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Like The Fed Funds Rate, The Fed’s Discount Rate Does Not Control Mortgage Rates

August 21, 2007

Friday, the Federal Reserve lowered its Discount Rate by 0.50% in an effort to preserve liquidity among our nation’s banks. This has nothing to do with mortgage rates that people like you and I get for our homes.  Well, not directly at least. The Discount Rate is the rate at which banks borrow money from the […]

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The Week In Review (August 20, 2007) : What To Watch For

August 20, 2007

Again last week, financiers failed to answer the major question dogging Wall Street: What is the “right” risk model to use for mortgage lending?  The models of the past are being proven to have been wrong. So, why do risk models matter? Because the basic tenet of lending states that the riskier the loan, the […]

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Why The Mortgage “Crisis” Is Not A “Crisis” For Everyone

August 17, 2007

Another day, another batch of Gloom-and-Doom stories in the news.  Remember to keep a level head — the media’s job, in part, is to sell newspapers and capture eyeballs.  Using the word “crisis” repeatedly is one way to meet that goal. A few facts to keep it all in perspective: There are still BILLIONS of […]

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Is Your Loan Officer Incorrectly Reading In Which Direction Mortgage Bonds Are Moving?

August 16, 2007

As we discuss over and over again, mortgage interest rates are determined by the price of mortgage bonds.  Nothing else, and nothing more.  The challenge in that truth is that mortgage bond pricing is not very accessible to the general public. This includes the press. As a result, the media tends to use a government […]

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A Few Good Reasons To Ignore Your Mortgage Prepayment Penalty

August 15, 2007

Industry trade magazine Inside B&C Lending pegs the 2006 dollar volume of new sub-prime loans at $640 billion.  According to the Real Estate Charts chart above, 78% of those dollars were in 2-year adjustable loans. A loan of this variety is often called a 2/28 (“two twenty-eight”). A 2/28 originated in 2006 will reach its […]

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The Fed Funds Rate Does Not Directly Impact Mortgage Rates

August 14, 2007

It’s been on the news a few times lately, so let’s address a key misconception about the Fed and its relationship to mortgage rates. The markets now anticipate that the Fed will lower the Fed Funds Rate within the next 45 days.  As a mortgage rate shopper, there’s not much reason to be interested.  That’s […]

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The Week In Review (August 13, 2007) : What To Watch For

August 13, 2007

After all the volatility and talk of a global crumble, all of the major U.S. stock indices posts gains last week.  It just goes to show you what a strange roller coaster ride we’re all on. Last week, the market bounced its way through: The Fed’s press release stating that inflation is still a concern […]

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What’s The True Risk In Mortgage Lending? It’s Anyone’s Guess Right Now.

August 10, 2007

Any security — stock, bond, or otherwise — has a specific risk associated with it.  Based on that risk, an investor decides whether or not the price is worth paying.  If the security is a “good value”, an investor will buy it.  If not, the investor will pass. Until recently, mortgage bonds were considered a […]

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Awaiting The Fed’s Next Statement

August 7, 2007

The stock market bounced back yesterday from Friday’s losses, adding 287 points.  There wasn’t much activity in mortgage rates, though, which remained relatively flat. Right now, it’s all eyes on the Federal Open Market Committee and their 2:15 P.M. ET press release. For as many people that want the Fed to make a powerful statement about […]

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The Week In Review (August 6, 2007) : What To Watch For

August 6, 2007

In a week in which several high-profile mortgage lenders closed their doors, not all news was bad. Mortgages rates for home loans bought by the quasi-government groups Fannie Mae and Freddie Mac actually dropped a bit. If you only watched the news, or market commentary on CNBC, though, you likely have the wrong idea about […]

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Money Magazine’s Best Places To Live 2007

August 2, 2007

Money Magazine recently listed their 2007 Top 100 Places To Live with Middleton, WI topping the list. The full Top 10 list, in order: Middleton, WI Hanover, NH Louisville, CO Lake Mary, FL Claremont, CA Papillion, NE Milton, MA Chaska, MN Wallingford, PA Suwanee, GA How did Middleton get to number one?  The formula seems […]

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Why Bad News For Stocks Can Be Good News For Mortgage Rates

August 1, 2007

Money leaving the stock market helped mortgage rates move lower yesterday.  As the Dow swung from a 140-point gain to a 140-point loss in a matter of hours, dollars were looking for a place to “park”. Mortgage bonds were one beneficiary. When investors sell stocks in a portfolio, they don’t always want to keep the […]

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Why You Should Approach Tomorrow’s Existing Home Sales Headlines With Some Skepticism

July 25, 2007

June’s Existing Home Sales reported weaker than expected and dropped from prior levels, according to the National Association of REALTORS. Because our country (A) loves to discuss real estate, and (B) loves statistical headlines, expect tomorrow’s newspapers to emblazon one (or both) of these data points on the front page: Home sales are down 3.8% from […]

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The Biggest Banks Are Eliminating The Most Prevalent Sub-Prime Loan

July 24, 2007

Mixed news from the sub-prime sector, depending on how you look at it. Many lenders discontinuing their short-term ARM products. Washington Mutual, Countrywide and Wells Fargo are among the sub-prime lenders no longer offering the 2/28 mortgage product. The “2/28” is a adjustable rate mortgage in which the interest rate remains fixed for two years, […]

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Why Medical Bills Are More Dangerous To Homeowners Than ARMs

July 20, 2007

If you own a home and somebody else depends on your income, consider that the leading cause of home foreclosures is not “adjustable rate mortgages”. As cited many times over (including by a Harvard law professor), the answer is medical bills. Even for the insured, medical expenses can dramatically impact a family’s finances and push […]

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Simple Steps To Keep Home Insurance Costs Down

July 19, 2007

As homeowners insurance premiums rise across the nation, Bankrate.com writes a helpful story on ways to keep your premiums down.  The tips may surprise you. Some of the highlights include: Don’t think a series of small claims is better than one big claim.  The smaller clains are more expensive to process for an insurer and may […]

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How Ben Bernanke’s Testimony To Congress Is Moving Mortgage Rates

July 18, 2007

Despite lower prices at the gas pump, the Consumer Price Index increased a little bit more than expected in June. According to the Bureau of Labor Statistics, CPI rose 0.2% versus the 0.1% expected by economists CPI tries to answer the question “How expensive is everyday life?”.  Over the last 12 months, says the government, “life” […]

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When Everyone Spends A Little Less, We All Save A Little More

July 13, 2007

Weakness in Retail Sales data this morning is causing a knee-jerk reaction in trading circles, edging mortgage rates lower this morning. Against expectations of a flat reading, retailers reported a 0.9% decrease in sales volume in June.  This is the largest reported drop in two years. As we’ve discussed before, though, when looking at data […]

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Do 500 People Speak For The Whole Country?

July 12, 2007

On the week, mortgage rates are slightly improved as traders keep a watchful eye on tomorrow’s Retail Sales report. Largely, markets want to know how Americans are using their disposable income.  Are they buying big-ticket items like automobiles?  Are they buying luxury items?  Are they buying appliances and home goods? Retail Sales is released at […]

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Before You Rush To Make Bi-Weekly Mortgage Payments…

July 11, 2007

Before paying down your mortgage balance with extra principal payments, be sure to plan carefully. The biggest risk in lending for banks is that you will suddenly stop paying your mortgage.  In that event, the banks hope that you owe them as little as possible against the value of the home. That way, your mortgage balance […]

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