MBA Mortgage Applications (from 9/18/13)

TRADEX GLOBAL INTERNAL COMMENTARY

Mortgage applications for both refinancing and purchases posted a “relief rally” last week.  The Index in the prior week had reached its lowest level since November 2008.  In particular, the refinance portion of the Index jumped 17.9%, albeit from the prior week lows that had not been seen since 2009.  This activity reflects mortgage rates having eased last week to 4.75% from 4.80% the prior week. 

Looking slightly longer term, mortgage rates have soared by more than 1% since May 2013, slowing the greatest refinancing wave in history to a crawl.

We believe it is the rising rates that has both new and existing home buyers trying to get a deal done, especially in light of any short-term pullback in rates where we ultimately expect higher rates.  The refinance sector is very key for our IO strategy in the Liquid Real Estate Portfolio.  We are of the belief that there are still some premium mortgagors who will do a refi, but that most pools will show ‘burnout” (defined as the borrowers who could refinance have already done so, and the others will not) and the “carry” will increase on those IO securities.

Furthermore, we believe that running both an RMBS and CMBS credit strategy that has done well as fundamentals in both housing and commercial real estate improve is a more balanced approach than relying on only one strategy.  For example, agency IOs have been a slight drag on performance this year, while non-agency MBS has done extremely well.

The Tradex Global Liquid Real Estate Portfolio has had a strong 3+ year track record and we believe going forward the opportunities are great. We invite interested investors to discuss this Portfolio with the Team.  Keep nimble. 

  

EXTERNAL RESEARCH COMMENTARY

Applications for U.S. home loans edged up in the most recent week, off their nearly five-year lows, as interest rates eased from a 2013 high, data from an industry group showed on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 11.2 percent in the week ended Sept. 13. That follows a 13.5 percent slump last week that took the index to its lowest since November 2008, in the thick of the financial crisis. The data come the same day as U.S. Federal Reserve policymakers meet to consider slowing a massive bond-buying program, which includes purchases of mortgage-backed securities. The Fed will issue a statement announcing its decision at 2 p.m. EDT (1800 GMT). The Fed's stimulus program, known as quantitative easing or QE3, has been a major boost for U.S. home prices, and many economists worry that policymakers might withdraw their aid too soon, dealing a blow to the housing recovery. Borrowing costs have soared by more than a percentage point since late May on views the Fed will soon slow its $85 billion per month in buying of MBS and Treasuries. MBA data showed 30-year mortgage rates eased 5 basis points to 4.75 percent, after last week matching the 4.8 percent high for 2013. The refinancing index jumped 17.9 percent to 1,801.7 after a plunge last week brought the index to its lowest since June 2009. The mortgage survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

Tradex Global Advisory Services, LLC

investorrelations@thetradexgroup.com 

203-863-1500

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