Mortgage Pricing Jumps on Weak Manufacturing Data – Daily Mortgage Rate Update for August 20th, 2010
Philly Fed index, expected to rise from 5.1 to 7.0 tumbles to -7.7; Mortgage pricing jumps back to recent highs; Lenders at capacity keep some of these gains from consumers – Daily Mortgage Rate Update for August 20th, 2010
The Philadelphia Federal Reserve index, published monthly by the Philadelphia Federal Reserve Bank, was released yesterday to the great disappointment of investors and economists. While expectations had been for a slight improvement in business conditions, the survey revealed a significant worsening in businesses’ outlook on the economy. On top of an already released unemployment claims report showing a 3rd straight week of increasing claims, 500,000 this time, the survey pushed mortgage pricing back to its recent high water mark.
Mortgage-Backed Security pricing jumped on these two reports yesterday, with the Fannie Mae 30-year 4.0% security reaching the same peak pricing level it first touched on August 6th & 9th, and off of which it has bounced several times in the past two weeks. In spite of the similar pricing levels between the two dates, prices offered by some lenders are a bit worse today than they were on the 9th. On a 4.625% 30-year fixed, the highest interest rate loan that can be included in a 4.0% MBS, a few companies are offering pricing 0.35 points worse today than on the 9th. Some others offer pricing that is essentially similar to that offered earlier this month.
The reason for this is capacity management. Without hiring additional employees, many lenders are currently at the absolute limit of their ability to process and close mortgages. As a result, the time required to close a mortgage has increased substantially with many banks. For one client I am currently assisting, approval took 17 business days due to capacity constraints. Reviewing current turn-around-times, most lenders need more than 10 days to underwrite a refinance loan. Mortgages for home purchases appear to be receiving extra priority due to the time sensitive nature of these transactions. Many such loans are turning around between 5-7 business days for first review.
Interestingly, lenders that have tightened their pricing have been able to keep wait times somewhat more controlled. Those I reviewed appear to be closer to 3 days for purchase mortgage underwrites and 8 days for refinances. They are, however, less competitive with market pricing.
Mortgage pricing is as close to its recent peak as it can be today, and with a somewhat more substantial week coming, from the perspective of market-influencing events and economic data, there is always some risk to floating. Mortgage prices have made several attempts to break through their current level with limited success. Still, if poor data continue to come, it isn’t impossible for pricing to get even better. Because improvements in mortgage pricing have lagged recent improvements in Treasuries, there is still some room to rise, even if Treasury yields hold steady. For any loans closing more than 15 days from now, I feel it is safe to float. You may want to consider locking if you’re closer to closing.
If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655, or by commenting on this post. Have a great day!
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Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
August 20, 2010 by Dan Hartman · Leave a Comment
I have worked as a residential mortgage advisor since February of 2000 and a part of the founding team here at Province Mortgage. We believe that by doing right by a family today, we can create a relationship for life, and, hopefully, and ambassador who will share the experience with others. It is our team of professionals that helps us to create this experience.
