FRM Update

December 18, 2017

Mortgage yield spreads versus Treasuries were mixed last week as curve flattening continues and yield spreads remain historically tight. Mortgage rates rose a couple of basis points, while mortgage applications fell 2.3% on lower purchase and refinance activity. The Refi Index has fallen eleven of the last fourteen weeks and refi activity remains at historically low levels. The proposed tax reform bill lowers the cap on the mortgage interest deduction for new home purchases from $1,000,000 to $750,000, and includes both primary residences and second homes.







CMO spreads tightened in various types of structures last week, while activity remained steady in the sector with good two ways flows. Investor focus continues in shorter PAC structures offering extension protection. Odd lot cleanup activity also remains elevated as investors approach year-end.



Mortgage Rates and Refinance Activity




Tax Reform – Mortgage Interest Deduction

The tax reform bill is expected to be voted on this week by Congress. The tax legislation lowers the cap on the deduction for new home purchases from $1,000,000 to $750,000 and includes both primary residences and second homes.


Dan Stimpson, CPA

Senior Vice President

Vining Sparks


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