Financial Market Update #1/ Week of August 17, 2009

Good Morning Everyone and Happy Monday! If you have been looking for lower rates, this is a happy morning for you . . . if you are a stock trader, probably not so much. This morning’s sell off in equity markets kicked off in Tokyo late last night (our time) with an announcement that the Japanese economy grew at a slower than expected pace in the 2nd quarter. The Tokyo stock market (Nikkei 225) sold off over 300 points on the news. The ill mood seemed to carry over to Europe and then our shores in pre-market trading.

The news for our economy that was reported this morning wasn’t too bad, actually. The New York Manufacturing Index reported it’s first positive number since April of 2008. A number which indicates expansion. The Feds announced this morning that they will extend their TALF program (Term Asset-backed Securities Lending Facility) to add liquidity into the lending arena going forward.

This morning is a win-win for mortgage rates. The Fed news is encouraging to credit instruments, and the sell off in the stock market means money is fleeing to the safe havens of the Treasuries and MBS’s. Rates this morning are about .500 better in rebate than Friday morning’s rate sheet. The sell off this morning is broad-based which could mean that selling will continue if traders think the market is moving downward, and this could have a continued positive affect for mortgage rates.

Investors seem slow to chase rates – maybe because they were burned early this year on dismal pull-through percentages. Banks want to be the last ones with whom you lock, not the first. The last bank gets the deal, so they’re willing to wait and let rates fall further, if that’s what they think is going to happen, and pick up the lock at the end of the process. In regards to pull through, it’s no wonder big banks were in support of the latest rounds of regulations. Much of what we have seen implemented in the last 6 months facilitates an effort to keep brokers with the investor with whom they start. It’s very difficult now to jump around from lender to lender once you’ve started the file process, specifically ordering the appraisal and having the lender issue a TIL. Maybe that’s a good thing, but doesn’t seem to be much a benefit to the borrower who might have a feeling of being trapped.

Have a terrific Monday and very profitable week!