Mortgage Rates Slightly Higher Despite Bond Market Improvements

After setting new record lows yesterday, Mortgages Rates
rose slightly today, though 3.875% best-execution remains intact.  Rather than affect the prevailing rates being quoted, today’s weakness is most likely to be seen in the form of slightly higher borrowing/closing costs for the same rates quoted yesterday (learn more about how we calculate Best-Execution in THIS POST).  The increases run counter to today’s market movements as well.  

Treasury yields are lower again today, and MBS (the “mortgage-backed-securities” that most directly govern interest rates) are slightly improved as well.  One reason that loan pricing hasn’t adjusted to match that fact is that MBS weakened late in the trading session yesterday.  Not all lenders priced that in by issuing adjusted rate sheets, instead reflecting the changes in this morning’s rates.  The MBS market was indeed weaker this morning, so if we’re comparing the time of day that most lenders put out their first rate sheets, today was indeed worse than yesterday.  Beyond that objective explanation, we also have to consider the fact that continued rate improvements from all-time lows are going to continue to be slow and hard-fought.  Lenders have little incentive to offer lower rates if current offerings are generating more-than-sufficient demand.  (read more on this topic in this previous post)

Finally, and although it’s not the only other potential factor, this Friday’s Employment Situation Report (aka “jobs report,” or “NFP”) represents a high-risk situation, ESPECIALLY with mortgage rates at or near all-time lows.  NFP, which stands for the the reports chief component “Non-Farm-Payrolls” is generally regarded as the single most important piece of economic data each month.  Even against the current backdrop of European headlines exerting more and more influence on domestic markets, it’s immensely important.  Based on where markets sit right now, we think that rates are somewhat vulnerable if the report is better-than expected.  In other words, there’s a certain natural level of “push-back” at current rate levels anyway, and a bullish jobs report would probably accelerate that. 

This, of course, is contingent on the report coming in with better-than-expected results.  If the opposite happens, rates could still improve.  It’s just that those improvements would likely be slower and smaller than the losses would be in the opposite scenario.  It’s also very much contingent on rates not moving much between now and Thursday afternoon, which may or may not be the case.

Today’s BEST-EXECUTION Rates

  • 30YR FIXED –  3.875% mostly, with a few lenders on either side of this
  • FHA/VA -3.75%
  • 15 YEAR FIXED –  3.25%, some lenders venturing lower, some completely stuck at 3.25%
  • 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
  • There are technical reasons for that as well as fundamental reasons
  • Lenders tend to get busier when rates are in this “high 3’s” level
    and can throttle their inbound volume by raising rates or costs.
  • While we don’t necessarily think rates are destined to go higher,
    given the above facts, there seems to be more risk than reward regarding
    floating
  • But that will always be the case when rates
    operating near historic lows
  • (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).

…(read more)

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HUD AWARDS $20 MILLION IN TECHNICAL ASSISTANCE TO HELP LOCAL COMMUNITIES STABILIZE NEIGHBORHOODS HARD-HIT BY FORECLOSURE

WASHINGTON – The U.S. Department of Housing and Urban Development today awarded $20 million in technical assistance funding to 12 organizations that will, in turn, help local communities across this country stabilize neighborhoods hard-hit by foreclosure through HUD’s Neighborhood Stabilization Program (NSP).

Mortgage Rates Hit New All-Time Lows!

It’s happened before and it happened again today: Mortgages Rates
hit new all time lows today.  Please note, that the actual interest rate you would have been quoted last week and this week may not have changed, but based on raw data from more than 20 leading lenders as well as feedback from the MBS Live community, the average Best-Execution rate, before rounding to the nearest eighth, hit its lowest level on record, 3.81%.  Although 3.81% is closer to 3.75% than 3.875%, we won’t declare 3.75% to be the Best-Execution champ until the average from our lender survey falls to 3.75 or lower, and we’re not there yet.  (if the last paragraph is confusing, we went into some more detail on these methodologies in THIS POST).

 

Last week, we noted a high degree of stratification in rates as lenders responded to the bond market rally at different
paces.  This continues to be the case today, but perhaps to a slightly smaller extent.  When we say that rate offerings are more stratified, we’re
talking about various lenders offering increasingly different rates to
the same type of borrowers.  Among some lenders in our survey,
best-execution rates are still at 4.0%, while the bulk have moved down
to 3.875% and 3.75%.  The important point here is to not believe everything you read about mortgage rates these days, unless the source examines multiple lenders and offers the caveat that they can only report averages while individual experiences may vary. 

For instance, several lenders are priced WORSE today than Friday.  It’s far more important to be working with someone you trust in a process that is more likely to hit its deadlines than to go overboard in pursuing the lowest possible quotes.  In the current market, overfocus on lowest possible rates can lead to delays which can result in a higher rate than the one from which you were originally trying to avoid!

Today’s BEST-EXECUTION Rates

  • 30YR FIXED –  3.875% mostly, with a few lenders at 3.75%.  Less 4.0’s today
  • FHA/VA -3.75%
  • 15 YEAR FIXED –  3.25%, some lenders venturing lower, some completely stuck at 3.25%
  • 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
  • There are technical reasons for that as well as fundamental reasons
  • Lenders tend to get busier when rates are in this “high 3’s” level
    and can throttle their inbound volume by raising rates or costs.
  • While we don’t necessarily think rates are destined to go higher,
    given the above facts, there seems to be more risk than reward regarding
    floating
  • But that will always be the case when rates
    operating near historic lows
  • (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).

…(read more)

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Why a New Refinance Program Faces Long Odds

Reuters
Rep. Scott Garrett (R., N.J.) opposes using a levy on large banks to offset the costs of proposed refinancing program.

President Barack Obama last week outlined a forthcoming plan to allow more homeowners who are current on their mortgages to refinance at today’s low rates. A levy on large banks would be used to offset the costs of the program.

But any such scheme that relies on a bank tax “would be dead on arrival,” said Rep. Scott Garrett (R., N.J.), chairman of the subcommittee on Capital Markets and Government-Sponsored Enterprises, in an interview last week. “No one is going to suggest that the way to help the mortgage market is to propose a tax indirectly on the system,” he said.

While the White House hasn’t spelled out any details for the program, including the mechanism for mass refinancing or the costs of such an initiative, the administration’s plan is expected to call on Congress to relax limits on allowing borrowers to refinance through the Federal Housing Administration, according to people familiar with the matter.

The FHA already faces a dire financial condition. It doesn’t make loans directly but instead insures lenders against losses on loans that meet certain standards. It charges insurance premiums to offset the cost of defaults. But its loan-guarantee business has swelled dramatically as the private market imploded over the past four years, and mounting defaults are expected to burn big holes in the agency’s reserves.

Using the FHA to refinance more borrowers “would be imprudent considering the way the balance sheet looks right now,” said Mr. Garrett. “It’s not a viable idea.”

Mr. Garrett said that while using a bank tax to offset potential losses to the FHA was a nonstarter, he said he didn’t oppose mass refinancing in principle. “If magically there were some additional funds to pay for the program that don’t have a negative impact on the economy, sure, but I’m not sure what they are,” he said.

The upshot: the refinance program is likely to reignite a long running political debate over how far the government should go to assist homeowners during a housing crisis that is entering its sixth year. But unless there’s a bipartisan appetite to allow unspent funds from, say, the Troubled Asset Relief Program to fund such refinance efforts, homeowners shouldn’t hold their breath on this latest call to action.

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HUD SECRETARY DONOVAN ANNOUNCES NEW REGULATIONS TO ENSURE EQUAL ACCESS TO HOUSING FOR ALL AMERICANS REGARDLESS OF SEXUAL ORIENTATION OR GENDER IDENTITY

WASHINGTON – U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan announced today new regulations intended to ensure that HUD’s core housing programs are open to all eligible persons, regardless of sexual orientation or gender identity. Donovan previewed the announcement at the 24th National Conference on Lesbian, Gay, Bisexual and Transgender (LGBT) Equality – Creating Change.