Updated: 2:35 pm-
Congress passed the rescue bill this afternoon. Stocks pare a decent amount of their earlier gains, the Dow is up 81 points compared to the 250 it was up to earlier in the day. Nasdaq has cracked 2000 and stayed there, up 24 so far and the S&P is looking at 12 points higher since the open. Mortgage Bonds are showing zero gain on the day, but this is up anywhere from 16 bp to 34 bp from when this mornings rate sheets came out. If this rally continues by moving up a little more even showing the stamina to hang on to current levels, Lenders will be in a position to reprice for the better. I'm not putting a "float!" strategy on the table yet for loans closing in the next 10 days, but I'm very close to that. Anything 30 days out, I am floating and locking over the weekend if research shows this is not a sustained trend I'm going to wait and see what next week looks like with the FOMC meeting minutes coming out on Tuesday afternoon at 2pm. I'll try to get an update on here over the weekend if not tonight so check back if you want to see how to advise your clients and/or how to proceed yourself.
Jobs- most jobs lost in 5 1/2 years and slight revisions to the two prior months figures added a net 4,000 jobs and unemployment holds at 6.1%. In 2008, the US has lost 760,000 jobs. This is a lousy report. Normally, this is going to move bonds higher (and rates lower) but prices are bouncing on account of several other factors that are proving to have a little bit more influence. There is talk that the Fed and other Central Banks around the world are strongly considering and even positioning themselves to actually start cutting rates and as we know, rate cuts are NOT GOOD for bonds and tend to push prices down. Which of course will push UP mortgage rates. Don't let the generic term "rate" lead you to believe that a "Fed Cut = Mortgage rate cut", the two are different animals that impact each other but are not the same thing. Speculation that the passage of the rescue bill in coming this afternoon is pushing stocks higher, the Dow is up 224.68 and the NASDAQ and the S&P are up 62.38 and 32.34 respectively. This is drawing money out of bonds and has our 5.5% FNMA Mortgage bond convulsing in a 50bp range. We've been up as much as 16bp and down as low as 35bp on the day. It's just 11:30am!! Currently, the 5.5% FNMA is trading at $100.09 which is down 9 bp. I think we're in for a wild ride today in all the markets.
We manage to bounce up anytime we approach the all important 200 day moving average but we're stuck on a ceiling of resistence at the 25 day moving average. Technical factors, i.e. stock trading, is most likely not going to be enough to break through that floor or above that ceiling. In other words, all the economic reports are out and the only non technical factor left to play on our market today is that bailout bill that is being debated in the house. If that passes and if the talk of Fed rate cuts heat up, we could see our support deteriorate and short term would be higher mortgage rates so call now, either me or your clients, or your mortgage professional you are currently working with, and find out what the current rate is and lock it if you like it. They are putting a 60% chance of passage on the bill so the odds are on it passsing. The "new mortgage market" is certainly different in that decisions have to be made on the spot and what you have to spend your time doing and discussing is strategy, not the hard and fast numbers because rates have proven that this mornings rates and this afternoons rates are often so completely different as the market acts and reacts violently to every whisper. So know what you need, know where to get the info, know what the next impacting force on the market is and just make prudent and well educated decisions on how to proceed.
Playing the "what if" game isn't the smart play anymore because there are too many variables and when it's your money, your family, and your financial well being that is on the table. You need solid advice from a mortgage lender that understands what is going on (to the extent that can be accomplished) and that you trust to make a decision with you and on your behalf after a thorough interviewing/game planning/strategy session. If your client isn't working with someone that can convey knowledge and understanding of the situation at hand, then you both could be in for a rude awaking when you get backed into corner and have to lock at an inopportune time because the "what if rates go down" card was played when there was information pointing the other direction. Call or email me if you further details on this, I hope this helps and we'll hope for a good weekend of selling houses and getting back to the business of serving our customers, clients, and borrowers.