Archive for the ‘Mortgage Rates’ Category

The Not So Perfect Storm

Tuesday, March 16th, 2010

This blog author still has a key chain that reads “Captain’s Stateroom — SS Titanic” given to him in a going away party a good while back when he was leaving Federal employment.

Roll time forward and the analogy to sinking cruise ships may be a current day fit, as the Fed’s continue to pursue their “QE2″ program. (the Fed’s “Quantitative Easing” program and the cruise ship “Queen Elizabeth 2″ seems to be an obvious allegory).

The author has taken to the sidelines and a lifeboat as the mortgage industry continues to flounder. That’s a poetic way of saying I’ve let my mortgage broker license go inactive. It just isn’t fun anymore putting on a happy face that low interest mortgage money is abundant and is readily available for submitting an application, when the reality is pretty much the opposite for most borrowers.

Loan originators, as mortgage brokers are now called, are generally able to offer the current under 3.99/4.25 rates on agency conforming loan amounts primarily to borrowers who are have a middle FICO score over 740 and enough equity in their home to qualify for a refinance or a large enough savings to cover their down payment and closing costs.

Except for government employees, whose credit hasn’t been dinged by the economic events of the past few years ? Whose credit score is still above the 740 high water mark?

And if your credit score has miraculously floated like burning oil on the churned up seas, whose mortgage isn’t at least partly underwater ? I have friends whose HELOC’s (home equity lines of credit) have been trimmed back severely in this period of reduced home equities.

Then to add insult to injury, if the terms of your loan application trigger any risk-based loan level pricing adjustments (LLPAs), your rate quote will most likely be higher.

Bottom line : if you do not fall into the “perfect borrower” category, batten down your hatches and stand by for the “perfect storm”. And prepare to get wet.

Loan originators find themselves shouting into the wind in this kind of economic weather, and at least this originator doesn’t find that to be productive, fruitful, or helpful to potential clients. A “perfect borrower” should be able to go into their local credit union and do just fine.

I’ll continue to post here and on my twitter blog “a1mortgageinfo” with opinion and information that I think cuts thru the chase and tries to make sense of it all.

I continue to be a strong advocate of the Reverse Mortgage Program for qualifying seniors.

Hang in there … keep your life vest inflated … and hopefully we’ll all wind up having stayed the course !

Walk Away (Renee) … an old song … now a new financial survival tactic ?

Saturday, January 9th, 2010

I’ve previously blogged in favor of toughing it out and not walking away from your  upside down/underwater mortgage  if you could afford to maintain your payment.   Been there, done that.  In my scenario, it was a hurricane that drove prices down for about five years, but they did come back to original levels and more.

An article in New York Times Magazine in the last few days somewhat said for some it was o.k. to abandon their mortgage commitment. I posted a good bit of that article yesterday because I agree  that everyone is unfairly putting this decision burden entirely on the shoulders of the Borrower. If Lenders have been given a big slice of the Stimulus Package Pie, why can’t they meet Borrowers half way or more, and modify their mortgages, specifically lower their interest rates ?

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Fed to Maintain Low Interest Rates into 2010

Monday, November 9th, 2009

The Federal Reserve could remove some of the extraordinary support it has extended to the U.S. economy once the recovery looks solid and monthly job growth has returned.   St. Louis Federal Reserve Bank President James Bullard said he would not favor tightening monetary policy before recovery was well-established.

The central bank, wary of undercutting the fragile recovery by withdrawing its support too soon, is also on guard for any indication that its emergency lending efforts are fueling an unwelcome bout of inflation as the economy heals.

The Fed cut the benchmark the federal funds rate to near zero last December and put in place a vast array of emergency liquidity facilities in an effort to combat the worst financial crisis and recession since the 1930s.

As part of its emergency efforts, it has bought long-term government and mortgage-related debt to try to drive down borrowing costs.

The central bank has pledged to keep interest rates extraordinarily low for “an extended period”. Most analysts expect it to hold rates near zero until mid-2010 or later.

Source :  cnbc.com

Early May ’09 mortgage rates revisited in Sept ’09 !

Thursday, September 10th, 2009

I don’t think the market is going to let rates get much lower. Actually I’m surprised we’re seeing these again, but with continued Government intervention in the mortgage securities market for now (this too will end), it’s a crapshoot.

A simple rule of thumb, rates go up a lot quicker than they go down.

Get off your decision fence, get that paperwork in and lock in your rate.   Especially those of you that qualify for the first time homeowners tax credit !

These  “planets”  will only stay aligned for so long, after which you’ll only be able to look back and kick yourself for not making a move then.


Missed The Mortgage Rate Boat ? Timing, Luck or Greed . . . maybe a bit of each ?

Tuesday, June 9th, 2009

Just like the stock market and how quickly prices can go down; mortgage rates have shown they can go up just as steeply and quickly. There has to be ton of people kicking themselves for trying to time the bottom and do better than the 4 to 4.25 percent mortgage rates of a month back.

Rates will possibly get back under 5% but not as low as they were, so there may be another opportunity if your circumstances allow you to wait. Lesson learned hopefully.

Q : Wait for how long ? A : No one has a crystal ball. Two weeks, two months ? As I’ve posted elsewhere, with government intervention, mortgage rate movements can be unpredictable.

(I personally don’t trust the government or government agencies to necessarily do the right thing. I think greed still prevails at the Lender level. Why not ? They got bailed out once. No lessons learned there that I can see.)

As of this posting, mortgage rates continued to tick higher as the market showed a disdain for the risks associated with investing in mortgage-backed securities. MBS are similar to treasuries in that the price and the yield are inversely related, meaning as price goes lower, yields move higher and vice versa. So as MBS move lower in price, mortgage rates move higher. Monday June 8th, over lunchtime hours, MBS made a dramatic move lower in price forcing lenders to reissue worse rate sheets. This increased the par 30 year conventional rate mortgage by another .125% in rate. By day’s end, most lenders were offering par 30 year fixed rate mortgages in the 5.5% to 5.625% range.

Home prices are still very affordable and rates are still under 6%, so it’s still a great time to buy. And if you are a first time home buyer you can get up to $8,000 back from the government. Don’t leave it to chance that things couldn’t get worse.

Source : mortgagenewsdaily.com

More on Economic Indicators

Thursday, February 19th, 2009

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Interest Rate Forecasting: Economic Indicators

Thursday, February 19th, 2009

Interest rates on residential mortgages and U.S. Treasury securities can be influenced by monthly changes and the longer-term trend changes of economic indicators.

There are many variables that can influence the rates on long-term debt instruments, but an understanding of key economic indicators can provide clues to the future direction of interest rates.

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Q : Why are mortgage rates jumping?

Tuesday, March 4th, 2008

 A : from msnbc.com : Why are mortgage rates jumping?

Leap Day February 29, 2008 In Review

Sunday, March 2nd, 2008

 

Unlike all the hype you hear from advertising, and sadly people who should know better, mortgage rates are more closely related to trends in Treasury Bond yields,  and definitely not directly to Federal adjustments of the prime rate.    This is a spot picture of where we were on 2/29/08. 

 

The Yield on the 30-Year Bond – As stocks got crushed, there was a flight to quality into US Treasuries.   The yield on the 30-Year US Treasury Bond tested 4.699 on Wednesday, as inflation fears trumped another rate cut by the Federal Reserve on March 18.   Then as stocks got clocked on Thursday and Friday a renewed flight to quality pulled the 2-Year note yield down to 1.616, a new low for the move. The bond ended the month at 4.473.     Monthly resistance is 4.066.

 

 

30 Year Treasury Bond Yield FPE 02/29/08

 

30 Year Treasury Bond

 

30 Year Treasury Bond Rates FPE 2/29/08

 

Chart Courtesy of Reuters and RightSideAdvisors.com