TRADEX GLOBAL INTERNAL COMMENTARY
Mortgage
applications dropped 4% in the last week.
The MBA
reported this morning that the total number of mortgage applications dropped 4%
and that the seasonally adjusted composite index dropped 3.3%. The refinance index and the purchasing index
both fell at the same rate of 3% (seasonally adjusted). The share of applications to refinance was 69%
of total applications, unchanged from the previous week. The average rate on a 30-year conforming
mortgage was 4.17%, the highest rate since March 2012. The prior week was 4.15%. The percentage of total refinancings due to
the HARP program was 31%, slightly up from 29% in the previous week. The weekly numbers are volatile and we are
much more interested in the trend of refinancings and HARP programs. In our view, the trend is our friend as we see
refi’s slowing dramatically, which is very positive for our IO portfolio. The big difference this cycle as compared to
2008 is that there is almost no forced selling of IO securities and leverage in
the system is minimal. The dealers gave
“low” marks to IO securities in May based on light trading and we believe that
we are very close to the bottom in prices. The last time we were at these levels, the IO
securities more than doubled in the next 18 months. We are excited about this asset class and
believe it is one of the most positively convex securities that an investor can
own. The non-agency IOs have held up
extremely well and still offer a terrific carry after hedging costs. We will continue to monitor that sector, as
well as our non-agency RMBS and CMBS portfolios where prepayments are treated
as principal repayments when received. The
two strategies of owning IOs and P&I bonds are expected to continue to
perform well with upcoming higher interest rates and improving fundamentals in
real estate. Keep nimble – Michael Beattie
The total number of mortgage applications filed in the U.S. last week slid 4% from the prior week as several interest rates crept higher, the Mortgage Bankers Association said Wednesday. The market composite index fell 3.3% on a seasonally adjusted basis for the week ended June 14 from the previous week, according to the weekly survey covering more than three-quarters of all U.S. residential-mortgage applications. The refinance index and the seasonally adjusted purchasing index both fell 3% from a week earlier. Interest rates have increased in recent weeks amid stronger economic data, curbing some individuals' appetite to buy a new home. The share of applications filed to refinance an existing mortgage was unchanged from the prior week at 69%. Adjustable-rate mortgages, or ARMs, was also unchanged a week earlier at 7% of total applications. The Home Affordable Refinance Program share of refinance applications rose to 31% from 29% in the prior week. The average rate on 30-year fixed-rate mortgages with conforming loan balances increased to 4.17%, the highest rate since March 2012, from the prior week's 4.15%. Rates on similar mortgages with jumbo-loan balances slipped to 4.23% from the prior week's 4.25%. The average rate on 30-year fixed-rate mortgages backed by the Federal Housing Administration rose to 3.85%, the highest rate since April 2012, from 3.81% a week earlier. The average rate for 15-year fixed-rate mortgages slid to 3.3% from 3.32% a week earlier. The 5/1 ARM average rate rose to its highest level since last June, jumping to 2.81% from 2.78% a week earlier.
Tradex Global Advisory Services, LLC
investorrelations@thetradexgroup.com
203-863-1500
@Tradex_Global
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