Mortgage Insiders

Rates Holding...

noreply@blogger.com (Peter Gladkin) — Tue, 10 Jan 2012 17:07:00 +0000

January has been a strong month for mortgage backed securities, and while we still have a few weeks of trading left in the month, it appears as though the MBS has support at these high levels that it didn't have in the months previous. This is very bullish for interest rates which have fallen to their lowest level yet again.

All this is due to the uncertainty governments and economies face around the world, investors looking for some safe haven have found mortgage backed securities.

It's not all roses and lollypops though, recent changes made in Fannie Mae and Freddie Mac to their guarantee fee have lenders across the board scrambling to raise the premiums they charge when offering rates. This is not something your average market follower will be aware of, and I can assure you lender's will not be advertising this raise in fee. And they don't need to, it's a hidden fee that they pay to the underlying investor... consequently they are passing thiis expense on to the borrower in the form of higher rates to protect their profit margin.

These changes will begin to take affect in the coming days and weeks with the end of January being the witching hour.

Not much you can do about this, maybe write to your Congressman... but honestly this is in response to Fannie Mae and Freddie Mac posting losses quarter after quarter. Then they walk over to Congress with their tail between their legs and ask for more money... we're not talking millions, we're talking billions each quarter, a perpetual event that has been happening over and over again since this mess erupted in 2008.

Something has to be done to make to turn this trend around, so while I am upset at this raise in cost, something has to be done.

I don't want this to scar anyone into inaction, after all rates are as low as they have ever been, and even with this change in how pricing offered to borrowers will be calculated, there are still amazing rates to be had, and if the MBS continues to trade up, this will be inconsequential.

If you've been on the fence now would be an excellent time to secure financing.

Support to Start 2012

noreply@blogger.com (Peter Gladkin) — Wed, 04 Jan 2012 00:55:00 +0000

This morning was a little unnerving, watching the mortgage backed securities market. The stock market had opened strongly and treasuries were not trading well, selling off leading to higher yields and little support to the MBS.

It looked as though a down day was inevitable. Then a rally ensued and the MBS market slowly but surely climbed out of the ditch it had found itself in to stat 2012.

The day ended zero sum, an incredible accomplishment considering it was done in the face of an equities rally, while treasuries sold off.

This is a strong sign of support for the MBS markets and future interest rates. It would seem the low rate environment is here to stay, at least for the time being.

Those that have been sitting on the fence need to look at this rally as a beacon aimed straight at them. While 4.000 is available at no cost to most qualified borrowers, we may see a day or two where 3.875 becomes available. These are the rate sheets worth paying serious attention to.

While I do not think we will see the mortgage backed securities market rally to a new high forcing rates down onto a new lower plateau, I do think the current range has serious support and will offer these low rates for sometime.

Timing your rate lock should be your primary concern, wait for a bullish day and don't hesitate to lock when you see the terms you've been waiting for.

MBS shows resilience as equities rally

noreply@blogger.com (Peter Gladkin) — Mon, 28 Nov 2011 18:40:00 +0000

The closing of last week was an interesting one... as investors sold out of positions preparing for the long weekend. After a good day of food, eyes were on Black Friday and Europe... would retail sales produce a number that suggested a weak or strong economy? And of course with Europe operating as usual, there was always a chance for a headline that would rock our markets.

Today, our first trading day after the long weekend, and the results are in... with everyone focused on how strong sales were over the weekend. 52 billion sold... at first this number is baffling... onw that the market has had a little time to digest it, the question everyone is asking is where's the beef?

Beef of course being profit... with profit margins tighter than they every have been, one has to wonder was this Black Friday not as successful as retails would like everyone to believe? Was the real benefit of Black Friday a turnover in old inventory?

This last question has many worried, and is the explanation behind both stocks and bonds rallying.

Bulls and Bears are having it both ways today, a rare day... which suggests we're still consolidation...

Week of Consolidation in MBS

noreply@blogger.com (Peter Gladkin) — Fri, 18 Nov 2011 16:43:00 +0000

The mortgage backed securities market has been consolidating all week with low volume trading. Cues are still the same, an inverse relationship to the stock market, and tracking and 10 year treasury.

All things considered this week should have been more bullish in the bond markets considering the contagion occurring throughout the European Union. Typically one would have expected us to see a strong rally in our bond market as Europe struggles... alas, we didn't... what's the reason?

Honestly I don't know... one interesting market point is the Italian 5 and 10 year bonds are now inverted, typically a signal to sell equities... and even though we did see a sell off in equities this week, it was relatively contained especially when one looks at the low volume traded.

Consolidations usually lead to breakouts... which i ma expecting. I think we will see a breakout that leads to better pricing, when this happens is more difficult to predict. With us moving into the holiday season I don't think we will see much activity regarding trading this coming week... what we do see will be investors preparing for their long weekends which means probably moving into cash positions across the board. If I'm right we'll see the stock market and bond market finish down in comparison to current trading levels... with some degree of give and take between the two.

The first week of December will be interesting... with three strong weeks of trading before Xmas and the super committee finished with their task one way or another, markets will take their cues from their success of failure, we may even see another downgrade from a rating agency if they completely fail (as if their successfully cutting 1.2 trillion over 10 years - that's 120 billion a year is going to do anything to our out-of-control debt anyways). A success on the other hand I think will lead to an equity rally, which will be short lived due to Euro calamity and the fact that any accomplishment they do make really is like claiming you climbed conquered the local sand bluff. Nothing to write home about unless you are a complete narcissist - wait a minute, they are complete narcissists so we'll hear about for the next week as if it's the only event transpiring.

Not expecting a late rally today, just looking to hold our ground and not fall off... an even sum day would be a strong finish for us, currently down 6 ticks... Here's a graph illustrating the consolidation we currently are experiencing.

Here's to a wonderful weekend.

Slow Start This Monday...

noreply@blogger.com (Peter Gladkin) — Mon, 07 Nov 2011 16:10:00 +0000

We're off to a slow start this Monday, with investors sticking to the sidelines. Greece's PM has gone quietly into the night over the weekend, leaving the current government leaderless for the next couple of months until elections. "Leaderless" does have a negative connotation associated with it, in this situation not having a leader may actually work in Greece's favor. For now the Euro bailout will continue without the referendum vote, which has the Euro Zone feeling good today - well as good as you can feel while sick.

Italy has become the talk of the town, and Italy is by no means a small potato. This could be why investors are wary... Greece, was/is a small country. If it is forced out of the European Union, it would be tragic for the Greek people but the world would survive. Kind of like cutting of an arm to save the patient. The arm isn't going to do so well, but life will go on in the body, albeit a slightly different life.

You could argue Italy is just another appendage, unfortunately despite it being the boot of Europe, Italy is more than a mere appendage... it's the leg of a professional runner that is Europe... in other words, it is not small... it's catastrophic... will Europe survive, most likely, but she's never going to run again.

This is in my mind what has investors moving slowly this Monday morning. It's a lot to digest, and while we like to believe this type of world event would benefit our bond markets, there is a question that I have not yet asked, namely: would an event of this magnitude force European countries to sell US bonds and the MBS to raise capital?

Their first play will be to try and inflate their way out of this mess by creating more Euros out of thin air... probably digitized, but they may crank up the old printing presses as well. And what does this type of move do to inflation... bullish for the dollar yes, but for how long -and how many new dollars would we create to give to the IMF which would play a large role in the Euro bailout (yes you read that correctly right now we are bailing out Europe with US dollars produced and given to the IMF by the Fed).

It's a mess, and investors are starting to feel the pressure. It will be interesting to see this come to a head - let's hope that's all it is.

Moving forward, we're likely to continue to trade in the established range with rates better or worse than our current pricing... That's a prophetic statement considering the madness that is Europe. We'll need a major headline to force our markets... in the past that would have been the PM of Greece being ousted, but in today's market that just a typical headline... You'll know it when you hear it - the headline is coming.

MBS recoverying...

noreply@blogger.com (Peter Gladkin) — Fri, 04 Nov 2011 15:16:00 +0000

The mortgage backed securities market is rally today as stocks sell off. Currently up 8 ticks on the day we have not made back everything we lost yesterday so rates are slightly off in relation to yesterdays opening rate sheet, but interest rates are tracking back down.

An interesting day all things considered, if the employment situation coming in with some positive figures, showing the private sector posting about 100,000 new jobs, one would expect the stock market to rally with our unemployment rate dropping from 9.1 down to 9.0.

Meanwhile the G20 is going on with a Greek vote of confidence set to take place (two different events)... today is anything but quiet, and that may be what has investors skittish and nervous about equities leaving bonds...

All things considered I think today ends zero sum. We may see some movement and repositioning, but in our market I do not expect to a crazy rally... if we make back the losses we incurred yesterday I'll leave for the weekend a happy man.

MBS Selling Off... Rates Move Higher

noreply@blogger.com (Peter Gladkin) — Thu, 03 Nov 2011 15:31:00 +0000

Another day another policy out of the Euro Zone; Greece now abandoning its apparent referendum vote which has lead stocks up and bonds down - meanwhile the G20 kicks off with the apparent talk all about Greece, a country not even a part of the G20.

Down 9 ticks on the day, it's what we would expect in the wake of a 140 point DOW rally considering the 10 year treasury has tracked back up above 2.000 in yield trading around 2.04% So we continue trading in our range, waiting for new headlines relating to government intervention...

I don't expect to see us recover today, if we can hold losses to a minimum we can count today as a win.

ON A SIDE NOTE: This is not a free market and no one should consider or believe it to be a free market. Our market today completely depends on future government policy.

Sad really.

Resistance in MBS...

noreply@blogger.com (Peter Gladkin) — Wed, 02 Nov 2011 22:20:00 +0000

It was a a down day in the market, to start... slowly we dug out of a 5 tick hole and found ourselves even on the day with a half day left. With the equities market rallying, bonds were behaving very bullish holding there ground in the face of a 200 point rally in the DOW. Ultimately we finished two ticks down, but that ain't bad in the face of a 200 pound bully.

Meanwhile the ten year treasury sneaked down below 2.00 yield finishing at 1.9889. It's clear it would have been a different day had treasuries behaved differently. Alas, they didn't, and here we sit waiting for news from the the Europeans.

It's no surprise as far as I'm concerned that Greece is about to fail, question is are they able to keep it together for a little while longer. If so, we may see our markets sell off, which in my opinion are anticipating the failure of Greece. The stock market on the other hand was drinking the KoolAid, yes, the funky kind and for some reason saw reasons to be bullish, as if trying to buy the market higher (in fact this is what hedge funds and other large players may have been trying to do) only to watch it slide twice as far down.

Anyway you cut the cheese it looks like we're going to see a sell off tomorrow in equities which on a normal day would probably lead to a rally in our markets, if the sell off is strong enough; sure, perhaps we gain a couple, but honestly I think it's going to take a larger event to push interest rates down into new low territory.

Greece is something everyone is somewhat prepared for, for better or worse. In other words, it's yesterdays news. Those that think it will lead the stock market higher are (crazy - my opinion) positioned that way, those that think it will lead bonds higher are strong in bonds; therefore it is possible a Greek implosion doesn't move the markets as much as one might think it would.

It may take something more, something less expected, something bigger than little old Greece. That something is Italy, making a lot of news lately as it's 10 year bond yields have risen above 6.000 percent and held, trending upward. This is frankly something Italy cannot afford, which means bailout. This would be cataclysmic in comparison to Greece - and a failure of this magnitude would in my opinion result in a massive stock sell off as the Eurozone prepares for massive reform, leading to depression and most likely hyperinflation, which will send money into our markets, primarily bonds as large international companies adjust future earnings based on the chaos that would surely ensue.

At this point in time, rates would move to a new low point. I have heard no one else predict when this might happen, I give Italy 12 months. Don't hit me if I'm wrong.

A Strong Opening for Mortgage Backed Securities November 2011

noreply@blogger.com (Peter Gladkin) — Mon, 31 Oct 2011 15:52:00 +0000

After a terrible month of October in relation to market performance, the mortgage backed securities market opened strong this first trading day of November after a strong close on the final trading day of October.

It's too soon to be calling this a rally, but this does illustrate support and a floor beneath current trading levels. Based on the events that brought mortgage backed securities to their low price point (low price means higher yield and worse rates) in October it's clear government intervention and headlines is what is moving markets for better or worse.

All things considered we appear to be trading in a range that was previously established before the Fed came out with operation twist. This range is is producing slightly higher rates than expectations, but with the market trading up and a well timed lock could mean securing the terms you are looking for.

This market is all about timing and timing mean being prepared. If this you're looking for a lower rate, but are apprehensive about entering a market as volatile as this one, you simply need to set a point of execution that you stick to and work towards that pricing. If it does not present itself, you've spent some time reviewing your financial position, which is something everyone should do at least once a year anyways.

I remain optimistic that interest rates will remain low and possibly trade even lower although lower rates will require excellent timing.

An Up Down Trading Week Ending on the Positive Side

noreply@blogger.com (Peter Gladkin) — Fri, 28 Oct 2011 16:23:00 +0000

Okay, it's a little early to call the close today but considering the strong trend up erasing all the losses we experienced yesterday after a strong day trading Wednesday and it appears the mortgage backed securities market is going to have its first positive week trading in the entire month of October.

Amazing considering the fact that at the end of Q3 (September0 we were expecting a strong move even higher bringing rates lower... instead we witnessed a systematic sell off bleeding value day after day until we found support which we are now rallying off of. It's important to understand the losses incurred in October, was not a firesale or in response to economic data that suggests a real recovery is beginning. The losses experienced were all based on mere conjecture and the European leaders jaw wagging. Yes I will concede they have apparently come up with a deal, but the deal which they've announced is a small band aid placed over a large and bleeding wound. Moreover, it appears as though there are more wounds that do not have band aids yet. Right now the Euro plan is to hopefully squash the Greek debt issue thereby containing the spread of a debt crisis across Europe. Problem is, they don't seem to realize the patient they're treating is a hypochondriac, as while the voluntary (curious whose going to volunteer) haircuts for 50% applied to Greek debt does nothing to address the Italian and Portugal debt issues.

Point is, the all clear siren investors are listening to will soon be the "world is on fire" siren which will send them running back to the bond markets.

True this is one man's opinion... so disagree with me if you choose to. Just have a reason that doesn't include the DOW rallying, and is based on Keynesian economics which this euro experiment has proven does not work.

Rates Fall Flat to End the Week

noreply@blogger.com (Peter Gladkin) — Fri, 21 Oct 2011 22:50:00 +0000

There's no if ands or buts about it, ours markets are taking their cues from the governments and their chosen methods of intervention or lack there of. This weekend we are led to believe the Europeans will come to terms and solve the problems the Eurozone has been experiencing or at least make good progress on an agreed upon path to prosperity.

I find this somewhat amusing, as if the last 6 months have been complete experiments leading up to this solution. Haven't they been trying to solve this mess now with various government interventions already? This was never suppose to be a political website, unfortunately when you have the governments of the world completely responsible for market shifts, you can't help but discuss the policy behind their choices.

There is skepticism in the market about the Europeans actually being able to solve anything, proof of which can be seen by a strong bond day, only down one tick in relation to a strong rally in the stock market. The bulls and bears are holding their ground acting how they think they must, it will be interesting to see who gives.

Monday will be telling, and will most likely take its direction from Sunday which is when the European leaders are meeting to discuss terms. So much for free markets working it out...

Interest rates Continue to Feel Pressure

noreply@blogger.com (Peter Gladkin) — Fri, 14 Oct 2011 16:19:00 +0000

Mortgage rates have not tracked back down as we had hoped. We are starting to see signs of a bottom to this sell off, but the low rates many were hoping for are no longer available and we've moved pretty far away from them in terms of secondary market pricing.

There are a number of reasons for this shift in investor sentiment, but the primary reason is the announcement made earlier this month that the EU had/has come up with a plan and are in agreement and will be releasing details at the end of the month. This announcement has been enough fuel equities which has led to a consistent sell of in the bond market.

It's my professional opinion one heavy hand on our market right now are the bailouts being discussed. I've heard 2 trillion in new Euros, the IMF wanting 250 billion to assist in the EU bailout... these are two examples that come to mind, and something I make point to because it infers inflation and that is the antithesis to mortgage backed securities.

Moving into the weekend I do not expect rates to mount any sort of recovery, and will probably continue to sell off or trade in previously established ranges we now find ourselves in once again. We'll need an international tape bomb to pick our market up and move rates back down.

I do think this headline is coming it's just a question of when it hits the wire.

Rates Continue to Move Higher...

noreply@blogger.com (Peter Gladkin) — Wed, 12 Oct 2011 15:44:00 +0000

Interest rates for home mortgages continued to inch higher as pressure from the equities market is weighing heavily on bond traders. To put things in persepctive we've seen a 50 bip swing in the ten year treasury yield, and mortgage backed securities have followed in form, selling off to the lowest levels we've seen in over a month.

Remember lower price means higher yields, and higher yields mean higher interest rates for home loans... so here we sit at new lows... even so, I'm not completely negative on interest rates, contrary to what some may be thinking.

What I think we're experiencing is severe volatility. severe enough to push our market so low that many are prepared to declare it the end of low rates... in reality I think we're going to see the mortgage backed securities market surge forward in price bringing rates down yet again, perhaps even lower than what we recently experienced.

Why you ask?

It's become clear that we no longer live and operate in a free market. This is not a debatable statement, governments and government intervention is now the lead indicator for our markets.

The most recent example of this is the Euro officials coming out and saying they've figured it all out and there now nothing to worry about, they've got the Euro mess under control and will have the published plan that will save everyone available by the end of the month. This revelation I found fascinating... because the markets ate it up and have been buying equities ever since as if they really do have a solution, and everyone will be "okay."

Forgive me if I am not going to buy into that particular piece of propoganda, and I am under the impression the false promises are going to come full circle and kick everyone in the ass when equities figure out the real truth and a major sell off insues.

At this point in time we'll see everyone run back to bonds, and rates will fall through the floor.

My advise is get your ducks in a row so you are prepared to take advantage of the market when it returns... those that wait to hear about low rates are certain to miss the boat.

Rate Continue to Climb Higher...

noreply@blogger.com (Peter Gladkin) — Thu, 06 Oct 2011 17:31:00 +0000

Mortgage rates are again under pressure today as the mortgage backed securities market sells off, currently down 10 ticks on the day...

We seem to be caught in a catch-22, equities posts gains, we sell off, equities sells off, mortgage backed securities posts gains. This back and forth ping pong match is making lenders nervous, and we're seeing it in their rates sheets as they hedge expecting losses, regards of which way the market moves.

In fact hedging is something lenders have become very good at and is the only real factor that is controlling wide price swings on published rate sheets.

That's not necessarily a good thing for those of us in tune with the secondary market. Hedging ultimately leads to more profitability for the funding bank. This profitability comes at a cost that the consumer ends up paying through higher terms. Of course what we are discussing here is an invisible factor that is never really discussed; be that as it may it is still taking place.

Can the underlying borrower do anything about hedging? Sadly no... hedging has and will always take place to some degree, after all the price difference between secondary market delivery and what the borrower secures in terms of rate defines the fund lenders profit for that funded loan (I'm not going to get into servicing here).

The only real cure, if you can call it that, for the hedging epidemic we're experiencing is a stable, and somewhat predictable market. If one can accurately predict, with some degree of deviation of course which one would expect, market movement, one does not need to plan for the worst and can price more aggressively not having to worry about eating their shorts on a strong shift against them.

Believe it or not, historically lenders were very good at predicting market movement and trends... after all, interest rates typically do not shift in yield like we've seen recently...

So while interest rates remain low, historically speaking, they could be lower if the market would settle. Now I don't expect this to happen, the world is on fire... so we're stuck with hedging banks, trying to protect their profits. Can't really blame them... what we can do is everything in our power to position ourselves to take advantage of rates when they present themselves.

Strategic locks, similar to trading is all about market timing. Rather than lock at the time of submission, you lock when the market is trading at a high point in the established range. Doing so will mean securing the best possible terms in a volatile market.

For this reason it is crucial your lender has access to secondary and understands the momentum and trends currently operating there.

This blog of course addresses these markets and is a peek inside my mind as a professional and practicing mortgage broker.

Mortgage Rate Inch Up...

noreply@blogger.com (Peter Gladkin) — Wed, 05 Oct 2011 19:50:00 +0000

It has not been a nice opening this October for mortgage rates, investors (some at least) have apparently decided enough is enough, the volatility is too much, and sidelined their capital. This wait and see attitude at this point in time comes with one advantage; the dollar is running well against other currencies. How our dollar became a safe haven play is beyond me and I think long term this could turn sour, however the point is investors are comfortable in cash right now, and that cash along with some positive gains in the stock market has not been kind to interest rates.

Even so, this is not the end of the world, and I fully believe interest rates are going to slide back down in the weeks ahead. We have the Fed and operation twist, selling short term debt and buying long term debt. This should help keep yields low despite some selling off (there is after all a buyer), and we cannot forget about the powder kegs set up throughout Europe, and best calculations on my part suggest it is about to get very interesting across the pond. BOOM! There goes Greece, powder keg one as they default and Europe scrambles in the chaos surely to ensue... Downgrades to follow (they would have to) from the rating agencies, forcing capital into safer markets... and then and there we should see an immediate snap in price up bringing yields and interest rates back down to super low levels... I honestly think we will see the 10 year treasury yield break below 1.5% this year, and will flirt potentially with 1.25% possibly even 1.00% into 2012. After all we still have four powder kegs left: Portugal, Italy, Ireland, and Spain.

If this doesn't happen it's because Europe and the U.S. will try and inflate (Quantitative Easing, Jobs Bills, Bailouts, Grants and Loans to Private Companies, Creative Accounting, etc... ) their way out of this mess declaring "it's too dangerous to do nothing... the world is ending... and in their typical rant and fashion. If this happens we'll see a surge in gold and silver prices, while other markets waffle under inflationary pressure. So go our low rates....

Inflation will ultimately be the death of these low rates, the question is when will the beast wake up.

To digress, I think when all is said and done, worldly events like the collapse of a currency or what have you don't play out as fast as one would expect them to... those in charge of the sinking ship are doing and will do everything possible to keep the status quo afloat. So time will pass, as it does, but eventually the ballasts will fill with water, and that will be that, no more pretending... at which time the beast of inflation will awaken and the world will be very different than the one we currently enjoy.

For now the charade continues and we'll press through the volatility securing lower and lower fixed rates, the best possible saber against that evil enemy know to be inflation. After all with a low fixed rate, your payment never changes, and in an economy ripe with inflation you should be able to easily meet you payment obligations with the dollar now worth nil.

So it is a ride to the bottom, wherever that bottom may be. Since we don't know the final stop, we have to secure lower rates as the market shifts down, simply waiting for what you think will be the basement floor rate may never come and there goes your opportunity... hence the step ladder down.

With rates at all time lows, this small hike up is not something we need be concerned with... the market will swing back down, the question is will you be in a position to take advantage of it when it does?

Mortgage Rates Fall Back into Range

noreply@blogger.com (Peter Gladkin) — Thu, 29 Sep 2011 15:39:00 +0000

This last week has been anything but favorable to mortgage rates. Last Thursday we hit new record highs, busting through every ceiling history had produced, wetting the lips of every originator waiting for lower rates. This sharp upswing was almost perfectly vertical, suggesting a strong demand for new coupons.

Since this buying frenzie, we have seen a sharp sell off as investors took profit. Let's be clear a sell off at new highs is to be expected. What we saw however was not jsut a mere sell off, it was a exit from MBS leading our markets down, down, down... forcing yields back up and rates higher.

Okay okay... enough doom and gloom. Yes rates are not were they were last Thursday, but were we sit right now is on our previous resistance, which has turned into support since last Thursday.

What does all this mean... we've entered a new range, currently sitting on its floor waiting for the market to push us higher in price and lower in rate.

There are a couple of important revelations that took place that should be pointed out. First during this corrective period we saw the 10 year fall to 1.72 in yield. It is now back at 2.00 in yield. Of course the MBS follow the buy and sell trends of the 10 year this last week, however our markets have faired better than the treasury markets.

Like I said, we are now sitting on new support which use to be our resistance. This run at the bond market has essentially forced us into a better range. So when the 10 year begins to creep down again in yield, the MBS markets should also produce lower yields which means better rates.

Ultimately I think we will see lower rates in the coming Winter months. Add all this up and the name of the game is patience. While wealth favors the prepared, I suggest getting everything in order so when the low rates do return you can execute.

Execution is the name of the game, and waiting until rates are available typically means you will not be able to close in time to realize that rate. Pay attention to locks and the lock period... watch turntimes carefully.... they will increase which can force lock extensions which cost an additional premium. Manage you time productively and you'll be able to capture an incredible low rate in the months to come.

Friday Sell Off...

noreply@blogger.com (Peter Gladkin) — Fri, 23 Sep 2011 22:03:00 +0000

Okay, no one likes a sell off (unless you're the one selling and profiting), but after the gains we saw in the last two days we should expect there to be some profit taking and settling dust as investors figure out what their next move is.

The question is one we have posed quite a bit recently, that's not to take away from the serious nature of the question. The world right now, from an economic standpoint, is on fire. The rush into long term markets is a result of the fire now burning.

One would expect long term markets to do well during as the world burns... and to answer that cry, the bond markets have done well, very well. You can't go up however if you don't once in a while come down... and that is the formula today.

Monday will be telling... I doubt we will see the sell off continue. Realistically I expect us to post gains tomorrow and throughout the week as investors continue to fee equities and move into the longer markets.

There will most definitely be bellowing from those on CNBC that don't want to see the market crumble and are still convinced we're in the heat of a recovery. Trust your gut... and you experience.

The smart money is shoring up... that means cutting expenses and protecting capital. There is no better way of reducing expenses than dropping your interest rate a point... with current 4.000% 30 year fixed rates available... now more people can realize that goal than ever before.

Don't hesitate, turn times are going to get long, beat the rush and get your paperwork in for underwriting as soon as possible.

Anyone interested in a 4.000% 30 year fixed is welcome to contact me... obviously this rate and the terms are subject to market changes, so take while the taking's good.

Mortgage Rates Fall as Fed Twists

noreply@blogger.com (Peter Gladkin) — Thu, 22 Sep 2011 17:52:00 +0000

Well the Fed has come out and announced policy that has sent our rates to all time lows. Operation twist as they say is something that involves the Fed selling short term debt to buy long term debt. This move does not increase their balance sheet so it is thought of as noninflationary (good for our markets) and of course the funds allocated to the longer term term bonds has essentially created a backstop that QE once provided our equities market. This "insurance" policy as some consider it means there is little risk to investing in long term bonds and mortgage backed securities. If the price falls, the Fed has already pledged to buy, so there is little downside risk.

This has lead the MBS markets to knew historic highs. While our previous note to watch was the 4.000 coupon, we are now watching the 3.5% coupon as benchmark, which simply indicates the low rate environment is going to be here for a while.

That's not to say you should hold off and wait for things to improve even further. Peaks and troughs.... what typically comes after a peak? The correct answer is trough, and considering we are peaking, what goes up must come down... timing is everything in this market, play the upside of a trend and pricing is typically better than a downtrend that happens to be slightly higher in market price... why... the lenders are hedging up or down and following the trend with their offered rates.

Yes, this is all very complicated, and is why it pays to have a responsible and well informed loan officer in your corner.

Fed Meeting Day 1...

noreply@blogger.com (Peter Gladkin) — Tue, 20 Sep 2011 17:38:00 +0000

So it begins... the two day Fed meeting that investors have been waiting for. For the last couple of weeks we have traded in a range with the market unclear as to which direction to follow. Flee with the bears, or run with the bulls?

The Federal Reserve has been anything but quiet in this crisis and has shot every type of arrow at this beast of a depression (let's start calling a spade a spade) we're currently battling, yet nothing seems to be working.

If you ask me the Fed needs to step back and let the free market fix itself in the coming years, but that's not going to happen, those that tinker will continue to do so, and this roller coaster will continue through the peaks and troughs that give us all that weightless feeling in our stomachs.

Question is, which way the Fed will nudge us this time? There has been talk about QE3, and if you read this blog you know how I feel about it... on a scale of 1 to 10... I give it a generous 1, but I digress... then there has also been talk about operation twist which is using capital generated from mature short term debt to buy newly issued long term debt. Not really addressing the real problem but "okay." This balance sheet move isn't really going to solve anything but it will help keep interest rates low for the time being which the Fed believes will help spur the economy. Considering we have been operating in a low rate environment now for the last two years, I doubt this is going to have any real effect.

Hmmmmm.... the Fed is running out of options, perhaps they need the two days so they can brainstorm some more possible solutions.

It's a mess out there, contrary to what you hear from the mainstream media, and it appears to be getting worse. Europe is a hay bail covered in kerosine, Greece is soon to be known as the Country formerly known as Greece, and our Fed is naive enough to believe opening their window and pledging dollars will solve the Eurozone's problems. The problem is the Eurozone, and the longer we perpetuate it, the worse things are going to get.

Right now we are witness to the first economic world war... in which all major economies are racing to devalue their currency in relation to all others. This is fine for governments, but when this action plan hits main street and real inflation takes hold, we may actually see politicians tried for treason as our net worth dwindles into oblivion due to their chosen monetary policy.

An interesting reflection which has terrible consequences on every man woman and child that is not in a position of power. We should be very mindful of what the Fed decides to do moving forward.

Mark my words.

Mortgage Rates Climb due to Uncertainty

noreply@blogger.com (Peter Gladkin) — Fri, 16 Sep 2011 16:26:00 +0000

Mortgage interest rates are now on the rise after a healthy uptrend and stable range were shattered by new Fed policy that got little attention in the news but has had sweeping effects across the markets, particularly the bond market.

It was yesterday morning when the Fed announced they would be opening their window to foreign investors and pledged U.S. dollars would be available for the next three months for these investors to borrow and or swap out for other failing world currencies. Honestly I do not have much information on their play here because its on the down low... hush hush... a play made by those looking to promote a new world order and bring everyone and everything under a single regime and banking system...

Forgive me for this blog getting political but unfortunately our monetary system has been politicized and there is no way around it anymore. One would expect the IMF to step and and back the Eurozone, which they have done, the Fed moving in behind them is just another backstop to help ease concern.

Long and short, U.S. tax dollars or newly printed dollars, or electronically created currency will be given the the European Union at the expense of the United States. What effect does this have on you?

Immediately the ten year treasury yield shot up from 2.000 to 2.1000 in yield. Due to concerns about inflation most likely, this forced our markets down ten ticks yesterday. The damage however is most likely far from over. The real problem is this move shattered the confidence many investors had in the MBS markets and blew straight threw our support. Now we are down three on the day... and what was an uptrend now looks like it may be a down trend.

If our Treasury Secretary and the Fed continue spending and giving away money as they hope to, I don't expect rates to stay low despite their claims that they will.

Time will tell. Some choppy waters and questionable rates ahead of us... Keep an eye on headlines.

Range Bound Interest Rates Remain Lowest on Record

noreply@blogger.com (Peter Gladkin) — Wed, 14 Sep 2011 22:47:00 +0000

There are no if, ands, or buts about it, home loan interest rates remain at some of the lowest recorded levels ever. The range we are currently enjoying appears to be a plateau leading well into the future, a conclusion that is not off base considering investors appear to be comfortable with the current yields being paid in secondary.

The ten year treasury yield remains on or around 2.000% which is incredibly low, yet investors are moving into the 10 year at signs of the yield climbing thereby creating the equilibrium experienced in todays market. In other words, investors are comfortable with these yields considering this economy and the future outlook.

That doesn't really say much for our economy... to say the least, and one msut wonder what the current Obama administration is going to do, because the jobs bill appears to be failing at face value and accused of being more of the same. While these rates are very attractive for homeowners, the simple fact that we are not seeing a return of new home buyers despite low real estate prices and low interest rates suggests the real estate market might be in for another correction.

If I am right about this and home prices are about to fall, those that are looking to refinance should do so while their equity positions are strong. Those looking to buy, you are responsible for holding up, or bringing down the current real estate market and home prices... while this is a true statement, we must understand most people would like to participate in this low price market, however due to unemployment and uncertain future employment, caution is the smart play.

So here we are... interest rates for home loans are at the lowest point on record. If you qualify... carpe diem.

Mortgage Rates Hit Resistance

noreply@blogger.com (Peter Gladkin) — Wed, 07 Sep 2011 17:17:00 +0000

Wednesday after Labor Day... yesterday we enjoyed gains all day until the final hours of trading when the market sold off to a zero sum day. This morning we opened low and the sell off continued as equity markets rallied. Fortunately the MBS market has rallied since the low price point of 104.03 and we are now back up to a price point of 104.10... Still down 4 ticks on the day, but a nice recovery to say the least.

Rate sheets this morning, to say the least, were disappointing. This fact is probably due to the sharp initial sell off we experienced right around the time rate sheets would have been released. This recovery, assuming it holds should lead to reprices for the better as the day continues on.

Think it is clear interest rates and the mortgage backed securities market is taking its cue from equities and the treasury more than ever. It is a back and forth trading environment where traders are moving between long term and equity markets trying to find the best returns for their captial. Unfortunately the flip flopping is forcing volatility indices through the roof and leading to more uncertainty. All things considered it appears as though low rates are here to stay but we will flip flop between good and bad pricing.

For this reason it is critical to pay attention to rate sheets and be prepared to lock at the appropriate time. Kind of like cooking chicken... take it off the grill too early and you're going to be sick, leave it on the grill too long and you're eating rubber.... it's all about perfect timing. Patience is key and executing when the time is right is critical. While lower rates are a distinct possibility, we have to consider the fact that this may be as good as it gets and must be willing to settle in the range we are currently trading.

Labor Day Rate Watch...

noreply@blogger.com (Peter Gladkin) — Fri, 02 Sep 2011 16:04:00 +0000

For those loyal readers you will recall a post I published about two weeks ago referencing labor day weekend as a pivot point to pay attention to. I also mentioned that I was not going to go into details because despite markets being cyclical, we're in anything but a normal environment and watching and depending on cycles in this market could spell certain doom.

That's not to say we completely abandon them. So what does labor day typically mean for interest rates and home loans. In the past, experience has shown rates typically fall after labor day and remain low through the winter months. It's hard to believe we could fall much lower - 4.25% on a 30 year fixed currently offered at no cost for qualified borrowers - but the fact remains, mortgage backed securities are posting gains which lead to lower yields and better rates for borrowers.

Usually moving into a long weekend we will see bond markets hedge and sell off so they do not have to worry about the markets, and they can enjoy themselves over the holiday. Then come Tuesday they reassess and reinvest based on those assessments. Today (although it is still early) we have not see the sell off that is typical with long weekends, instead we've seen a strong buying trend which is very bullish for our markets.

Couple this with the unemployment report which showed non farm payrolls adding 0 jobs - that's zero - and claims that the 10 year yield may fall to 1.5%, and you've got a road paved to lower rates.

Of course, nothing is certain and assured until you've got your rate locked into a period in which you can close, and we're not the type to count our chickens. For this reason, I highly suggest those interested begin getting paperwork in place so they can take advantage of the low rate environment that is coming.

Mortgage Rates Improve with Weak Consumer Confidence

noreply@blogger.com (Peter Gladkin) — Tue, 30 Aug 2011 15:56:00 +0000

Yesterday we saw our market fall 11 ticks, which really singalled that we were in a downtrend which was likely to continue until some tape hit that stuck and affirmed our economy was not is as good of shape as the media likes to portray. Today we are currently up 10 ticks with investors returning to our market with consumer confidence way, WAY down.

Where we sit now consumer confidence was measured at 44.5, down from 59 last month. The media is already spinning this low number off as an effect of the debt debate fought last month. Perhaps there is some merit to this rationale, but in all sincerity the problem is far deeper and much more serious than they are willing to give credit.

This recovery today however does not mean we are out of the thicket. On the contrary, this upswing will definitely help rate and pricing but it alone is not enough to send us back into the low rate environment we all hope to see once again.

Unfortunately because the equities market is what most media outlets focus on, they also focus on how to get the equities market to post gains, which makes everyone feel warm and cuddly. Well, everyone but us who would like to see the long term markets rally which usually comes at the expense of equities. Why the long terriddle? Becuase as I type the media is doing everything in their power to push QE3, becuase it is their expectation that more money in the system means equities will post gains and they can feel warm and cuddly again at least for the time being.

Realistically QE3 could mean doom for our economy and markets as it forces the US dollar off a cliff and into oblivion to be remembered along with the Continental. This is the fear, and if the Fed is not careful, very soon we'll all be enjoying a 20 dollar loaf of bread along with our 10 dollar cup of coffee and 40 dollar gallon of gasoline. If this comes to pass, I assure you rates will no longer be in the 4s, or even the 5s, or 6s... Think days of Jimmy Carter - 16, 17, 18 percent.

Scary times we live in.

Which is why securing the right financing and locking in a low fixed rate now, while home loan interest rates are still in the low to mid 4s is literally one of the smartest financial decisions one can make at this point in time.

Post your questions, post your comments, call me crazy... time will sort all out.

MBS... More than a Case of the Mondays

noreply@blogger.com (Peter Gladkin) — Mon, 29 Aug 2011 23:11:00 +0000

In everyone's favorite cubical movie "Office Space" our protagonist is accused of having a case of the Mondays when he doesn't show up his chipper self when arriving at the office. For those who have seen the movie, I don't need to tell you, he doesn't have a case of the Mondays. he truly loaths his job and is simply acting how he always feels.

This may also be the case with the mortgage backed securities market which after a couple days in the green has turned around and sold off all recent gains and then some. At this point in time there is a clear down trend in the MBS markets which is forcing interest rates up. Investors are looking other places for returns, and it appears as if this trend is going to continue.

With the stock market moving forward and posting gains as if everything was as it should be, there is little reason for anyone to sit out the rally, and the fear that brought people into our long term market has wained and they're moving back into the short term markets at the expense of the long term bond markets.

The effect is immediate and interest rates through reprices have slowly but surely trickled back up. It's unfortunate because most people looking to take advantage of these low rates are going to be stuck either closing on a rate that is much higher than they had hoped, not closing at all, or waiting in hopes the market returns.

It is this third option that I find the most interesting. Considering the guidelines for approval right now, you really need to be an A-paper borrower to secure these best and lowest rates which means documenting income, assets, etc... Most A-paper borrowers refinanced last year when they had the chance to secure these low rates in 2010. This time around they are simply trying to improve their position. This means these higher rates currently available are of no interest to these clients... tehy already have a great rate... which means not closing (at the current pricing) or waiting it out to see if they drop back down.

I anticipate when loan volume drops off a cliff, which it will in the near future due to rates rising, banks will have no choice but do what they can to lower rates and entice borrowers back to the finance table.

For now, we're trading in a range that is producing rates higher than they have been in recent weeks. Hopefully after labor day, when banks recognize they are not closing the loans underwritten before labor day, they'll cut into their profit margin and do what they can to reduce rates.

Let's hope secondary cooperates and the mortgage backed securities market rallies hard on the buy side.