Clint Hammond

Ever pushed too hard to get something done? To the point where you were forcing a square peg into a round hole? It happens when we get so wrapped up in trying to get something done that you almost lose sight of what you were really trying to do in the first place. It mainly happens when getting a loan closed or a transaction pushed through takes the place of doing what is right for your client or borrower, which is of course the ONLY thing we should be concerned with. I pride myself on doing a good job of that but every now and then I find myself having to step back and say "the best thing to do here is walk away." It's tough because that's how all of us make our living, pay our mortgage, buy our groceries etc., and you don't get paid for walking away or advising a client to "not buy right now" or "not refinance right now" but there is no question that both of those statements have a place in our daily work life. If more Realtors and mortgage lenders had been willing to say that over the last few years, perhaps we wouldn't be where we are today. There are still plenty out there doing things the wrong way which upsets me when I lose a loan to one of them or when I upset a Realtor or other referral partner but in then end, I always know that the loan wasn't one that I should close and the good referral partners never have a problem with it when it is the right course of action. So don't let it upset you if you lose a deal to a "less than reputable competitor" or to standards and practices that aren't 100% above board. Though they are still in business today, rest assured that they won't be much longer.

As the famous coach John Wooden said:

"Be more concerned with your character than your reputation, because your character is what you really are while your reputation is merely what others think you are."

Just my two cents worth for today.

I hit it on the head with where rates were headed, what I didn't hit dead on was the length of time that they would stay there. I'm rolling with refi's like most of us but I am seeing the purchase business pick up a substantial head of steam lately. The importance of our ability to take care of our clients and borrowers cannot be understated. It's way to easy to lose focus on what's important and why we're in the business. This is not a sustainable level for interest rates long term and refinances and sales are going to be exaggerated when rates are down. It's like a clearance sale. Long term, sustainable success is the key and the only way to do that is create a raving fan with every transaction. The only way to accomplish that is to do the job we should all have already been doing and that is keeping that clients best interest at heart and having their needs and wants as the central focus of the transaction. It's simple, we do what we're supposed to and we'll succeed.

I just wrote a small novel for all those that are either bored and/or having trouble sleeping and forgot to mention that since my last post, I moved my office. I have updated my profile to reflect the new address. The phone numbers and other contact info is all the same.

New address:

7011 Garners Ferry Road
Columbia, SC 29209

I'm headed out, 9:15pm is too late for anyone to still be at the office!

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!

Just a "food for thought" item for the end of my day.....

"There has never yet been a man in our history who has led a life of ease whose name is worth remembering."

- President Theodore Roosevelt