Looking at Steep Losses In Loan Pricing. What's Extension Risk Again?

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Posted To: MBS Commentary

It sounds almost surreal, but the new best execution rate is 5.25%. We just blew through 4.75% and 5.00% in less than a week. Volatility in loan pricing is absolutely huge. Extension risk for MBS investors was and still is absolutely huge. WHAT IS EXTENSION RISK??? But like I said... ALERT: 5.25% IS NOW THE NEW BEST EXECUTION 30 YEAR FIXED MORTGAGE RATE Note the brutaility in the WEEK OVER WEEK pricing delta column. 245bps erased on average. Anyone hoping for 4.75% is gonna have to pay at least 2 points to get it. And the buydown from 4.875 to 4.75 is getting more expensive everyday. (Signalling a delayed shift into 4.5's as production coupons). EXPLANATION OF LOAN PRICING COMPARISON Buydowns are the cost of floating down to the next lowest note rate. Buydown costs are matched to the note rate...(read more)

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