San Jose Mortgage

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San Jose Mortgage

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Posted To: MBS Commentary

"Little Engine That Could" status certainly has to go to MBS this week. Like the rest of the fixed income market, after a largely positive 2 weeks, MBS came under heavy fire today with the better than expected NFP print. When that happens, bonds of all shapes and sizes head south in a hurry, but to a much greater extent than treasuries, MBS fought back hard. What does that mean? Take a look at how MBS are definitely rallying from 1030am onward and even return to yesterday's range, whereas treasuries just seem to fizzle sideways, never coming close to even the highest yields from 3/4…. As you can see, MBS appeared to almost be playing the same sort of ball they were for the past two days, but treasuries will certainly be opening their locker to find a one way ticket back to the…(read more)

San Jose Mortgage

The Downside of Hedging Interest Rate Risk with Mandatory Loan Commitments

Posted To: The Garrett Watts Report

We are often asked whether or not a mortgage banker should be actively managing interest rate risk via mandatory commitment loan sales. We recently provided information from a prominent hedging consultant firm regarding the pricing spread between best efforts pricing and mandatory pricing. As was noted, the wide spread between mandatory one-off's and best effort pricing that was observed in early 2009 has since narrowed considerably. HERE is the data. HERE is more perspective on WHY. Many owner/operators see the large spread in commitment prices as an easy method to add 30-50 basis points in gain on sale to the bottom line. We agree, mandatory commitments offer the opportunity to increase profits and even lower rates, but we must point out the risks associated with mandatory committing…(read more)

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San Jose Mortgage

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