Non Farm Payrolls Day
Mortgage backed securities had a brief early morning rally after opening to the down side yesterday. Early morning weakness in stocks led to the rally but as the day moved along stocks managed to improve off their lows which brought MBS back to early morning levels. There was reports of a couple lenders repricing for the better but they quickly repriced for the worse as the market turned. This kept mortgage rates unchanged on the day. The market is waiting for directional guidance which could be discovered today with the release of the Employment Situation report.
The U.S. Department of Labor reports on the Employment Situation this morning. This data provides market participants several key components regarding the employment situation in our country. First, this report totals the number of jobs that have been created or lost in the prior month. Our economy needs a monthly gain of about 150,000 to maintain adequate employment levels and to sustain economic growth. During the recent recession, job losses have approached the 600,000 level but recent reports are indicating an easing in the number of jobs lost hinting at an economic recovery. Next we get the official unemployment rate which measures as a percent the number of Americans that are currently unemployed. An unemployment rate of 5% is considered healthy. This data set also provides information on wages with the average hourly earnings and work week. A healthy economy will show increasing wages and a stable work week. If wages rise to fast though, that will apply pressure on consumer prices to increase which is known as wage based inflation. If companies must pay employees more money to retain and hire, they pass that expense on to the end consumer.
The report shows a substantial improvement on all fronts. The nonfarm payrolls was expected to show a loss of 320,000 but the report shows only a loss of 247,000. This is the smallest decline since August of last year. May’s and June’s numbers were revised better showing 43,000 fewer jobs lost. The unemployment rate which was expected to rise from 9.5% to 9.6% actually fell to 9.4%! It is being reported that the decline was due to a sizable drop in the labor force meaning many people stopped looking for a job. Deeper within the Employment Situation report, the Department of Labor counts all unemployed workers including the discouraged ones that stopped looking for a job and workers that are under employed(working part time but want full time) which places the rate of unemployed closer to 16%. The average work week posted a rise from 33.0 to 33.1 right on expectations and hourly earnings rose more than expected by .2% vs .1%. This report is further confirmation of a turnaround for our economy. Immediately following the release of this data, MBS moved considerably lower as did treasuries. Expect mortgage rates to be higher this morning.
I spoke yesterday regarding transferring appraisals from now closed Taylor Bean and Whitaker to a new lender. The Home Valuation Code of Conduct has stated that appraisals should be portable from one lender to another. I received an email from a major lender yesterday stating that they will not accept an appraisal transferred from Taylor Bean to them under any circumstance. If you had a loan with Taylor Bean and the appraisal has been completed, you will now have to pay for another appraisal to complete your transaction.
Early reports from fellow mortgage professionals are indicating higher rates this morning. The par 30 year conventional rate mortgage is now in the 5.375% to 5.625% range for the best qualified consumers. In order to qualify you must have a FICO credit score of 740 or higher, a loan to value of 80% or less and pay all closing costs including 1 point loan origination/discount/broker fee. As always, you can elect to pay less upfront costs but your rate of interest will move higher. In addition, you can elect to pay additional discount points to buy the rate even lower. Think about it like a see-saw, the higher the costs, the lower the rate.
The U.S. Department of Labor reports on the Employment Situation this morning. This data provides market participants several key components regarding the employment situation in our country. First, this report totals the number of jobs that have been created or lost in the prior month. Our economy needs a monthly gain of about 150,000 to maintain adequate employment levels and to sustain economic growth. During the recent recession, job losses have approached the 600,000 level but recent reports are indicating an easing in the number of jobs lost hinting at an economic recovery. Next we get the official unemployment rate which measures as a percent the number of Americans that are currently unemployed. An unemployment rate of 5% is considered healthy. This data set also provides information on wages with the average hourly earnings and work week. A healthy economy will show increasing wages and a stable work week. If wages rise to fast though, that will apply pressure on consumer prices to increase which is known as wage based inflation. If companies must pay employees more money to retain and hire, they pass that expense on to the end consumer.
The report shows a substantial improvement on all fronts. The nonfarm payrolls was expected to show a loss of 320,000 but the report shows only a loss of 247,000. This is the smallest decline since August of last year. May’s and June’s numbers were revised better showing 43,000 fewer jobs lost. The unemployment rate which was expected to rise from 9.5% to 9.6% actually fell to 9.4%! It is being reported that the decline was due to a sizable drop in the labor force meaning many people stopped looking for a job. Deeper within the Employment Situation report, the Department of Labor counts all unemployed workers including the discouraged ones that stopped looking for a job and workers that are under employed(working part time but want full time) which places the rate of unemployed closer to 16%. The average work week posted a rise from 33.0 to 33.1 right on expectations and hourly earnings rose more than expected by .2% vs .1%. This report is further confirmation of a turnaround for our economy. Immediately following the release of this data, MBS moved considerably lower as did treasuries. Expect mortgage rates to be higher this morning.
I spoke yesterday regarding transferring appraisals from now closed Taylor Bean and Whitaker to a new lender. The Home Valuation Code of Conduct has stated that appraisals should be portable from one lender to another. I received an email from a major lender yesterday stating that they will not accept an appraisal transferred from Taylor Bean to them under any circumstance. If you had a loan with Taylor Bean and the appraisal has been completed, you will now have to pay for another appraisal to complete your transaction.
Early reports from fellow mortgage professionals are indicating higher rates this morning. The par 30 year conventional rate mortgage is now in the 5.375% to 5.625% range for the best qualified consumers. In order to qualify you must have a FICO credit score of 740 or higher, a loan to value of 80% or less and pay all closing costs including 1 point loan origination/discount/broker fee. As always, you can elect to pay less upfront costs but your rate of interest will move higher. In addition, you can elect to pay additional discount points to buy the rate even lower. Think about it like a see-saw, the higher the costs, the lower the rate.
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