Market Improves Except Jumbo


Mortgage Daily Staff

                                                 June 10, 2010

Mortgage rates eased and might have done even better if the stock market hadn’t surged. This week’s new loan activity was better than last week’s, though the jumbo spread deteriorated.

Improving 0.07% from last week, the average 30-year fixed-rate mortgage came in at 4.72% in Freddie Mac’s Primary Mortgage Market Survey for the week ended today. The 30-year was 5.59 a year earlier.

The conventional 30-year in the Mortgage Market Index report for the week ended June 9 improved to 4.780% from last week’s 4.836%. At the same time, the jumbo 30-year rate rose to 5.670% from 5.650% — pushing the jumbo spread to 89 BPS from last week’s 81 BPS.

Off just 3 basis points from last week, the average 15-year fixed-rate mortgage was a record-low 4.17% in Freddie’s survey. The conventional 15-year was down 4 BPS to 4.180% in the most recent report.

Frank Nothaft, Freddie’s chief economist, attributed the decline in mortgage rates to “a relatively weak employment report.”

The yield on the 10-year Treasury bond was 3.294% during trading today, falling from 3.39% at last Thursday’s close, based on data from the U.S. Department of the Treasury and the 30-year having moved similarly, the 10-year offers little insight into which direction rates will head before next week’s reports.

The 10-year Treasury price — which moves in the opposite direction of the yield — was down a dollar during trading today as the Dow Jones Industrial Average ascended 200 points.

A majority of the panelists surveyed by for the week June 10 to June 16 expected mortgage rates to stay within 2 BPS of their current levels during the next seven or so days, while 44% expected an increase. Nobody forecasted a decline.

The five-year Treasury-indexed adjustable-rate mortgage eased 2 BPS to 3.92%, Freddie reported.

Improving 4 BPS, the one-year Treasury-indexed ARM averaged 3.91% in Freddie Mac’s report. The one-year averaged 5.04% a year ago and hasn’t been this low since the week ended May 27, 2004.

The yield on the one-year Treasury bill closed yesterday at 0.33%, lower than 0.38% the prior Wednesday. The one-year yield is used as the index for the one-year ARM, while many subprime ARMs utilize the six-month London Interbank Offered Rate. LIBOR finished yesterday at 0.75%, while it yielded 0.76% the prior Wednesday.

ARM applications amounted to 5.1% of activity in the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ended June 4. Seven days earlier, ARM share was 5.2%.

Technical staff at Mortech Inc. this week identified a programming glitch in the Mortgage Market Index that resulted in reporting an index value that was a week older than indicated — impacting reports issued between April and last week. After correcting the glitch and adjusting the index, mortgage activity was up 22% this week.

Last week, based on MBA’s report, applications fell 12% on a seasonally adjusted basis. Purchase activity was down 16% and refinances fell 14%. Refinance share eased to 72% from 74%.

Refinances represented half of this week’s activity in the report, higher than 48% last week. This week’s rate-term share was 36%, and the cashout share was 14%.

The index reflects the activity of mortgage originators who subscribe to Mortech. The full report indicated that the average mortgage amount rose to $215,771 from $212,806 seven days earlier. The highest average was Washington, D.C.’s., $318,812, and Nebraska’s $156,741 was the lowest.

Mortgage Daily Staff

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