Secondary Market Corner 8/6/20

Pete Radigan, Senior Consultant, Spillane Consulting Associates

8/6/20

From the “Corner”, mortgage rates continue to trend lower with one aggregator quoting a price of 102.879 not including the SRP on an interest rate of 2.875%. Good time to increase the house margins again. Pull through rates remained at a healthy 75% as lenders moved applications through the manufacturing process although we are seeing more 60 days locks and delivery extensions.  The 30-year conforming to 10-year treasuries remained in a tight trading range with the 10-year treasuries at 53 basis points.

With the drop-in rates the MBA reported this week a 5.1% increase in application volume.

Best efforts to mandatory spreads are returning to normal at 55 basis points as the market is trying to find its footing in the new normal. As a sidebar, a recent informal survey of SCA clients indicates a move to increase the loan loss reserves closer to the 2% range as the forbearance/modification/foreclosure process is in uncharted waters. Credit quality in the existing residential portfolio is catching the attention of the risk managers.

The “Corner” would like your thoughts on ROE as a measure of mortgage profitability and comments on the efficiency ratio.

Secondary Market services and whole loan trading offered by Spillane Consulting Associates, Inc.