Mortgage Bonds set new record highs.  Weakness in the job market helped Mortgage Bonds move higher again this week. The benchmark 5.00% coupon moved 28 basis points higher to $102.75, 6 basis points more than last weeks high of $102.69.  Helping Bonds move higher were disappointing earnings reported from Dow component Proctor & Gamble and Dow Chemical.

Remember, Mortgage Rates fall when Mortgage Bond prices rise. Therefore some lenders reduced interest rates by .125% this week.

The Treasury announced it will be selling $74B in government debt next week.
We will be keeping a close watch on this sale as the results could move the Bond markets in either direction.

Fed Chairman Ben Bernanke stated in a speech on Monday that the Fed must avoid raising interest rates too soon and urged the government to proceed cautiously in cutting spending and raising taxes.

The Fed Chairman also told “Meet the Press” that the US could go into a double dip recession if housing prices continue to decline, and said that we are in a “quasi-recession”.
If only they would listen…
Article- Economic Recovery Depends on the Real Estate Market

Pending Home Sales- came in at -2.6% for June, slightly better than the expected -5.0%.  This makes you wonder … did the Tax Credit really offer any meaningful help to the housing market.

We maintain a bias toward locking into rates as we are in uncharted waters.

Fannie Mae 4.0% Bond: 102.75  +28 BP

John Sauro speaks with Kathleen Hays on Bloomberg.
Click below to listen to John and Kathleen discuss the new laws and the impact it will have on  the finance industry and consumer mortgage’s.  https://www.northatlanticmortgage.com/featured_news.htm

Mortgage Bonds broke through a tough ceiling of resistance yesterday and moved higher this morning due to weakness in stocks only to give back most of their gains as stocks recovered. Due to better than expected economic reports.

Second Quarter GDP reported the economy slowed to 2.4% annually, slightly lower than the expected 2.5%.  The Chicago Purchasing Managers Index came in at 62.3, better than expectations of 56.3 and consumer sentiment came in at 67.8, a bit better than expected.

Another week of massive Bond Supply. The Treasury auctioned $104B in securities. This is important to note as bond prices broke through a tough ceiling of resistance in the face of overwhelming supply. We all better hold on tight when this starts to unwind.

We continue to recommend locking into rates and not risking loosing a
historical good deal.
Remember, Higher Mortgage Bond prices mean lower mortgage rates.

Fannie Mae 4.0% Bond: 102.41  +9BP

Technicals are showing signs of possible weakening prices for Mortgage Bonds.  The drop in Mortgage rates can be attributed to many factors, one being the weakened Euro. Europeans are putting their money in the US Bonds. However, that may change as rates in Canada are looking more attractive for Europeans since the Bank of Canada raised rates by.25% up to .75% on Tuesday.

Another concern for Mortgage Bonds and Mortgage rates is China’s Reserves which stand at $2.5T. most of these reserves are held in US Treasuries and Mortgage Backed Securities. However, last quarter was the first time in a long while that the Chinese did not increase these reserves. Could it be that China is slowing its investments in US debt? 

Mortgage Bonds began their climb on April 6th when they were at $96.18 and finished Thursday at $101.78. Its been quite a run, but as we know what goes up must come down. And, don’t forget that Mortgage Rates move in the opposite direction of Mortgage Bond prices.

Housing Starts fell 5% in June to 549,000, below expectations of 575,000. The latest survey of New Home Sales showed a drop of 33%. in the latest survey. Building Permits did show an uptick, but it was mostly multi-family homes.
Existing Home Sales for June came in at 5.37M, better than expectations of 5.09M, but below May’s number of 5.66M. However the better numbers are influenced by the Tax Credit, which had a deadline of June 30th. So, its likely more closings were scheduled for June in order to take advantage of the Tax Credit.
?
President Obama signed the Financial Reform bill into law Wednesday. Unfortunately, while there are some good points in the Bill, there are also many unintended consequences. One example is that rating agencies won’t allow their ratings to be printed on offering documents. This shut down the asset-backed debt markets on Wednesday as these deals can’t happen without the printed ratings. Ford Motors pulled a financing deal Wednesday night because they couldn’t get a printed rating on their offering.
We maintain our bias towards locking into mortgage rates here.
?
FNMA 4.00% Bond $101.78 -16bp

Mortgage Bonds continue to flirt with all time highs.  Dancing with a Double Top pattern on the charts, where prices fall from their highs only to climb back up to test that same high. This creates a ceiling of resistance.  Hence, our Alert to Lock earlier in the week. 

While it’s human nature to try to time a market, I believe in the bird in the hand principal.  Remember, Mortgage Rates don’t have much room to fall further, but the sky’s the limit when they move higher.  

Mortgage Bonds are down 22 basis points as I write this.
Lenders will be re pricing mortgage rates for the worst.
Nervousness ahead of the 10 Year Treasury Auction can be the reason for Mortgage Bonds loosing ground.

However, this can change if the auction goes well.
Stay tuned, but for now we recommend locking in ahead of an intraday re price for the worst.

Current Price of FNMA 4.00% Bond: 100.97 -22BP

Rates will be moving higher – When?
Will you miss the train as it leaves the station?

Have you wondered: When will this gift of low interest rates end?
At North Atlantic Mortgage we never miss a major market move.
We use our resources to gain insight into the markets so we can offer the best advise on the mortgage market to our clients.

The market is positioned for mortgage rates to move higher. It’s not if they move higher but WHEN.
We employ analysts that not only chart the markets, but read the future of the markets by using fundamentals and technical analysis, so we can inform you before the markets turn.

Mortgage rates have been low for a while. Don’t sit at the casino table too long. Rates won’t go much lower than they are right now – but they have plenty of room to move a lot higher.  Right now the odds are in your favor. Don’t get greedy. Know when lock in and be a winner.

Mortgage Bonds have been holding up well, just under a ceiling of resistance at 101.47.
Our Alert to lock on Wednesday morning was timely as Mortgage Bonds lost 38 basis points in value that afternoon and banks re priced mortgage rates .125% to .25% higher.
Remember Lower Bond prices mean Higher mortgage rates.

On Thursday, the wall Street Journal stated that “fears of a double dip recession are exaggerated”.  I wonder how they know?

The Treasury Department announced the size of next weeks auction’s to be about $69B. This is the lowest offering in a year and is partially responsible for Mortgage Bonds holding on to their nose bleed levels.

We recommend locking into rates as bond prices are at historic levels.

Current Price of FNMA 4.00% Bond: 101.47 +6BP

*Requires a maximum 80% Loan to Value with a Maximum loan amount of $729,000.

Mortgage Bonds have had quite a run and are over bought as they are now up against a tough ceiling of resistance.

This makes the market ripe for profit taking and could result in a pullback, which would result in Mortgage Rates moving higher.

With rates at historical lows, our advice is to lock into mortgage rates hear, ahead of a possible pullback.

FNMA – 30 Year 4.00% Coupon $101.72 +9 BP

*4.75%  APR 4.78%

Jumbo 30 Year Fixed Rate

Not only will you get a great low rate, but you’ll also get the expert advice and great service from a company you trust.

Featured on CNBC, FOX & Bloomberg TV

Mortgage Bonds prices continued their trend higher peaking at 103.875 on Wednesday before pulling back. The 10- Year Note climbed over $105 on Thursday with a yield of 2.926%.
Mortgage rates, while still historically low, have not reacted as favorably as lenders are reluctant to lower rates in relation to the record prices of Mortgage Bonds in order to maintain a higher margin of profitability and garner protection from a potential steep drop in prices.

One thing that could help to move Mortgage rates lower is the possibility that the Fed may once again start buying Mortgage Bonds, and increasing its balance sheet to stimulate the economy.
Their balance sheet is already at a lofty $2T, with a theoretical limit of 5T. This may be good for mortgage rates, but can have negative consequences over the long term.
The House of Representatives passed the Financial Reform Bill Wednesday and it will now go in front of the Senate for a vote after July 4th.  The Bill does much to eliminate competition in the mortgage industry by, discriminating against small lenders and mortgage brokers.  In the end, if passed, it will further restrict the availability of credit and increase costs for home financing to the consumer.
The extension of the Home Buyer Tax Credit was passed on Wednesday by the Senate. Once signed by the President, it will give homebuyers until September 30th to close on a home that was in contract by April 30th.

June Job losses came in at 125,000, more than expected, as thousands of temporary census jobs ended and private hiring grew less than expected.  The unemployment rate fell unexpectedly to 9.5% from 9.7%.

We currently recommend locking into mortgage rates, as Bond prices are in the nose bleed section.
Have a Happy and Safe 4th of July Holiday.

FNMA – 30 Year 4.00% Coupon $101.40 +6 BP

*5.50% APR 5.505%
No Income Check 30 Year Fixed Rate

Not Only will you get a great low rate, but you’ll also get the expert advice and great service from a company you trust.

Lofty Bond prices took it on the chin Thursday as did stocks.  One reason is Wednesday’s Fed statement, “financial conditions had become less supportive of economic growth following the European debt crisis”.

The drop in Bond prices is not surprising, as they were at all time highs. Banks reacted immediately raising Mortgage Rates that afternoon. Remember falling Bond prices means higher mortgage rates. Hopefully, yesterdays Alert to Lock helped you avoid the increase in mortgage rates.

Financial Regulation (Finreg) has been reconciled and is expected to pass the House next Tuesday and the Senate thereafter. The President is expected to sign the Bill shortly after the 4th of July.

Finreg’s impact could further limit the availability of mortgages by eliminating competition within the mortgage industry. Whether the Bill actually prevents another financial melt down, like the one during 2008-2009, is in question. Senate Banking Committee Chairman, Chris Dodd says the BIl makes “huge accomplishments” while William Isaac, former FDIC Chairman and now Chairman with Fifth Third Bancorp said the Bill “doesn’t reform anything, not anything that needs to be reformed.”

It amazes me how few people are aware that the big banks are not required by law, as are mortgage brokers/bankers, to be educated, tested and licensed to originate residential mortgages. Are you kidding? These very same institutions were responsible for the credit crisis, yet escaped the new laws only to create another crisis in the future.
I guess it pay’s for these banks to be owned by the government. Remember this when you consider visiting your local bank branch for a loan.

Proposed extension of the home buyer tax credit did not get passed, which would have extended the tax credit to Sept 30th.
Not that the meager tax credit was very helpful, but you would think that all that could be done to help these markets, would be done.
I guess the government thinks the real estate market has fully recovered.

In other economic news the Final reading of First Quarter Gross Domestic Product was revised down to 2.7% from the previous reading of 3.0%.  Consumer sentiment was reported to be 76, a bit better than the expected 75.5.

Mortgage Bonds have improved as I finish writing this at 11:56 AM with a gain of 31 basis points. If the gains are sustainable,  mortgage rates should improve by .125%.

I recommend Floating, Not Locking, for now. But be ready to lock should the market turn down again.

FNMA 30-Year 4.0% Coupon $100.75 +31BP

Mortgage Bonds Prices are at all time highs this week and you would think Mortgage rates would see more improvement. However, banks are slower to reduce rates than they are to raise them and will do all they can to maintain a healthy margin.Former Federal Reserve Chairman Alan Greenspan wrote an op-ed in the Wall Street Journal titled “US Debt and Greece Analogy”. He warned that the present path of government debt accumulation is unsustainable. “Don’t be fooled by today’s low interest rates. The government could very quickly discover the limits of its borrowing capacity,” said Greenspan. He went on to say that the present low inflation and low long-term interest rate environment has created a sense of complacency (within the government) that can have dire consequences.”

Mr. Greenspan also said that Treasury yields could jump, and quickly. “I grant that low long-term interest rates could continue for months, or even well into next year. But just as easily, long term rate increases can emerge with unexpected suddenness. Between early October 1979 and late February 1980, for example, the yield on the 10-year note rose four percentage points.”

There really is no fundamental reason for interest rates to be this low. One thing we know for sure is that they won’t stay this low for ever.

For now we recommend locking into mortgage rates here, as the lofty prices in Mortgage Bonds can easily tumble and move rates higher.

Current Price of FNMA 4.00% Bond: $100.16, -0BP

https://www.northatlanticmortgage.com