Mortgage Market Guide as of Wednesday, November 21, 2007

By
Mortgage and Lending with FAMILY HOME LOANS

THE ELASTIC WAISTLINE PANTS ARE READY FOR TOMORROW!!!

Volatility continues in the Bond Market.  Currently, bonds are up a whopping +38 basis points so we're enjoying this news.  As of today, we are offering 30-year fixed at 6.375% with NO points and we will advise to "float" your interest rate to see if further gains come our way. 

Yesterday, Mortgage Bonds opened lower, hovered on an support floor of support throughout the day before dropping sharply right before the market close.  Unfortunately, we heard of some lenders re-pricing early in the day, which is unusual in advance of the release of the Fed Meeting Minutes without a significant move in the market.  Thankfully we have had a great ride on the Up Escalator, which provided significant gains.  But, we apologize if your lender had re-priced prior to the alert.  We always strive to be ahead of lender moves and assure you that we will continue to do our best.

Yesterday, it was also interesting to see the divergence between Mortgage Bonds and the Ten-Year Note.  At one point in the day, the Ten-year Note was trading 12bp HIGHER and Mortgage Bonds were 22bp LOWER. 

Also yesterday, the Fed Minutes and Forecasts were released.  There were no surprises, but the Fed did forecast lower inflation ahead, which is good news for Bonds in the longer term.  Additionally, there was some talk that indicated some Fed members feel the Fed should not cut rates at the Dec 11th Meeting.  However, the forecasts for lower inflation, slower economic growth and slower job growth all suggest that there may indeed be another rate cut in December. 

Stocks are getting hammered lower and from a technical standpoint are looking pretty bad.  Each of the three major stock indices, the Dow, NASDAQ and S&P 500, are trading beneath their 200-day Moving Average.  As long as Stocks continue to struggle, Bonds may be the beneficiary as money flows out of Stocks and into Bonds.

Technically, Mortgage Bonds remain on the Up Escalator and this morning's rebound higher has popped prices back above yesterday's floor of support.  With prices still enjoying the nice uptrend we will continue to float longer-term transactions, but be mindful of the extreme volatility and itchy trigger fingers some lenders are showing.  This means that if you have transactions closing in the next couple of weeks, you need to pay closer attention to the quick daily changes in pricing.  However, with transactions closing 30 days out or more, it is wise to watch the long-term uptrend in price we are seeing.  In either case, should prices step off the Up Escalator as we have seen in the past, we will quickly change to a locking stance across the board.

On behalf of John Adams Mortgage and myself, Have A Very Safe and Happy Thanksgiving Day!

Santos

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