Oh what fun it is.

I haven't posted anything in forever, it's been a good thing though that I've been so busy but it's also gotten me totally out of the habit. I'll do what I can not to let it slip from here on.

We've got the jobs report coming out tomorrow morning at 8:30am so maybe, just maybe, we'll see rates come back just a bit closer than the general public thinks that they are. For once though, mortgage rates are based so much more on what the lenders can A) handle volume wise. Remember, for the past 18 months mortgage companies and the big servicers have done nothing but go bankrupt, downsize, and reduce exposure and now all of sudden the entire world is trying to refinance so capacity is an issue. B) On what lenders are willing to pay out in the form of yield premiums considering a lot of people just refinanced last January and those hefty premiums that were paid haven't been recouped yet....they don't want the loans paid off yet. And of course there is the third factor seperating the market from the offered rates, though the Fed is buying up billions of dollars in mortgage backed securities, they aren't buying the coupon rate that would push rates much below current levels. So while the hefty goverenment appitite is pushing demand up, which of course would push home loan rates down further, they are buying like this:

Total of 30 year Mortgage Backed Securities purchased to date: $20,774,000
Of which $9,374,000 are 5.5%, 6%, and 6.5% 30 year bonds. That doesn't push rates lower because of the seperation between the coupon rate and the rate paid by the borrower. The coupon rate is the rate that the end investor is going to be paid because the originating firm, the wholesaler, Fannie/Freddie, the securitizing firm on Wall Street, they all take their little piece. The end result is that a mortgage rate of 6.25% paid by the borrower nets down to a coupon of about 5.5%. So the note rates of 6% - 6.5% are the loans being refinanced today so a 5.5% bond purchase by the Fed are the loans beinig refinanced meaning that the Fed is recouping their costs on a quick turn around. It's actually pretty smart if you think about it but it won't do much to push current rates much further.

If you want the direct info as to what the Fed is currently purhcaseing: www.newyorkfed.org/markets/mbs/index.html

Could rates move lower? Certainly, that's always possible and in today's volatile climate I wouldn't rule anything out. However a refinance borrower or a potential home buyer that is "waiting" for lower rates stands to cost themselves a lot of money. Look at it like this-
If I am at 6.25% on my $250,000 mortgage and I could refinance today at 5%, I would save $197.24/month. However I am waiting on rates to hit 4.75% before I pull the trigger, what are the monetary consequences? Well, the 4.75% interest rate would certainly save you more money, it would save you exactly $37.93 MORE than 5%. So for my "fence sitting refinance borrowers" that I could've locked and closed at 5% in December have already made January, February, and will certainly make the March payment as rates wouldn't be at 4.75% yet (without paying points that is!!!!!), so they have forgone $1,539.29 in the form of one missed mortgage payment, +$197.24 in monthly savings x's 3 months which is $591.72 for a grand total of $2,131.01 and that's assuming we hit 4.75% with no points tomorrow and I close them at the end of this month. So to save an additional $37.93 we lost $2,131.01. That means that it will take 57 months before it was "beneficial" to wait. ($2,131.01/$37.93). What if you move or refinance within 5 years of closing the new loan? Statistically you will have done one or the other and therefore even though you like the way 4.75% looks on paper, it cost you more money!!!

The exact same thing is true for the "buyers that aren't buying." Except with them, it's actually MORE costly. Assuming rates do eventually get to their "mark" in order to make a move, they have forgone the tax deduction as well as the savings so it only adds to the time needed to make up the cost of waiting.

We've become so rate conscious that we very easily forget, rates are insanely low and we've allowed the media (who by the way has never been in the mortgage business......) dictate to us what the rate should be and are therefore costing the public millions and millions of dollars in a time when every dollar is precious to most of us hard working Americans.

I'll get off my stump now, hope you found this somewhat informative and check back tomorrow for a "post jobs report" update.

Good Night!