What Will Your Verse Be?  This is now the second time I am endorsing an Apple commercial…what can I say, they make great commercials. I suppose there are two compelling reasons why I love this particular commercial: (1) I’m a big fan of the movie Dead Poets Society. I’ve written about it before in my post O Captain My Captain!  (2) I read Walt Whitman when I was in college…I had a copy of his Leaves of Grass on my end table. I got the book because I thought it would be cool to read it for girls, and it was. But I also fell in love with his unique way of looking at the world…his style is seductive and captivating.  The commercial is taken from one of several call to action scenes by Robin Williams’ character in the Dead Poet’s Society. Here is the text of the commercial:

We don’t read and write poetry because it’s cute. We read and write poetry because we are members of the human race. And the human race is filled with passion. And medicine, law, business, engineering – these are noble pursuits and necessary to sustain life. But poetry, beauty, romance, love – these are what we stay alive for. To quote from [Walt] Whitman,

“O me, O life of the questions of these recurring. Of the endless trains of the faithless. Of cities filled with the foolish. What good amid these, O me, O life? Answer: that you are here. That life exists and identity. That the powerful play goes on, and you may contribute a verse.”

That the powerful play goes on, and you may contribute a verse.  What will your verse be?

My Market Watch:  Bonds Up Again and Prices Improved Again.  This morning the 30-year Fannie Mae bond is up +23bps so far. Conversely and not surprisingly these gains are a direct result of the triple digit losses of the stock market.

The big reason for the flailing stock market is poor economic data coming out of China which has a big impact on global economies. Moreover, its logical to assume that many U.S. traders have been looking at overseas investments since the Fed announced QE tapering last year. If true, then bad news coming from foreign countries will have a bigger impact on stock market trading in general.

There is usually an inverse relationship between the stock market and the bond market. It’s not always true, but most of the time this analysis is trustworthy.

When the stock market is doing well investors pull money out of bonds to invest in stocks and when that happens our rates/pricing get worse. When the stock market is doing poorly investors sell off their stocks and invest in bonds instead and when that happens our rates/pricing improve.

I’d be cautious to watch the stock market carefully. Remember, an investor’s job is to buy low and sell high and buy low again. Although stocks are being sold off for now, at some point investor’s will see low stock prices attractive and start buying again and when that happens…….. Let me know if you want to discuss.

21:16 Bitching-Free.  I was frustrated at 21:16 into my spin class on Sunday morning. I looked down at the elapsed time on my spin bike…only 21 minutes and 16 seconds had elapsed…nearly 40 minutes to go. And the spin instructor was driving me crazy…she wouldn’t shut up. Stop talking so much! The ideal spin instructor plays great music, yells at the right moments, and doesn’t fill every single second in the 60-minute class with her voice. This instructor was failing in all three respects. At 21:16 I was frustrated…angry even…in my head I was bitching. Then it occurred to me…maybe I was feeling this way because I had 2 glasses of wine and an aggressive homemade Manhattan the night before. Maybe I was the one failing…not the instructor. And then I think I said out loud, “what the hell is wrong with me?” What was I complaining about? How fortunate was I to belong to this club and to be in a class with 50 other motivated people?  And why was I bitching about my instructor who was up at the same time on a Sunday morning as I was…and who was expressing her passion to get the most out of her class?  At 21:16 I changed my focus, I changed my thought process, I refocused my energy into the task at hand…getting a great work out…bitching-free.  That’s the thing about exercise…it refocuses your energy, physically and mentally. After class I thanked the instructor for a great workout and then hit the steam room. Ahhhhhhhhhhhhhhh…….

My Market Watch.  Bonds Up +5bps. Prices Improved.  This morning the 30-year Fannie Mae bond is up +5bps and is trading exactly on a ceiling of resistance.  There are not a lot of pressing economic reports this week…it shouldn’t be volatile. Did I just type that?!  Now I’m nervous!

The bond is trading exactly on a ceiling of resistance. Using my Glass Elevator analogy, the bond price was going up and stopped at a ceiling…the glass elevator is stopped…the elevator doors are open…and we’re wondering whether the elevator is headed up to the next ceiling or down to the floor below. If it heads up then we could see improved pricing. If it heads down pricing could get worse. With little going on today, or this week for that matter, I think rates will do nothing today. I think the elevator is just staying put.

How to think about the Bond Glass Elevator.  Think of the bond price as a glass elevator that goes up and down. As the elevator reaches the next ceiling up there is a good chance it might stop and then head back down. This is how traders think about it…they might decide its a good time to sell since the elevator is as high as its going to get. But if the elevator goes through the ceiling and continues going up, then there is a good expectation it will keep going up until it reaches the next ceiling.

MLK Gloriously Oblivious. (I posted this last year)
We watched Martin Luther King’s I have a Dream speech with the kids Saturday morning. “What is he talking about?” asked the 7-year old. I tried to explain, “you see honey, there was a time when people weren’t treated equally, in fact, people still aren’t treated equally, and Martin Luther King stood up for those people and motivated all the people you see on the computer and people all around the country to stand up for people who were not being treated fairly.” Not bad, eh? “Why weren’t they being treated equally Daddy?” I stammered on this one…my wife looked at me puzzled as well. How do you tell a 7-year old girl, whose concept of bigotry and baseless hatred is as foreign as the workings of the Large Hadron Collider? How do I explain to a girl whose second grade class is made up of 20+ different cultures that there was a time when we enslaved people based on the color of their skin? More importantly, do I want to explain it? My wife tried and stuttered an explanation to no avail…my daughter didn’t get it, and that’s just fine by me. Gloriously oblivious.

“I have a dream that little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character”

My Market Watch: Bonds Up +16bps. Prices Improved. This morning the 30-year Fannie Mae bond is up +16bps and is approaching a ceiling of resistance.

The bond is trading just below a ceiling of resistance…if it breaks through and sustains we would see improved pricing. If it stops at the ceiling it will probably head back down. Think of the bond price as a glass elevator that goes up and down. As the elevator reaches the next ceiling up there is a good chance it might stop and then head back down. This is how traders think about it…they might decide its a good time to sell since the elevator is as high as its going to get. But if the elevator goes through the ceiling and continues going up, then there is a good expectation it will keep going up until it reaches the next ceiling.

She Loves Herself. This morning at breakfast my almost-6-year-old son asked my almost-9-year-old daughter if she loved him. She replied, “well, I love myself the most, but I love you too.” If this isn’t the reason we love our kids I don’t know what is. First, she loves herself…as a Dad how awesome is it to hear that?! Life is good, eh? I know they’ll be fighting about some stupid toy or that one glared at the other, but I’ll bask in the love-shine for now…

My Market Watch: Bonds Up +30bps. Prices Improved. This morning the 30-year Fannie Mae bond is up +30bps. Do you feel like we’re on a roller coaster? I said yesterday I felt the bleeding was going to be over and sure enough it stopped and now we’re headed back towards happier land.

The bond is trading just above a ceiling of resistance but the momentum is not convincing enough to suggest a huge rally. We might see a price improvement today if the bond can settle in above that ceiling…if it does the ceiling of resistance transforms into a floor of support and creates a baseline for traders.

Think of the bond price as a glass elevator that goes up and down. As the elevator reaches the next ceiling up there is a good chance it might stop and then head back down. This is how traders think about it…they might decide its a good time to sell since the elevator is as high as its going to get. But if the elevator goes through the ceiling and continues going up, then there is a good expectation it will keep going up until it reaches the next ceiling. I hope that analogy makes sense. So the question is how do traders decide if the elevator is going to stop at a particular floor? The answer depends on what else is going on out there…economic reports, geopolitical news, general politics, extreme weather, foreign policy, etc.

In general things are up and down and up again…typical I guess. Rates for the most part have settled in to their current range. This is where we’re going to be for a while.

I threw my Ladainian Tomlinson jersey on the floor and stomped on it. Yes, when tested I’m a Minnesota Vikings fan…you got a problem with that?

A few years ago the Vikings and Chargers were playing in San Diego in the first game of that year. I wore my Tomlinson jersey and a Vikings hat. I figured I’d been following the Chargers long enough that I had to support them, even if they were playing my precious Minnesota Vikings. But as soon as the kick-off was completed I ripped off my jersey and threw it on the floor. I just couldn’t do it. When tested I’m a Vikings fan, and I will always be a Vikings fan, and believe me, that is not an easy thing to be. So, I’m always cheering for the Bolts, but if they’re in the Vikings way then I spit on them…it is what it is…I ams what I ams… How do you like me now?!

My Schedule:  I have an appointment at 11:30a and will be done around 1:30p or so. Then I have another appointment at 4:15p.

Market Watch: Bonds Down and Falling. Pricing Improved From Yesterday But Not For Long…  This morning the 30-year Fannie Mae bond is down -33bps and falling. We could see a mid-day reprice worsening.

The Fannie Mae 30-year bond has been falling all morning and has now dropped below 2 floors of support.  Even though Interbank’s pricing has already taken into account the lower bond price, I believe they will take a prudent/conservative approach and issue a reprice worsening. So, if you were planning on locking today I hope you saw my earlier warning and locked before Capital Markets took action.

There were a few economic reports that supported a stronger economy but my opinion is the sell off this morning is simply due to traders taking gains from yesterday’s rally. Yesterday I advised you lock and I hope you did because the nice price rally I was hoping for was short-lived. Now the bond price is back to where it was Friday afternoon…all those gains are gone. But more concerning is where the next floor of support is. The next floor down, the Lobby in my graphic below, is a ways down there. It’s not inconceivable that traders will continue to sell since they don’t expect the bleeding to stop until it hits that Lobby. Remember, a trader’s job is to sell high and buy low…if they think the price will drop to the Lobby, then they will sell and wait for the price to hit that Lobby.  I hope that makes sense. Let me know if you have questions…

Chargers.  Admittedly I’m a Minnesota Vikings fan but I’m also a San Diego Chargers fan, unless of course they’re playing the Vikings.  I’ve lived in San Diego since 2000 so I’ve paid my dues, and yesterday was a heartfelt loss, even if it wasn’t a surprise. To beat Denver in Denver would’ve been nothing short of a miracle, and by golly I thought the miracle was comin!  But at least they ended strong. If they couldv’e gotten things going just a little earlier we might have had a chance. But too many dropped balls and missed plays. You just can’t do that and expect to beat the best quarterback in the NFL. With a healthy Matthews next year and a couple of adjustments, we might have a team, unless of course we lose all our coordinators in the off-season.                                                           

I ADVISE 45-DAY LOCKS ON EVERYTHING. Turn-times are fast…like lightening fast. But free lock extensions are going away or will be extremely difficult to obtain in the future. I’ve been working diligently on getting relief to this rule, and I’m close. But for now, I strongly advise you lock 45 days or take enough rebate to cover extension costs.  Let me know if you want specifics…

My Market Watch:  Bonds Up and Rising!  Pricing Improved.  This morning the 30-year Fannie Mae bond is up +28bps and rising. We could see a mid-day reprice improvement.

The bond is currently trading above 2 ceilings of resistance which is fantastic. If it holds then these ceilings convert into floors and become a foundation for the rest of the week. Let me know if you’d like a more thorough explanation….  Assuming we do not get any geopolitical news or negative economic reports, we would be is the midst of a nice pricing rally.

My Disclaimer

Wake Up! I slept! Thank goodness! My eyes are awake. Are you awake? Today is the first day of the new QM rules. Are you excited?! I’m excited about the market right now! Read below…

My Market Watch Bonds Up Big! Surprising Jobs Report Comes In Weak…Very Weak. This morning the 30-year Fannie Mae bond is up +81bps. As a result, rates are improved from yesterday. This morning the Jobs Report came in at only 74,000 new jobs when it was expected to come in at around 200,000. That is significantly lower and took everyone by surprise. As a result, traders are buying bonds and rates have improved.

Remember, traders are concluding the economy is weaker because 125,000 less new jobs than expected certainly indicates a weaker economy. That makes sense…less new jobs than expected = weaker economy than thought. Traders would rather invest in bonds when the stock market is a bad bet…and when the economy looks weak the stock market looks like a bad investment. Bonds are up big, and prices are improved accordingly.

We might see some very competitive pricing this month. First, Fannie Mae delayed a Gfee and LLPA increase and now we have a weak economic report. It very well could be a good month…that would be nice, eh?! Here is a look at the Jobs Report over 2013, courtesy of MBS Highway:

Something Rdiuculouslous.  I’m tired…real real real real tired. I was up most of the night, again, last night. Wednesday night I didn’t sleep at all…not a wink, and last night I slept a little, but not enough. Sleep seems like a dream, if you know what I mean…HEY, that rhymes!  So, if I say something incoherent to you today, or if I type something rdiuculouslous, please forgive me. I’m happy…but I’ve got tired eyes.                                                           

Fannie Mae announced yesterday it was postponing its Gfee and LLPA (adjustment) increases. This is GREAT NEWS because it should result in more competitive pricing, at least in the short-run.

Announcement SEL-2014-01: Pricing Update Change
In Selling Guide Announcement SEL-2013-09, Pricing Update, Fannie Mae announced plans to increase single-family guaranty fees and implement changes to loan-level price adjustments and other related pricing fees at the direction of the Federal Housing Finance Agency (FHFA). On Jan. 8, 2014, FHFA directed Fannie Mae to delay implementation of all of these changes until further notice. In its news release on Jan. 8, FHFA indicated that it would give not less than 120 days’ notice after completing the evaluation before implementing any changes. Read the announcement here.

DEADLINE FOR NON-QM ATR LOANS IS TODAY!  UPLOAD BEFORE 3pm. Tomorrow QM kicks in so if you have any loans you’re concerned about then I advise you get them uploaded today before 3pm.  If you upload after then you will be subject to the new QM rules.

I ADVISE 45-DAY LOCKS ON EVERYTHING. Turn-times are fast…fast like lightening fast. But free lock extensions are going away and if you need more time, for whatever reason, I will not be able to assist. I have been making an argument to get some relief, and I’m gaining headway, but the safe bet is to lock for 45 days to avoid issues down the road. For now, Interbank is being advised by legal that it has no choice but to require you to extend at a cost and redraw docs, even if it’s a purchase.  Let me know if you want specifics…

My Market Watch: Bonds Flat; Fed Minutes Released, Jobs Report Is Tomorrow. This morning the 30-year Fannie Mae bond is flat. As a result, rates are the same as yesterday.

Yesterday the Fed released their minutes from last month’s Fed meeting. If you recall, this was the meeting where they announced QE Tapering, new policy of decreasing the amount of bonds the government buys. The minutes revealed many members believe the economy is and will continue to recover at a good clip, and, that many members supported a more significant taper. Frankly, I’m surprised we didn’t see a bond sell-off after learning this, but I’ll take a passive response to this kind of news every time.

Jobs Report Tomorrow.  The Jobs Report tells us how many new jobs were created in December. Traders use this information to determine if the economy is stronger or weaker, and then they buy and sell stocks based on that information. Simply put, if the report indicates more new jobs than expected, then traders conclude the economy is stronger. That should make sense…more new jobs = stronger economy. On the other hand, if the report indicates less new jobs in December than anticipated, then traders will logically conclude the economy is weaker. Traders buy stocks when the economy looks strong and they buy bonds when the stock market is a bad bet. Therefore, most of the time there is an inverse relationship between when traders buy and sell bonds and stocks. Here is a good way to look at the analysis:

Tomorrow it is expected that 200,000 new jobs will be reported for December. Because the ADP Employment report yesterday was stronger than expected, I recommend locking rather than floating. It’s a conservative approach but it makes feel all warm and fuzzy inside.

My Disclaimer

She swam from Cuba to Florida. You didn’t hear about this? She was 64 years old when she did it last year…it was her 5th attempt. How do you not know her? Yesterday I wrote a post about Janet Yellen being confirmed as the next Fed Chair…she is the first woman to hold the position. I referenced Diana Nyad as an example of a strong woman…I got several emails giving me the impression people didn’t know who she was.

Diana Nyad is the definition of perseverance. She swam 28 miles around Manhattan for charity. If I tried to swim 1 mile I’d throw-up and then drown and then throw up again after already being dead. She is fun to watch break records and raise money for worthy causes, but she is even more fun to listen to because she is so strong-minded. Whenever I feel like tossing in the towel, like I did last night while I stayed awake with my sick son, I thought of Diana. Last night I didn’t sleep a wink…and I was okay with it. Hell, if Diana could swim from Cuba to Florida in jelly and shark infested waters, then what do I have to complain about?

Bonds Are Down; Fed Minutes From Dec Released Today, Initial Jobless Claims is Tomorrow & Payroll is on Friday. This morning the 30-year Fannie Mae bond is down about -25bps. As a result, rates are worse than yesterday.

The culprit is the ADP Employment report which indicated more new jobs created in December than anticipated. This report is interpreted by traders as strength for the economy…more new jobs means the economy is improving. Whenever traders feel the economy is improving they typically invest in stocks and pull money out of bonds to do so. When that happens rates worsen.

This afternoon the Fed releases their minutes from last month’s Fed meeting. If you recall, in this meeting they announced QE Tapering, a new policy of decreasing the amount of bonds the government buys. We all knew this was going to happen eventually, and quite frankly most believed it would’ve happened much sooner. But the detail in the minutes will shed some light into the discussions leading to the decision, and depending on how these notes are interpreted the market might shift once again. Although I’m in the car all day, I’ll do my best to keep you apprised…

Janet Yellen Confirmed. She is the first woman to hold the illustrious position, and it’s about time. I am a firm believer that women are the future of this country. Simply put, I’m a feminist. First, women are stronger than men…there are several examples of this including the struggle over sheets, pregnancy-birth, and feminine hygiene-maintenance. But I’ll use Carrie Mathison from Homeland (fiction example) and Diana Nyad (real-life example) as my primary examples of strength. Second, let’s face it, women think differently than men…and different thinking is what we need…that’s my opinion anyway. And finally, women certainly couldn’t do any worse than men have done, am I right?

Fed Minutes From Dec Released Tomorrow, Initial Jobless Claims is Thursday & Payroll on Friday. It’s a big week but I’m mostly interested in what the Fed minutes say…this was the meeting where QE Tapering was announced. It should be an interesting report…make no mistake about it, this could be a volatile week…

CHANGES NOW IN EFFECT! 
Your GFE MUST be correct when you upload the submission package. When you took the application and when you locked is irrelevant.

FOR EXAMPLE, let’s say you took a loan application on December 27th, registered the loan in the Interbank portal on December 28th, and locked the loan online on December 29th. Your processor now wants to upload the submission package today. Because the submission package is being uploaded in January, you are now subject to your NEW JANUARY COMP PLAN AND OUR NEW $799 LENDER FEE. The fact your borrower signed an application in December and you locked in December is irrelevant. Your GFE must be correct…if it’s incorrectly based on our old $699 Lender Fee or on your old 4th quarter comp then you’re screwed because your GFE would be a compliance violation and therefore your loan and your lock would be cancelled.

If this is not 100% clear then please let me know…. For a comprehensive list of QM/ATR changes please contact me ASAP.