"Go on, take the money and run"...Steve Miller.
This morning, Bond prices ran up and touched a ceiling of resistance at the 25-day Moving Average. But then Traders quickly sold Bonds, took some money by grabbing the profits gained and ran to the sidelines.
We literally saw Bond prices drop 38bp in a 15 minute time span. But this is becoming
a very common occurrence, as huge intra-day price swings and rapid directional changes
are now the norm.
CLICK HERE FOR UP TO DATE MORTGAGE MARKET INFORMATION
Wednesday, April 23, 2008
Interesting article...to expalian the Jumbo Rate Mess
Jumbo mortgages caught up in subprime fallout
Apr 21, 2008 - McClatchy Tribune Business News Author(s): By Brendan M. Case
DALLAS _ For months, mortgage lenders have been backing away from borrowers with spotty credit, all but closing down the so-called subprime mortgage market.
More surprisingly, they've also been increasingly loath to lend to high-end borrowers who might want to finance a high-cost home. That means doctors, lawyers, business owners and corporate execs looking for jumbo mortgages _ those more than $417,000 _ are apt to pay significantly higher interest rates than people with similar credit scores in line for smaller loans. "When the subprime mess came to full fruition, jumbo loans got thrown in with all the subprime loans," said Tom Parker, president of Home Team Mortgage, the in-house mortgage company of Ebby Halliday Realtors in Dallas. "The liquidity not only for subpr me loans dried up, but also for jumbo loans." That's reflected in the divergence of two key interest rates over the last 12 months.
A year ago, a 30-year fixed-rate jumbo came with an average rate of about 7 percent in Dallas, according to Bankrate.com. That was only slightly higher than the 6.75 percent someone might pay on a smaller mortgage with otherwise comparable terms, known in the industry as "conforming" loans. Since then, conforming loans have gotten cheaper, with average interest rates at 5.87 percent last week. But jumbos have become pricier, with interest rates ranging above 7.5 percent in recent weeks before dropping to 7.19 percent last week. The difference adds up, and many say higher jumbo costs are contributing to a growing slump in some high-end home markets that are seeing declines in sales and prices.
If jumbo loans had drifted down to 6 percent, a person taking out a $500,000 fixed-rate mortgage for 30 years would pay just under $3,000 a month in principal and interest, or nearly $1.08 million over the life of the loan. At 7.5 percent, the same borrower would shell out almost $500 more each month _ and an extra $180,000 over the life of the loan. That math made Clayton Roberts think twice about taking out a 30-year fixed-rate loan when refinancing his home recently, even though that was the only kind of mortgage he had used in 15 years of home ownership. Roberts, 48, a Dallas anesthesiologist, wanted to combine two home loans to cut his monthly payment.
He had taken out a loan last year to build a pool and pay for a landscaping project. But with the high interest rates on fixed-rate jumbos, "it just doe n't make sense," he said. Instead, the doctor ventured into unfamiliar territory, opting for a jumbo loan on which he pays only interest for five years, at a rate of about 6 percent. After that, he will have to pay off the outstanding principal and interest over 25 years, at an nterest rate that will be determined later. Roberts knows such adjustable-rate mortgages have gotten many borrowers in trouble. But by reducing his monthly payments during the next five years, he thinks he can apply the savings to reduce the loan's principal by a greater amount.
"I'm going for the ARM to pay down the principal balance," he explained. Roberts is not the only one following that strategy, despite the risk that interest rates could rise, said Gary Akright, president of Dominion Mortgage Corp. in Dallas. "One way you can do it is to take an interest-only feature," he said. "Are you subject to rate volatility? Absolutely." Prime jumbo mortgages are actually less risky than conforming mortgages of the same quality. In January, about 1.3 percent of prime jumbo mortgages were 60 days or more past due, compared with 2.2 percent of prime conforming mortgages, according to First American CoreLogic Inc.'s LoanPerformance, which tracks mortgage data.
But jumbo delinquencies are rising rapidly. In January 2007, less than 0.6 percent of prime jumbo loans were delinquent by 60 days or more. That means the percentage of troubled jumbo loans has more than doubled in 12 months. Moreover, lenders feel safer making the smaller conforming loans because they can sell them to government-sponsored entities such as the Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan Mortgage Corp., Freddie Mac. Congress is temporarily allowing government-sponsored entities to buy mortgages of up to $729,750 in pricey markets such as Los Angeles and New York (and even larger loans in a few other markets).
But many investors now shy away from mortgage-backed securities, given the recent credit problems. About $19 billion in private-label securities backed by jumbo mortgages was issued between October and December last year, according to government data. That was less than half the amount issued between July and September. "There's no appetite on Wall Street to buy those notes anymore," said Mike Anderson, CEO of Reliance Mortgage Co. in Dallas. "I don't care what the quality is." ___ (c) 2008, The Dallas Morning News. Visit The Dallas Morning News
Apr 21, 2008 - McClatchy Tribune Business News Author(s): By Brendan M. Case
DALLAS _ For months, mortgage lenders have been backing away from borrowers with spotty credit, all but closing down the so-called subprime mortgage market.
More surprisingly, they've also been increasingly loath to lend to high-end borrowers who might want to finance a high-cost home. That means doctors, lawyers, business owners and corporate execs looking for jumbo mortgages _ those more than $417,000 _ are apt to pay significantly higher interest rates than people with similar credit scores in line for smaller loans. "When the subprime mess came to full fruition, jumbo loans got thrown in with all the subprime loans," said Tom Parker, president of Home Team Mortgage, the in-house mortgage company of Ebby Halliday Realtors in Dallas. "The liquidity not only for subpr me loans dried up, but also for jumbo loans." That's reflected in the divergence of two key interest rates over the last 12 months.
A year ago, a 30-year fixed-rate jumbo came with an average rate of about 7 percent in Dallas, according to Bankrate.com. That was only slightly higher than the 6.75 percent someone might pay on a smaller mortgage with otherwise comparable terms, known in the industry as "conforming" loans. Since then, conforming loans have gotten cheaper, with average interest rates at 5.87 percent last week. But jumbos have become pricier, with interest rates ranging above 7.5 percent in recent weeks before dropping to 7.19 percent last week. The difference adds up, and many say higher jumbo costs are contributing to a growing slump in some high-end home markets that are seeing declines in sales and prices.
If jumbo loans had drifted down to 6 percent, a person taking out a $500,000 fixed-rate mortgage for 30 years would pay just under $3,000 a month in principal and interest, or nearly $1.08 million over the life of the loan. At 7.5 percent, the same borrower would shell out almost $500 more each month _ and an extra $180,000 over the life of the loan. That math made Clayton Roberts think twice about taking out a 30-year fixed-rate loan when refinancing his home recently, even though that was the only kind of mortgage he had used in 15 years of home ownership. Roberts, 48, a Dallas anesthesiologist, wanted to combine two home loans to cut his monthly payment.
He had taken out a loan last year to build a pool and pay for a landscaping project. But with the high interest rates on fixed-rate jumbos, "it just doe n't make sense," he said. Instead, the doctor ventured into unfamiliar territory, opting for a jumbo loan on which he pays only interest for five years, at a rate of about 6 percent. After that, he will have to pay off the outstanding principal and interest over 25 years, at an nterest rate that will be determined later. Roberts knows such adjustable-rate mortgages have gotten many borrowers in trouble. But by reducing his monthly payments during the next five years, he thinks he can apply the savings to reduce the loan's principal by a greater amount.
"I'm going for the ARM to pay down the principal balance," he explained. Roberts is not the only one following that strategy, despite the risk that interest rates could rise, said Gary Akright, president of Dominion Mortgage Corp. in Dallas. "One way you can do it is to take an interest-only feature," he said. "Are you subject to rate volatility? Absolutely." Prime jumbo mortgages are actually less risky than conforming mortgages of the same quality. In January, about 1.3 percent of prime jumbo mortgages were 60 days or more past due, compared with 2.2 percent of prime conforming mortgages, according to First American CoreLogic Inc.'s LoanPerformance, which tracks mortgage data.
But jumbo delinquencies are rising rapidly. In January 2007, less than 0.6 percent of prime jumbo loans were delinquent by 60 days or more. That means the percentage of troubled jumbo loans has more than doubled in 12 months. Moreover, lenders feel safer making the smaller conforming loans because they can sell them to government-sponsored entities such as the Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan Mortgage Corp., Freddie Mac. Congress is temporarily allowing government-sponsored entities to buy mortgages of up to $729,750 in pricey markets such as Los Angeles and New York (and even larger loans in a few other markets).
But many investors now shy away from mortgage-backed securities, given the recent credit problems. About $19 billion in private-label securities backed by jumbo mortgages was issued between October and December last year, according to government data. That was less than half the amount issued between July and September. "There's no appetite on Wall Street to buy those notes anymore," said Mike Anderson, CEO of Reliance Mortgage Co. in Dallas. "I don't care what the quality is." ___ (c) 2008, The Dallas Morning News. Visit The Dallas Morning News
Monday, April 21, 2008
Rates up last week...
"THERE IS NOTHING WRONG WITH CHANGE, AS LONG AS IT IS IN THE RIGHT DIRECTION." ~ Winston Churchill.
And there were some big changes indeed for Bonds and home loan rates last week - but not necessarily all in the "right direction". For most of the week, Bond prices were pummeled lower, causing home loan rates to rise - and even after a Friday afternoon rally, home loan rates worsened by about .25% for the week overall.
And there were some big changes indeed for Bonds and home loan rates last week - but not necessarily all in the "right direction". For most of the week, Bond prices were pummeled lower, causing home loan rates to rise - and even after a Friday afternoon rally, home loan rates worsened by about .25% for the week overall.
Monday, April 7, 2008
Mortgage Rates Stay Unchanged Last Week...
"I KNEW THE RECORD WOULD STAND UNTIL IT WAS BROKEN." ~ Yogi Berra
A record was broken on the job front last Friday as the Labor Department reported a much worse than expected loss of 80,000 jobs in March - the greatest jobs loss reported in five years. In addition, revisions to both January and February's Jobs Report delivered an additional loss of 67,000 jobs - that's on top of the previously reported loss of 85,000 jobs for that two-month period.
And...the story might be even a bit gloomier than it already appears. The Labor Department uses a lot of averaging to help it come up with its numbers more quickly, but this practice can skew the current picture significantly. Think of it this way - and because it's now baseball season, here's a Baseball analogy - let's say that mid-way through the season, a red-hot hitter with a batting average of 340 declines into a bad slump for several weeks. While he now can't even hit a basketball thrown underhand to him, his average - while lower to 300 - is still very strong due to his previous hot performance. So someone looking at just the statistics may think that this batter is still absolutely terrific, but he is really someone the fans are booing as he approaches the plate. This is not very different from current numbers being reported by the Labor Department - previous averaging is likely causing an understating of the ACTUAL number of job losses...which somewhat masks how bad the job market really is.
A record was broken on the job front last Friday as the Labor Department reported a much worse than expected loss of 80,000 jobs in March - the greatest jobs loss reported in five years. In addition, revisions to both January and February's Jobs Report delivered an additional loss of 67,000 jobs - that's on top of the previously reported loss of 85,000 jobs for that two-month period.
And...the story might be even a bit gloomier than it already appears. The Labor Department uses a lot of averaging to help it come up with its numbers more quickly, but this practice can skew the current picture significantly. Think of it this way - and because it's now baseball season, here's a Baseball analogy - let's say that mid-way through the season, a red-hot hitter with a batting average of 340 declines into a bad slump for several weeks. While he now can't even hit a basketball thrown underhand to him, his average - while lower to 300 - is still very strong due to his previous hot performance. So someone looking at just the statistics may think that this batter is still absolutely terrific, but he is really someone the fans are booing as he approaches the plate. This is not very different from current numbers being reported by the Labor Department - previous averaging is likely causing an understating of the ACTUAL number of job losses...which somewhat masks how bad the job market really is.
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