Thursday, January 29, 2009


Potential home buyers and refinancers who stay on the sidelines first quarter 2009 while rates are good, just may be singing the blues this late spring and summer.

Home loan rates are very attractive right now; it may be quite a different picture heading into summer as some inflationary factors will probably come into play. As we approach the summer driving season oil prices may be on the rise, some of the economic stimulus might begin to take effect, corporate cost-cutting measures could start to bear fruit, AND, very importantly, the Fed may no longer be buying Mortgage Bonds. All these factors add up to the real potential of significantly higher interest rates this summer.

So why would bond traders be nervous now, with no hint of inflation in the current market? Comments from Fed Governor Frederic Mishkin last week may provide some insight: “inflation could come to the forefront, given all of the government programs” and “once the economy recovers, liquidity must be taken out of the markets” …. meaning the Fed may need to rapidly hike rates down the road, to control the potential of inflation.

Renewed fears of the deepening worldwide economic slump put heavy selling pressure on global stocks last week. And this was despite the good news from better than expected earnings from IBM and Google, and with GE meeting their earnings expectations. Sometimes the downward pressure on stocks can benefit bonds, but the mention of inflation was felt – with home loans ending the week around .25% higher than where they began!

Jan 26-30th Watch report

The Fed will be holding their regularly scheduled meetings on Tuesday and Wednesday. And Wednesday, the Policy Statement is issued along with a decision regarding the Fed Funds rate.

Other factors influencing the market include the Gross Domestic Report to be released on Friday. The GDP is the broadest measure of economic activity, and given the state of our economy, a negative one might not be that much of a surprise. Thursday’s Durable Goods report will give us a look at consumer and business buying behavior. The housing market reports come on Monday, with Existing Home Sales numbers and on Thursday, reporting on New Home Sales.

NOTE: The arch enemy of bonds and home loan rates is inflation, and even the mention of it can have negative ramifications.

Reality vs possibility:
don’t buy into the ‘maybe it’ll be lower later” view, take the great rate available now, save yourself those hard earned dollars and don’t get caught singing the blues ‘cause you waited for the rates to “bottom out”.

Please call me or email me at or 913-642-3334 for insight about the benefits of acting today, and not waiting for what may never come.

Friday, January 23, 2009


I just received an email from a highly respected colleague in the mortgage business, someone I’ve worked with for many years. He had just left a meeting with his account rep at a national lender we both work with and he passed on some very interesting points for consideration. In turn, I think that my clients could benefit from these comments.

“As you know, rates were driven down when the government committed to purchase $300 billion in loans from FNMA & FHLMC. That money has been used up and they have added more on top of that. But they (various sources in the government) have also said that the current plan is for the government is to stop purchasing mortgages in June and let market driven forces do what they may. If that happens, rates could go back to the 6% to 6.25% range that they were in before the government purchase program began.

In the meantime, there is still a lot of interest by the government to keep rates low in order to stimulate the housing market. That may mean that government purchases of mortgages may continue beyond June. HOWEVER, the issue then is lender capacity. Industry experts estimate that there is $5 trillion dollars worth of loans that would benefit by a refinance at 5% interest rate. If the rate goes to 4.75%, that number goes to $7 trillion, and at 4.5% the number goes to $12 trillion. That sounds like a lot of business for brokers but lenders currently do not have the capacity to handle it. The highest annual loan volume ever was $4 trillion in 2003! At that time there were about 100 direct lenders and another 200 pass through companies to handle the volume. Now the number of lending companies is much smaller. And these remaining lenders have laid off a large percentage of their staff. They could rehire, but most will not do that if they think the volume will drop later this year if the rates go back up. So, the conclusion many in the business have reached, is that even if the government pumps in money to buy more mortgages (which would keep rates down), lenders may not give a corresponding rate decrease because they are already overwhelmed and want to restrict volume.

Along that same line, lenders may actually take steps to further reduce volume by adding more restrictions or continuing to increase fees. One particular restriction may be extra fees for refinances vs purchases. That would allow lower rates for purchases but reduce volume for refinances. (Note: this is speculation on the part of the loan company rep and is not an official position by this national lender!)

The conclusion is that people should refinance now rather than wait.

They may want 4.5%, but if 5.25 works for them, they should at least get the process started. Then, they could watch rates and lock if it gets lower, OR, they could accept the current rate and just feel good that they improved their current position.”

I feel that if the information above is at all accurate, you will want to do something sooner than later. Please contact me by phone or email, or 913-642-3334.

Friday, January 16, 2009


Current state of the market: The last part of December bad news just didn’t seem that bad to investors, who reacted positively, thus keeping the market bullish. But recently investors woke up to reality as the economy comes back to earth, with the market bearish in the first full week of January. The bond market has been a volatile roller coaster just like the stock market, but we have officially crossed the threshold of the historic low 30 yr fixed rates that were available in 2003. The December job loss numbers were just released from the Dept. of Labor, making 2008 the worst year for job losses since WWII.
This weak labor data should help president-elect Obama pressure Congress to get his bailout package cleared. The Federal Reserve was actively buying mortgage backed securities this past week, keeping mortgage rates trending downward and keeping origination volume high. Hopefully mortgage rates will hold steady to offset some part of the weak economy.

But, keep in mind, rates could begin to rise if the stock market recovers. Investors who moved to the relative safety of Treasury bonds will shift money back to Wall Street if it seems more profitable. If stocks are being purchased, the market has guessed that the economy is recovering. When economies recover, rates eventually go up to stop growth and fight inflation.

So how do we, at InSight Mortgage Group, help you, our loyal clients, get the best rate for your current financial situation?

Current game plan with my clients: All the upfront work gets done now so we are staged to pull the trigger fast if rates hit a predetermined target.

Here is a quick breakdown of the next steps:

1) We take a Phone Application which takes 5-10 minutes to make sure all other things are in check. Debt ratios, etc.
2) We Pull Credit to confirm your credit scores so you know where you stand
3) We Call an Appraiser and have him pull some comparable closed sales to confirm the value of your home is where we estimate & need it to be to have the refinance make sense.
4) We Email you the Loan Compliance documents for signatures
5) You fax/email back (asap) the Loan Compliance doc’s along with your income and asset documents (paystubs, W2’s, bank statements, etc.)
6) You schedule a time with the appraiser to do his inspection (once the rate is locked)
7) We receive your package, compile and move to underwriting. With increased volumes, the underwriting turn times are escalating up to 2-3 weeks.

In essence, we are getting everyone’s loans preapproved and ready to submit so that if we see the dip we can act fast, and lock. These rate dip “windows” typically last only a few hours sometimes, so it is about getting your documentation in order and being ready!!

My team and I stand ready to assist you, so just say the word. Please call or email, We look forward to working with you.

Michele A. Cole