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%.





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




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

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2021
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120