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Jumbo Premium, 15-Year Discount Decline


Compared to conventional 30-year mortgages, jumbo loan pricing improved over the past seven days and 15-year pricing wasn’t as good. Fixed rates are hovering just above their lowest levels ever.

A 2-basis-point drop from last week for the average 30-year fixed-rate mortgage left it at 3.88 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended April 26. The 30 year was 90 BPS less than the same week in 2011.

The economy has been moderately expanding, with labor market conditions improving — though unemployment remains elevated — a statement Wednesday from the Federal Reserve’s Federal Open Market Committee said. The housing market remains depressed, but inflation has picked up a little.

The FOMC statement said that the target rate for the federal funds rate will be kept at between 0.00 percent and 0.25 percent. In addition, the Fed will continue reinvesting principal payments from its holdings of agency debt and mortgage-backed securities. It will also continue executing operation twist by maintaining its program to extend the average maturity of its holdings of securities.

The 30 year averaged 4.12 percent during the final week of March, 24 BPS higher than in February, the Federal Housing Finance Agency reported.

An analysis of Treasury market data by Mortgage Daily indicates that mortgage rates will be about the same in Freddie’s next report. The yield on the 10-year Treasury note averaged 1.99 percent during the period that Freddie surveyed its 125 mortgage lenders this week, while the 10-year yield closed at 1.98 percent today, according to the Department of the Treasury.

But a majority of panelists surveyed by for the week April 26 to May 2 forecasted that mortgage rates will rise at least 3 BPS during the next seven days. Another 39 percent projected no changes ahead, and just 7 percent predicted a decrease.

Freddie expects the 30-year mortgage to average 4.1 percent in the second quarter then rise 20 BPS each quarter until the second-quarter 2013.

The U.S. Mortgage Market Index report from Mortech Inc. and Mortgage Daily for the week ended April 20 indicated that jumbo borrowers paid a 55-basis-point premium over conforming borrowers, a little better than 56 BPS the prior week and 57 BPS during the same week in the prior year.

The average 15-year fixed-rate mortgage experienced a 1-basis-point week-over-week decline to 3.12 percent, Freddie said. The discount for a 15-year loan over a 30 year fell to 76 BPS from last week’s spread of 77 BPS.

But a 7-basis-point increase from seven days earlier was recorded by Freddie for the five-year, Treasury-indexed, hybrid, adjustable-rate mortgage, which averaged 2.85 percent.

Freddie said that the Treasury-indexed one-year ARM averaged 2.74 percent, better than 2.81 percent last week and 3.15 percent at this point last year. The one year is expected to average 2.8 percent this quarter, 2.9 percent in the third quarter and 3.0 percent during the final three months of the year.

The Treasury Department data indicated that the yield on the underlying one-year Treasury note closed at 0.18 percent Thursday, creeping up from 0.17 percent seven days ago.

The six-month London Interbank Offered Rate, an index for many subprime ARMs, was 0.73 percent as of Wednesday, according to LIBOR was 0.74 percent a week prior.

ARMs accounted for 4.8 percent of pricing inquiries in the latest Mortgage Market Index report, up from 4.3 percent in the previous report.

In Freddie’s April outlook, ARM share of mortgage production is expected to be 15 percent through the end of next year. ARM share was 17 percent in the first quarter.

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