Mortgage Market Update: WE NEED LIQUIDITY!!
Rates are stable from Friday's close, currently at around 6.25% on 30 Year Fixed Conforming mortgages and a whopping 7.875% on JUMBO 5/1 ARM's.
While the DOW is down close to 450 points due to the rejection of the much anticipated rescue plan, the treasuries are rallying and their respective yields are plummeting. I see this as good news for conforming mortgage rates but an absolutely horrible prediction for unsubsidized loans.
There is barely any liquidity in the secondary mortgage market, and with the most recent upset from congress and the Wachovia "failure", I do not think banks will be in the business of lending un-securitized loans for much longer.
Risk aversion is first and foremost in present day economy and it's still not over. Stay tuned!
ON BEHALF OF ALL MORTGAGE PROFESSIONALS: WE NEED LIQUIDITY!!!
Posted by Noah
Mon Sep 29th, 2008 02:48 PM
f liquidity, this market needs PEPTO BISMOL!
Posted by JT
Mon Sep 29th, 2008 02:55 PM
Need more liquidity = need more debt crack!
Yeah, that sounds like just what we need (roll eyes).
I know you need liquidity to sell apartments but the bailout will do nothing for the housing market anywhere.
The secular shift is in. Look at consumer spending last month.
Do you think that will turn on a dime from more liquidity or that banks will actually lend more money or will they just hoard the cash to shore up their balance sheets.
Think about it.
Posted by MortgageMan
Mon Sep 29th, 2008 02:59 PM
What are the chances of Warren Buffett, single handedly buying out the entire secondary mortgage market?
Posted by Noah
Mon Sep 29th, 2008 02:59 PM
JT - I dont think Jeff meant we need liquidity so we can sell houses. Jeff is not a real estate agent. Access to credit goes FAR BEYOND just housing! Small/Medium businesses, auto's, student loans, etc..
The longer credit is shut off, the more job losses we will face. Its beyond who dunnitt and you know where I stand on doing these things. But its become a lesser of two evils. We will face hell in some way, shape or form no matter what. Question is how hot and how long?
Posted by MortgageMan
Mon Sep 29th, 2008 03:06 PM
JT:
Good point.
I think that if the secondary markets do see some liquidity, it will certainly free up some money and allow for banks to lend money at a lower cost to qualified borrowers.
It’s not going to happen overnight and will not stimulate the real estate market to turn around on a dime, but I don't think that's the point.
I think what we are all missing here is that even if banks do have some extra cash, the s*it has already hit fan and there is no turning back.
Just because banks at some point will be able to lend again doesn't mean that lax lending practices will still be enforced.
Posted by Noah
Mon Sep 29th, 2008 03:06 PM
they will redo the plan, and eventually get it through. But if it doesnt, I wonder how quick the fed will cut rates?
Posted by Noah
Mon Sep 29th, 2008 03:10 PM
exactly! We will not see looser standards, and the sectors that are getting hurt the MOST due to this heart attack of credit, are small and medium sized businesses who pay their employees and use credit to operate their businesses!
That sort of thing leads to residual lost jobs that can really hurt us. Forget the buyer who is inconvenienced for a while because they cant get a loan for the 45 days the credit markets were clogged up.
BUYER CONFIDENCE IS SHOT! Ive said that for almost 10 months now. If you are going to buy, you expect a discount and likely can secure financing. No matter what, sales volume for re agents is going WAY DOWN in years to come.
Posted by brenda
Mon Sep 29th, 2008 03:28 PM
Wasn't Wells F offering its 30-year fixed jumbo for a whopping 9% last week?
A broker told me that a gainfully employed client, sadly a banker of the formerly investment sort, went to try to procure a mortgage after he finally found a two bedroom+ in the 1.1-1.3M range. The mortgage broker told him he'd probably need 35% down. What is going to happen to people who are already in contract for new developments who won't get mortgages? UGLY.
I am so squeky-clean prime I squeak and Citi recently cut off my HELOC (NOT close to underwater, and not close to HELOC limit), and last week Amex discontinued my extended payment option on my Platinum card. We haven't been late, and our income is significantly HIGHER this year than last (and I would be happy to prove it, but I think they're desperately turning off the spigot). We have been a client of Citi for 23 years (bad judgment, I know) and Amex for 20. I don't need this credit, but I truly feel for someone who is just getting by and needs to pay for an emergency fan belt change and is told by the mechanic that their credit card has been denied.
Posted by Noah
Mon Sep 29th, 2008 03:35 PM
credit deflation Brenda! Its a bitch.
How about this post in OCT 2007! Talk about looking ahead:
http://www.urbandigs.com/2007/10/new_dev_closings_reason_to_wor.html
"WHAT ABOUT ALL THE BUYERS THAT SIGNED CONTRACTS ON EXPENSIVE NEW DEVELOPMENT PROPERTIES BEFORE THIS MESS HIT, AND WILL NOW CLOSE THEIR DEAL IN A LENDING ENVIRONMENT THAT IS TIGHTER & MORE EXPENSIVE?"
Posted by Noah
Mon Sep 29th, 2008 04:00 PM
This would classify as a capitulation in my opinion. VIX near 45. I did get long some SSO, DRYS (i know, gambling here), and I bought some TBT, which I think will be a 2009-2010 trade on shorting the long end of the curve.
Curious to know any other traders out there who may offer their feelings on todays panic selloff.
If they come back and recover this thing within a few days, the market will shoot back up again. These are trading comments, so please dont look into what I want, what I dont want..etc..just talking here. Clearly, the system worked as the house voted down the plan!
Posted by brenda
Mon Sep 29th, 2008 04:04 PM
Re capitulation, I have to say that I was checking out the graph of the 3-year DJIA. In September 2005, it was at 10,500, just about where we are today. Are we in the same shape (okay, you could argue that we were in bad shape but just didn't know it) now as we were then?
Posted by yournamehere
Mon Sep 29th, 2008 04:11 PM
Noah - I agree, feels a lot like capitulation. I dipped in a bit with SPY this afternoon.
They will pass something, for sure.
One wild card, however, is hedge fund redemptions. It didn't occur to me until now, but one reason why the administration was rushing this through may have been to get something done before the redemption deadline (Sep 30 for many funds) and stall a run on the funds.
Now many folks may seek redemptions, leading to even more hedge fund liquidations.
May be a VERY good time to keep loading up.
Posted by Noah
Mon Sep 29th, 2008 04:11 PM
way worse! any longs I take for next 12 months are short term rally trades!
Until an hour ago, I was only long gold via DGP & GLD..those guys took me for a ride 3-4 weeks ago, but the story remains the same.
I covered my shorts unfortunately around 11,300 or so.
Posted by Honest Abe
Mon Sep 29th, 2008 07:07 PM
Looks like it's time for you to find a new line of work.
Posted by Noah
Mon Sep 29th, 2008 07:21 PM
me? I had my best year, with many new requests coming in. Tell that to agents who simply expect business to just 'come to them'.
Posted by John Wake
Mon Sep 29th, 2008 07:43 PM
There's not going to be much liquidity until home prices bottom out.
Why invest in a falling asset class?
Mortgage liquidity will miraculously appear when it's clear home prices have bottomed out.
Posted by MortgageMan
Mon Sep 29th, 2008 10:02 PM
Honest Abe:
Not yet. I'm in it for the long run (I hope), I want another refi boom. Maybe 10 years from now my wish will come true. Till then, I will try my best to stay afloat and keep my fingers crossed.
I have to be honest though, even with the horrible economy and extreme volatility, I still managed to have a great year...
Besides, where do you recommend we go right now? Last time I checked, a lot of reputable financial institutions were falling to their knees, and the rest are trying very hard from collapsing. Not to mention the unemployment rate which is constantly breaking historical records...
Posted by brenda
Tue Sep 30th, 2008 06:17 AM
dow futures up a couple of hundred points. this is why I don't truly think this is capitulation yet. I think the market players are deeply fearful, but not in a generalized sense. If the bailout occurred today the market would probably swing back 500 or so points. Still no recognition of how deeply destroyed this economy is, with or without a bailout.
Maybe if no bailout occurs at all, the true fear and loathing may set in.
Posted by Noah
Tue Sep 30th, 2008 09:06 AM
brenda - well naz down 10%, dow down 8% certainly is some panic selling. Yes, its all trading on rescue plan news now. The economy is deeply destroyed and credit markets have been frozen for weeks now. This will come out down the road in data.
I truly think they will pass the plan. Although I would like to see them consider alternatives
Posted by brenda
Tue Sep 30th, 2008 09:45 AM
The fed pumped over 600b into money supplies over the last couple of days. Paulson's plan has turned into $250b up front, a further $100b easily obtained, and the last $350b upon congressional review. A far cry from the give me $700b no questions asked and the right to billions more with no review process. At this point, this isn't much of a plan. What's to say the banks won't hoard the money if they do get it (treasuries here we come). I think passing the plan as is is more about political posturing than a real rescue of the money system. I think they NEED to consider alternatives. I'm with Dean Baker on this one, there seems to be very little upside, and potentially more of a downside. We don't have a lot of money (any, really) and we may have quite the need for it, so we sure as hell should try at least to spend it effectively.
Posted by Noah
Tue Sep 30th, 2008 09:48 AM
downside, yes I agree! Im already out of 50% of my longs from yesterday.
Posted by DW
Tue Sep 30th, 2008 11:34 AM
what are the current mtg rate for conforming fixed loans.
Posted by Noah
Tue Sep 30th, 2008 11:45 AM
i believe rates are up across the board as everything is frozen right now and LIBOR rates, if any indication, are insanely high right now.