Wow, I wouldn't want to have been a trader on the floor of the exchange Thursday, with an unprecedented sell off and recovery in a matter of minutes. Complete with rumors of someone erroneously entering an order with "billion" instead of "million" listed (rumor seems to have been squashed but it made for some intrigue.) Bonds went through a similar cycle both on Thursday and on Friday, with one major difference.
Markets move incredibly fast. See the Mortgage-Backed Securities (MBS) chart further down in this email. You can see the extremes of the 150 basis point ($1.50 per $100. in bond cost) swing on Thursday. The stock market moved even more violently (998 points on the Dow or 8% in one day). When stocks move, it translates dollar for dollar into shareholders wealth, their mutual funds and portfolios. When MBS move that much to the upside, banks do not translate it immediately into lower rates for borrowers.
Banks only move fast to increase rates. On the Thursday, where MBS moved 150 bps, one of our large national banks came out with pricing in the morning (the bottom of the green bar) and repriced once in the 150 bp climb (part way up) only to reprice again down, once it got back into the fat part of the line. On Friday, this same bank came out with pricing in the morning and never changed in spite of a 60 point climb. Nonetheless, mortgage rates improved with all of the action.
Mortgage rates for 30-year fixed on Friday got down to 4.625% and have settled back comfortably this morning to 4.750% for the price of an origination and normal closing costs. FHA 30-year fixed got down to 4.500% and settled back this morning to 4.625% for the price of an origination and the cost of mortgage insurance as necessary. For someone who has a limited time horizon for a loan, a 5/1 ARM, fixed for 5 years and amortizing over 30 years can be had this morning for 3.250%! Three-year fixed (3/1 arm) as low as 2.875%. We work carefully with our clients to understand their plans and timing and help them understand the options and judge the risks. Most often the benefit of the 30-year fixed loan "insurance" outweighs the possibility of extreme low rates, but it needs to be looked at in each case.
Signet carries other loan programs that will suit the needs of your buyers/borrowers. Jumbo program 30-year fixed to $600k as low as 5.250% and to $1.5 million as low as 6.125%. Construction lending in these same rate ranges. USDA RD loans to 102% of value. Manufactured home financing. From large acreage properties and farms to condominium projects, even largely unsold, non-Fannie-Warrantable condo projects. Signet can arrange workout and Bridge Financing for less than an arm and a leg. We have Fannie Mae HomePath® and Freddie Mac Homesteps® programs that allow 97% financing with NO appraisal to trip it up and NO mortgage insurance, ever on their listed REO properties. Call me to find out if the property you are considering qualifies.
The week ahead is off to a stabilizing start with Sunday's European Central Bank and IMF pledging nearly 1 trillion (in US$) to guarantee sovereign debt in weaker countries of Europe (the list is growing - Greece, Spain, Portugal, Ireland, I even heard Great Britain on the list last week.) It is hard not to be cold now when the European finger was being pointed and wagged at the US 2 years ago. Even with significant problems still looming in our own system (California default on the horizon) and some mistakes in the heat of battle, the response for the past 3 years has been nothing less than remarkable.
The markets are now open and stocks are rebounding with a relief rally. Bonds opened down in response but are holding their own at 101.25, above Wednesday's close. We have some interesting economic news coming with balance of trade data on Wednesday and Retail Sales data on Friday. But nothing will compare to what becomes of the European Flu. Can the guarantees hold off the run on the banks? And even more interesting will be the Treasury auctions this week of $82B. The flight to quality on Thursday pushed the yield on 10-Year T to 3.39% and before Sunday's ECB action we would have expected better than normal demand for US Treasury securities.
These days, more than ever, experience counts. Signet continues to grow and we appreciate your support. Please let us call your friends and clients who could use expert advice. Marci, make it a great week!
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