Third Quarter Momentum Slows . . .

Posted on Sep 18, 2012

Mortgage-backed bonds dropped today after opening well. 

Mortgage rates were higher nationwide and government g-fees (stated interest rate on by the government-sponsored entities) added to the downward move. The Federal Reserve's third-quarter induced rally may have ended before it ever started. With mortgage rates already near all-time lows and loan pipelines clogged with refinance activity, there's only so far for rates to fall.

As well, with HARP refinances surging, and liberal guidelines pushing volume higher for both the FHA Streamline Refinance and the VA Streamline Refinance (IRRRL) programs, the nation's largest banks have little reason to be price-competitive.

Analysts are concerned that the effects of the Fed's newest stimulus will be muted and, based on emerging data, they may be right. The spread between the "raw" price of a Fannie Mae bond and "everyday mortgage rates" rose to 1.45% last week.

Historically, the spread is closer to 0.50%.

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