Who's the least intelligent??
Who's the least intelligent??
A young boy enters a mortgage banker's office and the mortgage banker whispers to his customer, "This is the dumbest kid in the world. Watch while I prove it to you."
The banker puts a dollar bill in one hand and two quarters in the other, then calls the boy over and asks, "Which do you want, son?" The boy takes the quarters and leaves.
"What did I tell you?" said the mortgage banker. "That kid never learns!"
Later, when the customer leaves, he sees the same young boy coming out of the ice cream store. "Hey, son! May I ask you a question? Why did you take the quarters instead of the dollar bill?"
The boy licked his cone and replied, "Because the day I take the dollar, the game's over!"
What does that have to do with rate locks? It appears that many originators are once again playing lock ping-pong: heavy locks, but heavy fallout. Applications rose last week, with purchases +6.1% and refinances +7.7%. (Refinances accounted for 45% of the applications.) Yesterday A-paper prices worsened by almost .250, and they're worse again today, for a number of reasons. First, many are beginning to believe that the Fed will continue increasing short term rates. Second, oil prices have retreated to pre-hurricane levels as refineries come back on line and additional oil comes from overseas sources. Third, stocks did very well yesterday, somewhat in anticipation of the rebuilding that will be required in Louisiana and Mississippi. And fourth, additional supply is hitting the debt markets with the Treasury's auction of $13 billion of 5-yr Notes today and $8 billion of 10-yr Notes tomorrow.
We've already seen the 2nd Quarter Productivity numbers: Productivity declined from +2.2% to +1.8%, and Unit Labor Costs rose from 1.3% to 2.5%. Neither is good news for mortgage prices. The second report comes when the Federal Reserve will release its Beige Book report at 11AM PST.
This report details current economic conditions in the U.S. by region.
If the release reveals any significant surprises, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed's next interest rate move.
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