FRM Update

February 20, 2018



Mortgage related security yield spreads to Treasuries tightened and the curve flattened last week, as volatility remains elevated in the financial markets. Mortgage rates were mixed last week but have increased almost 50bps this year.  Mortgage applications for the week ending February 9th fell 4.1%. Purchase apps were down 5.9% and the MBA Refi Index fell 1.9% to 1274.  Refinance activity continues to be historically low and range-bound averaging a low index level of 1270 in 2018.  Housing starts and building permits boomed in January with starts up 9.7% and permits up 7.4%.

 

MBS

 





CMOs

CMO yield spreads were unchanged last week, while CMO yields of 3% or higher are attainable for typical bank-type structures.  Investor activity is focused on those structures that offer 3% yields or higher and weighted average lives around five to six years in sequential and VADM structures with coupons typically ranging from 3.5% to 4%.

 

 

Mortgage Rates and Refinance Activity

 

 

Housing

Strong Start to 2018 for New Housing Activity:   Housing starts and building permits boomed in January with starts up 9.7% and permits up 7.4%.  These data have big month-over-month swings when weather in one region is worse-than- or milder-than-normal, as is the case with the January data.  However, the YoY data provide a little more clarity on the overall strength by region.  Housing starts are now up over 70% YoY in the West, but are down almost 30% in the Midwest.  While the pace of gains in housing activity has slowed, it continues to be positive and the sector is expected to be accretive to economic growth this year.

 


 

 

 


Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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