MBS POST CLOSE: Lessons From Doug Dimsdale...

MBS have rallied a bit into the afternoon, or are rather holding the rally into the afternoon.  But who's interested in MBS prices?  Especially when they can rise and lenders can reprice for the worse.  That's the end of the blog I suppose...  I guess hitting the nail on the head as far as MBS price movements and commenting on the reasons for the disconnect between rate sheets and MBS is not sufficient.  Since the lenders are not willing to tell us what they are going to do with pricing before they do it, we'll hang up the keyboard and go back to our jobs at the Try 'n Save.  It's been fun while it lasted.

I suppose by way of some "packing up the boxes" information, it would be worth mentioning that anyone that clicked through the educational links on the settlement process that we've posted numerous times would see that TODAY and not YESTERDAY is the last day of settlement.  Therefore, this afternoon would be the first opportunity that many institutions would have to have replenished funding lines.  And just like parachuting into vegas with a fresh stack of chips, the smart players will probably not blow their wad on the first call.  What does that mean? Exactly what we said it would: things will improve AFTER the roll, not "set your last possible lock day as the 13th as all your lenders will go "all-in" with an extra point of YSP."  "After the roll" would be the immediately ensuing period.  We will now begin to track lender spreads to MBS prices as it's obvious that nailing MBS direction is not sufficient.  But you have other people that do that for you right? If those spreads don't begin to tighten, notwithstanding that we have provided you with sufficient education to understand why in this post, we'll send out dartboards with our pictures on them.  Until then, don't be surprised to see lenders continue to make decisions here and there due to the factors discussed in that article.

But whatever you do, for the love of the MBS gods, please don't make decisions that involve a significant amount of yours or other peoples' money without understanding the fire with which you play.  Expect a full post on new required reading, "Grand Unified Theory Of Pipeline Management," which will discuss things we've discussed in the past like 1) don't float deals you'll lose if price deteriorates, 2) always lock a portion of your pipeline to hedge against risk, 3) never float a small or single-loan pipeline if your income is dependent on it, and many more exciting topics which appear to need more explanation.  Let me know where we're all going to meet to learn and talk about MBS in the coming weeks.  I'll be sure to pay attention and take notes for you.