Where R Rates / MBS Market Update
POSSIBLE BETTER RATES
We are finding ourselves in a very interesting place at the moment. This could be a really big deal if you know what you are looking for.
I have talked about floors and ceilings and trading windows. All of those terms just mean breaking points where things can get better or worse for mortgage rates.
Since June 11th which is 11 business trading days ago. We have gone from a low of 100.69 on a Fannie Mae 6% Coupon to the current price of 101.47 and a high today of 101.72.
Do not worry about understanding coupons and the price. What you need to know is the numbers 101.50. Think of that as you looking at a rate sheet and it is paying you 101.50 in lender credits or origination fee or whatever you want it to be. Just think 6% Fannie Mae Coupon producing a price of 101.50. Fyi, the better the price as in 101.50 going up to 101.60 is BETTER for mortgage rates. Up is good.
For example, in my chart below the conv 6% says up 9 today. That means we went from 101.38 to 101.47 so far today. Your Fannie Mae rate sheets are better by 9 BPS.
The 101.50 is a key “ceiling” which means whenever we have hit it recently the traders decide to sell, and rates bounce off the ceiling of 101.50 and sell and rates dwindle a little bit. We cannot seem to break through into better rates.
IF we can get back above 101.50 today and stay there for a couple days the possibility of better rates ahead is very real. You see, once you break through a ceiling of say 101.50 it opens up a new era of trading and that ceiling which you just broke through now becomes a floor of support. That means when you are trading above and pricing hits the floor of 101.50 it bounces back UP vs DOWN.
Therefore, we are watching to see if we can maintain this 11-day streak of breaking through into better rates.
In addition, we are currently sitting at 4.26 on the 10 Yr. That is the yield our 10-year treasuries are bringing. The lower the 10 Yr is the better it is for mortgage rates. The key number for the 10 Yr is to get it below 4.20. That is the number you want to watch out for.
Give us a 10 Yr below 4.20 and a 6% coupon above 101.50 and you will be sending out some marketing about better rates.
That being said, the opposite can happen as well. We could bounce right back to where we have been since last September. Here is to hoping for some good movement.
Of course, global events can mess everything up. We also had a 5 YR Treasury Auction that was yucky yesterday which was not good. We have another 44 billion dollar 7 Yr Auction today so hoping we get better demand.
Tomorrow is PCE (Personal Consumption Expenditures) which is a big inflation number for us and the markets.
Use today’s intel to talk intelligently to those in your community.
| YESTERDAY CONV 5.5% – UP 6 CONV 6.0% – UP 6 GOVT 6.0% – UP 10 10 YR NOTE – DOWN 4 DOW JONES – DOWN 136 |
| SO FAR TODAY CONV 5.5% – UP 12 CONV 6.0% – UP 9 GOVT 5.5% – UP 12 GOVT 6.0% – UP 9 10 YR NOTE – DOWN 2 TO 4.27 DOW JONES – UP 184 |
GREEN is GOOD for Rates – RED is BAD for Rates
Product & Guideline Highlights Ad Mortgage Products
INTERESTED PARTY CONTRIBUTIONS
From time to time, we all need a little refresher on the basics of what makes a deal work. Recently, Fannie Mae revised their guides to offer a little more clarity on the gray areas. I figured this beautiful Thursday would be a good day to give you something to remind yourself of the rules of the road. Also, great to share with your referral partners.
So hear goes!
What Are Interested Party Contributions (IPCs)?
IPCs are payments made by people or companies involved in selling a home—like the seller, builder, or real estate agent—to help the buyer with some of the costs of buying the home. These costs are usually the buyer’s responsibility, but sometimes others help out to make the deal happen. These days, sellers are helping out a lot more than they did over the past few years.
Who Counts as an “Interested Party”?
Anyone who benefits from the sale of the home, such as:
The seller
The builder or developer
The real estate agent
Any company connected to the above
Limits on How Much Help Can Be Given
The amount of help allowed depends on how much the buyer is borrowing and what kind of property it is:
| Type of Home | Loan-to-Value (LTV) Ratio | Max Help Allowed |
|---|---|---|
| Main or 2nd home | Over 90% | 3% |
| Main or 2nd home | 75.01% – 90% | 6% |
| Main or 2nd home | 75% or less | 9% |
| Investment home | Any amount | 2% |
Now, If the help goes over these limits, it’s called a sales concession and the home’s price must be adjusted down when calculating the loan. That means if they have a sales concession of 5K on a 100K purchase price. The LTV would be based on 100K – 5K = 95K revised purchase price. In other words, the buyer still has to bring the very 5K they were given a sales concession for.
What Are Sales Concessions?
These are extra gifts or perks that don’t directly help with the loan, like:
Cash or gift cards
Furniture or cars
Moving costs
Discounts or rebates not listed in the loan paperwork
These must be subtracted from the home’s price when figuring out how much the buyer can borrow.
What Doesn’t Count as an IPC?
Some things are okay and don’t count as IPCs:
Lender discounts from higher interest rates
Gifts from family or friends (if they’re not involved in the sale)
Tax credits
Certain lender fees
Important Warning For Some Of Those Mischievous Folks Out There
If any IPCs are not disclosed (not reported properly), the loan can’t be sold to any of the agencies. This includes secret payments like:
Paying the buyer’s moving costs without telling the lender
Giving the buyer a second loan that isn’t reported
Share this with your potential clients and referral partners so they can better negotiate the best deal for all parties.
Jackism of the Day
HIS FINAL WORDS
Over the past couple months I began watching The Chosen series and The House of David series.
To say the quality of movies made on biblical history has been less than spectacular in my lifetime is an understatement. Hollywood typically does not pour a lot of finances into biblical story telling.
These two are very well done and there have been a few in the past well done. I specifically am enjoying these two.
For The Chosen it does a very good job of humanizing the disciples and Jesus. Of course, they take a lot of liberty in filling in the details left out in scripture. What it does do is make The Word come alive in ways we may not have seen it before by attaching an example of what life was like back then and the different personalities amongst the disciples.
The same goes for The House of David series. I was reading through 1 and 2 Samuel which is where you will find the stories of King Saul and King David. Samuel was the prophet that lived during their time.
I was finishing up 2 Samuel which means I am finishing up King Davids reign and I started chapter 23. These words really got me when I read them. I said to myself, oh snap, Davids final words. What were they and I was excited to read them and he did not disappoint.
Think of a King after a lifetime of ruling a kingdom and being a man after Gods own heart. What would a king like that say.
This is what David said.
When one rules over people in righteousness.
When he rules in the fear of God.
He is like the light of morning at sunrise.
On a cloudless morning.
Like the brightness after rain.
That brings grass from the earth.
Now if you just read that you may just pass it on by. When I see the heading “David’s last words”, I stop and ponder. This is important.
I rephrased it for my personal use to:
When I live my life in true righteousness.
When I live in the awe and respect of who God is.
Then it is all of these things like the light of morning at sunrise.
Imagine living out our days in pure righteousness and awe of our creation.
Christian or not. This can apply to you.
Righteousness is simply broken down into this.
Right = Correct, just and ethical. Whatever your belief.
Eous = Full of something.
Ness = Turns adjective into a noun. Becomes a state of something.
Therefore, Righteousness means the state of being morally, ethically and spiritually upgright.
The Fear of God is often completely mis-understood. Fear of God can most easily be explained by looking at something and when you see it you are left in pure awe, reverence and respect for something you cannot fully comprehend but you know it is real and true.
When I lived on the beach here in Orange Beach, AL. I loved sitting on my back porch looking over the water. We would get storms all the time and we could see them roll in from far away. I would just sit out there and be in awe.
I would see lightning strikes and clouds form and the immense power these storms held but it did not cause fear. They caused respect, awe and reverence for what had created them. The power they held was unimaginable and how they came to be and how they move about made me know that to see it is a privilege and if it comes my way I better respect it and abide by what it is telling me to do.
It does not matter whether you love your job, your life, your family, your community or hate them or are indifferent to them.
If you wake up each day and live your life in the state of being morally, ethically and spiritually upright and if you live in awe, respect and reverence of who you see as your creator then there is nothing that life brings you that can bring you down.
You will live a blessed life, you will bless others with your life and you will hear on your death bed. Well done my good and faithful servant.
How would you describe how you are living life at the moment?
Does it line up with the final words of the greatest King in scripture or does it line up with something you hoped you would never be.
Life is a choice. It can change at any moment you decide to change it. Live today according that which you believe and the life you want to embrace. You are the only one that can make that choice.
