Where R Rates / MBS Market Update
RATES TAKE OFF
Well folks, we are in the midst of an almost 8 day run of better rates. That is fantastic to hear and should put a smile on your face while at the same time saying whoa that is going up fast. Check out todays gains. What next?
If you look at the graph below. The far right represents today then yesterday then the day before going all the way back to November 25th. Each “candlestick” is one day. Green is good. Red is bad. We have had 7 out of the last 8 days be green with one tiny red in the midst of it.
This is good as this means better rates. This is also what you look out for when it decides to hit a ceiling. As an example, pretend the below graph is a stock price. Just pick one. Game Stop or Nvidia as they are known from the news in the past. Now when a stock goes up like that what eventually happens. Investors cash in and sell that stock and there goes the quick rise in value and it goes back down.
I am not saying it is going to reverse but it will hit a ceiling at some point and reverse so keep that in mind when deciding to lock. What you want to do is look at the history of when it reversed last time. That is what we call one of the potential ceilings. If you count 14 candlesticks from the right to the left that is when it reversed last time and we broke through that ceiling which is great news.
Our next big ceiling will be if you look at 9 to 11 candlesticks from the left to the right. That is when it took a deep plunge around December 6th. I think that was an inflation thing but it was still a ceiling and it reversed. Up is good for rates and down is bad. We are about 15 BPS from that at the moment.
I am not saying lock or not lock as I don’t do that and if I did I would choose the opposite of what I say : ) I am just saying don’t look a gift horse in the mouth and you gotta know when to hold em and know when to fold em. Nobody has the crystal ball so just advise your client and let them choose.
The Home Price Index came in today and it shows an overall 4.5% year over year increase in values if you look at the 20 largest metro cities in the country. NY was the highest at 7.2% then Chicago at 6.6% then Boston at 6.3% with Tampa bringing up the bottom at negative 1.1%. Ouch!.
Yesterdays bond auction showed a great demand yesterday which certainly helped rates yesterday. We will see what todays huge 5 yr bond auction will bring plus we have some Fed Speakers, Consumer Confidence and The Richmond Manufacturing Index coming in today. None are huge market movers but together it can do a little thing or two if it comes in way off expectations.
| YESTERDAY CONV 5.5% – UP 15 CONV 6.0% – UP 12 GOVT 6.0% – UP 13 10 YR NOTE – DOWN 3 TO 4.40 DOW JONES – UP 32 |
| SO FAR TODAY CONV 5.5% – UP 25 CONV 6.0% – UP 19 GOVT 5.5% – UP 21 GOVT 6.0% – UP 12 10 YR NOTE – DOWN 8 TO 4.32 DOW JONES – UP 236 |
GREEN is GOOD for Rates – RED is BAD for Rates
Product & Guideline Highlights
LEASE LENGTHS
One of the places I get ideas for this section of my morning update are from client scenarios. Any time I don’t know the answer and I ask the question and get an answer that surprises me I always like to share that with you.
If I did not know it then I am sure some of you do and others do not. So here is to something I did not know and now you will : )
A borrower had departed his residence last year. When he departed he leased his property out on a six month lease. Most people either do 12 month leases or daily like VRBO or Air BNB.
We have heard the term short term leases are not allowed but what does that mean? According to google it means any lease less than 12 months.
Here is the point. Fannie Mae requires a 12 month lease in order to use it as income. Freddie Mac use to require a 12 month lease or at least I believe they did. That verbiage has now been removed. It just requires an active lease. It no longer defines the term required.
Now do not get me wrong. We are not going to take a one week or one month lease. I suppose this will be up to the interpretation of each lender as to whether they will even take a six month lease.
As for us we accepted the six month lease and submitted the loan to Freddie Mac to close it.
As you get questions from referral partners and clients now you know what you can and cannot use on lease terms. May be a good little Did You Know for those that you serve in your community.
Jackism of the Day
RECOGNIZE THE NUDGE
Do you ever get that nudge from your gut that says you should maybe do something or in some cases stop doing something? You know what I am talking about. It starts as a gentle nudge and then as we ignore that nudge in our gut it begins to grow a little more each day.
It continues to grow until it becomes a burden on us. Something that makes us scratch our heads and say to ourselves. What do I not know that my gut is telling me that I should know.
That gut feeling or that nudge comes from your core of who you are. You can call it your aura or your internal moral or ethics code or your body telling you something or for me it is usually the Lord saying YO JACK, do you want me to whisper this to you or would you rather me scream it from the mountaintops.
Whatever view you take on this here is what you need to hear. Your aura, moral code, body or God all of them will patiently wait until we make the decision ourselves to do something that we likely have been given lots of notice to do something about.
I had a great aha moment just this past weekend. It really made me smile.
If you have been reading my Jackism’s long enough you know my story with alcohol. If not, here is a recap. I drank 2 – 3 drinks almost all nights for the past 30 years. I never got drunk, it never hurt my relationships, it never cost me financially, it never impacted my work. It was a habit that after work my wife and I would hang out together and have a drink or three and it was how we started our evening. Me more than her number wise. After dinner we were done and all was normal. I enjoyed 3 cups of coffee in the morning and 2 – 3 drinks in the evening.
But there was this divide between me and God and each morning He would remind me of this. I never truly realized why. It was not a big problem. I would quit fairly regularly for a week or two just to say I got this and I was fine quitting for that period. Not easy but I was ok with it. Even went three months once before.
When I quit nobody wanted me to. I was now impacting their life with my motivations. But every morning I got up and during my prayer time he kept saying Jack, anything that has this much control over you then do you really want it part of your life? I would then respond with well does it have that much control? Really? Kinda sorta I suppose. I definitely looked forward to it and it did allow me to relax.
11 months ago on Easter Sunday I finally conceded. I have not had a drop of alcohol since that day. I never intend to have another one again. Ever. That is my intention at least. It was hard when I went from I will quit for a week or two to prove I am ok to making the statement I do not drink anymore.
I don’t miss it. I have never been healthier in my lifetime. I sleep fantastic. One of the biggest shockers was my blood work. Holy cow, it practically cured anything I had. I was blown away as was my doctor by the results. I have had low testosterone as long as I can remember. It more than doubled in six months. Sorry my lovely bride. HA! Cholesterol went down and all of my blood work got better.
I just don’t want that stuff in my body anymore. Simple as that. Side benefit was I also quit caffeine at the same time. I was not going to let anything have control over me regardless of what it was. I have a little coke or regular coffee when I am out from time to time but 95% of the time I am caffeine free. That has made an immense change as well.
I still attend all of the community parties, go on all the same trips I did before and have drinks with friends and family events. I just have NA beer instead. I have missed out on anything. I actually feel sorry for a lot of folks but I never judge as that was me not too long ago.
Now let me get to the point of the story here. What was my great revelation? God had been nudging me for another reason than saying I had a problem. I had a bad habit but I wasn’t an alcoholic.
I think I got the nudge in my gut because it was a warning sign of where I was heading. It was a sign for my future. I did feel like I was having that third drink more often than not. From time to time I would have that third one after dinner.
I think his nudge said Jack let me save you from where you are going. You have handled it up to this point but it is beginning to take an unhealthy path forward. You are relying on it more than you are relying on Me (God) and I am not sure you know that.
What do I think? I think that nudge in my gut saved me from a future I never want to know what could have been. I think that nudge brought me to a split in the road and I went left where I was heading to the right before. I changed my end destination of where life may have been taking me to a far greater place.
There are plenty of examples of what it has done to others. I am just thankful I saw the warning signs and listened to that nudge to take away what could have been.
What nudge are you having or have had for a very long time that maybe it is time that you start listening to that rumbling voice in your gut. What split in the road are you facing that you still have control over to choose which way you will go?
