The Mortgage Manifesto

Mortgage Rates Heading Higher

What's that soon to be in our rearview mirrors?

Rates below 6%, that's what!

The technical damage to mortgage-backed securities continues in this morning's trading.  You know how hard it is for home sellers these days to find buyers?  Well, that's the same situation a mortgage lender has trying to find a buyer for the pools of recently originated mortgages it has on its books.

No one wants them.  No one trust them anymore!

For real estate sellers, their only option is to low-ball their listing price.  For mortgage debt sellers, they have to raise the interest rate to make it an appealing investment for the higher perceived risk in today's market.

Mark these words.  We only have a few days left of sub-6% 30 year fixed rate mortgage rates and it probably will be YEARS before we see them again.

The Fed doesn't control mortgage rates.  The U.S. government doesn't control mortgage rates.  The market does and right now that market is getting smaller and smaller with every passing day.

On a side note, if you anticipate a need to get some of your equity in your home into cash you better do it soon.  I will not be surprised if lenders completely do away with all cash-out transactions as 2008 becomes a landmark year for declining real estate prices across the country.

These times are proving this axiom:  equity in your home is not like cash in the bank, the only thing like cash in the bank IS cash in the bank!

www.BrettGrendahl.com

Rates Stink for Jumbo Mortgages

On my daily perusal of mortgage rate sheets today I saw striking evidence of the further worsening of options for those who need jumbo mortgages.

Here is a snapshot of the Jumbo ARM pricing of one national mortgage company:

• 7/1 ARM at 8.25%
• 3/1 ARM at 9.0%
• 6 month ARM at 12.5%

If you are scratching your head I don't blame you.  Normally, rates get lower for shorter fixed-rate terms on ARM programs.  Those listed above show rates getting much worse for shorter term rates.

What does this mean?

This just shows how cautious and uncertain a large financial institution is about the near future.  This lender is pricing themselves out of the market, they don't want it any more. 

It also means that for those who need jumbo financing, your options continue to dwindle & get more expensive with every passing day.  Unfortunately, I believe that this will continue to be the case for at least another 12 months.  The only thing that will cure this is the rebuilding of confidence in these loans and that means new originations the perform (payments come in on time) to build a track record that captures investor interest again.  That doesn't come quickly.

Brett

Mortgage Rates Edge Higher

As the markets come back up to speed after the 3 day weekend mortgage rates are pricing higher than where they were last Friday.

Here's a snapshot:

• 30 year fixed around 5.875% with no points
• 15 year fixed around 5.5% with no points

Remember, with the recent tightening of underwriting guidelines and Fannie Mae's new pricing structure, there are more variables than ever to price out a conforming mortgage loan program.  Those rates listed above assume 20% equity, 720+ credit score, and a strong application.  Any variant from that baseline will bring higher rates & or costs.

A few weeks back I mentioned that the next little bottom for highly volatile mortgage rates would be about half the distance to the mid-January low of 5.25%.  That is precisely where they bottomed last week.

The question remains:  "who wants to buy mortgage debt these days?"

Financial markets are built on perceptions of value.  Right now, there is a major re-defining of these perceptions.

Until someone steps up in a big way and says, "I AM!", don't believe that these is a reason for a big move lower in mortgage rates.  There just isn't.

www.BrettGrendahl.com   

The Velocity of Debt Hits the Wall!

As we head into the holiday weekend, & a snowy one for us in Minnesota at that (ick!), I find myself pondering another layer of this credit crisis.

For as many years as I can remember, it sure was easy to move debt from one lender to another.  Wasn't it?

How about all that flipping of balances from one 0% interest credit card to another?  Or, how easy it was to flip your mortgage financing from one loan to a new one.  This was widespread from the consumer level all up to the former big wigs (I'm thinking Bear Stearns)!  Everyone fell prey to it.  It can be argued our government is the all-time leader in this game.

However, this is a like a children's game of hot potato.  What happens when the velocity of this constantly swirling sea of debt stops?  Your stuck with what you have, that's what!

The new economics we are moving into will be very debt-averse.  Human behavior will change.  How excited are you these days to bring on more debt?  I bet not as eager as your were only 12 months ago!  I'm sure not.

Have a great holiday.  Spring is right around the corner, right?

BG

Simple Market Economics at Work

Amidst all the bond market moves let's switch gears and just do a quick digest on the stock market.

Overall, as the "rubber" of the financial alchemy of recent years meets the market "road" we are finding values nowhere near what they are marked down on the books.  Oops!

In order to cure this ill market players are in a rush to raise cash anyway they can.  You raise cash by selling stuff.

That's why for the foreseeable future expect the market to become dominated by more sellers than buyers.  That's why, way back in September of 2007 I told my members of Tidalwave Trader to go to CASH. 

"Sell it all," I said.  Thankfully, we got through the door before the stampede of realization began.

www.BrettGrendahl.com

Can Mortgage Rates Go Lower?

Click on this chart to open a bigger version to look at.

This chart shows the prices of the bond markets.  Prices move in opposite direction of rate.

See that high from January?  See how we are getting close to that again?

It is highly unlikely that bonds can get higher than that level again anytime soon.  Translation:  don't expect dramatically lower mortgage rates.

Also, mortgage lenders are bleeding money these days and fighting for their own survival.  The biggest mortgage lending operator (Bear Stearns) just went under.  If the big guy tumbles, you can bet the smaller ones are also hurting.  Translation:  these lenders are not going to lend money out as cheap as they did a few years ago.

Double translation:  there really isn't a strong foundation to get us to much lower interest rates than we have right now.

Just a few weeks back the 30 year fixed was up at 6.375%.  Now, it's been dancing around 5.5% to 5.75%.

Mortgage Rates

This morning the bond markets are holding their gains and mortgage lenders are CAUTIOUSLY improving pricing.

Improvements always come more slowly than worsening prices.

I've been pricing some 30 year fixed rates at 5.5% but I only have that available with one investor.  Most of the market is at 5.625%.

Where are we going from here?

Honestly, there are WAY too many unknowns that this market faces on a daily basis.  Predicting more than 24 hours out is hard enough, let alone trying to predict investors moods after a 3 day holiday weekend.

So far though......I don't see a technical breakdown, yet.

Mortgage Rates Repricing.....for the Better

Starting to see the repricing notices, better pricing coming this afternoon.  This is the beginning of the setup mentioned in the post from a short while ago...

When to Lock a Mortgage Rate?

BIG QUESTION.

The Treasury market is up strong today but we haven't seen this strength show up in lower mortgage rates yet.  My hunch, we just might see fantastic pricing tomorrow.  Get ready.

If we do, there will be a stampede of people rushing to lock in before they miss out on what happened 2 months ago.

Also, if lenders take in a swath of new registrations I expect them to pull those low rates quickly.  Why?  Because most mortgage lenders are running on lean staffs as they try to weather the current stormy market.  They will not add staff just to handle a short-lived blip.

This means, once they book their quota of new business expect those doors to shut.

If we've been watching a scenario the past two months please just shoot me an email on what rate is ACTIONABLE for you to lock on.  We just might not have time to connect on the phone or even by email tomorrow.

Locking every loan takes time and if we get a day that is anything like we did in January there just might not be enough time in the day to get to every possible request.

Brett

Expect Lower Rates Today

Quick update as I am watching bonds breaking higher in this morning's trading.

We will likely see better pricing coming today or tomorrow on fixed mortgage rates.  This is a dip to act upon. 

The market is VOLATILE and waiting through a long, holiday weekend is not wise.  Too many things can happen.