Thursday’s bond market opened flat but has since moved well into positive territory after the major stock indexes turned south. The Dow is currently down 162 points while the Nasdaq has fallen 46 points. The bond market is currently up 12/32, but this morning’s improvement in mortgage rates may be minimal due to the late surge in bonds. However, I would not be surprised to see mortgage rates improve during afternoon trading due to this morning’s gains.

There is no relevant economic news scheduled for release today. Weakness in overseas markets are contributing to this morning’s stock selling. There was also news of rate hikes by other central banks, indicating inflation is a concern beyond the U.S. economy. However, the significant selling in stocks of late has made bonds more attractive to investors as a safe-haven from the volatility. This is good news for mortgage shoppers, but I have concern that this is only temporary.

The benchmark 10-year Note yield has slipped below 5.00% this morning, which is good news. However, in my opinion we need to see it remain and stabilize under that threshold before we get too excited. Accordingly, I am holding the lock recommendations. We will likely see an afternoon improvement in rates if today’s auction goes fairly well, but the risk versus reward of floating is still l eaning towards the risky side beyond today’s potential improvement. Therefore, be careful regarding your interest rate if not locked yet.

The Treasury Department will auction 10 year Notes today. Results of the sale will be posted at 1:00 PM ET. If the sale was met with a decent demand, we should see bonds at least hold this morning’s gains, possibly even move higher. This should allow mortgage rates to be revised lower this afternoon. But, a weak demand could send bonds much lower, preventing an afternoon improvement in mortgage pricing.

The only semi-relevant monthly factual report this week is due to be posted tomorrow morning. April’s Goods and Services Trade Balance data, which will give us the size of the U.S. trade deficit will be released at 8:30 AM. It isn’t likely to cause much movement in the markets or mortgage rates, but nevertheless forecasts are expecting to see a $65.0 billion deficit.

Fed Chairman Bernanke will be giving a speech at the commencement ceremony at the Massachusetts Institute of Technology tomorrow morning. I don’t expect his words to have much of an impact on bond trading or mortgage rates, but we always need to be cautious when he speaks.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Lock if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.


a la mode

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CHICAGO (MarketWatch) — Mortgage documents that inflate borrowers’ income and real estate professionals who don’t tell consumers the whole truth about their loans were two of the problems highlighted by consumer advocates at a Federal Reserve Board hearing Wednesday exploring trends in home-equity lending.

Clearly written disclosures, improved consumer education and increased lender accountability could further help consumers protect themselves against predatory lending practices, hearing participants said. As well as gathering information on mortgage lending trends from consumer groups, industry associations and others, the Board is looking at the impact of 2002 Home Owners Equity Protection Act revisions. Congress enacted HOEPA in 1994 as an amendment to the Truth in Lending Act. The law was an attempt to protect consumers from predatory home lending practices in underserved markets, where some lenders market high-rate, high-fee home loans to cash-poor homeowners.

Under HOEPA, creditors are required to identify high-cost mortgages, and provide enhanced disclosures and comply with restrictions on loan terms.
Although consumer groups represented at a morning session agreed that certain HOEPA revisions were affective in helping consumers, they also came armed with stories from the field that told of people who still sign on to mortgages beyond what they can afford. For instance, stated income loans, in which borrowers need provide no documentation of their income, are a concern to Daniel Lindsey, supervisory attorney for the Legal Assistance Foundation of Metropolitan Chicago’s Home Ownership Preservation Project.

According to the paperwork of one loan, a client made $7,000 a month, Lindsey said. In reality, she only brought in a $1,000 Social Security check and $700 for a part-time housekeeping job. The client was never able to make a payment. In another case, a homeowner wished she had never left public housing when she became entangled in a financial mess stemming from a home mortgage, said Diane Thompson, an attorney with the Land of Lincoln Legal Assistance Foundation.

"There is something seriously wrong with the system when people think home ownership is a trap," Thompson said.

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