Where R Rates / MBS Market Update
SHAKING FHFA UP
Yesterday we started the day down a little bit and ended the day up 3 across the board. For the record, that is the first time I have ever seen all mortgage bonds end the day with the same change in BPS. Even the Dow Jones was only off by 1 point yesterday showing up 4.
Part of the turn around was the good demand we got on the 2 year note treasury auction. As a reminder this week we have 160 billion in fixed rate securities auctions that are competing with investors buying our Mortgage Backed Securities. Between treasury and some large corporations putting out bond sales this week demand is going to play a role in our pricing.
Today we have 70 billion in 5 year treasury notes so we will see what kind of demand those receive. That hits at 1 PM Eastern time as one of those times of the day you may want to check where the markets are.
This morning William Pulte the FHFA Director that is shaking up Fannie and Freddie by firing a chunk of the boards and President and putting himself on the board announced that there is no intention to cut the loan limits for Fannie or Freddie. Honestly, I did not even know they were thinking about this.
A lot of what Pulte is doing is preparing the agencies per Trumps plan to get out of conservatorship but that is not happening anytime soon. Pulte is making a lot of changes that we will see as they come down the pipe.
Durable goods came in up this morning vs down which was not expected. Durable goods are manufactured items that are expected to last for 3+ years. Some of this is due to manufacturers trying to beat the tariff timeline so getting more sold at a quicker pace. This may be why we are down slightly this morning as that is good for stocks and bad for mortgage bonds.
The average 30 year fixed rate went from 3.72% to 3.71% so at least we can market rates are coming down! Mortgage applications were down 2% week over week. Purchase applications increased by 1% and refinance application decreased by 5% to get that -2% number. In case you are curious most of that purchase activity was driven by the FHA product which was up 6% week over week.
Other than two Fed Speakers not much else happening today. Of course, anything can happen in the news that will impact markets.
See ya tomorrow!
| YESTERDAY CONV 5.5% – UP 3 CONV 6.0% – UP 3 GOVT 5.5% – UP 3 GOVT 6.0% – UP 3 10 YR NOTE – DOWN 2 DOW JONES – UP 4 |
| SO FAR TODAY CONV 5.5% – DOWN 10 CONV 6.0% – DOWN 3 GOVT 5.5% – UP 0 GOVT 6.0% – UP 3 10 YR NOTE – UP 4 TO 4.35 DOW JONES – UP 198 |
GREEN is GOOD for Rates – RED is BAD for Rates
Product & Guideline Highlights Ad Mortgage Products
VA RECOUPMENT TEST
If you were to read the VA form 9723-A VA IRRRL Net Tangible Benefit form you may still be confused on how to calculate the 36 month recoupment test.
Here is the verbiage.
Total of all Loan Estimate categories are added for the initial statement (origination charges, services you cannot shop for, services you can shop for, taxes, HOI, interest, other government fees, and the VA Funding Fee).
FULL FORM LINK
So, do you include taxes, insurance, VA Funding fee and escrows in the recoupment?
Now, let’s go to VA Circular 26-19-22 page 2 3 paragraph from the bottom. Here is the verbiage.
(3) Calculating Recoupment. Recoupment is calculated by dividing all fees, expenses, and closing costs, whether included in the loan or paid outside of closing (i.e., an appraisal fee), by the reduction of the monthly PI payment. The VA funding fee, escrow, and prepaid expenses, such as, insurance, taxes, special assessments, and homeowners’ association (HOA) fees, are excluded from the recoupment calculations. See Exhibit B for more specific instructions and examples including IRRRLs with Energy Efficient Mortgage (EEM) improvements.
VA CIRCULAR LINK
How about now? What do you include?
As is typical our agencies like to complicate things that should not be complicated.
The answer to the question is you must include all closing costs or should I say allowable closing costs and divide by 36 months. You do not include any form of taxes, insurance, escrow or funding fee.
If you are using a lender credit to pay costs you do not have to include those as well. It is only closing costs that are either financed by the Veteran or paid at closing. If lender is paying or has to do with non-closing costs then they are not included. But the form makes you put them on there. Very strange.
By the way, you can do an IRRRL if the P&I payment is increasing. The only rule on that is that the Veteran cannot be paying a single penny in closing costs. All must be covered by the lender. Main reasons for increasing P&I is going from Arm to Fixed or to a shorter term.
Hope this helps!
Jackism of the Day
THE 3 POUNDER
The one thing that I love about life and about truths in life is that they are so simple. Life really is not that complicated.
Over the last couple years I have become a lot more health conscious. My main decision for that was because as we grow older (I am 55), we see a lot of people with health problems, some dying earlier due to one reason or another and just our bodies do not work as well as they did in our 40’s and earlier.
I want to be here to enjoy my grand children and to enjoy retirement. To be active and engaged and travel through my second half as they call it. That is my why behind it.
I was smiling as I got on my scale this morning as I weigh every morning. I do it because I like to see the results of my actions from the previous day. I learn a lot from it.
I have been at my desired weight for a year or two now so I go up and down within about a 5 pound range and am ok with it. When I got on it this morning I had gained 3 pounds yesterday.
A big ole smile came across my face and I said to myself, yep, that makes sense you big dummy. But oh my, that breakfast I splurged on at my mens Tuesday morning group was not my normal I get. That strawberry sprinkled donut I found on the counter was amazing, the peanut butter and jelly piece of toast I had around 3 was tasty and the bbq we went to at my kids house with the big ole cheese burger with all the fixings and a big ole hotdog with chili and cheese and yumminess tasted great after the 93 chips I dipped in the French onion dip with the big ole side of pasta salad.
Then on the way home we stopped at Culver’s and got the custard flavor of the day which was Rasberry Cheesecake. Wheweeeee, that was yummy. Even my 115 minute weights workout and hour of cardio did not seem to counteract all of those choices.
That is why I smiled and I absolutely loved gaining the weight. If I had done all of that and gotten away with not gaining weight, then what lesson is there to be learned? We should not get upset when our actions give us the results. Don’t get mad at yourself because you slipped up and had a glorious day of eating or whatever you are tracking.
Get happy about it because it is at that point we grow. We grow in to a better person and remind ourselves of what does not work to achieve our objectives. Today, I assure you I will likely lose 1 or 2 pounds and by Thursday or Friday I will be back to my place I like to be because of the choices I make.
Is your marriage struggling? Both I and you can probably explain why. It’s not rocket science. It’s overcoming pure selfishness and not loving your spouse unconditionally for exactly as who they are vs who you want them to be.
Are you broke or don’t have what you expected you would have in the bank? Very easy. What is your savings pattern, what is your spending pattern? Give me a spreadsheet of a persons bills and 3 months bank statements to go through and I can cure most peoples financial problems and get them on the right track. Done it 100’s of times. It’s right in front of us as to why.
How’s your health, finances, business, hobbies, relationships? Think of where you do great and think of where you fail miserably. I think you can figure out it is because of your choices that made them that way.
I have been playing the guitar for over 20 years. I cannot play you a single song all the way through. Nope, not one. It’s because I piddle then put it down. Mind you I like to just pic and play through different chords and stuff. Not a big memorize a song guy. But I am still not very good and I know exactly why.
I have a great marriage, a wonderful relationship with my kids and family, physically healthy, a good income, an efficient retirement account and zero debt and Jesus is the #1 priority in my life.
The reason is because I track habits and behaviors in every one of those areas. It is also because I have failed miserably in all of those areas in my lifetime. I mean epic failure and times of my life I desire never to go back to. My lessons usually come from struggle and oh do I still struggle to make the right choices on a regular basis. This only makes us stronger when we learn from our choices.
What choices have put you in the place you are right now in an area of your life. I am sure you are thinking of an area you are struggling in. That is good, I also encourage you to think of the area that you are doing very well in and ask yourself why? Then apply the good areas of your life to help you figure the areas you struggle in. This is exactly what I do. I have a long ways to go in all areas of my life that are good in order to still make them great.
It’s very simple. It’s up to you and your choices to be the person you desire to be.
