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Looking Back And Looking Ahead : February 4, 2008

February 4, 2008

We entered the New Year uncertain of the country’s economic future. With January over, it’s a little more clear. Last week’s data and events helped firm expectations. In the near-term, we can expect weakness: The economy is shedding jobs Consumer sentiment is low Home sales continue to slump nationally In the intermediate-term, however, the picture […]

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Making English Out Of Fed-Speak (January 2008 Edition)

January 31, 2008

The Fed lowered the Fed Funds Rate by 0.500% to 3.000% yesterday.  The move was widely anticipated and so Wall Street’s reaction was muted. Because it is tied to the Fed Funds Rate, Prime Rate also fell by 0.500% yesterday.  Holders of home equity lines of credit and credit card debt benefited from the change […]

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History Is A Teacher: Cuts To The Fed Funds Rate Lead To Mortgage Rate Hikes

January 30, 2008

When the Federal Open Market Committee adjourns from its two-day meeting today, it is widely expected to lower the Fed Funds Rate. This does not mean that mortgage rates will fall. In fact, using history as an indicator, we should expect mortgage rates to rise if the Fed Funds Rate falls. Remember: The Fed Funds […]

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The Week In Review (January 28, 2008) : What To Watch For

January 28, 2008

Mortgage rates change from day-to-day, but last week’s volatility was a record-breaker. After drooping through Tuesday and then skyrocketing Wednesday and Thursday, mortgage rates retreated slightly on Friday. By weeks’ end, rates were at their same levels from mid-December. This is in contrast to Tuesday, just after the Fed’s rate cut and before the stock […]

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How The Stock Market Rally Was Terrible For Mortgage Rates

January 24, 2008

The Dow Jones Industrial Average surged 631.86 points in the last three hours of trading yesterday as traders piled into equities. Fueling the rally?  The bond market. For as much as stocks gained today, bonds lost.  Including mortgage bonds.  The dramatic sell-off created a huge swing in mortgage rates and erased nearly all of 2008’s rate improvements. […]

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It’s A Good Day To Have Your Mortgage Adjust

January 23, 2008

When the Federal Reserve lowered the Fed Funds Rate by 0.75% yesterday, it was in response to economic weakness that mounted since its last meeting December 11, 2007. By contrast, the mortgage markets meet every day. Because of this, mortgage rates had already “priced in” the weakness to which the Fed was reacting. This is […]

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The Week In Review (January 22, 2008) : What To Watch For

January 22, 2008

As promised, last week was heavy on data and on drama.  And mortgage rates continued their slide lower. This week, by contrast, is devoid of data and markets are already digesting the Federal Reserve’s surprise 0.750% rate cut this morning. Mortgage rates are falling in response, but not because of what the Fed did as much […]

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Mortgage Rates Are Down (But Not Everyone Is Eligible)

January 18, 2008

Overall, mortgage rates are at their lowest levels since late-2005. Despite rates falling, however, not everyone can take advantage. This is because mortgage lenders started to tighten the guidelines of what they will lend and to whom, also beginning in late-2005. In other words, the chart at right doesn’t apply to all homeowners equally. If you are […]

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Which Leads Which Lower: Mortgage Rates Or The Fed Funds Rate?

January 16, 2008

It’s a point that’s always worth repeating: Ben Bernanke and the Federal Reserve do not control mortgage rates This is particularly relevant today as newspapers, television programs, and market pundits posit that the U.S. is in the midst of a recession. The latest evidence supporting that assertion is that Retail Sales grew at its slowest […]

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The Week In Review (January 14, 2008) : What To Watch For

January 14, 2008

Markets are welcoming the return of cold, hard data this week. Most of last week was spent making sense of Fed speakers, recessionary fears, and a takeover of the nation’s largest lender. This week, we’ll find out if the recent fears of recession are on target, or overblown. The data deluge starts Tuesday with the […]

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Why Making A Less-Than-20-Percent Downpayment Is Getting More Costly

January 10, 2008

Private Mortgage Insurance (PMI) is an insurance policy paid to a lender in the event that a homeowner defaults on his home loan. These defaults are up 35 percent over last year, according to an industry group — bad news for all homeowners requiring PMI with their mortgage. Much like home insurers adjust premiums after a […]

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Americans Are $6.25 Billion More Wealthy Since September Because Of The Federal Reserve

January 8, 2008

Since September 2007, the Federal Reserve has lowered the Fed Funds Rate by 1.000%. This has caused Prime Rate to fall by 1.000%, too.  This is because the Fed Funds Rate and Prime Rate are directly related. In mathematical terms, the relationship looks like this: (Prime Rate) = (Fed Funds Rate) + (3.000%) So, because […]

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The Week In Review (January 07, 2008) : What To Watch For

January 7, 2008

Stock markets tanked last week behind high oil prices and weak employment data. Amid a sell-off that led to a 4.5% decline in the S&P 500, investors sought safety in the bond markets. As a result, mortgage bonds improved last week, driving some mortgage rates to their lowest levels in two years. This week, with […]

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Why It’s Not So Bad That Unemployment Reached Its Highest Rate Since November 2005

January 4, 2008

On the first Friday of each month, the Bureau of Labor Statistics releases key data about the American workforce. The report is officially called “Non-Farm Payrolls” but most people refer to it as the “jobs report”. The jobs report’s influence on markets is palpable for two major reasons: Consumer spending makes up two-thirds of the […]

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$100 Oil Could Mean More Than High Gas Prices For Americans

January 3, 2008

The price of oil briefly touched $100 per barrel yesterday, just short of the all-time inflation-adjusted high of $102.81 in April 1980. According to economic forecasting firm Global Insight, each $10-per-barrel increase in oil prices: Increases gas prices by 19 per gallon Cuts consumer spending by one-third of a percent Reduces employment by 100,000 Adds […]

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The Week In Review (January 2, 2008) : What To Watch For

January 2, 2008

It’s a short, but heavy, week for mortgage markets.  Investors are returning to the fray after a few lighter-than-normal weeks and their return should bring some stability to mortgage rates. Last week, mortgage bond prices rose which, in turn, moved mortgage rates down. The main reason for last week’s rate improvement was the assassination of […]

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The Week In Review (January 2, 2008) : What To Watch For

January 2, 2008

It’s a short, but heavy, week for mortgage markets.  Investors are returning to the fray after a few lighter-than-normal weeks and their return should bring some stability to mortgage rates. Last week, mortgage bond prices rose which, in turn, moved mortgage rates down. The main reason for last week’s rate improvement was the assassination of […]

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The Difference Between Private Mortgage Insurance And Homeowners Insurance

December 28, 2007

Private mortgage insurance (PMI) is insurance for the mortgage lender in the event of homeowner default. PMI helps the lender recover its costs and losses after foreclosing and selling a repossessed home. PMI rates vary by loan type, loan size, and loan characteristics.  The higher the risk to the bank, the higher the cost of […]

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The Difference Between Private Mortgage Insurance And Homeowners Insurance

December 28, 2007

Private mortgage insurance (PMI) is insurance for the mortgage lender in the event of homeowner default. PMI helps the lender recover its costs and losses after foreclosing and selling a repossessed home. PMI rates vary by loan type, loan size, and loan characteristics.  The higher the risk to the bank, the higher the cost of […]

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Holiday Spending APPEARS To Be Lower, But It Isn’t Really Lower

December 26, 2007

During the Holiday Season, economists watch consumer spending intently because it makes up two-thirds of the U.S. economy. When spending is stronger-than-expected, it can lead to inflation which pushes mortgage rates higher. So far this season, mortgage shoppers should be in good spirits.  Sales have fallen four weeks in a row and the outlook for a late-December rally […]

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