Here’s the thing.  Markets have displayed a huge amount of volatility over the past several months.  Where once mortgage-backed securities (those things that actually control mortgage rates) would trade in a 35bp range on an average day in 2006, today we have 100 bp days all the time, and it’s not all that unusual.  At least, that was true until the last three weeks.  For the last three weeks, we’ve been trading sideways in very narrow ranges, almost always slightly down.  It’s maddening, frankly.  Rates are being ground higher a bit at a time, just a hair here and a hair there, until where once we quoted 4.75%, today we’re talking about 5.375%, and that’s only for those with 740 credit.

So the big question is: what’s going to happen next?  Up or down?

And the answer is: who could possibly know?  There are two wild cards here.  One is Fed buying, which is still going on, but is probably being muted in its effect by Treasury selling of bonds, and the other is the “stimulus” package being argued over in Congress.  Nobody knows what provisions that will contain, and until we do, no bank is going to be interested in lending money.  Why bet your company in a game where the rules might change from one day to the next?

I’ll make a prediction, because you’d be disappointed if I didn’t.  I predict that the stimulus package will pass by the end of next week, and give us a boost to the downside on rates for mortgages that will be powerful but brief, like two or three days brief.  To take advantage of it, you’ll need someone with his finger on the trigger who can lock immediately, but who also can get the loan closed before the lock blows.  Broker underwriting is averaging over 30 days right now.  Our underwriting is 48 hours.  We can – and do – close loans from application to fund in less than two weeks.  The rally we get will be followed by more slow upward grinding, until the middle of this year, when rates will spike as the Fed runs out of buying power.