Thursday 3/5…Investors Moving Down in Coupon

We are having a very nice start to the day.  Mortgage backed securities are benefiting from a flight to safety,  the stock market opened down over a 100 points and treasuries are in rally mode which is helping mbs move higher in price which reduces mortgage rates.  So far, mbs are up 8 ticks from close yesterday which will equate to .25 in discount better meaning if a rate cost you a .25 yesterday it will cost nothing today.  I suspect that lenders rate sheets will still have par 30 year conventional rates anywhere from 4.875% to 5.125%.

We did get a few pieces of economic data this morning.  First we got jobless claims, economists where expecting 650,000 people to have filed for unemployment last week; however the number came in slightly better at 639,000.  The continuing claims number which measures how many people continue to file for benefits decreased slightly to 5.106 million which historically is still very high.  Since this figure did not vary much from the consensus there was very little reaction.  Next, we got productivity which measures the efficiency of our labor force.  If employee’s efficiency is increasing, than companies do not need to hire more people to produce more product which keeps wage based inflation in check.  Economists where expecting a 1.5% increase; however the number came in lower at -0.4%.  This is a negative for mbs but with treasuries rallying, mbs did not move on this data.  We are also getting factory orders, which give investors insight into whether businesses see future growth.  MBS prefer gradual slow growth which is less likely to produce inflation.   Economists are expecting this report to show factory orders have declined -1.5% from the prior month.  The actual number came in at a decline of -1.9%, since this was a little worse than expected it would be mbs positive but no reaction after the release. 

Yesterday we did get a release of more details of the government’s program to help people refinance that may owe more on the home than what it will appraise.  Currently, if you owe more than the value of the home, you really have no options for refinancing unless you are behind on your payments or about to go into foreclosure.  Up to this point, the only way to benefit from any government program was you had to be behind on the mortgage so many responsible home owners that have never missed a payment but couldn’t refinance to the low rates we have today due to property value now have an option.  If you have been turned down on a refinance due to appraised value, contact your loan officer as you may have an option to refinance.  If you care to read the guidelines of this new program <<CLICK HERE>>.  One very positive item in these new guidelines is a reduction in the LLPA adjustments; you can go to page 16 to see the new price adjustments or look below.  We will be providing further analysis after we have had adequate time to review.  On first glance though, it is looking very positive and hopefully this will get investors to move down in coupon which will help lower mortgage rates.

MBS are still up on the day and I am feeling very optimistic that we should hold these gains or maybe improve more throughout the day.  If you do not have access to live mbs pricing, keep your eye on the stock market and treasuries.  If either of those turn, it could apply pressure on mbs to move lower in price which results in reprices for the worse.  Currently the Dow is down 125 points to 6750 and the 10 yr treasury is at 2.88 after being above 3 yesterday.  Early reports from fellow mortgage professionals are showing better pricing today from lenders.