Below is a collection of articles, news, and announcements associated with our industry.

Archive for the ‘In The News’ Category

Special Update: Fed to Reduce Bond Purchases

Friday, December 20th, 2013

Anyone watching mortgage rates couldn’t miss the news this week that the Fed will begin to “taper”, or cut back on their purchases of MBS and Treasury bonds.  All eyes are on the impact this will have on interest rates.  Their plan to purchase $10bb less per month signals the Fed’s growing confidence in the economy.  Important to note though is that this means they will still purchase $75bb per month in MBS and treasuries for the time being, which still amounts to considerable economic stimulus. 

Much less publicized, but more immediately significant for interest rates, were two other announcements.  The FHFA announced a .1% increase in the guaranty fee for mortgages delivered to Fannie Mae and Freddie Mac, effective in the spring, which amounts to an automatic .1% increase in interest rates.  Also, Fannie Mae announced new Loan Level Pricing Adjustments (LLPAs) for loans delivered to them, also beginning in the spring.  LLPAs are based on loan characteristics such as credit score, LTV,  loan purpose, occupancy, number of units, product type, etc.  These adjustments will also increase the cost of borrowing for homeowners.  The net effect is that interest rates will likely rise a bit in the near term, so take advantage of current rates while you can.

Share

In The News: Measurement of GDP is Revised

Tuesday, July 30th, 2013

Gross Domestic Product (GDP) is the broadest measure of economic growth. The major components of GDP include private consumption, gross investment, government spending, imports, and exports. To keep up with the times, the government adjusts its measurements periodically, but the changes usually are minor. This year, however, will see the most signficant reclassification since 1999. Beginning with tomorrow’s second quarter report, GDP will now include spending on research and development, some forms of entertainment, transfer fees related to home sales, and a new treatment of pensions. The changes are estimated to add about $400 billion to the size of the roughly $16 trillion US economy. Prior data will be revised to reflect the changes all the way back to 1929. As a result, the changes are not expected to have much impact on the growth rate of the economy.

Share

Special Update: 2.5% 30 Yr Agency MBS prices now available!

Tuesday, November 20th, 2012

Are any of you looking for 2.5% 30 yr Agency MBS prices?  MBSQuoteline now makes them available as part of its mortgage market information service.    Not only can you see live MBS prices at any time during the day,  you can see the path of price movement throughout the day.  The prices are conveniently available on your desk top, as well as your smartphone.  Go to www.mbsquoteline.com to start a free trial to see how this information and more can be a benefit to you.

Share

Special Update: More on G-Fee Increase

Tuesday, September 25th, 2012

On August 31st, FHFA announced another increase in the guarantee fee (G-fee) charged by Fannie Mae and Freddie Mac on the loans they insure. The amount of the increase is set to average 10 basis points, but the amount of the increase may vary by product and seller. The increase is to be effective on loans sold directly to Fannie or Freddie beginning in November and for any loans to be pooled in a mortgage-backed security (MBS) with a December 1st or later issue date. Longer term locks already reflect this increase. Short term locks may as well, depending who is buying the loan and whether the loan will be pooled in a MBS. If they don’t now, they will very soon. G-fees are paid by the borrower from the interest paid on the loan or are collected upfront as a cost to the borrower. The cost is approximately five times the increase in G-fee. The effect of this increase in G-fee on the borrower has been masked somewhat by recent price increases in the MBS market. Loans locked at prices before the G-fee increase was added will incur heavy extension fees, if required, so timely delivery of well documented, high quality loans is extremely beneficial.

Share

In The News: Greece Receives Bailout 2.23.12

Thursday, February 23rd, 2012

Economic troubles in Europe have helped mortgage rates move lower in recent months.  One reason is that slower global economic growth reduces the risk of inflation, and inflation is negative for mortgage rates.  The second reason is that investors have been concerned that the debt problems in Europe could spread to other countries and hurt the global banking system.  As a result of the uncertainty, investors have shifted some funds to relatively safer assets, including US mortgage-backed securities (MBS).

Greece has experienced the worst of the European debt troubles.  After weeks of negotiations, on Monday European officials finally agreed to provide a $172 billion bailout package to Greece.  This aid will allow Greece to avoid defaulting on debt maturing on March 20, removing some uncertainty from the market.  As it became clearer last week that a deal was close, investors began to reverse the flight to safety trade, selling MBS, and mortgage rates moved a little higher.

Investors will continue to watch the situation in Europe.  It is not at all certain that Greece will fully implement the severe austerity measures required in the deal, and other countries such as Portugal are teetering on the same economic edge as Greece.  With the Greek bailout package done, events in Europe, at least for the short-term, may have less influence on daily US market movements.  Investors likely will focus more on incoming US economic data which has generally been surprising to the upside so far this year.  A stronger economy, although great for employment and the stock market, is potentially inflationary and may not be good for mortgage rates.

Share

In The News: Greek Debt Negotiations 1.24.12

Tuesday, January 24th, 2012

Greece has experienced the worst debt troubles of any European nation, and its debt burden is clearly unsustainable. European officials and bondholders both want to avoid a default, so they have been negotiating a “voluntary” agreement to reduce Greece’s debt burden by 50%. As usual, though, the sticking point for the two sides is price. In the case of bonds, this means the yield on the new bonds. Bondholders want the highest possible yield. A higher yield means higher debt payments, however, and Greece will require financial aid from the IMF and other European Union countries to make the payments. A default would trigger many costs and raise the level of uncertainty for investors, possibly raising yields for other European countries, which gives bondholders some leverage. On the other hand, if the Greek government defaults, there is little reason to give bondholders anything. The lack of progress has caused a flight to safety, which has helped relatively safer investments, including US mortgage-backed securities (MBS). Mortgage rates are largely determined by MBS prices, and a “messy” deal or a default would likely cause US mortgage rates to move lower. If bondholders agree to a deal at a yield which Greece can handle comfortably, then investors may partially reverse the flight to safety trade, leading to higher US mortgage rates. The negotiations have been going on for months, and it’s not clear what will break the impasse. Meanwhile, US financial markets continue to be influenced by the news from Greece.

Share

Special Update: European Summit 10.21.11

Monday, October 24th, 2011

European officials are scheduled to meet this weekend and again next week, and they hope to release a plan for a comprehensive aid package by Wednesday. Officials are divided on what steps to take to help ease debt problems in troubled nations. Given the conflicting goals of the parties involved, the optimal solution is not clear. Whatever the outcome, it will likely have a significant impact on mortgage rates next week. Until the results of the summit are known, MBS prices may be subject to a high level of volatility, as news and speculation comes out. A decisive plan to prevent the spread of debt problems could cause investors to reverse the flight to safety trade, leading to higher mortgage rates. On the other hand, a plan which disappoints investors could produce an increased flight to safer assets, causing mortgage rates to move lower. In any case, be prepared for higher than normal volatility over the next several days.

If you need additional information about this blog post, please visit our website MBSQuoteline.com or call 800-627-1077.

Share

Special Update: New HARP Announcements 10.24.11

Monday, October 24th, 2011

This morning, FHFA announced their enhancements to the HARP refinancing program. Operational details of the plan are to be released on November 15. Only loans that were purchased or guaranteed by Fannie Mae or Freddie Mac on or before May 31, 2009 and have a current LTV over 80% are eligible. In addition, the loan must be current, no late payments in the last six months and no more than one late in the last 12 months. There are no restrictions on who may refinance these loans. Program guidelines include:

*No limit on LTV, if new loan is a fixed rate loan (current LTV must be above 80%)

*Loans previously refinanced under HARP not allowed

*Certain agency fees will be waived if new loan is a shorter term loan

*Appraisals not required where Agency AVM is available

*Certain originator Reps and Warrants will be waived

Borrowers can determine if their loan is owned or guaranteed by Fannie or Freddie at http://www.fanniemae.com/loanlookup/ or http://www.freddiemac.com/corporate/

If you need additional information about this blog post, please visit our website MBSQuoteline.com or call 800-627-1077.   

Share

Understanding the Fed Announcement

Friday, September 23rd, 2011

Since the Fed released its statement yesterday afternoon, MBS markets have staged a very strong rally for several reasons. First, quite simply, the Fed confirmed that there are “significant downside risks” to the US economic outlook. Slower economic growth reduces inflationary pressures, which is favorable for MBS markets. Second, the Fed announced the widely expected Operation Twist program. This program will extend the average maturity of the Fed’s portfolio by purchasing $400 billion of longer-term Treasury securities and selling an equal amount of shorter-term Treasuries. The increased demand for longer-term assets is intended to help push longer-term rates lower. The third major element from the statement helping MBS markets was a surprise to most investors. The Fed will begin to reinvest MBS principal payments (from prepayments and maturing securities) in additional agency MBS. Until now, the Fed has been reinvesting the MBS principal payments in Treasury securities. With roughly $885 billion in MBS holdings in the Fed’s portfolio, these principal payments are expected to create a significant source of additional demand for MBS, and this measure is specifically targeted at keeping mortgage rates at low levels. As usual, the impact of the economic news was priced in very quickly, similar to the reaction to prior Fed announcements about purchasing MBS.

Share

U.S. Considers New Refinance Plan

Thursday, August 25th, 2011

Prices on lower coupon mortgage-backed securities (3.5% and 4.0%) have improved today while prices on higher coupon securities (above 4.0%) have fallen.  The cause appears to be an announcement that the Obama administration is considering a broad refinance program for government guaranteed loans to be refinanced without the normal restrictions, like LTV.  The details of plans being considered are not available.  The goal of the program would be to stimulate the economy, as people would have more discretionary funds.  The downside could come from MBS investors whose investments will pay off much faster than anticipated. On future investments, investors would likely pay lower premiums for higher coupons.  This news should have little impact on most loans currently in your pipeline.

Read the full article from The New York Times:  U.S. May Back Refinance Plan for Mortgages

Share