FRM Update

March 5, 2018

The mortgage market experienced minimal change in yield spreads versus Treasuries, as mortgage rates and curve slope were unchanged last week.  Mortgage applications rose for the first time in three weeks, while refinance activity fell for the third consecutive week and continues to be historically low and range-bound.  New and pending home sales dropped in January, rounding out an extremely weak month for the housing sector.





CMO yield spreads were unchanged last week, widening slightly over the last month. 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 base case and up 300bp weighted average lives of four to six years in front sequential and VADM structures with coupons typically ranging from 2.5% to 4.5%.




Mortgage Rates



Refinance Activity



New home sales fell 7.8% MoM in January (expected +3.5%) on slower activity in the Northeast and South.  A silver lining of sorts was a lower median sales price and the most homes on the market since 2009.  As a result, months’ supply rose to 6.1, the highest since 2011.  Pending home sales dropped 4.7% MoM in January, rounding out an extremely weak month for the housing sector.  The 4.7% drop in pending sales to start 2018 was the largest monthly decline since May 2010 and points to more potential pain for existing sales in the coming months due to low supply levels and the increase in mortgage rates.




Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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