A Quick Refresher on Mortgage Pricing

Conforming loan pricing is calculated directly based on movement in mortgage backed securities (MBS) with every 50 basis point movement in the price moving the rate up or down by .125% (one eighth of 1%).  MBS are securities traded in an open market just like U.S. Treasuries and other fixed income products.  Typically when packages of loans are scrutinized (sold to Wall Street firms), the firms charge a commission of about .75%.  For that reason, with rates around 3.625%, we are following the 3.0% coupon bonds to allow for the commission to be added to the rate.  Though MBS bonds and Treasuries typically trend in the same direction, media assertions that the Ten Year U.S. Treasury bonds determine rates are not true.