Is it Time to Change the MBS Coupon?

As I mentioned, the MBS bonds that we are watching are based on the 4.0% coupon.  What on earth does that mean?  Well after loans are closed they are pooled and securtized (sold to Wall Street in the form of bonds).  Since everything having to do with Wall Street is marked up, the coupon being traded will always be less that the prevailing interest rates.  Normally the mark up on MBS bonds is .75%.  As a result a 4.0% coupon would indicate rates are about 4.75%.  Currently that is close enought to the 4.50% rate to keep the 4.0% coupon in place.