We've reference "VWAP" before, though it's not a metric that makes it into every post. VWAP stands for "Volume-Weighted-Average-Price." We find it to be an incredibly useful, simple, and logical tool in telling another story about what is happening in the markets beyond the simple price charts. In short, it WEIGHTS a given price with the VOLUME traded at that price. As such, it tends to show a much more stable picture of most trading days considering that volume tends to congregate most heavily at or near one price and taper off as it moves further and further away from that price. Here's a visual on this concept of "distribution" As you can see the volume congregates most densely around 116.28 and generally tapers off from there. This isn't always…(read more)

Source:MBS CLOSE: Illustrating Deceptive Effects Of Low Volume

“The real and effectual discipline which is exercised over a workman is … that of his customers. It is the fear of losing their employment which restrains his frauds and corrects his negligence.” Adam Smith – Scottish philosopher and famed economist, 1723-1790. Among other things, Adam Smith is known for the concept of Division of Labor. As we visit mortgage operations around the country, we see many types of business models. The mortgage business is actually pretty easy… Sales people, (loan offices), go out and kill the animal (originate a loan) The animal (loan file) is skinned, dressed and package up for market (mortgage operation) The finished product (investor file) is delivered to market for sale (secondary market investor). Within these three broad areas of the mortgage…(read more)

Source:The Evolution of Origination Processes and Lender Operations Models

Vic gave me permission to write on his blog today. Thank you Vic. So most readers are locked right? At least those of you who are closing in December? We have been shouting LOCK from the rooftops since early December. I assume there are not many readers still holding their breath in hopes of better mortgage rates before 2010. Right? Putting aside compliance issues…administratively I'm not even sure its possible not to be locked at this point in the month. Tomorrow is pretty much an off day, lock desks will be thinly manned and bps cutting decision makers will be no where near their rate sheets. Then early next week, only specific secondary staff will be present, the processing pit will be sparse, underwriters will have up out of office replies…but you should find a few closers and shippers…(read more)

Source:Attention Floaters and Fence Sitters: MND Mortgage Rate Outlook

I am really struggling to find something to talk about today. I already discussed the delay of FHA HVCC, we went over Personal Income and Spending data, I published color on New Home Sales , wrote on mortgage apps, and already told you that secondary is on cruise control until 2010. Not many new stories to share with you….especially in the bond market. Rates showed signs of a rally in the overnight session and carried progress over into the NY trading day…something we were anticipating but not as a function of any BIG PICTURE perspectives. This outlook was based on expected "position squaring" and final exit from the market ahead of Christmas, which we considered to be bond market friendly because positions were SHORT, which needed to be covered, which means buying at the lows…(read more)

Source:MBS LUNCH: Shorts Covered. Positions Square. Flows Now Nonexistent

Has AQ shared with you guys already that there is not much to say about the market at the moment? That continues to be the case. Data is non-existent and volume is pathetic. After seeing some AM short covering that brought the 10yr yield down 3.69. Volume takes a noticeable vacation and the bid-side of the market went with it. So sellers soliciting bids were met with more than a few answering machines, vacation messages, and out-of-office replies, figuratively speaking of course. So, the less demand on the bid side of the equation, the more yields have the room to back up regardless of volume. In other words, there isn't some significant amount of "selling" per se, but more appropriately, just no buying. This phenomenon has led both MBS prices and tsy yields more or less in line…(read more)

Source:MBS AFTERNOON: Slow Decline Back Toward Par

I am in a really goofy mood this morning. Unfortunately this state of mind is making its way onto paper via sarcasm. Please see the Mortgage Apps story for more on that… At 1am the Treasury announced the terms of month-end debt supply. $44,000,000,000 in 2s go off on MONDAY December 28 $42,000,000,000 in 5s to be auctioned on TUESDAY December 29 $32,000,000,000 in 7s will be auctioned on WEDNESDAY December 30 That totals $118bn ($95bn in new cash). Pretty much "as expected" in terms of auction amounts. Oh…and by the way. "Rate sheet influential" MBS prices are FALLING FAST! The FN 4.0 is now +0-06 at 97-04 yielding 4.273% and the FN 4.5 is +0-06 at 100-06 yielding 4.489%. (My speeds are slower than the street's assumptions). The secondary market current coupon is…(read more)

Source:MBS MORNING: Reprices for the Worse Possible

First off, if you use a Blackberry and have not been receiving email or have found it difficult to surf the web…don't yank the battery yet, you are not alone. RIM has confirmed another outage, the second one in less than a week! READ MORE Now, this implies if you are a devoted MND Mobile reader or have not been back to a computer since yesterday afternoon, that you may have missed the big news I sent your way last night. The FHA has delayed the implementation of HVCC guidelines . HERE is the story. If you have been unable to locate the "official" notification, you are not alone, many others have emailed asking what/who was my source of this information. I responded back to all inquiries with the same response: I GET ENCRYPTED MESSAGES FROM THE FHA WHENEVER MAJOR NEWS IS ABOUT…(read more)

Source:MBS OPEN: Modest Rates Recovery Before and After Data

The Census Bureau and the Department of Housing and Urban Development today released New Residential Home Sales survey data for November 2009. The survey is primarily based on a sample of houses selected from building permits. Since a “sale” is defined as a deposit taken or sales agreement signed, this can occur prior to a permit being issued. Changes in sales price data reflect changes in the distribution of houses by region, size, etc., as well as changes in the prices of houses with identical characteristics. It takes four months to establish a trend of new home purchases In last month's release, which reported on October survey data, sales of new single family houses rose 6.2% to a rate of 430,000 annual transactions, much better than the market's expectation for 410…(read more)

Source:New Home Sales Fall in November. Activity Still Stagnate Near Record Low Levels

The Mortgage Bankers Association today released the Weekly Survey on Mortgage Application Activity for the week ending December 18, 2009. The survey covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole. Furthermore, in a low mortgage rate environment, such a trend implies consumers are seeking out lower monthly payments which can result in increased disposable income and therefore more money to spend on discretionary items or to pay down other debt. In last week's release, new loan application activity…(read more)

Source:Refinance and Purchase Loan Applications Fall Heading into Holidays

Cashtration (n): The act of buying a house, which renders the subject financially impotent for an indefinite period of time. Maybe this is some "ok" news? In a story that I first noticed here on Mortgage News Daily, enactment of ML 2009-28 ("Appraiser Independence") will be delayed until February 15, 2010 . "ML09-28 (originally planned for a January 1, 2010 implementation) has two parts: a) prohibition of mortgage brokers and commission-based lender staff from the appraisal process, and b) appraiser selection in FHA Connection. The effective date for both sections of this guidance will now take effect for all case numbers assigned on or after February 15, 2010. This extension will provide FHA and lenders additional time to adjust systems to accommodate the changes….(read more)

Source:Delay in FHA Appraisal Requirements; RESPA Update; VA Loan Flipping; Mortgage Apps Down

Markets are looking to push upwards for a fourth consecutive day ahead of several economic releases this morning. Two hours before the open equities are clearly looking up with Dow futures 25 points higher at 10,433 and S&P 500 futures up 4.50 points at 1,118.00. WTI crude oil is below the $75 per barrel mark but has inched up 10 cents overnight to $74.59. In minor contrast, Spot Gold is down 3 cents to $1083.97 per ounce. In case you missed it, Treasury Secretary Tim Geithner told NPR last night that economic growth is “accelerating now in the fourth quarter.” He said consumers are spending more, businesses are beginning to invest again, and the risk of a W-shaped recession was mild. "We are not going to have a second wave of financial crisis," Geithner said. "We…(read more)

Source:The Day Ahead: Equities Looking for Fourth Straight Gain

House prices rose during October according to the Federal Housing Finance Agency's monthly House Price Index (HPI.) While the increase was only 0.6 percent on a seasonally adjusted basis, it followed two months in which prices declined and was only the 7 th upward blip in the last 31 months. At the same time, the 0.0 percent estimated change in September was revised downward to a 0.4 percent decline. Since October 2008 prices have fallen 1.9 percent and they are off 10.8 percent since the peak of the housing market in April 2007. The HPI is compiled from data collected by Fannie Mae and Freddie Mac data on the houses purchased with mortgages bought or guaranteed by those government sponsored enterprises. The index is unique in that it only includes houses where a previous sale was also…(read more)

Source:FHFA: GSE Owned Home Prices Up Marginally After Revision

Two days… Two catastrophic beatings for bonds. And I keep looking up at the stock chart and it still looks like the top of Bart Simpson's head… The S&P has a lot of 1's in it, and the Dow seems to be 10,4xx every time I glance at it over the past few days. So either AQ is messing with me again or stocks continue to hold relatively sideways while bonds put bullet after bullet in their heart of hearts. And with losses in 4.5's today, they're about to add another "bullet" to that list (trader jargon for discounted coupon, aka trading under par). That's right folks! How the mighty have fallen! Not quite as bad as yesterday, but the 4.5 was still down 18 ticks to 100-00 on the nose. Once again, the lower one went in the stack, the worse it got (almost like a…(read more)

Source:MBS CLOSE: Why You Can Still Be Afraid Of Further Losses

I just received an update from the FHA that I believe will spread some holiday cheer. Mr. Jerrold H. Mayer writes re: Delayed Implementation Date for New Requirements in ML 2009-28 If that Mortgagee Letter doesn't ring a bell…it's the one that put FHA loans under HVCC watch. Notice anything else? IT'S BEING DELAYED! From the FHA: Enactment of ML 2009-28, Appraiser Independence, will be delayed until February 15, 2010 . ML09-28 (originally planned for a January 1, 2010 implementation) has two parts: a) prohibition of mortgage brokers and commission-based lender staff from the appraisal process, and b) appraiser selection in FHA Connection. The effective date for both sections of this guidance will now take effect for all case numbers assigned on or after February 15, 2010. This…(read more)

Source:FHA Delays Implementation of HVCC Standards

Heeeeeeeading into 5 pm "going out" marks…..there is not much I can tell you to stem the frustration of being in the float boat. That of course assumes you are out to sea (without a sail). For those of you who have locked up and are pending a CTC….I hope our commentary is colorful enough to draw your attention from last minute holiday preparations (or clean up if you've had eight crazy nights already). Sorry, got a little distracted there…like I was saying: Yawn. The 0.75% coupon bearing 2 yr TSY note is -0-02 at 99-22 yielding 0.905%. The 3.375% coupon bearing 10 yr TSY note is -0-17 at 96-30 yielding 3.746%. The yield spread between the 2yr TSY note and 10yr TSY note…which is slightly firmer than the 286bp record that was set earlier today). Here are 10s…see what I…(read more)

Source:MBS AFTERNOON: Short Covering Induced Recovery Rally?