Where R Rates / MBS Market Update
HOPE FOR BETTER RATES
A green week is a good week in my book. We had a nice rally on Friday that got us back in the green. Last week we ended at Friday close of business not to far from where we started Monday open in the Fannie and Freddie space. Govt loans ended up a bit better than conventional did.
We are also starting out the week with some green on the screen this morning. We started out significantly better and have lost a little ground this morning for morning rate sheets. Should be close to where we ended last week.
This week is going to be full of jobs reports. Today we have a manufacturing index coming out called PMI (Purchasing Managers Index) where we get insight on new orders, inventory, supply and other information that helps gauge what the next 6 months looks like for businesses.
Tomorrow we have JOLTS which is job openings and labor turnover survey telling us who is hiring, who is firing or laying off and how much.
Wednesday is ADP and Fridays is payrolls and unemployment.
We are sitting very close to the highs we have seen so far this year so we are trying to break through in to another trading window and into better rates.
We also had a unique month in March that has not happened in 5 years. The standard quo for stocks and bonds is when stocks are good then mortgage bonds are bad and vice versa. They typically do the opposite of one another. Depending on the economy you either want to be an owner (stocks) or in bad times you want to be a debtor (bonds). When inflation gets involved that messes up all of the normal flows. March was an indicator of getting back to the normal tug a war of bonds vs stocks.
Lastly, the Fed starts tomorrow with it’s pause on quantitative tightening. Quantitative tightening means that the Fed is actively reducing their balance sheet. This means when treasury bonds mature they do not re-invest those funds. They do this so their total balance sheet decreases. They are pausing this.
Last time they did this it was very good for mortgage rates and bonds. Until they started cutting the Fed Funds Rate and plop there it went. Hoping for good results on this as well. If they do reinvest that keeps demand up and demand is good for mortgage rates.
| LAST WEEK CONV 5.5% – UP 6 CONV 6.0% – UP 9 GOVT 6.0% – UP 25 10 YR NOTE – DOWN 5 TO 4.23 DOW JONES – DOWN 596 |
| SO FAR TODAY CONV 5.5% – UP 9 CONV 6.0% – UP 3 GOVT 5.5% – UP 9 GOVT 6.0% – UP 3 10 YR NOTE – DOWN 3 DOW JONES – DOWN 170 |
GREEN is GOOD for Rates – RED is BAD for Rates
Product & Guideline Highlights Ad Mortgage Products
INSURANCE COVERAGE
Understanding the minimum required insurance is not an easy task for a lot of folks out there which includes me.
It is actually quite simple, although when you do not do it every single day it can be difficult to get it straight in your mind as to what the minimum required coverage is.
First, you must know that an actual cash value insurance policy is never acceptable to the agencies. If you get one you cannot accept it.
Actual Cash Value if you have a claim takes the amount of coverage you have then depreciates the items you are repairing based on their age or condition and then takes out the deductible. This is a very bad policy for folks when it comes time for a claim. That depreciation can hurt as well as if the value listed is not accurate then it can also hurt.
Replacement cost value takes the insurances amount to repair the property with like materials and condition as it was before the claim was required minus the deductible. This gives much better coverage for the owner and the agencies to get proper repairs.
To get the needed coverage you must have two numbers. You have to have them. You must have the listed amount of replacement cost value coverage and you must have the unpaid balance.
Out of those two numbers you will need three numbers to be able to figure the coverage needed.
#1 – Replacement Cost Value
#2 – Unpaid Principal Balance
#3 – 80% Of Replacement Cost
This chart explains the minimum coverage. Columns 1 and 2 make it easy. Column 3 is where you have to remember the rules.
COLUMN 1
If you have 90K in coverage and your UPB is 100K you can use the lower 90K because that is all it will cost to repair the home. As long as the lender and agency knows they can get the house fixed back to like kind condition then they are good with it.
COLUMN 2
This column makes sense because if something happens to the house then at least we know that the mortgage can be paid off regardless of whether they fix the house or not. Remember, when a claim comes in the check goes to the borrower but the borrower must send it to the lender to get the check processed back to them. Therefore, the lender has a check sitting in escrow that will pay the house off in full if the work is never completed.
COLUMN 3
This is the one most people forget. When you have a lot of equity most think the unpaid balance should be sufficient. Based on #2 it would make sense. The rule though is that as long as the unpaid balance is more than 80% of the replacement cost value then you can use unpaid balance. If the balance is less then you must use the 80% rule. You just have to know the 80% rule and compare the two.
Hopefully this helps you understand the why behind the what. May be a good tutorial for referral partners and clients to better understand the required amounts. The reason we do not use full value or appraised value is due to land is not part of insurance policies so these formulas must be used.
Jackism of the Day
NO EXPECTATIONS
One of the truths I live by served me well this past weekend and when used properly it can serve anyone well in the right situations.
This past Friday was one of our community gatherings where we invite the entire community (88 Townhomes) to the pool on a Friday night with a BYOB and some foodage to share. We do it likely 6 – 8 times per year.
Then on Saturday was our Annual Workday where we get the property ready for the season and do a lot of improvements ourselves vs paying contractors which allows us to keep our property in pristine condition without all the cost.
With this comes a lot of comments and opinions though. I always find it entertaining listening to some of the conversations and I just listen and smile and nod my head and even sometimes share the truth that saves me a lot of grief and it could for you as well.
As the President of the Association there is two other guys and myself that pretty much maintain the entire property 364 of 365 days of the year except community workday. Some people chip in from time to time but for the most part it is 2 of us here full time and 1 part time that helps when he is in town. We get a lot of thank you’s and great job and people stopping and offering water. Nice gestures and I say thank you and am appreciative of their comments.
The truth I live by is “If you have no expectations, then you will never be disappointed”. This has served me very well in my Association capacity as well as in all areas of life.
The comments I heard on Friday and Saturday throughout the day was why is so and so not coming out. I see their car. They should be out here. Or, I bet so and so won’t come out and help. This is their property too. Or so and so is not working as hard as I am and they need to pick up the pace and do their share. And of course at the dinner party small comments like I wonder if they are making a statement by not showing up.
Let me be clear. This is about 1% of the conversation. The other 99% of the conversations were great, very uplifting, wonderful camaraderie, good times and it is an amazing community to be a part of.
It is the fatal flaw that just because you are doing something does not mean everyone else should have to do it as well. I love piddling around the property and fixing stuff and doing projects and serving people. I get bored off my rocker if I just sat inside when I was not working and watched tv. Not to mention I am a control freak and like to be in charge of most things I am a part of. My kids are grown, I have minimal hobbies, I am a minimalist and just get bored so I enjoy getting out and doing stuff.
That is not the case for everyone. As a matter of a fact the reason most people buy a condo or townhouse or have an association is so they don’t have to do any of that. Not to mention they pay a monthly HOA fee so they don’t have to. I am all for that.
The point here is to think twice before judging the actions of others just because you are doing something that you feel someone else should be doing as well. You do not know their schedule, what is happening in their life, their stress or tired level or their why behind why they do not or are not doing what you are doing. Your not that special.
I guarantee you pass by people doing something that you could easily stop and help with but do not every single day. At work, in the community and I know right in your own home.
If your going to do something. Do it because you are called to do it, want to do it and enjoy doing it without any expectation of a thank you in return nor anyone coming along side you to help you. They are not you and you are not them.
Of course, your going to think it. I know I do. Then I say to myself, Jack, it’s not about me and it’s not about them. It’s about who I am and desire to be. We are not put here by our creator to decide other peoples lives and choices. We are here to fulfill ours.
Do what you do because it is the right thing to do. Then let others do their passion for what they do because it is the right thing for them to do.
If you always do what is right then you will never be wrong in your own heart. If you have no expectations of others, then you will never be disappointed in others.
Be the best you that you can be so that others can be the best they can be in the way they desire to be it.
