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MARKET UPDATE 2/22/12: From The Capital Markets Desk Of Franklin First Financial

Well the price of mortgage securities can actually go down and sometimes by a lot! We have had the luxury of a great mortgage rate environment for some time now and we have all become a little complacent that it would continue forever, right. The bond gods have a way of correcting this insane rational and they have reminded us of this over the last week especially over the last few trading sessions.

We are getting a little glimpse into what will happen once the situation in Europe is under control. And what will happen is higher bond yields, higher mortgage rates, higher oil prices and a higher stock market. Here is what we have experienced over the last few trading sessions:

The 10yr did touch the 2.07% yield that we have been speaking of as a clear 1st level of support. This is the level that we rarely have gone beyond since 11/1/11 and when we did touch it yesterday it did show support (buyers came in) and we managed to not break that level. This is a positive sign... 

... to read the rest of this post, visit http://www.askshah.com/market-update-22212-from-the-capital-markets-desk-of-franklin-first-financial/

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MARKET UPDATE 2/8/12: From The Capital Markets Desk Of Franklin First Financial

We are opening up with a relatively unchanged market from yesterday’s close and while we are approaching the 2.00% level on the 10yr (1.98% to be exact) I believe all-in-all the bond/mortgages markets are holding up pretty well in light of the recent events. There is still buzz in the air regarding Friday’s NFP monster number and it appears that there will eventually be a resolution on a Greece bail-out plan. Both things would weigh on the bond markets but it would be really hard and irrational complaining about a 2.00% 10yr. This is still an extremely low rate environment and one that is very conducive to loan originations.

In regard to the NFP number the talk is that the Fed might have understated the strength underlying our economy. That is a fair argument considering... Read the rest of the Market Update 2/8/12 here: http://www.askshah.com/market-update-2812-from-the-capital-markets-desk-of-franklin-first-financial/

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A Closer Look At The 20 Hottest Real Estate Markets In USA

HotPads.com, the national housing search engine, published quite an insightful statistic about how the prices of real estate changed in 2011. Their data showed that the rental price of 2-bedroom units jumped 3.75% in 2011, while the sale price fell by 1.83% in the same period.

"Studio rentals remained the highest growth segment, with a 7.12 percent increase over the year. One and two bedroom rental properties also saw a price increase, 2.59 percent and 3.75 percent respectively, while three bedrooms dipped by .31 percent.", reports HotPads.

According to their data, popular metro areas like New York, Boston, Miami, San Francisco, Los Angeles, and Chicago had some of the most expensive rental listings in the U.S., as measured by median listing prices of two bedroom properties. Rental listings in San Francisco appeared in particularly high demand, staying active for just 28 days on HotPads, compared to an average of 49 days across other top metro markets.

Here is the list of the 20 hottest markets in the USA: http://www.askshah.com/a-closer-look-at-the-20-hottest-real-estate-markets-in-usa/

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MARKET UPDATE 1/26/12: From The Capital Markets Desk Of Franklin First Financial

Unless you share a rock with Patrick Starr from SpongeBob Squarepants, you know that the market has been all about the Fed since yesterday afternoon. Simply put the Fed dropped a bomb yesterday by stating that they will keep interest rates low through at least late 2014. Here is the statement that was unexpected and caused everyone to flock to treasuries:

“The Committee decided today to keep the target range for the federal funds rate at 0 to ¼ percent and currently anticipates that economic conditions- including low rates of resource utilization and a subdued outlook for inflation over the medium run- are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

When the Fed specified a low rate policy about 6 months ago by giving the markets the mid-2013 date in their statement, they did something that was extremely rare and brought a lot of criticism. Now this criticism was in large part due to the fact that the Fed had historically been quiet on a definitive timeframe when stating economic policy even if many economist believed that the Fed would stay put for that period of time. In essence they really stuck their necks out but the fed under Bernanke have been very transparent especially when you compare him to his predecessor in Alan Greenspan who gave people nothing but clutter that became known as Green-speak.

Read the rest of the market update for 1/26/12 here: http://www.askshah.com/market-update-12612-from-the-capital-markets-desk-of-franklin-first-financial/

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Market Update 1/25/12: From The Capital Markets Desk Of Franklin First Financial

Mortgages are opening up a little weaker as we can point to the brief and detail-lacking mention by President Obama of yet another refinancing effort by his administration to help good honest “Americans who work hard and play by the rules everyday”. When loans refinance that is not a good thing for holders of mortgage securities because at this point, as a result of the historically low interest rates, all liquid mortgage securities are trading above par (100.00). Therefore when you pay above par and more like 104.00-106.00 you are not very happy that you just paid a 4-6pt premium for a loan that does not last for its assumed maturity at time of purchase.

(Image courtesy of LA Sun)

There was a lot more mortgage market buzz about the President giving more about this at the State of the Union speech last night but as rational people would expect last night was not the time and place for details. Of course the industry will keep an ear out for more details in the days ahead but some are speculating that this latest plan will include the ability for FNMA/FHLMC/FHA to refinance mortgages that it does not currently own or insure like…..ready for this…ALT A loans or even subprime loans. As the saying goes the devil is in the details so we will see. I am sure if this is true it will come with some significant political debate.

This morning we... Read the rest of the article at http://www.askshah.com.

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MARKET UPDATE 1/23/12: From The Capital Markets Desk Of Franklin First Financial

We are starting the week on a bit of a down note as the trade of selling treasuries and buying equities is continuing on good news coming from Europe and encouraging economic data domestically. Last week in itself was a tough week for the bond markets as we saw the 10yr and 5yr treasuries retreat by 15bps and 10bps respectively.

This caused mortgage pricing to back-off by about 1/2pt if not more once you factor in the investors implementation of the 10bps g-fee increase. With the 10yr trading @ 2.08% we are definitely in bear market mode as we trade now on the higher end of the 10yr yield range as opposed to where we were @ 1.85% just 1 week ago (1/17 to be exact) when we recommended everyone to look at their pipelines and lock loans that were ready to be locked (every now and then we get this stuff right so we like to point out those rare times).

There are 2 events going on right now that are getting traders excited about equities and hating on US Treasuries. First, is a debt restructuring that involves Greece (go figure) that in essence limits losses on bond holders of this debt to 70%. One would think that investors would not be too excited on losing 70% of their investment but considering the dire situation over there this is a positive sign to what investors in the region view as an acceptable resolution. When you consider when scratch and dent US subprime paper was trading @ 30 cents on the dollar if not lower, this kind of makes sense.

The other event is more all encompassing in the positive data right here in the good old USA. We are getting consistently strong economic numbers, or enough positive ones vs. weak to neutral ones, and this is giving enough reason for investors to buy US equities. Inflation continues to be a non-event and housing is showing signs of improvement. One such strong indicator is that sales on existing homes rose 5.0% in December which was a 3rd straight month of improvement. What is interesting about this statistic is that the strength of the last 3 months numbers has caused supply of unsold homes to drop to 6.2 months which is the lowest reading on supply since 2006. Yes the same 2006 that saw home prices at all-time highs.

I also want to encourage everyone to make sure that you not only honor your locks but that you honor your lock expiration date. With the mandated 10bps increase in the G-fee it has caused pricing to deteriorate by about .5pt. over the last few weeks. Therefore if you happen to lock a loan for a shorter lock term that was not affected by this increase, any future lock extension will result in a greater extension fee then you traditionally have received in the past.

Please keep this in mind and stay on top of your locked pipeline. Also if and when an extension is required remember not to shoot the messenger but call your local Congressman or Senator to complain.