Mortgate Rates Improve Over Weekend

Following a better than expected Retail Sales report on Friday, MBS opened that morning much lower than the prior day leading to the worst rate sheets for the week. As the day progressed, MBS did recoup the early morning losses leading to a few lenders repricing better by day’s end; however, most lenders left rate sheets unchanged on the day.

This morning, the economic data started with the release of the Empire State Manufacturing Survey. Each month, the New York Federal Reserve conducts a survey of approximately 175 manufacturing executives in New York State on the strength of business conditions. Readings above 0 indicate expanding or improving conditions while readings below 0 indicate contraction. This data has indicated steady improvements since August of 2009.

The New York Fed reported that manufacturing conditions to a small step back from last month’s reading of 24.91 to 22.86, beating economists’ expectations for a 20.0 reading. Despite the decline from the prior month, today’s report continues to show improving conditions well above the zero mark. This report is a lower tier report thus there wasn’t any noticeable reaction in the market.

Of higher importance this morning was the release of the Industrial Production report. This data gives economists a measure on the strength of the manufacturing sector by measuring the output at U.S. factories, utilities and mines. Higher industrial production would be a positive economic indicator which would benefit the stock market at the expense of the fixed income sector. Economists expected a 0.0% reading for last month following January’s 0.9% increase. The report indicated Industrial Production increased 0.1% from the prior month beating economists’ expectations and making for the eight consecutive monthly improvement.

Here is a peak at the week ahead. Of highest impact will be Fed meeting and inflation data coming on Wednesday and Thursday.

Tuesday
- Housing Starts(high impact)
- Import and Export Prices(low to medium impact)
- Federal Open Market Committee Meeting.. it is expected there will be no change to Fed Fund rate but the words of the statement will be dissected for any hints of future monetary policy(potentially high impact)

Wednesday
- The weekly MBA Applications Index(low impact)
- Producer Price Index, measures inflation on the producer level. During periods of high unemployment or bad economic times, producers are reluctant to pass along higher prices to their consumers which makes this report less impactful than consumer level inflation.(medium impact)

Thursday
- Consumer Price Index, measures inflation on the consumer level(high impact)
- Jobless Claims(medium to high impact, especially if varies greatly from expectations)
- Leading Indicators(low impact)
- Philadelphia Fed Survey(low impact)
- Announcement from Department of Treasury of the size of next week’s auction of 2 year, 5 year and 7 year notes(medium impact)

There are no scheduled economic reports to be released on Friday.

Reports from fellow mortgage professionals do indicate lender rate sheets to be better this morning. The par 30 year conventional rate mortgage has fallen back to the 4.75% to 5.00% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year term, you should expect par in the 4.25% to 4.50% range with similar costs but lower FICO score requirements.

If you followed my advice on floating over the weekend, you picked up some price gains this morning. With most lenders offering 4.75% as par once again, I am advising to only float loans that are a day away from locking on a shorter lock period. If you are 16 days out from closing and funding, I would float until tomorrow so you could lock on a 15 day lock for better pricing. If you are 31 days out, I would also float until tomorrow.