Mark's Blog Report

There has been quite a swing in interest rates these last three days.  Many lender did not update their rate sheets on Monday to reflect the changes in the market.  Some that did, didn't pass down the full change in MBS prices to rate sheets.  But with prices improving yet again this morning, we saw a bigger portion of those changes in the rates today.

As far as economic data, the only scheduled release was MBA mortgage applications which fell 1.9%.  This includes both refinances and purchases.  Taking a look at just the purchase activity, we see a rise in 1.6%, month over month, which is over a 10% decrease year over year.  The reason for the bad refinance numbers - the higher rates in February (compared to January).

Seeing as how it is a light news day which follows a landmark announcement, traders will continue to sit around the campfire and ask each other how they feel about the 200 billion dollar check that Uncle Ben said he'd trade them for some of their mortgage paper.  They were pretty stoked about it yesterday including the rest of the economy apparently. 

If you didn't catch yesterday's news, the Fed announced a Term Securities Lending Facility to make 200 bil available in liquidity.  What it amounts to is the Fed allowing MBS holders to buy treasuries with their MBS holdings.  This does not mean that Fannie and Freddie are turning into Ginnie, but they are certainly shopping at the same stores.

It will be interesting to see how this stop-gap plays out.  The hope is that, putting a band-aid on liquidity and quality problems in the MBS market will stimulate enough loan activity to ameliorate the housing and mortgage component of the current recession (yeah I said it).  But until quality is proven and/or realized on a broader level, the liquidity cannot return of it's own accord.  And if Fannie and Freddie go out and blow their allowance on more bad mortgages, Uncle Ben might not be so generous next time.