Here is a candlestick chart of the most common Mortgage-Backed Security or MBS (3.5% 30-yr FNMA) and its activity over the past 90 days. I’ll be happy to cover any of it in detail, but in general the candles represent the price of bonds (when price goes up, yield goes down and rates improve). MBS are where banks get mortgage money to lend, so there is a very direct relationship between movement in price of bonds and what banks offer.
The fat part of each candle represent open and close, wicks represent intraday high and low. Last 3 days are red, but take us back to the values around the middle of 8/10, the day after Fed announcement of “no change into 2013” (Big green bar about 10 trading days ago.) The upward slope in past month is mostly about losing hope on the US economy and clear “flight to safety” away from the Euro.
Today’s red candle was enough to get some lenders to reprice for the worse and others to reprice twice for the worse. I can see pricing is better for those with 11 am pdt pricing change vs 3 pm pdt pricing, creating an impact of about $1,500 in closing costs (on a $300k loan). The lower rate lenders are at 4.125% with 3rd party closing costs (appraisal, lender, title, escrow, etc) right near $3,200. 4.25% is at about $,1400 in closing costs with the lender paying the difference of $1,800 toward closing costs. Over the next couple of weeks, it is as likely to go back to 4.125% thereby achieving lower closing costs as it is of getting worse. If we don’t need to close in the next couple of weeks, we are being advised to float. There will be some turbulence the next two days on T Note auctions and Friday with the Bernanke announcement out of Jackson Hole. The market has already baked in some likelihood of a QE3 stimulus. Probably won’t happen though so there will be a temporary knee jerk against us Fri/Mon, then back to Euro distress and likely to get back to where we were.
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