Why are rates going up?

evolovik26 · Posted: Thu Feb 14, 2008 9:20 am Post subject: Why are rates going up?

Ridle me this

Whenever in the past I have looked at mortgage 30yr rates I have looked at 10yr treasury bonds and 30yr treasury bonds as the factor of the mortgage rates.
Several legit sourses have explained to me that when bonds are up the rates are up and when bonds are down the rates are down.
And for the past several years that I have been paying attention that has been true.
So why have the rates been steadily going up the whole last week while bonds have been droping like a rock!?!?

gmakerley · Posted: Thu Feb 14, 2008 2:14 pm Post subject:

you mean you can't smell the fear, eugene?

not that this is the scariest environment , but everyone is scared stiff. realtors, loan officers, buyers, sellers, owners, lenders, servicers, government folk, sheriffs, lawyers, doctors, indian chiefs....you name it.

maybe not you and me, though.

chrisburns · Posted: Thu Feb 14, 2008 2:19 pm Post subject:

The market stopped making any sence to me over six months ago.

gmakerley · Posted: Thu Feb 14, 2008 2:26 pm Post subject:

chris, while i have your attention, let me ask about down payment assistance down that way.

other then florida housing, and ship programs, do you have any awareness of other down payment assistance programs (soft second, of course) for a purchaser in brevard county?

i am struggling to work a deal with a borrower down there who is trying to accumulate the funds to make her purchase work.
thanks in advance.

chrisburns · Posted: Thu Feb 14, 2008 2:46 pm Post subject:

Is the seller willing to participate in order to facilitate the deal closing?

The only government sponsored down payment programs I've been associated with in Florida are SHIP loans however if your seller is willing to work with your borrower you can use non-traditional down payment assistance to get them done.

It would function in much the same way the FHA down payment assistance programs work where the sales price is increased and a third party filters down payment funds for a small fee.

gmakerley · Posted: Thu Feb 14, 2008 3:40 pm Post subject:

yeah, i have suggested that. this is a $100K purchase. the borrower came to me telling me that the price is $100k with no concession; in turn, I suggested they bump the price to $103100 so the seller can give back 3% and still get his $100k.

i have to do it as a my community mortgage at 95% ltv due to declining markets plus debt ratios that won't come close to qualifying for fha.

ah well...thanks for the input

chrisburns · Posted: Thu Feb 14, 2008 3:53 pm Post subject:

What are the debt ratios out of curiousity?

Posted: Thu Feb 14, 2008 4:16 pm Post subject:

Too bad you haven’t been following the spread volatility in the CMBS side. What a ride! Also a lot of “passes” – don’t want to even look at the project; well, then, when?; when the market gets back to normal. Yea! Killer on the widening spreads is that yield maintenance is still tied to the 10-year whereas the new rate on the refi is speeding far north.

Could be residential MBS is just catching up with what’s been going on in the CMBS side. Maybe folks have been the product "on the cheap too long" subsidizing borrowers.

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.12 Dollars($)

evolovik26,

Bonds have taken a dive and I am suprised that the rates have not gone up more than they have. It is suprising to see in this market. I would have thought that bonds would have gone up or even held steady. The 30 year bond sunk again today and there was a mid day worsening of rates by another .25%.

gmakerley · Posted: Fri Feb 15, 2008 8:06 am Post subject:

ratios on this loan are 42.15/55.51, chris. fortunately, on the my community loans i can run with ea-1 findings.

Jason1 · Posted: Sun Feb 17, 2008 8:11 pm Post subject: Rates and the 10 YR Bond

Hi Eugene, good topic. Theoretically when the yield on the 10 YR Bond rises (bond value decreasing) we see FRM rates rise. There have been a few times in the past several years where the opposite has happened which had always had me scratching my head. While the 10 YR Bond is a decent indicator of which way the FRM will move, it's really not the bond itself but the Mortgage Backed Securities of which a large portion of the 10 YR Bond is actually made. I haven't found a free or inexpensive way to follow the MBS so I stick with the bonds and try to get a sense of where the related markets are heading for the day. I'm not even sure I would want to follow the MBS as I think I already fixate far too much on the inner workings of our industry!

I do wonder what others have found regarding bond movement. My experience has been that when the yield on the 10 YR Bond moves intraday about 10bps that I'll expect about 25bps change to fee on FRM. Depending on how close you price to the 'floor' the next day's pricing can change dramatically, ie. par pricing when there's a dramatic charge to buy the rate below par. Also, I find some companies come out with pretty aggressive pricing in the morning and are very quick to change when there's even a sense that rates might move.

Any other thoughts on this out there?

Best regards,

ckalvesmaki · Posted: Mon Feb 18, 2008 6:13 am Post subject:

I think we are seeing more of a spread between what the bonds are yielding and what is needed to sell the bonds as part of an MBS.....the upward movement in rates since the January low and now I believe represents the added spread.....to offset past and future losses.

charlesarmbruster · Posted: Wed Feb 20, 2008 12:39 pm Post subject:

Yup, I'm still living by the 10-year.

Try to gauge your local gas price by gallon with the daily move in per barrel pricing and you'll find yourself in the same predicament, eh?

I always recommend locking rates when rates are dropping. Also, I try to educate my client by comparing rates -- 0.5% more doesn't really mean that much more in the monthly payment....it is more, but if you can't afford it, maybe you shouldn't be in that loan! Lenders concentrate on risk -- borrowers should too!

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