The Fed announced that it will begin to buy MBS in early January.  Good news?

Well, yes, it is good news, and although that move is pretty much already priced into the market and rates are already low, it is also true that rates have risen since two weeks ago.  So, we might see them float back down to the levels of two weeks ago.

And, it was at that point that I locked everyone I could.  Since then, I have been taking refinance and purchase mortgage applications for people all around Atlanta, the state of Georgia and even neighboring states.  But, I have been floating the rates, waiting on this event.  So, by next week we will have a window to lock loans again.

Even Pope Benedict XVI, in his Christmas address Urbi et Orbi alighted on the concerns on the economic crisis.

The Pope stated, in a long list of difficulties around the world, that “wherever an increasingly uncertain future is regarded with apprehension, even in affluent nations: in each of these places may the Light of Christmas shine forth and encourage all people to do their part in a spirit of authentic solidarity…If people look only to their own interests, our world will certainly fall apart.”

Well, economists and social commentators have said it – 2009 may be a tough economic year.  Even this friendly, neighborhood Mortgage Banker has affirmed that now is the time to get your economic affairs in order, including rolling revolving debt into a new, low rate mortgage and reducing expenses, and be prepared to weather a period of high inflation.

But, it is also a time of hope.  It can be a time of families and friends coming together, a time to focus on the lasting things rather than the fleeting.  A time beginning at Christmas, the”feast of light” that begins with a small glimmer in the night, which then spreads out “from a precise point in the universe: from the stable of Bethlehem, where the divine Child was born.”

Merry Christmas.

Source: Bloomberg

The Fed has been buying Mortgage Backed Securities (MBS) like we all know.  And, the plan has worked.  Mortgage rates, while still volatile, are bouncing around their all-time lows.

And I have been just as busy as everyone else, taking loan application for refinances and for purchase loans just about as fast as I can take them.  I love it, I must admit.

While most people I speak with I am able to help, there is a small percentage of Atlanta area borrowers who, when we go through the loan application, decide to hold off on locking in their rate, on an intuition that mortgage rates will drop further still.  When I ask what makes them think such, the response is some form of “I just feel like they will go down further”, or “it’s a gut instinct”.

My advice?  Remember that the bond market determines mortgage rates; and there are real economic forces that move bonds up or down.  Those market forces have gotten a big help to push rates downward from the Strong Arm of the Fed, buying MBS.  Even though their buying is ongoing, that has now been factored into the pricing of Mortgage Backed Securities.  Going forward, we will see all the traditional influences on MBS begin to take more prominence, and even out the market.  And, yes, market sentiment regarding the economy will weigh in.

Remember, there is one 800-lb. gorilla that will possibly step into the market in early January, as the SEC meets to consider revising the current Mark-to-Market rules.  And if they do revise the rule, it will bode very well for stocks, but mortgage rates will rise. Click here to spend 7 minutes watching the video explaining this one in more detail.

So, if you are around Atlanta and looking to refinance your mortgage, lock in on any dip in rates, and count your blessings.  It is too easy to get caught up in greed and miss the whole party…i.e. to be coveteous of the absolute lowest rate, and not lock at all, only to wake one morning in the not-too-distant future and find you missed the lows by a whole point or more.  Missing by .125% will not make nor break any homeowners.  Missing by 1.5%…well that could break the bank.  So, get the apps in and lock on any dip, is my best advice.

The stories are all over the news, including this one from the Associated Press, that mortgage rates are low.

How low?  Well, depending on where you look, anywhere from 37 year lows to All-time lows.  I can tell you that from a raw rate standpoint, they are at all-time lows.

So, should you refinance now?  The philosopher in me would answer that with one definitive word: Distinguo. (i.e.  It depends)

First question to ask yourself – Can you refinance?  Many people’s homes are underwater.  They owe more than the home is currently worth.  If that is your circumstance, then another set of options are available to you outlined in the post that I linked to above.  That is, unless you are in an FHA mortgage loan, in which case you can do a Streamlined FHA refinance.  Call me and I will walk through how that is done.  And, that is a great topic for another post.

Assuming you can refinance, the Second question is, should you?  In the simplest form, three things determine whether you should refinance your Atlanta mortgage, or not:

1. What is your Loan-to-Value?  We’ve determined that you do not owe more on the home than it is worth.  Now, sometimes higher loan to values carry slightly higher interest rates.  Again, for FHA loans, that is not the case.  For conventional, if can be.
2. What is your credit score?  Lower credit scores now carry with them either higher discount points to get the best rate, or higher interest rates with no points.  This is true of conventional loans, read Fannie and Freddie products.  It is substantially less so with FHA loans.
3. How long will you be in your home?  If you are planning on selling in the early Spring, then a refinance won’t make any sense.  If not, then the length of time you will likely be in the home matters.  If this is it, the last home you will ever buy and you plan to die happily in it, then look at refinancing into the lowest rate possible, paying full closing costs (but I am still not a fan of paying points).  If you will be there a while, but know you will be moving on down the road at some point, then I would recommend a slightly higher rate, but low or no closing costs.  Why eat up your equity with fees, when you will still be saving a lot each month with a lower rate, and keep the equity in your home.

A rather fun video, pretty much summing up the market in ‘08.

Hey, if you can’t laugh, you haven’t lived. Right?

Source: WallStreetGreek blog

This rate cut was unusual.  Normally, when the Fed cuts the Fed Funds Rate, it favors stocks and money flows out of the bond market.  Therefore, mortgage rates suffer.

This time around, Bernanke threw us a bone – he indicated that the Fed would continue to purchase Mortgage Backed Securities (MBS), those bonds that determine mortgage rates.  With that, rates have gotten better, instead of worse.

They are still extremely volatile; but they are lower today than before the Fed rate cut.  So, Bernanke put on his Santa suit for this Fed rate cut.

Everything you wanted to know about appraisals; but were afraid to ask.

30 year mortgage rates ended Friday close to 4.75%.  A bit higher for lower credit scores or higher loan-to-values, of course, but still in the low 5’s.  Good, by any measure.  But, watch this video, and you will see why these rates could be history in early January – and why stocks may be headed up at the same time.

Bottom line:  If you are considering refinancing your conventional or FHA loan on your Georgia home, call or email and let’s lock right away.

The following article was sent out in my October newsletter, and I am reprinting it here, now.  Want the latest great info?  Subscribe to the newsletter in the box on the Right.  This has a lot to do with a video that I just recorded, and will post soon, about the reason to refinance right away, if you are considering it.

Crazy times. I am asked about the causes and ESPECIALLY about the consequences of this crisis every day.  So, here goes.

Whatever the political posturing, a plan needs to be passed. The country will not enter “financial armaggedon” if it does not, but things will get much tighter before they get better.  Credit markets are frozen and banks are going bust every day. This is not totally because of “toxic” mortgages. This has a lot to do with FASB 157, also known as “mark to market”. 

Each day lenders must mark their assets to the marketplace. It’s like you having to appraise your home everyday and if your neighbor was under duress because they got very ill, divorced, lost their job and was forced to sell their home quickly they may have sold it super cheap. Now, does that mean your house is worth that super cheap price? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But “mark to market” does not allow for this, which creates a vicious cycle. 

Why is this so bad? Because as lenders mark down their assets the amount that they have loaned previously becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to “mark to market” requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio…at cheap prices. And this makes the vicious cycle continue. 

And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages, are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together it isn’t just A paper or B paper etc. it’s everything. Its got some A paper, B paper, C paper, and even what looks like toilet paper. An “A” investor buys the whole pool but because they are an “A” investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.

Now add to all this the opportunistic shorting done on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector. As for the plan the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posture from both sides is just part of the process. 

These are rather high-flying economic realities that, to be honest, many of my collegues in the industry do not understand.  And this is our industry.  So, on one read, I would not expect the average homeowner to ‘get’ it.  Not when the elected officials who need to vote on this do not.

Once this is done it will take some time but the markets will stabilize. As for my industry it will take a bit of time but we will make it through this. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to fix our industry. I am here with you to ride out the storm.  Count on me, as I count on you.

There you go.  That was written October 1.  Now in early January the SEC is considering revising “Mark-to-Market”, and if they do, mortgage rates will rise quite rapidly (and the stock market will rally).  The subsequent video will explain the reason for that.

Source: Bankrate.com

The Fed has announced that is will be buying Mortgage Backed Securities (MBS) in an effor to lower mortgage interest rates.  Even though they have made two purchases of MBS, and rates are lower, they have been quite volatile still.

On Monday, the Fed is making another multi-billion dollar purchase of the Securities.  You can read more about that here.  So, I am getting everyone’s docs in that I can, in an effort to lock all the loans on Monday and take advantage of the dip.

As I am calling past clients to get them ready to lock, a few have mentioned that they are ‘waiting for the Fed to get rates to 4.5%’ as was widely reported in news outlets.  You must understand that it is not a magic bullet nor a hard and fast target.  The only means that the Fed has of lowering mortgage rates is buying MBS, just like rates have always been determined.  It is not an exact science.  So, when there is a dip, lock.

Will you be ready to take advantage of these low rates and lock in?  Call me: 770-518-2440.  Let’s be ready.

Want to get things rolling faster, to be ready to lock.  Fill out the secure, on-line app here.