Search This Blog

Tuesday, December 9, 2014

Mortgage Bond Market Analysis - What's going on?

Happy Tuesday Morning - if you're not invested in Greece or China.  So there's very little economic data and what data there is surprised to the up (good) side yet the benchmark bond is continuing yesterday's rally.  So what gives? While we were sleeping, the global equity markets were getting rocked. The two main culprits were China and Greece and the China stock market was down 5%+ and Greece’s down 11%+ (would be the equivalent move of 900-1000 points on the Dow). Apparently the powers that be in China sensing their economy is in a bit of a downturn and concerns over defaulting loans banned investors from using low-grade corporate bonds as collateral for short-term financing (that took a little air out of the bubble). Then separately of course Greece’s government decided to bring forward a parliamentary vote for president. The vote will now take place, two months ahead of schedule. The bleeding has of course found its way to the US and the Dow is down 192 (1%) and bonds are getting the benefit. Not sure they deserve it on their own but they are the world’s safe investment vehicle.  Here's today's chart:

The lack of data continues tomorrow so the market will again depend on direction from other sources like economic news from different parts of the world.  For now the benchmark bond is up 10 basis points, 18 off the high for the morning.  It's 3 basis points below the 1st level of resistance and 18 below the 2nd resistance level.  It's a good time to lock but if you decide to float, watch the market carefully because you never know when a big sell-off will happen.

Loan limits announced (and more):  FHA announced that their floor (maximum loan amount for low cost counties) is 65% of the conforming loan limit ($417,000) or $271,050.  The actual loan limits for individual counties have not been released yet - Clark County, Nevada is currently $287,500 and Salt Lake County, UT is currently $300,150.  

On a related note, FNMA and FHLMC have decided to offer financing to qualified borrowers with just 3% down.  This program went away shortly after the melt down, came back for a little while, when away again, and now, surprise, it's back.  This is a great alternative to FHA financing for those who qualify.  Here are some differences to keep in mind:  1) rates on conventional loans are very credit score driven and there are also loan level pricing adjustments for loan amount and LTV so the rates for the 97% LTV program will likely be a fair amount higher than FHA (.5% - .75% in my estimation).  2)  There is no upfront mortgage insurance on conventional loans. 3) The mortgage insurance rate for conventional financing at 97% is probably about .5% lower than FHA's annual mortgage insurance rate - this will roughly offset the higher interest rate, and 5) mortgage insurance for conventional loans automatically cancels when the loan balance reaches 78% of the original purchase price - FHA's is life of the loan unless you put 10% down (then it's 11 years).

This is a lot to digest but all in all the news is good - there's another good option for people to finance their home purchase.  I'm available if you have any questions or need a mortgage approval to purchase a home - 702-812-1214.  Make it a great day and feel free to share your thoughts in the comments section and share this post with your friends and associates.

No comments: