Kansas City Real Estate Overland Park Homes

Lets lock all mortgages rates at application, regardless of when its closing.  I think this is about as good as it gets for a while.  I still see 30 year fixed rates a tad under 6% (5.875%) but the good economic data, released today, could drive mortgage rates up next week.

I recommend a 7/1 ARM today.  Rates offered for a 7/1 ARM, for loans under $417,000, are OVER a half a percentage point less than the 30 year fixed (5.25%).  Most borrowers will feel comfortable with a seven year time frame.  This means that 5.25% rate is locked in for 7 years- thats until 2015.

(all loans offered to the consumer at the wholesale or ‘par’ rate.  We are paid 1% by the consumer.)

To give you an idea of how long 7 years is, Disneylands California Adventure opened in early 2001.  You probably thought it was around forever.

The bond traders wont be merciful next week unless recessionary data are overwhelming.  Jump on these low rates now.

No real change in my posture.  I still believe that mortgage rates have room to go lower in the next 30-90 days but I’m advising clients who are closing in less than 17 days to lock. All others can float.

Mortgage-backed securities traders have “baked in” a .25% rate cut from the Fed when they meet tomorrow.  If Bernanke doesn’t cut, mortgage rates will jump quickly.  This week is filled with economic data.  If the data are reported weaker than the estimates, we could see lower mortgage rates in the next week.  The risk of that not happening, in this volatile market, is real so I’m sticking to the recommendation of locking your loans if you are closing before May 15.

Countrywide Financial  reported a a big loss from foreclosures while MasterCard reported huge profits.  While MasterCard doesn’t actually issue the cards (they just make money from transactions), it shows that people are walking away from their mortgages and using credit cards more frequently.  Traders think that Bernanke is fixing the financial crisis in this country but those two events should give you reason to deliberate.  We’re still bouncing around on choppy seas and should be through the end of the year.  I just don’t see mortgage rates above the 6.5% level at all this year.

I’m still floating mortgage rates, unless my clients are closing within 14 days.  I"m cautiously floating because of the volatility in the market.  Fundamentally, mortgage rates shouldn’t have a whole lot more room to come down; the Fed cuts are probably coming to an end.  Something much more drastic than the Fed open market activities will be needed to pull us out of the recession. 

Yep.  I said the R word and have been since last fall.  I’m not scared of the recession; I welcome it.  Here’s the trick for mortgage rates.  The weak dollar has world investors believing that the Fed’s easy money policy is inflationary…

UNTIL…

the recession hits them.  Make no mistake about it, the economic slowdown is a global phenomenon.  Canada and the UK are following suit by cutting rates.  I think the world wide recession will lower oil prices and provide some much needed relief to the American consumer.

Nothing says it like pictures.   I’ll show you some charts, to see how I’m thinking.

Read more »

Mortgage rates should decline, in the near term.  I’m changing my recommendation from lock all loans to float all mortgage applications, if the loan is closing more than 14 days out.  That means that if you’re scheduled to close on your mortgage, before April 15, 2008, you should lock your mortgage rate.

Fed Chairman Bernanke spoke to Congress this morning.  I’m one of those weird people that actually watch the Fed Chairman’s testimony.  I look for a twitch, a nervous tic, or a tenuous posture, in addition to the text of his testimony.  I’m as screwed up as the bond traders on Wall Street.  That was my world; I can’t change who I am now.  Well, Bernanke thinks a “contraction” is underway. In Southern California, we call that a recession but we’re awfully dramatic in Southern California.  Anyway, recessions contractions lead to lower mortgage rates.

Want to see how effective my lock/float recommendations are?  It looks like I’m always a tad early:

Let’s see:

1- I came into the new year, floating rates. 
2-  On January 8, I advised to lock.  I was early, you could have improved your rate by an eighth.
3-  I floated on January 17- bonds improved a full point, then dropped a half a point
4-   Pulled the trigger to lock, on January 24- bonds deteriorated- rates went up.
5-  Stayed locked (but pointed out the ten-year ARM value) throughout February
6-  Went to float, on March 6- bonds improved 3 points, and mortgage rates fell .5%, during that time
7- Have had all loans locked, since March 21-

I’m not bragging, I’m doing my job.  The value of a mortgage planner, who watches the CORRECT influencing factors, can save you an eight to a quarter point, on the rate of  your mortgage.  This means that my advice can save you THOUSANDS of dollars, over the life of the loan.

If you’re watching the “points", a stronger bond market can save you a lot of money, on closing costs.  Clients who made an application, on March 8, received a 2% rebate, from the lender, because of my prowess, by waiting until March 21 to lock.  Even worse, those loan applicants that didn’t engage me, in February, may have paid as much as 2% MORE, in closing costs, than my clients.

Advice and execution is the value of a skilled mortgage planner.  Ask originators to prove the value of their fee before you hire them.  I’ll gladly do just that.