Mortgage Rates...

[jq26]

Even as the stock market hit new lows, rates were only down slightly. Then when the market slightly rebounded, mortgage rates popped.

30 year fixed: 7/18/08: 6.42%, 7/11/08: 6.09% (Bankrate.com)

Nothing moves up or down in a straight line but more of a sawtooth pattern. But the trajectory of that trendline appears to be moving north. Just my 2 cents.

[firstsource]

In this case your 2@ is probaby more like 2$.

At this time the genius's think that the recession is really over, and they are buying stocks-pulling money out of the bond market, making yields go up.

ALSO

They think that Americans are going to continue to use gas as we have in the past, and that oil prices & therefore gas prices are going to stay up, causing inflation. Another reason to get out of the bond market, and make yields go up.

Everyone that I know is cutting back on their driving, so I think that oil prices will come back down and greatly lower the inflation concerns. I will make a note to read this in a month or so to see how well I can guess what people are going to do.

Charles

[Goose123]

Can you post links in here? I have a couple of good sites for predicting the market.

My forecast:

Rates go down .25 on Tuesday based on increased oil prices and a pull back in the stock market. Largely due to AMEX reporting after hours and hurting all of the plastic companies.

I've been wrong before.

[jq26]

Largely due to AMEX reporting after hours...

Did you see why they missed the street number so badly? They have to set aside another 300+ million for increasing consumer card defaults. Not a good sign at all but not unexpected.

[Goose123]

I guess I was wrong again. My rates remained unchanged today. It was oil that threw me a curve ball. Mortgage rates are being moved by the stock market which is being moved by oil.

Oil up = stock market down = improved mortgage rates

Oil down = stock market up = worse mortgage rates

Have you noticed this trend too? It's too bad we have become so dependant on something we get from the people that hate us. I walk to work 3 days a week. Of course, I am out on my jet skis on the weekend, so I can't be that high and mighty.

Who listens to an animated goose anyway?

[firstsource]

Hi Goose,

Part of the problem is that although you (and I and many others in our industry) use the 10 year bond yield as the rate movement indicator, rates actually reflect what is happening in the Mortgage Backed Security market. I have spent hours trying to find the market for them, but it is rather secret. One investor sends me what happened yesterday in the market, but won't tell me where they get that info.

ANYWAY.

MBS move with the 10 year bond, but also have their own liquidity/market, so you will see, like yesterday, the bond not did much but rates went down a "smidge" (technical term for movements so small that they are not actually reflected in rates as rates are in 1/8th increments, but movements can be in 1/64th or so.

Hope that helps a bit.

Charles

BTW: I was really hoping that you were correct on Tuesdays movement/s as I don't seem to be able to predict much anymore.

[Goose123]

Charles,

I have a good MBS site, but you have to pay for it. That is why I asked about links to other sites. Government sites shouldn't be a problem, but the Admins might not like me posting a link to a revenue based sites.

The 10 year, MBS, Dow, Commodities have all been moving pretty consistently. You can see where rates are going when oil opens. There is no need to pay for a MBS site. Predicting what will happen the next day is something I haven't mastered, but will keep trying.

How are things for you? I have a couple of friends that own broker shops, and they are both close to closing down. All of their wholesale lenders are going away. I got pressure today because my July applications are low. My fundings will be 8 units for $1.7, but that doesn't matter. That's what I get for being honest with people and telling them to wait for rates to drop.

Good luck,

[amortgageman]

Hi Goose,

Part of the problem is that although you (and I and many others in our industry) use the 10 year bond yield as the rate movement indicator, rates actually reflect what is happening in the Mortgage Backed Security market. I have spent hours trying to find the market for them, but it is rather secret. One investor sends me what happened yesterday in the market, but won't tell me where they get that info.

ANYWAY.

MBS move with the 10 year bond, but also have their own liquidity/market, so you will see, like yesterday, the bond not did much but rates went down a "smidge" (technical term for movements so small that they are not actually reflected in rates as rates are in 1/8th increments, but movements can be in 1/64th or so.

Hope that helps a bit.

Charles

BTW: I was really hoping that you were correct on Tuesdays movement/s as I don't seem to be able to predict much anymore.

http://online.wsj.com/mdc/public/page/2_3024-bondmbs.html?mod=mdc_bnd_pglnk

[amortgageman]

I know I'm a little bit late to the party, but, last week Fannie Mae and Freddie Mac pretty well got hammered by the market.

IMHO, Congress announces they are going to start investigating trading in the oil markets, so all the big dollars that were moving the prices artificially higher had to take their money and run (right George Soros {"I believe FNMA is going to fail, and if if the stock rebounds, this will give me the opportunity to short the stock some more."}, and your cohort dumba.. Paulson, who needs to have a little more thought before opening his mouth (because when you open your mouth, investors listen).

Now, they have to plunk their money elsewhere, and since there is no real place to put your money (except eggs , right JQ26), they decided to make some ruffles and try to connect the forclosure and housing crisis to FNMA (stock price drop from around $18.00 to about $5.00 in a matter of three days) and Freddie MAC (with a similar decline).

The truth is, these two companies have the safest portfolios in the industry, and in reality, will not need the bailout as Paulson has alluded to. Even the FNMA website issued a statement saying a bailout is not needed, and everything is fine. This did nothing to deter the bashing the stock received on Wall Street. Anyway, to cut the rant short, let's compare the "10 year treasury to the average mortgage rate for last week.

The ten year treasury rose from 3.90 percent to 3.98 percent, while the average mortgage rate went from 6.02% to 6.42%, during the same period. This happened because of less faith in the FNMA bonds (due to the previous paragraph), and thuslym the "spread" between the ten year treasury was widened because more investors felt that the FNMA bond was "that much less safe" than the 10 year treasury bond.

If nothing else, this proves that the 10 year treasury and mortgage rates do not follow in unison, as so many would believe, although their is an accepted spread (more risk).

[jq26]

You're right, but the 10yr is a large part of the rate. There was a time when there was almost a direct correlation. In these troubled times, spreads are widening concurrently so there is another factor at work. And this is why rates will continue to rise. They have to. Both the 10yr is heading that way and so are spreads.

I'm not so sure about Fannie and Freddie. When they say they have $10 bil in capital, that is not much. They are holding loans in the trillions. If loans losses happen to pick up, they're toast without additional capital injection. Of course, here we go again with bailout nation.

The bigger problem is why they are holding loans at all. That's not their job and never was. They were to package and sell- but they started holding them in boom times to bolster earnings.

But notice this- recently when markets get pounded, treasuries are falling like feathers. When markets make a strong rally, treasuries shoot up like a rocket. I think this is shpowing a trend of higher yields. Unless spreads come in significantly (highly unlikely), there is nowhere to go but up on mortgages.