Stocks are higher and Mortgage Bonds are lower so far this morning. Mel Watt, the head of the Federal Housing Finance Agency (FHFA), said yesterday that the FHFA has been working to refine the Representation and Warranty Framework to provide more repurchase clarity to the country’s banks. Currently, there is quite a bit of ambiguity regarding re-purchases of mortgages, leading to lenders implementing their own overlays. If the FHFA provides us with a more in detail explanation of the Reps and Warranty guidelines, it could make the loan process more seamless. In addition, the FHFA is preparing guidelines for mortgages w/LTVs of 95-97%, permitting down payments as small as 3-5% of the home value. Fannie Mae said they will start buying loans with as little as 3% down. We could see Freddie Mac follow suit. This is good news for housing.
And speaking of housing news, Existing Home Sales were reported. This report measures closed sales for September. Sales were up 2.4% at 5.17 M units. This was stronger than expectations looking for 5.10 M units and the best number of the year. The Median Existing Home Sales price was reported at $209,700, up 5.6% year over year. Additionally, inventory declined a bit to a 5.3 month supply. Distressed sales dropped to 10%, while cash buyers were at 24% and investors were 14%. First time homebuyers remained at 29%. This was a strong housing report following a good Housing Starts report last week. We will get New Home Sales on Friday.
Mortgage Bonds are still trading in the middle of a wide range between support at 103.35 and overhead resistance at 104.64. The S&P 500 opened up above a very important level of resistance at its 200-day Moving Average. If Stocks can gain momentum from here, it may apply pressure to Bonds. The 10-year Treasury Note Yield is currently battling a very important level at 2.21%. If Yields break convincingly above this threshold we could see rates start to move higher.