secondary market design.  CMLA is asking that a smaller Fannie and
Freddie be configured to serve 30-35 percent of the overall secondary mortgage
market while being barred from securitizing or investing in anything but plain “vanilla”
mortgages.

The trade association stated its
preferences in a letter to the secretaries of Housing and Urban Development
(HUD), Treasury, and the Acting Director of the Federal Housing Finance Agency
(FHFA) as well as the chairs and ranking members of two congressional
committees which will be involved in the future definition of the market.    

CML said
the two government sponsored enterprises (GSEs) have benefited from the strong
oversight and leadership they have received from FHFA and that has been
reflected in the housing market where credit has remained available primarily
because of their presence.  While the
housing industry, Congress, Treasury, HUD, and the FHFA are seeking clarity on
how the GSEs should perform going forward, CMLA “believes that the housing
industry and the public at large are best served through a sensible and calculated
reformation of the GSEs that reduces their footprint in the industry while at
the same time allowing them to serve their historically critical functions.”

The CMLA endorses a future whereby Fannie and
Freddie shrink to serve 30-35 percent of the overall secondary mortgage market,
and are barred from securitizing or investing in anything but plain
“vanilla” mortgages.

While the FHFA’s October 2011 projections shows
that the balance sheets of the GSE’s are improving, FHFA has also expressed
doubt that they will ever be able to repay the government its investment during
the crisis.  CMLA believes that the
taxpayer can be repaid through creative and thoughtful planning and through
tailoring an increase in guarantee fees to more accurately price risk. 

There are a number of principles that should
inform creation of a fair and effective secondary mortgage market according to
CMLA:

1.  
Standardization reduces
costs

2.  
Liquidity is needed

3.  
Conventional lending
should be protected

4.  
Loss mitigation
procedures should be retained and further enhanced

5.  
Risk must be made
explicit

6.  
Market concentration
should be reduced

7.  
Portfolio flexibility
should be increased

8.  
Proper use of
Guarantee Fees must be required

9.  
Reform must include
standards for the non-GSE Secondary Market.

The letter states that a sensible and calculated
reformation of the GSEs will result in continued liquidity and stability
without an unnecessary disruption
to the secondary market, “or worse, a
concentration of the secondary market within a limited number of large
banks/servicers.”  CMLA sets out the
following steps for the GSEs to complete within a transition time and
recognizing market realities.

  • Pay an explicit
    backstop fee to the federal government;
  • Be prevented by
    statute from securitizing or investing risky mortgages as defined by the
    Qualified Residential Mortgage Rule;
  • Be shrunk and
    normalized to sustain roughly 30 to 35 percent of the secondary market
  • Continue to be required
    to serve lenders of all sizes and to nurture smaller markets in areas of market
    concentration;
  • Continue to provide
    standardization of origination documentation, servicing practices,
    securitization terms and modification/foreclosure strategies as a policy of
    consumer protection;
  • Reduce and maintain
    portfolios over time, but only as transitional market pricing reduces the
    portfolios. Given that the portfolios
    provide a stabilizing influence of mortgage pricing and that the FHFA has said
    the portfolios will only cause 9 percent of overall losses “any forced downsizing
    seems politically motivated to benefit large banks and Wall Street.”
  • Establish a governing
    board to maintain and set a competitive guarantee fee following the public
    utility model with funds generated to be retained in the housing industry for
    the benefit of taxpayers;
  • Regulate
    post-conservatorship executive compensation through a governing board to
    prevent excessive risk-taking.

CMLA says it is the first trade group to call for
the GSEs to remain intact.  Mark
McDougald, Chairman of the organization said, “Our plan is forward-looking
and will result in distinct changes in the secondary market. However, we call
on Washington to move expeditiously and to avoid
drastic, politically-driven changes that will harm small lenders and the small
communities in which they serve,”

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