Talk about giving the mortgage market some direction... Along with the latest Fed rate cuts down to a range of 0% to .25%, they gave the MBS (Mortgage Backed Securities) market quite the lift we have all been waiting for in the form of an announcement that they would purchase large quantities of Mortgage Bonds and would expand their purchasing program in the future.
This language brings confidence back to the MBS market and helps in setting value in MBS currently being traded, which will lead to improved pricing and lower mortgage rates.
This made for a nice rally on Tuesday afternoon in the MBS markets which led to the lowest rates we have ever seen on Wednesday morning. We briefly saw the notorious 4.5% rate on the 30 year fixed conforming, until there was some profit taking and the MBS markets dramatically sold off shooting interest rates up about .25%.
This morning, the MBS opened up relatively flat, then had a downward swing only to finish up the day 16 bps up after the stock market took a beating on bad economic news. (Remember that bad economic data is typically good for the bond market).
With the speculation that the manufacturing sector will continue to contract with the announcement that the automakers have made that they will either be halting production or extending holiday shutdowns to match production with lagging demand will depress the stock market which could help out bonds and ultimately lead to lower mortgage rates.
While we don't ever wish harm on anyone, we are keeping our fingers that interest rates do continue to drop which can lead to "refinance-made stimulus packages" and the increase of real estate purchases.
We will have to see what Friday and the new Holiday week brings...
Thursday, December 18, 2008
Monday, September 8, 2008
Mortgage Stability?
I am sure you have heard what happened with Fannie Mae and Freddie Mac over the weekend…
With so much speculation and uncertainty in the markets these days, a little confidence was injected into the mortage backed security market with the government taking over Fannie Mae and Freddie Mac.
The announcement came as the government felt that both of these institutions were potentially unable to meet their obligations. These agencies must pay off maturing Bonds every month, and they do so by selling new Bonds. But during the last twelve months, investor appetite to purchase new mortgage-backed security Bonds has deteriorated. As such, it has become more difficult for Fannie and Freddie to replenish capital to fund more loans. If both Fannie and Freddie became insolvent, the housing market as well as the mortgage market would come under further pressure.
With the Treasury stepping in to provide a "backstop" for the mortgage giants, investors now have confidence to purchase Mortgage Bonds. And the greater interest has helped lower interest rates today.
At the end of today (Monday 9-8-08), our benchmark FNMA 6.0% bond rocketed higher for a gain of 100 basis points and a close at $102.47, which the highest we've seen since January of 2005.
Following Sunday's news the government will take operational control over Fannie Mae and Freddie Mac. The Federal Housing Finance Agency (FHFA) will be taking over the board of directors and management of the two mortgage giants while the U.S. Treasury is providing up to $100 billion in capital for each company to ensure they will be able to meet their debt obligations. Technically, the government's takeover plan is a form of conservatorship similar to a Chapter 11 bankruptcy that will allow the two companies to reorganize their operations. However, the two companies could be run by the FHFA for an indefinite period of time. This story dominated the financial news and markets today and could continue to do so in the days to come as more intricate details of the plan become known. Some analysts are predicting 30-year conventional mortgage rates could fall by as much as half a point over the next few weeks presenting borrowers a great opportunity to refinance loans at lower rates.
Basically, the government stepped in to create a guaranteed foundation underneath the conforming mortgage industry. By creating a 200 billion dollar open ended line of credit to guarantee all bond holders of Fannie Mae and Freddie Mac loans, this brings an incredible amount of stability to the current markets and for future trading as well. This brought with it substantial improvements to the pricing of conforming home loans.
This could definitely help put a new floor for the housing market for us here on the Central Coast.
Call me with any questions you may have.
With so much speculation and uncertainty in the markets these days, a little confidence was injected into the mortage backed security market with the government taking over Fannie Mae and Freddie Mac.
The announcement came as the government felt that both of these institutions were potentially unable to meet their obligations. These agencies must pay off maturing Bonds every month, and they do so by selling new Bonds. But during the last twelve months, investor appetite to purchase new mortgage-backed security Bonds has deteriorated. As such, it has become more difficult for Fannie and Freddie to replenish capital to fund more loans. If both Fannie and Freddie became insolvent, the housing market as well as the mortgage market would come under further pressure.
With the Treasury stepping in to provide a "backstop" for the mortgage giants, investors now have confidence to purchase Mortgage Bonds. And the greater interest has helped lower interest rates today.
At the end of today (Monday 9-8-08), our benchmark FNMA 6.0% bond rocketed higher for a gain of 100 basis points and a close at $102.47, which the highest we've seen since January of 2005.
Following Sunday's news the government will take operational control over Fannie Mae and Freddie Mac. The Federal Housing Finance Agency (FHFA) will be taking over the board of directors and management of the two mortgage giants while the U.S. Treasury is providing up to $100 billion in capital for each company to ensure they will be able to meet their debt obligations. Technically, the government's takeover plan is a form of conservatorship similar to a Chapter 11 bankruptcy that will allow the two companies to reorganize their operations. However, the two companies could be run by the FHFA for an indefinite period of time. This story dominated the financial news and markets today and could continue to do so in the days to come as more intricate details of the plan become known. Some analysts are predicting 30-year conventional mortgage rates could fall by as much as half a point over the next few weeks presenting borrowers a great opportunity to refinance loans at lower rates.
Basically, the government stepped in to create a guaranteed foundation underneath the conforming mortgage industry. By creating a 200 billion dollar open ended line of credit to guarantee all bond holders of Fannie Mae and Freddie Mac loans, this brings an incredible amount of stability to the current markets and for future trading as well. This brought with it substantial improvements to the pricing of conforming home loans.
This could definitely help put a new floor for the housing market for us here on the Central Coast.
Call me with any questions you may have.
Wednesday, July 9, 2008
That darn pendulum...
While we have slowly seen loan products swing away from us, we have yet to see the pendulum swing back. The products we have available in the market today are much different than what we had even a year ago. Long gone are the 100% financing programs available to anyone that could fog a mirror, now borrowers must actually qualify... What a concept.
While fingers are pointed in all directions, the fact of the matter is that Wall Street developed a thirst for riskier and riskier loan products, while leaving too much control in the hands of the consumer who elected to buy often out of their realm.
This lending practice led us to where we are today... A mountain full of foreclosures, and very limited lending programs. Well, it's not all that limited. I like to think that we are back to the early 2000's where stated income loans were not common place. Were you had to put your OWN money down to purchase a property.
What does confuse me is the market we are in today... We have home values at all time lows, low interest rates, a large home selection and people are still on the fence about buying properties. My question is, "What are you waiting for?". Last time I checked, food, water and shelter were still popular... People are waiting for the market to hit bottom, but you don't know you hit bottom until your on the way back up.
Now is the perfect opportunity for first time homebuyer’s to get into a property and to enjoy Uncle Sam paying part of your mortgage through your interest deduction, or for current homeowner to move on up into more house.
While fingers are pointed in all directions, the fact of the matter is that Wall Street developed a thirst for riskier and riskier loan products, while leaving too much control in the hands of the consumer who elected to buy often out of their realm.
This lending practice led us to where we are today... A mountain full of foreclosures, and very limited lending programs. Well, it's not all that limited. I like to think that we are back to the early 2000's where stated income loans were not common place. Were you had to put your OWN money down to purchase a property.
What does confuse me is the market we are in today... We have home values at all time lows, low interest rates, a large home selection and people are still on the fence about buying properties. My question is, "What are you waiting for?". Last time I checked, food, water and shelter were still popular... People are waiting for the market to hit bottom, but you don't know you hit bottom until your on the way back up.
Now is the perfect opportunity for first time homebuyer’s to get into a property and to enjoy Uncle Sam paying part of your mortgage through your interest deduction, or for current homeowner to move on up into more house.
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