Rates Remain Range Bound into Quarter End

Mortgage rates were were unchanged for the most part yesterday as prices of mortgage-backed securities held to their recent range.  Following Monday’s light volume trading session which pushed MBS prices to levels not seen in months, trading volume picked up yesterday and MBS were able to hold onto the gains.   Today is the final day of the third quarter, so we will be more optimistic if the topside breakout holds when the fourth quarter begins tomorrow.

The Mortgage Bankers’ Association released their weekly applications index this morning. This data tracks the weekly change in the volume of mortgage applications at major lenders.  An increasing trend, especially in the purchases index, would be positive for the economy. Despite summer low  mortgage rates, the index fell sharply last week.   Purchase activity dipped 6.2% while the refinance activity fell 0.8%.   The decline the purchase index points to a slowing in home sales, which have recently been showing signs of improvement. For more on this data, READ MND STORY.

Does anyone think that activity in the mortgage and housing market has already peaked this year?

Next we received a read on the jobs sector from the payroll company ADP.  This data differs from the official government report we get on Friday. The ADP numbers measure private company payrolls and do not take into account government employment.   ADP estimates that our economy shed a worse than expected 254,000 jobs last month.   The official Employment Situation report is due out on Friday and is expected to show a loss of only 170,000 jobs. READ MND STORY

Final Q2 GDP was also released today. READ THE MND STORY

The final report of the day was a read on the strength of business conditions in the Chicagoland area...the Chicago PMI. Readings above 50 indicate expanding or improving conditions while readings below 50 indicate contraction.   Recent reports have shown business conditions improving with last month’s report coming in at a breakeven 50 which was the highest reading since the middle of 2008.  Economists surveyed are expecting continued improvement with a 52.0 reading for September.  The report indicates that business conditions dipped back below the breakeven level to 46.1.  Following the release of this much worse than expected economic data, the stock market moved lower while MBS prices moved higher.

Reports from fellow mortgage professionals are indicating that the par 30 year conventional fixed rate continues to hold in the 4.75% to 5.00% range for the best qualified consumers.  If you are looking to secure a 15 year fixed rate, you should expect a par rate in the 4.25% to 4.50% range.  As always, to secure a par interest rate you must have a FICO credit score of 740 or higher(620 for 15yr), a loan to value at 80% or less and pay all closing costs including one point loan origination/discount/broker fee. 

We continue to see the best rates since early this summer and with the Employment Situation report looming I am continuing to caution clients and readers on floating.  If you have been floating until today, you have picked up some gains. Now is a good time to take what you earned.  

I have been receiving information that underwriting at lenders is getting tougher.  A recent Fannie Mae announcement stated that the maximum debt ratio for loans will be lowered which will make it more difficult for consumers to be approved for a refinance or a purchase loan.  Your debt ratio is your total monthly obligations for items on your credit report divided by your gross pay.  Typically, you would be approved up to a 55% DTI, but the new announcement is lowering that to 45% but will go higher if consumer has strong compensating factors like low loan to value, strong assets, etc….  I would like to hear from fellow mortgage professionals on this topic.  Are you seeing tougher underwriting and more conditions on the approvals?