Mortgage Rate Forecast: May 2009

What the Markets Are Doing Today:

The bond market and mortgage backed securities markets as well as the stock markets opened in positive territory this morning. However, all markets are losing their gains of the morning

• The Dow opened up 62 points from yesterday's close
• NASDAQ opened up 14 points from yesterday's close
• The 10 Year Treasury Bond opened up 12/32 from yesterday's close
• FNMA 30 Year 4.5% coupon opened up 5/32 from yesterday's close

The price of the FNMA 30-Year 4.5 coupon closed down 2-9/32 (white line) from its opening yesterday, but is currently up 1/32 (blue line). Remember, on MBSs, as the price goes up, the yield goes down - and mortgage interest rates go down with it. Conversely, as the price goes down, the yield goes up - and so do mortgage interest rates. I expect that mortgage rates today will be as much as 1% worse in rate from yesterday's opening.

Economic Reports Being Released Today:

• Durable Goods Orders Report for April - The report showed an increase of 1.9% in durable goods orders for April - this is much higher than the predicted rise of just 0.5% - and is the biggest monthly gain since December 2007. This follows a revised drop of 2.1% in March. Most of the increase is attributed to automobile orders and defense spending. Excluding defense spending, however, durable goods orders fell 1.5%. The overall year-to-year durable goods orders (April 2008 - April 2009) is down 24.4% while non-defense related durable goods orders is down 32.8%. This report is considered negative news for bonds (lower prices and higher yields) because rising manufacturing activity indicates the economy is expanding.
  
  
• New Home Sales - This report gives us a measurement of the strength of the housing market and future mortgage credit demand. New home sales came in at an annualized rate of 352,000, which is slightly less than the 360,000 that was expected. This compares to 356,000 new homes sales in March. Since April 2008, sales of new homes have fallen 34%. The supply of new homes on the market - now standing at 297,000 units - continues to dwindle, and is now down to a 10.1 month inventory - the lowest level in 8 years. However, this report is not considered to be of much importance to the bond market.
  
  
• Jobless Claims - 623.000 new claims for unemployment were filed last week, less than the 635,000 new claims that were predicted. Continuing claims for unemployment rose for the 19^th week in a row by 110,000 to another new record of 6.772 million. Unemployment now stands at 9.0%. This indicates that it's taking more time for the jobless to find work. With more people unemployed, the threat of wage based inflation is subdued. Employers do not have to pay higher wages to attract new employees during high unemployment times as people will be happy just to have a job. However, this data is not considered to be of high importance to the bond or the mortgage backed securities markets.
  
  
• Fed's MBS Purchase Program - The results of this week's purchases of mortgage backed securities (MBSs) by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $481 billion in MBSs. The Feds plan on purchasing up to $1.25 trillion in MBSs through December 31st.

Important News of the Day:

The Feds will be holding a 7-year Treasury Note auction which may impact bond trading and possibly mortgage rates later today. Yesterday's 5-year sale was met with a respectable demand, so hopefully today's sale will also go well. Results will be posted at 1:00 PM ET, so any reaction to the bond market will occur during afternoon trading hours.

A total of six important economic reports or news are being released this week. Two of the six reports - the CCI and the Durable Goods Orders - are highly important to the bond market and mortgage pricing. The remaining reports are considered to be of moderate importance to the markets. Look for more details on this week's economic data releases and events on my Weekly Mortgage Market Watch.

What Happening With Mortgage Rates Today:

High Volatility. For a brief overview of what happened in the MBS markets yesterday, please read my Daily Interest Rate Lock Advisory.

Overall, it will be a busy week for bonds and mortgage rates. There is a pretty good possibility of seeing mortgage rates change several times this week, so please proceed cautiously if you're still floating an interest rate.

There's still continued downward pressure on MBS prices (which means higher yields and mortgage rates). The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government expects to issue between $2.7 trillion and $4.2 trillion in bonds over the next two years to pay for the massive debt obligations. That in and of itself may give rise to the concerns for inflation. In addition, there are sign that the global recession is easing, and there is a growing concern over the potential for inflation due to the massive government borrowing and spending.

No one knows how long rates will stay down this time or if they'll go any lower. In addition, the spring and summer home buying season is upon us. Mortgage rates historically climb this time of year before peaking in July or August. If you haven't locked in a rate yet, then you may want to consider doing so. Floating is making less sense now as the ever increasing massive government debt as well as the spring and summer home buying season could soon drive mortgage rates up even more. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in.

My Interest Rate Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Lock if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers. See today's mortgage rates at www.LewCorcoran.com/RateSheet.

The ‘bubble' in the mortgage backed securities (MBS) markets blew up yesterday. So what happened? While there are a number of factors that affect mortgage rates, let's look at a few underlying causes of what happened yesterday.

The FNMA 30-Year 4.0% Coupon dropped 227 basis points (2-9/32) on 5/27/09 (blue line).

Since January 2009, the government's intervention in the MBS and bond markets has caused a tightening of the normal spread between MBS and the 10 year bond. (MBS trades at a higher rate than bonds because they are riskier, and there is a 'normal spread' between yields of bonds and MBSs.) As the 10 year bond continued to fall in price (and increase in yields) over the past few months, MBSs remained relatively stable - thanks to government intervention - and mortgage rates have stayed down. This caused a tightening of the 'normal spread' between bonds and MBSs. This was bound to unwind - which it did in a big way yesterday. After holding back while the 10 year note rate climbed (which it has been doing since January), prices of MBSs fell and their yields (and mortgage rates) jumped back to the level it was at before all this started - and that was back in December 2008. If you remember, the Feds announced back then that they will begin purchasing MBSs - as much as $600 billion worth - to help lower mortgage rates and keep them down to help revitalize the housing market.

Right now, the massive debt the government has piled on is about 79% of the gross domestic product (GDP). This has caused some to be concerned that the US may be poised to lose its AAA bond rating. Bill Gross, who is the co-chief investment officer of Pacific Investment Management Co., said the U.S. will eventually lose its AAA rating.  (In Britain, their debt is 100% of their GDP which has caused them to lose their AAA rating).

Timothy Geithner, Secretary of the Treasury, stated just last week that he is committed to cutting the budget deficit as concerns about the deteriorating U.S. creditworthiness deepens. Unfortunately, it appears that Congress and the president have no intention of reducing the ballooning deficit - in fact, they intend to make it even worse. The Feds have been selling massive amounts of T-bills, notes and bonds to help finance all the stimulus packages, spending programs, and the bailouts of banks and financial institutions as well as others. The US is completely dependent on foreign investors (namely China and others) to fund our growing massive debt. And foreign investors are becoming leery of purchasing more and more of that debt.

Others are concerned about the impending inflation that may be looming as signs indicate that we may be nearing the end of the recession. And inflation is the nemesis of bonds and MBSs. Just the fear of inflation will drive up bond yields and mortgage rates. But we're not out of the woods yet. Without lower mortgage rates, the housing market will continue its downturn. If housing prices are not stabilized, then it's widely expected that the economy won't recover anytime soon.

Remember, the recovery of the housing market is the key to an economic recovery. And one of the keys to getting the housing sector back on track is to keep mortgage rates down. In order to keep rates down, the Feds needed to create an artificial demand for MBSs. (In the bond market, a higher demand leads to higher prices and lower yields and mortgage rates). With the Feds buying up to $1.25 trillion (that's with a ‘T') of MBSs and another $300 billion in Treasuries, many thought that that would do it.

However, the Treasury has also been selling massive amounts of T-bills, notes and bonds to help finance the growing national deficit. The market is now oversaturated with notes, bonds and T-bills - which in and of itself causes their prices to fall as there is no more demand for a growing supply. Less demand for bonds drives their prices down which in turn causes yields (and mortgage rates) to rise. The Feds simply can not continue to sell notes, bonds, and Treasuries without creating higher rates.

As of last Thursday, the Feds have purchased $481 billion in MBS since January. By creating an artificial demand for MBS, they have kept their prices up which in turn has helped keep mortgage interest rates down. However, mortgage rates cannot stay down in the face of increasing long term treasury rates. There is a ‘normal spread' between the 10 year bond and MBS - MBSs trade at a higher yield than bonds because they are riskier. Since January, the yield on the 10 year bond has been rising while the yield on MBS has been relatively stable. This has caused the spread between bonds and MBSs to narrow. As the spread between the yields of the 10 year bond and MBSs narrowed, traders were bound sell off the MBSs. Why? Basically, if you get the same rate of return for a relatively safe investment such as a 10 year bond and a riskier investment such as MBSs, you're going to drop (sell off) the riskier investment because there's not enough reward (higher yields) for the higher risk you're taking.

Our government now has a major problem. What are they going to do? Continue to buy more Treasuries? Continue to buy more MBSs? Continue with the bailouts? Continue with an ever increasing federal spending packages? If so, how will they finance it? Do they continue to sell more notes, bonds, and T-bills? If they do, who will continue to buy our mounting deficit? Will they finally address the massive deficit - or keep spending more?

All I can say is expect a significant increase in market volatility as prices of MBSs trade more in line with the bonds.

What the Markets Are Doing Today:

The bond market and mortgage backed securities opened in positive territory while the stock markets opened in negative territory this morning. However, prices of bonds and mortgage backed securities reversed course and are continuing their downward spiral (higher yields and higher mortgage rates) that started last Thursday.

• The Dow opened down 21 points from yesterday's close
• NASDAQ opened down 8 points from yesterday's close
• The 10 Year Treasury Bond opened up 6/32 from yesterday's close
• FNMA 30 Year 4.0% coupon opened up 3/32 from yesterday's close
  

The price of the FNMA 30-Year 4.0 coupon closed down 13/32 (white line) from its opening yesterday, and is currently down 13/32 (blue line). Remember, on MBSs, as the price goes down, the yield goes up - and so do mortgage interest rates. Conversely, as the price goes up, the yield goes down - and mortgage interest rates go down with it. I expect that mortgage rates will be 0.5 - 0.75 worse in discount points from yesterday's opening.

Economic Reports Being Released Today:

• Existing Home Sales -Released by the National Association of Realtors, the report tracks the resale of existing homes in the U.S. Existing home sales was up 2.9% in April to an annual rate of 4.680 million, and is as forecasted. Distressed properties (foreclosures and short sales) accounted for 45% of all existing home sales. The year-to-year rate is still down by 3.5%.
  
  Prices of existing home sales held fairly steady, and is up 0.2% to a median $170,200. The year-to-year prices of existing homes are down 15.4%, however. Meanwhile, the supply of homes on the market rose to 10.2 months; it was at 9.8 months in March and 9.7 months in February.
  
  It appears that the housing market is bottoming out, which would indicate that the worst may be over. However, this news is not considered to be of great importance to the bond markets.

Important News of the Day:

The Treasury Dept. will be holding a 5-year Treasury Note auction today. It may have a positive influence on bond trading and possibly mortgage rates if they are met with an exceptional demand.

There will be six important economic reports or news released this week. Two of the six reports - the CCI and the Durable Goods Orders - are highly important to the bond market and mortgage pricing. The remaining reports are considered to be of moderate importance to the markets. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch.

What Happening With Mortgage Rates Today:

High Volatility. Overall, it will be a busy week for bonds and mortgage rates. There is a pretty good possibility of seeing mortgage rates change several times this week, so please proceed cautiously if you're still floating an interest rate.

There's still continued downward pressure on MBS prices (which means higher yields and mortgage rates). The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government expects to issue between $2.7 trillion and $4.2 trillion in bonds over the next two years to pay for the massive debt obligations. That in and of itself may give rise to the concerns for inflation. In addition, there are sign that the global recession is easing, and there is a growing concern over the potential for inflation due to the massive government borrowing and spending.

No one knows how long rates will stay down this time or if they'll go any lower. In addition, the spring and summer home buying season is upon us. Mortgage rates historically climb this time of year before peaking in July or August. If you haven't locked in a rate yet, then you may want to consider doing so. Floating is making less sense now as the ever increasing massive government debt as well as the spring and summer home buying season could soon drive mortgage rates up even more. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in.

My Interest Rate Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Lock if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers. See today's mortgage rates at www.LewCorcoran.com/RateSheet.

What the Markets Are Doing Today:

The bond market and mortgage backed securities opened in positive territory while the stock markets opened in negative territory this morning. However, both the bond and stocks markets revered course on a much better then expected economic report.

• The Dow opened down 43 points from Friday's close
• NASDAQ opened down 13 points from Friday's close
• The 10 Year Treasury Bond opened up 2/32 from Friday's close
• FNMA 30 Year 4.0% coupon opened up 9/32 from yesterday's close

The price of the FNMA 30-Year 4.0 coupon closed down 6/32 (white line) from its opening Friday, and is currently down 3/32 (blue line). Remember, on MBSs, as the price goes down, the yield goes up - and so do mortgage interest rates. Conversely, as the price goes up, the yield goes down - and mortgage interest rates go down with it. I expect that mortgage rates will 0.125 - 0.25 worse in pricing from Friday's close.

Economic Reports Being Released Today:

• Consumer Confidence Index (CCI) - This report measures consumer willingness to spend. The report is revealed a reading of 54.9, and is much higher than the 42.0 reading that was expected. This follows a 39.2 reading in April. This means that consumers are much more optimistic about their own financial situations than many had thought. Consumer spending makes up two-thirds of the U.S. economy. This is negative news for bonds because rising confidence usually translates into higher level of consumer spending, which fuels the economy.

Important News of the Day:

A Case-Shiller report released today indicates that the housing market has yet to bottom out.  The S&P/Case-Shiller Home Price Index reveled that housing prices have continued to decline at a 18.7% year-to-year rate. According to David Blitzer, Chairman of the Index Committee at Standard & Poor's, "...we see no evidence that that a recovery in home prices has begun." 

There will be six important economic reports or news releases this week. Two of the six reports - the CCI and the Durable Goods Orders - are highly important to the bond market and mortgage pricing. The remaining reports are considered to be of moderate importance to the markets. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch.

What Happening With Mortgage Rates Today:

Moderate Volatility. Overall, it will be a busy week for bonds and mortgage rates. There is a pretty good possibility of seeing mortgage rates change several times this week, so please proceed cautiously if still floating an interest rate.

There's still continued downward pressure on MBS prices (which means higher yields and mortgage rates). The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government expects to issue between $2.7 trillion and $4.2 trillion in bonds over the next two years to pay for the massive debt obligations. That in and of itself may give rise to the concerns for inflation. In addition, there are sign that the global recession is easing, and the prices of US stocks are currently priced 55% less in value than their European counterparts.

No one knows how long rates will stay down this time or if they'll go any lower. In addition, the spring and summer home buying season is upon us. Mortgage rates historically climb this time of year before peaking in July or August. If you haven't locked in a rate yet, then you may want to consider doing so. Floating is making less sense now as the ever increasing massive government debt as well as the spring and summer home buying season could soon drive mortgage rates up even more. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in.

My Interest Rate Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers. See today's mortgage rates at www.LewCorcoran.com/RateSheet.

What the Markets Are Doing Today:

The bond market, mortgage backed securities and the stock markets all opened in positive territory this morning following news that as Lowe's beat earnings estimates, as Goldman Sachs analysts put Bank of America on its "buy" list, and as signs point to an easing of the global recession.

• The Dow opened up 105 points from Friday's close
• NASDAQ opened up 20 points from Friday's close
• The 10 Year Treasury Bond opened up 6/32 from Friday's close
• FNMA 30 Year 4.0% coupon opened up 1/32 from Friday's close

The price of the FNMA 30-Year 4.0 coupon closed down 6/32 (white line) from its opening Friday, and is currently down 1/32 (blue line). Remember, on MBSs, as the price goes down, the yield goes up - and so do mortgage interest rates. Conversely, as the price goes up, the yield goes down - and mortgage interest rates go down with it. I expect that mortgage rates will 0.125 - 0.25 worse in pricing from Friday's close.

Economic Reports Being Released Today:

• There are no economic reports scheduled for release today.

Important News of the Day:

According to Sheila Bair, Chairman of the Federal Deposit Insurance Corp. (FDIC), chief executives of a number of banks will be replaced in the next couple of months as the Fed scrutinizes financially troubled lenders.

This week will be pretty light in terms of scheduled economic releases. There are no major economic reports scheduled for release this week except for the minutes from the last FOMC meeting. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch.

What Happening With Mortgage Rates Today:

Light Volatility. Overall, I think it will be a fairly calm week for mortgage rates provided the stock markets stay calm and provided this week's economic data doesn't reveal any major surprises. The FOMC minutes, on the other hand, might lead to some volatility in the markets Tuesday afternoon.

There's still continued downward pressure on MBS prices (which means higher yields and mortgage rates). The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government expects to issue between $2.7 trillion and $4.2 trillion in bonds over the next two years to pay for the massive debt obligations. That in and of itself may give rise to the concerns for inflation. In addition, there are sign that the global recession is easing, and the prices of US stocks are currently priced 55% less in value than their European counterparts.

No one knows how long rates will stay down this time or if they'll go any lower. In addition, the spring and summer home buying season is upon us. Mortgage rates historically climb this time of year before peaking in July or August. If you haven't locked in a rate yet, then you may want to consider doing so. Floating is making less sense now as the ever increasing massive government debt as well as the spring and summer home buying season could soon drive mortgage rates up even more. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in.

My Interest Rate Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers. See today's mortgage rates at www.LewCorcoran.com/RateSheet.

What the Markets Are Doing Today:

The bond market, mortgage backed securities and the stock markets all opened in positive territory this morning following a better than expected economic reports.

• The Dow opened up 31 points from yesterday's close
• NASDAQ opened up 5 points from yesterday's close
• The 10 Year Treasury Bond opened up 3/32 from yesterday's close
• FNMA 30 Year 4.0% coupon opened up 2/32 from yesterday's close

The price of the FNMA 30-Year 4.0 coupon closed up 3/32 (white line) from its opening yesterday, and is currently down 6/32 (blue line). Remember, on MBSs, as the price goes down, the yield goes up - and so do mortgage interest rates. Conversely, as the price goes up, the yield goes down - and mortgage interest rates go down with it. I expect that mortgage rates will again be the same today as they were yesterday.

Economic Reports Being Released Today:

• Consumer Price Index (CPI) Report for April - This is similar to Producer's Price Index (PPI) report, but measures inflationary pressures at the more important consumer level of the economy. There was no change in the overall index from the previous month, but the core data reading rose 0.3%, slightly more than expected. The core data is the more important of the two because it excludes the more volatile food and energy prices. This is considered bad news for bonds (lower prices and higher yields and mortgage rates) because it indicates that the prices at the consumer level are rising quicker than thought, thus raising the concerns for inflation.
  
  
• Industrial Production Report for April - This measures manufacturing sector strength by tracking output at factories, mines and utilities. The production report revealed a 0.5% decline in output - analysts forecasted a 0.6% decline - and follows a 1.5% decline in each of the previous two months. This indicates that the contraction in manufacturing activity may be slowing. A smaller decline in output is considered bad news for the bond market and mortgage rates (lower prices and higher rates) because it would indicate that the manufacturing sector is stronger than expected.
  
  
• University of Michigan's Index of Consumer Sentiment - This is a preliminary report; this index measures consumer willingness to spend and usually has a moderate impact on the financial markets. The sentiment index came in at 67.9 - analysts predicted a reading of 67.0 - and is higher than the 65.1 reading the previous month. This too is considered bad news for the bond market and mortgage rates (lower prices and higher rates).

Important News of the Day:

GM today announced plans to close 1100 out of 6200 dealerships. Fritz Henderson, the CEO of GM, also stated that GM will probably file for bankruptcy protection on June 1st, and that it intends to close 50% of its dealerships.

Next week will be pretty light in terms of scheduled economic releases. There are no major economic reports scheduled for release next week except for the minutes from the last FOMC meeting. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch on Monday.

What Happening With Mortgage Rates Today:

Moderate Volatility. Overall, it's been a pretty active week for mortgage rates. Look for the stock markets to continue to have a major influence on bond trading. There were several noticeable changes in rates this week, and would not be surprised to see multiple intra-day revisions as well. Accordingly, I would strongly recommend maintaining contact with your mortgage professional if you're still floating an interest rate.

There's still continued downward pressure on MBS prices (which means higher yields and mortgage rates). The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government expects to issue between $2.7 trillion and $4.2 trillion in bonds over the next two years to pay for the massive debt obligations. That in and of itself may give rise to the concerns for inflation.

No one knows how long rates will stay down this time or if they'll go any lower. In addition, the spring and summer home buying season is upon us. Mortgage rates historically climb this time of year before peaking in July or August. If you haven't locked in a rate yet, then you may want to consider doing so. Floating is making less sense now as the ever increasing massive government debt as well as the spring and summer home buying season could soon drive mortgage rates up even more. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in.

My Interest Rate Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Float if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers. See today's mortgage rates at www.LewCorcoran.com/RateSheet.

What the Markets Are Doing Today:

The bond market and mortgage backed securities opened in positive territory this morning. Meanwhile, the stock markets opened in negative territory this morning following a worse then expected retail sales report.

• The Dow opened down 134 points from yesterday's close
• NASDAQ opened down 20 points from yesterday's close
• The 10 Year Treasury Bond opened up 11/32 from yesterday's close
• FNMA 30 Year 4.0% coupon opened up 4/32 from yesterday's close

The price of the FNMA 30-Year 4.0 coupon closed up 1/32 from its opening yesterday, and is currently up 6/32. Remember, on MBSs, as the price goes down, the yield goes up - and so do mortgage interest rates. Conversely, as the price goes up, the yield goes down - and mortgage interest rates go down with it. I expect that mortgage rates will be the same today as they were yesterday.

Economic Reports Being Released Today:

• Retail Sales Report for April - Retail sales of durable and non-durable goods fell 0.4% in April, and is much lower than anticipated. Analysts predicted the report would reveal a 0.1% increase. Excluding auto sales, sales fell 0.5% in April. Analysts were expecting a 0.3% increase. This is an extremely important report for the financial markets as it measures consumer spending. Because consumer spending makes up two-thirds of the U.S. economy, this data can have a pretty significant impact on the markets. A weaker than expected level of sales should push bond prices higher and mortgage rates lower.

Important News of the Day:

Speaking before the Independent Community Bankers of America, Tim Geithner, Secretary of the Treasury, said that the financial system is beginning to heal and the overall lending conditions have started to improve. But, he added, the recovery will take some time.

Geithner also said the mortgage interest rates have dropped to "an historic low" and is helping the broader economy begin to recover.

This week will be very busy next week with many economic reports scheduled for release. Monday and Tuesday will be fairly quiet, but there will be a couple of key inflation readings, an important measurement of consumer spending and a reading on industrial output in the later part of the week. That means the middle and latter parts of the week will probably be very active with several key reports being posted over three trading days. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch.

What Happening With Mortgage Rates Today:

Moderate Volatility. Overall, it likely will be a pretty active week for mortgage rates. Look for the stock markets to have a major influence on bond trading. I expect to see several noticeable changes in rates this week, and would not be surprised to see multiple intra-day revisions as well. Accordingly, I would strongly recommend maintaining contact with your mortgage professional the next several days if you're still floating an interest rate.

There's still continued downward pressure on MBS prices (which means higher yields and mortgage rates). The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government expects to issue between $2.7 trillion and $4.2 trillion in bonds over the next two years to pay for the massive debt obligations. That in and of itself may give rise to the concerns for inflation.

No one knows how long rates will stay down this time or if they'll go any lower. In addition, the spring and summer home buying season is upon us. Mortgage rates historically climb this time of year before peaking in July or August. If you haven't locked in a rate yet, then you may want to consider doing so. Floating is making less sense now as the ever increasing massive government debt as well as the spring and summer home buying season could soon drive mortgage rates up even more. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in.

My Interest Rate Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Float if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers. See today's mortgage rates at www.LewCorcoran.com/RateSheet.

What the Markets Are Doing Today:

The bond and mortgage backed securities markets opened in negative territory while the stock markets opened in positive territory this morning.

• The Dow opened up 60 points from yesterday's close
• NASDAQ opened up 11 points from yesterday's close
• The 10 Year Treasury Bond opened down 4/32 from yesterday's close
• FNMA 30 Year 4.0% coupon opened down 5/32 from yesterday's close

The price of the FNMA 30-Year 4.0 coupon closed up 14/32 from its opening yesterday, but is currently down 6/32. Remember, on MBSs, as the price goes down, the yield goes up - and so do mortgage interest rates. Conversely, as the price goes up, the yield goes down - and mortgage interest rates go down with it. Despite being down in trading this morning, I expect that mortgage rates will improve by 0.125 - 0.25 in discount points today because of the improvements in MBS yesterday.

Economic Reports Being Released Today:

• Goods and Services Trade Balance Report for April - This report revealed a trade deficit of $27.6 billion, and is slightly worse than forecasted However, this data is not considered to be highly important to the bond markets and will have no impact on this morning's trading.

Important News of the Day:

Ben Bernanke, Chairman of the Federal Reserve, stated yesterday that he is encouraged by plans of the major banks to raise capital after the government stress tests results were released. He also indicated that the worst of the world wide recession may be over.

The Treasury Budget report for April is due out later today. This report typically shows a sizeable surplus from tax receipts. However, the fiscal stimulus package and the various bailout plans have pushed federal spending up significantly. The budget deficit now stands at $956.8 billion, and is double that of last year's at this time. Foreign investors typically do not like large deficits, and the continued increases could shut off foreign investment of bonds and mortgage backed securities, which will result in lower bond prices and higher yields and mortgage rates.

This week will be very busy next week with many economic reports scheduled for release. Monday and Tuesday will be fairly quiet, but there will be a couple of key inflation readings, an important measurement of consumer spending and a reading on industrial output in the later part of the week. That means the middle and latter parts of the week will probably be very active with several key reports being posted over three trading days. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch.

What Happening With Mortgage Rates Today:

Moderate Volatility. Overall, it likely will be a pretty active week for mortgage rates. Look for the stock markets to have a major influence on bond trading. I expect to see several noticeable changes in rates this week, and would not be surprised to see multiple intra-day revisions as well. Accordingly, I would strongly recommend maintaining contact with your mortgage professional the next several days if you're still floating an interest rate.

There's still continued downward pressure on MBS prices (which means higher yields and mortgage rates). The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government expects to issue between $2.7 trillion and $4.2 trillion in bonds over the next two years to pay for the massive debt obligations. That in and of itself may give rise to the concerns for inflation.

No one knows how long rates will stay down this time or if they'll go any lower. In addition, the spring and summer home buying season is upon us. Mortgage rates historically climb this time of year before peaking in July or August. If you haven't locked in a rate yet, then you may want to consider doing so. Floating is making less sense now as the ever increasing massive government debt as well as the spring and summer home buying season could soon drive mortgage rates up even more. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in.

My Interest Rate Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers. See today's mortgage rates at www.LewCorcoran.com/RateSheet.

What the Markets Are Doing Today:

The bond and mortgage backed securities markets opened in positive territory today while the stock markets opened in negative territory as stocks set to decline after a two-month rally and the Federal Reserve prepares to buy more U.S. debt.

• The Dow opened down 127 points from Friday's close
• NASDAQ opened down 30 points from Friday's close
• The 10 Year Treasury Bond opened up 16/32 from Friday's close
• FNMA 30 Year 4.0% coupon opened up 2/32 from Friday's close

The price of the FNMA 30-Year 4.0 coupon closed down 1/32 from its opening Friday, but is currently up 6/32. Remember, on MBSs, as the price goes down, the yield goes up - and so do mortgage interest rates. Conversely, as the price goes up, the yield goes down - and mortgage interest rates go down with it. I expect that mortgage rates will improve by 0.125 - 0.25 in discount points today.

Economic Reports Being Released Today:

• There are no economic reports scheduled for release today.

Important News of the Day:

Ben Bernanke, Chairman of the Federal Reserve, will speak tonight at 6:30 pm EST at the Atlanta Fed's Financial Markets Conference in Jekyll Island, GA. Last week, Bernanke encouraged an increased government oversight of the financial markets and over each bank and individual financial company. Over the weekend, the Obama administration said they may propose legislation for the Fed to play such a role. 

This week will be very busy next week with many economic reports scheduled for release. Monday and Tuesday will be fairly quiet, but there will be a couple of key inflation readings, an important measurement of consumer spending and a reading on industrial output in the later part of the week. That means the middle and latter parts of the week will probably be very active with several key reports being posted over three trading days. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch.

What Happening With Mortgage Rates Today:

Moderate Volatility. Overall, it likely will be a pretty active week for mortgage rates. Look for the stock markets to have a major influence on bond trading. I expect to see several noticeable changes in rates this week, and would not be surprised to see multiple intra-day revisions as well. Accordingly, I would strongly recommend maintaining contact with your mortgage professional the next several days if you're still floating an interest rate.

There's still continued downward pressure on MBS prices (which means higher yields and mortgage rates). The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government expects to issue between $2.7 trillion and $4.2 trillion in bonds over the next two years to pay for the massive debt obligations. That in and of itself may give rise to the concerns for inflation.

No one knows how long rates will stay down this time or if they'll go any lower. In addition, the spring and summer home buying season is upon us. Mortgage rates historically climb this time of year before peaking in July or August. If you haven't locked in a rate yet, then you may want to consider doing so. Floating is making less sense now as the ever increasing massive government debt as well as the spring and summer home buying season could soon drive mortgage rates up even more. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in.

My Interest Rate Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers. See today's mortgage rates at www.LewCorcoran.com/RateSheet.

What the Markets Are Doing Today:

The bond and mortgage backed securities markets opened in negative territory again today while the stock markets opened in positive territory again today following the results of the bank stress test yesterday, and the release of a better than expected employment report today.

• The Dow opened up 81 points from yesterday's close
• NASDAQ opened up 14 points from yesterday's close
• The 10 Year Treasury Bond opened down 8/32 from yesterday's close
• FNMA 30 Year 4.0% coupon opened down 2/32 from yesterday's close

The price of the FNMA 30-Year 4.0 coupon closed down 22/32 from its opening yesterday (white line), but is currently up 8/32 (blue line). Remember, on MBSs, as the price goes down, the yield goes up - and so do mortgage interest rates. Conversely, as the price goes up, the yield goes down - and mortgage interest rates go down with it. I expect that mortgage rates will be worse by 0.375 - 0.625 in discount points today as compared to yesterday's opening. However, if the current pricing trend continues, we may see an improvement by 0.125 - 0.25 in discount points this afternoon.

Economic Reports Being Released Today:

• Employment Situation Report - The Labor Department reported that 539,000 jobs were lost in April, much less than the 630,000 job loss that was expected, and much less than the 699,000 jobs lost in March. It's also the smallest job loss since October 2008. This indicates that the worse of the recession may be over, and that we are hopefully beginning to see signs of a gradual recovery.
  
  However, the unemployment rate rose to 8.9% in April, the highest since September 1983, and is as analysts expected. There are now 13.7 million people unemployed.

Important News of the Day:

The Feds released the results of their bank stress test yesterday. Of the nation's 19 largest banks, 10 of them - including Bank of America, Wells Fargo, GMAC, Citigroup, and Morgan Stanley - must raise a combined total of $74.6 billion in capital in order to withstand another economic slump.

Banks that are not required to raise any new capital include American Express, Bank of New York Mellon, Capital One Financial, Goldman Sachs Group, JPMorgan Chase, MetLife, and State Street. The much anticipated results were better than expected, and comes as a relief to many investors.

Fannie Mae recorded a 1st quarter loss of $23.2 billion. That compares with a loss of $2.19 billion a year earlier. Fannie Mae said its "entire guaranty book of business, including loans with lower risk characteristics," was experiencing "increases in delinquency and default rates as a result of the sharp rise in unemployment, the continued decline in home prices, the prolonged downturn in the economy, and the resulting increase in mark-to-market loan-to-value ratios."

Fannie Mae said it will need a $19 billion infusion from the Treasury. This is in addition to the $15 billion it received from the Treasury on March 31^st.

Next week will be very busy next week with many economic reports scheduled for release. Monday and Tuesday will be fairly quiet next week, but there will be a couple of key inflation readings, an important measurement of consumer spending and a reading on industrial output in the later part of the week. That means the middle and latter parts of the week will probably be very active with several key reports being posted over three trading days. Look for more details on next week's economic data releases and events on my Weekly Mortgage Market Watch on Monday.

What Happening With Mortgage Rates Today:

Moderate Volatility. Look for plenty of movement in the financial markets and mortgage rates this week. As the reports released this week revealed stronger than expected economic conditions, bond prices fell and yields and mortgage rates rose.

There's still continued downward pressure on MBS prices (which means higher yields and mortgage rates). The supply of bonds and T-bills on the market continues to weigh heavily on the market. The government expects to issue between $2.7 trillion and $4.2 trillion in bonds over the next two years to pay for the massive debt obligations. That in and of itself may give rise to the concerns for inflation.

No one knows how long rates will stay down this time or if they'll go any lower. In addition, the spring and summer home buying season is upon us. Mortgage rates historically climb this time of year before peaking in July or August. If you haven't locked in a rate yet, then you may want to consider doing so. Floating is making less sense now as the ever increasing massive government debt as well as the spring and summer home buying season could soon drive mortgage rates up even more. So, if you like the rate that you are being offered today, then there's nothing wrong with locking in.

My Interest Rate Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers. See today's mortgage rates at www.LewCorcoran.com/RateSheet.