Good morning and happy Monday! We do have some unscheduled stories today. First up, FHA has a delinquency problem. Before the pandemic, FHA serious delinquencies (90+ days) totaled 4% of all FHA mortgages. That number got to 12% in Feb. of 2021 and has fallen to 8.5% as of the end of Sept. 2021. This 8.5% accounts for 1/2 of all mortgage delinquencies, even though FHA mortgages only contribute to 17% of the total.
In other news, mortgage rates fell .05% in the most recent week ending Nov. 4th. Most don’t expect that move to lower rates to continue. Lastly, this recent rally may have significant ramifications for mortgage originators, as a 1.45% range 10yr T-Note equates to a 2.00% current coupon vs. 2.50%’s, which had been the previous coupon and primary hedge vehicle for them. Their concern is that borrowers will let the originators keep their lock-in fee and lock in at lower rates. Those lower rates will be an expensive pain in the rump for them, and will cause the originators to have a duration mismatch and force them to rebalance their pipelines. 2.50%’s have a 4.67yr duration, 2.00%’s a 6.33yr. This means they would be 26% under hedged!
Bonds today are down, with 10yr T-Notes -8/32 to yield 1.47%. In MBS, FNMA 30yr 2.50% are +9/32 to $103-09, which yields 1.78% and is +69 to the 5yr treasury curve.
Cherry Picks
10 Year Fixed
15 Year Fixed
20 Year Fixed
30 Year Fixed
Agency CMBS
Agency CMO – 3 Year
Agency CMO – 5 Year
Agency CMO – Long End
Jim Tait is a registered representative with and offers securities through Hanover Securities, Inc. (Hanover), Member FINRA & SIPC. Although this information has been obtained from sources we believe reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Securities that may be shown are subject to availability and changes in price. Past performance is not indicative of future results. Changes in any assumptions may have a material effect on projected results.
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