This weeks Fed meetings and announcements, Jobless Claims reports, etc. had a minimal effect on interest rates.  If anything, rates are cheaper than they were at the beginning of the week.  Again, we are back to lowest levels we have seen, and the resistance towards lower rates is as strong as ever.  We are encouraging all of our clients to lock in now because waiting for better rates could mean a long wait . . .

April 17th, 2012 – The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to develop enhanced and aligned strategies for facilitating short sales, deeds-in-lieu and deeds-for-lease in order to help more homeowners avoid foreclosure. The effort will come in stages with the first taking place this June. The new, aligned timelines include the requirement that mortgage servicers review and respond to requests for short sales within 30 calendar days from receipt of a short sale offer.

“FHFA and the Enterprises are committed to enhancing the short sales and deeds-in-lieu process as additional tools to prevent foreclosure, keep homes occupied and help maintain stable communities,” said FHFA Acting Director Edward J. DeMarco. “These timeline and borrower communication announcements set minimum standards and provide clear expectations regarding these important foreclosure alternatives.”

With the alignment, servicers will be required to do the following:

• review and respond to requests for short sales within 30 calendar days from receipt of a short sale offer and a complete borrower response package;
• provide weekly status updates to the borrower if the short sale offer is still under review after 30 calendar days;
• make and communicate final decisions to the borrower within 60 calendar days of receipt of the offer and complete borrower response package

By the end of 2012, Fannie Mae and Freddie Mac will announce additional enhancements addressing borrower eligibility and evaluation, documentation simplification, property valuation, fraud mitigation, payments to subordinate lien holders, and mortgage insurance.

Source: http://www.fhfa.gov/webfiles/23887/Short%20Sales%20release%20041712.pdf

When we refer to interest rate movement, we are usually referring to the COSTS as opposed to the rates themselves. While there are more than 2 components that determine how interest rates change each day, the two that allow us to most objectively track the changes are RATE and COST. The RATE component refers to the actual interest rate that would appear on a borrower’s Note. The COST component refers to what the borrower would have to pay in order to secure that rate. Rate Trend – LOWER means a rates cost less. Rate Trend – HIGHER means rates will cost you more.

30 yr fixed 3.875% is at 0 points, 3.999% is at 0 points and no fees for conventional, conforming loans (check loan amount, credit score, other parameters for pricing adjustments).  Click here to visit our rate sheet page.

Mortgage rates are back to their lowest levels and we could see further improvement over the next few weeks. Mortgage Bonds closely follow US Treasuries, so we watch both closely when trying to predict interest rate moves. The 10 yr Treasury yield has been as high as 2.11 recently, 2.00 today, so mortgage rates are improving. Here’s an interesting clip from MarketWatch.com today:

“I still firmly believe that we’ll retest the range lows in 10-year yields near 1.80% in the coming weeks,” said Bill O’Donnell, head of Treasury strategy at RBS Securities. “The euro-zone debt crisis is in the early stages of returning to full song, as we witnessed last fall.” The European central Bank will wait until “another full-blown crisis,” before stepping in, according to RBS. “We expect such conditions to develop over the coming weeks,” amid more European debt auctions, data and elections in France and Greece,” O’Donnell said.

Mortgages Rates for purchase loans and refinances moved lower today following a weaker-than-expected Jobs report. Combined with yesterday’s gains, we are back to the best levels of the month.

From Mortgage News Daily:

The 800-lb gorilla in the room finally had its say today… The all-important Employment Situation Report showed a MUCH-weaker-than expected labor market with only 120k new jobs created versus expectations just over 200k. That’s an absolutely huge miss, especially considering the other various employment metrics in late March seemingly indicating improvement over February.

Generally speaking, news that’s negative for the economy is good for mortgage rates. If job growth is strong, it hearkens further economic improvements, and a stronger economy can support higher interest rates. But reports like today’s cast some doubt as to the pace of the recovery that some would suggest has been overstated due to the exceptionally warm winter.

When that fear and doubt creep back into the market–fear that the economy isn’t really growing as fast as thought–investors may seek the stability and safety of Fixed-Income investments such as Treasuries and MBS, which are the “Mortgage-Backed-Securities” that most directly influence lenders’ rate sheet offerings.

From last Friday: “Betting on lower rates is to hope that the data turns out to be economically worse-than-expected or that a news headline rattles market confidence and drives better demand for fixed income investments like MBS. Ultimately, Friday’s Jobs Report is the “biggie,” and will serve to either accelerate or undo some of the progress or deterioration created in the first four days of the week.” Long story short, if you rolled the dice through today’s Jobs report, you won.

There’s some house-cleaning to be done in the mortgage world early next week as investors settle and deliver the current batch of MBS and move on to filling the bucks for the next round. That process can cause unexpected rate sheet behavior in either direction. There are also several important Treasury auctions. These will help to take the market’s temperature in a way, after some major fluctuations in interest rates over the past 3 weeks.

That process will be aided by the fact that many market participants who were out of the office for today’s Good Friday holiday will return and add to next week’s trading volume. Today’s was very light for a Jobs Report day, and officially ended early due to the holiday. That’s either scary or promising depending on how they trade when they return. Even so, today puts bond markets in a much better position to fight for lower or at least more stable interest rate offerings.

Rates are up today. From Mortgage News Daily – “MBS have sold off mightily in the wake of today’s FOMC minutes. The level of interest in further quantitative easing appears to be waning among FOMC members. No QE3 makes bond markets unhappy.”

So far today, rates have gotten about .625 points more expensive. For example, for a rate of 3.999%, yesterday we could have gotten this for 0 point costs with an additional .625 point fee credit. Right now, it would be at 0 point costs, but we lost the .625 fee credit. On a $400,000 loan amount, that translates to $2,500!!

Interest rates remain “range bound” – hovering close to their recent lows. Costs are slightly higher than the low point we reached in January/February. 30 year fixed remains at 3.999% with 0 points. Recent range for 0 point offering has been 3.875% to 4.125%. Additional cost to get to 3.875% is substantial – even worse for 3.75% – making “buydowns” questionable for anyone unsure of how long they will have their loan.

New Mortgage Insurance Premiums kicked in today for FHA Loans. 1.75% UFMIP (up from 1%). Annual MI up as well, but just 10 bps (.10%).

9am – We are recapturing yesterday’s losses in the bond market. News to follow.

1pm – It was a volatile week for mortgage rates, reacting to mixed economic data and unexpected comments from Fed Chief Bernanke. The various influences roughly offset each other, though, and mortgage rates ended the week essentially unchanged. Testifying before Congress on Wednesday, Fed Chief Bernanke caused a swift move higher in mortgage rates. His comments lowered investor expectations for a third round of Treasury bond and MBS purchases. The possibility for additional demand from the Fed has lifted MBS markets over recent months, and those gains were partially reversed after Bernanke’s speech. As the economic data has improved in recent months, the need for additional Fed easing has seemed to decrease, but this week’s testimony was seen by many investors as one of the first signs that Fed officials share this view.

This week’s housing data was once again positive, as January Pending Home Sales rose 2% from December. They are at the highest level since April 2010, when the deadline to take advantage of home buyer tax credits spurred sales. Since Pending Home Sales are a forward-looking measure, this data suggests that home sales may improve in coming months.

Week Ahead
The biggest economic report next week will be the important Employment data on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Before the employment data, ISM Services and Factory Orders will be released on Monday. Productivity will come out on Wednesday. The Trade Balance is also scheduled for Friday.

Rates are slightly cheaper once again this morning. Updates to follow.

3pm – From Mortgage News Daily:

Mortgages Rates finished out last week in positive fashion, logging three straight days of minor improvements after beginning the week poorly. This week begins on a much calmer note with rates mostly steady compared to Friday and very slightly improved in some cases. The improvements haven’t been enough to change the Best-Execution landscape much, if at all. Rather, the gains are more readily seen in the form of slightly lower closing costs for the same rates that prevailed on Friday.

In terms of market factors driving interest rates today, things were extremely quiet. The rest of the week will be fairly busy in terms of economic data and events, so today feels like sort of a warm-up for the busier days ahead. US Treasuries (a broad indicator of the overall interest rate environment) and MBS (the mortgage-backed-securities that most directly influence lenders’ rate sheets) both held steady ranges throughout the day. The central 3 days of the week will be the busiest in terms of events on the calendar.

We’d probably feel a bit more defensive if underlying MBS prices don’t improve much tomorrow as they’ve been on a fence between the better levels of mid-to-late January and recently lower levels seen through most of February. The fact that rate sheets haven’t made even more of a push into 3.875% Best-Execution territory goes hand in hand with the indecisive levels of underlying MBS. Fortunately, tomorrow’s session should be more informative than today’s in assessing how this will play out.

Our rate sheets improved slightly overnight, unwinding a bit from yesterday’s run up. Today’s news out of Europe shows there are lingering doubts about the Greek bailout so rates are improving, but so far the changes are minimal.

Update 1:30pm – Continued improvement. Yesterday’s losses have been regained and our rates improved twice today. On average, rates are about .375 points cheaper than yesterday (for example, if 4.0% cost .375 points yesterday, today it cost 0 points).

From Mortgage News Daily:

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
- 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

Mortgage rates worsened today (meaning the cost for a given rate is a bit higher). “Good” news regarding the Greek bailout is driving bond markets in the wrong direction for mortgage rates. Effects have been minimal – so far.

2pm update – Rates are trending higher over the past few weeks. We are still at 3.999% with 0 points on the 30 yr fixed conventional/conforming program. If recent history repeats itself, this mini run up in rates will settle down and we will return to cheaper pricing. Remember, bad news here or abroad usually results in falling rates, and with the economic problems the world is still facing (not to mention Iran/Isreal/US tensions, rising oil/gas prices), it’s not unrealistic to think that rates should remain at these levels for the foreseeable future.