Archive for the ‘Rate Watch’ Category

RateWatch 14 Oct – Dear Harry Reid, et al.

Markets: Flat.  Dead, absolute, flat.  No movement.  We’re in the middle of a trading channel and we cannot move higher or lower.  That sticks us at about 4.25 – 4.5% on standard 30-year notes, depending on several factors.

Analysis: Unemployment claims data in today showed mixed results.  New claims were up, continuing claims were down.  The inflation data came in much higher than was expected, but nobody believes that data any more, so markets didn’t react to that.  There was a bond auction as well, and it stank, but nobody cared about the, either.  Nobody cares about anything until the Fed decides what it’s going to do about another round of “quantitative easing” (that’s marketspeak for “the Fed buying up government debt”).  It’s inflationary, which is bad for bonds, but it also reduces the risk of DEflation, which is also bad for bonds.  Right now, markets are focused on the Fed and on this foreclosure moratorium.  Herewith, an open letter to Senate Majority Leader Harry Reid, and his cohorts, on that subject:

Dear Mr. Reid:

I see that you have called for a moratorium on foreclosures across the nation.  While I clearly understand your desire to protect the homes of the Senators and Congressmen that are inevitably going to be chucked out on their ears this fall, I want to suggest that such a moratorium is a bad idea.

No, strike that.  I want to tell you that calling for such a moratorium shows that, as we have long suspected, you have half the intelligence of a hatful of lice.

A foreclosure is the remedy of last resort for a bank.  In most cases, this bank has sent hundreds of thousands of dollars out there on behalf of a homeowner, on the promise that the homeowner will pay the bank back.  When the homeowner does not, the lender has no other recourse other than to foreclose.

Now, it is true that in 23 states in our great nation, foreclosures are undertaken judicially; that is, the lender has to prove to the court that it has the legal right to foreclose, upon which the court lifts that automatic stay of foreclosure and allows the lender to seize the house.  It is also true that in many cases (but by no means even a large minority) the banks fudged the proof by having someone state that he had seen the documents proving the aforementioned right to foreclose, when no such thing had actually happened.  This is perjury.  The banks are being punished right now, even as we speak, by having mortgage notes invalidated in such cases, giving the homes in question to the individuals living there outright.

Perhaps this is justice.  The banks violated the law.  But the individuals that are now getting their homes given to them violated the contract under which the home loan was made.  Search all you want, and you will not find a single case in which the homeowner was sent into foreclosure despite having made all his payments.  The homeowner was derelict.  he violated a contract.  He will not, nonetheless, be punished for it.  In Nevada, perhaps, that is called justice.

Leaving that aside, in the other 37 states the lender hasn’t made even a technical violation of the law, but you’re calling for them to be unable to foreclose there anyway.  I know this is likely to get you votes from the deadbeat class, and maybe that’s the only reason you’re calling for it.  But I want to point out a couple of things that you probably missed, not having had to actually hold a job for three decades or so.

One is that there are a lot of people out there that need to get out of their houses so that housing stock can get back to producing returns.  Those people were going to be levered out through foreclosure, quite often.  Pass a moratorium, and those houses can sit there on the banks’ books as non-performing assets until their walls fall in.  This is a bad time to have stuff like that happen.  If there’s a moratorium on foreclosures, how many people are just going to stop paying those mortgages altogether?  That’s also going to be really good for the tottery financial industry.

But the second thing is worse.  If banks have only one recourse in a mortgage default, and you take that recourse away, what will banks do?  They will stop lending money.  Why would they?  What can they possibly gain from it?  The mortgage market is already in the ICU from all the other crap you guys have been throwing at it, and this would further reduce the already pitifully small number of people that can qualify for a mortgage in the first place.  Surely, SURELY, you can see this.  Your state’s unemployment rate is already well above the national average, and why is that?  Because of all the people there that used to be part of the homebuilding and homebuying industry that are now out going door-to-door selling vacuum cleaners.  What you’re suggesting will make that problem WORSE.

Since there’s nobody on your staff, apparently, that is able to understand this, you’ll just have to trust me.  Or trust the White House.  Nobody there has ever had a real job, either, but even THEY have this figured out.

We out here on the front lines of the market have only one request.  LEAVE US ALONE.  The sooner you do that, the faster things will get moving in the right direction again.

Or, you know, just wait a couple weeks, then you can make whatever decisions you want, and we won’t care.  We’ll see if Sharron Angle has a better grasp of third-grade economics.  Maybe you can get a new job selling vacuum cleaners.  You’re obviously a hell of a salesman.



RateWatch Tuesday 14 Sept 2010

RateWatch ALERT – Friday Sept 10

As you are doubtless aware, rates have been absolutely fantastic for about three weeks.  We have seen rates tumble from already ridiculous lows to unseen and unheard-of low 4% ranges.

That appears to be over.

The last three days the market has moved in the wrong direction every day, and today is no exception.  RateWatch sees that the benchmark bond is off 38bps, which is enough to move rates higher when coupled with the loss of 70+bps over the last couple days.  I believe that we have seen the best pricing we’re ever going to see.

If you have been holding your fire on doing a refinance, or you are purchasing a home but have not locked your rate yet, you had best get on it quickly.  Rates will have moved to 4.5% this morning, edging toward 4.625%.  If your credit isn’t perfect (or your loan has other quirks), your rate will be higher yet.

Sorry to be the bearer of bad news.  But we all knew this wasn’t going to last forever.

RateWatch 5 August 2010 – FHA Fee Shift?

Welcome to RateWatch for Thursday, August 05, 2010.  Here’s what’s happening:

Employment again is the news of the day, with new claims up another 20,000 or so to 479,000.  Continuing claims were down, though, to 453,700.  That was not as far down as the markets were expecting, however, and that’s meant that bonds have stayed strong.

Not too strong, though.  There really is no upside here.  Unless we get a truly shocking number tomorrow from the unemployment people, showing unemployment at, say 10.5%, there just isn’t any confidence in the bond market to cause a buying wave.

What that means for rates: nothing.  We’re down 6bps, which might just as well be flat.  There is no upside without huge news, and no downside because what news there is is bad.  So we’re hanging out with rates in the 4.5% range.

Anything else?: yep.  Sure is.  The big news today comes out of Washington, surprise surprise, with the Senate passing a bill that changes FHA fees.  Up-front MI will move from the current 2.25% down to 1%, a positive change, but more than made up for by the increase in monthly MI from an annual .55% to .9%, and the FHA gets authority to go all the way to 1.5%.

Bottom line: on a $200,000 loan, you are paying right now $4500 in UFMIP and $91.66/mo in monthly MI.  When these changes take effect, you’ll be paying $2000 UFMIP but $150/mo in MI.  For more commentary on that, see the blog at

I’m Chris Jones, aka Agent Zero.  That’s RateWatch for today.  Until next time, we’ll be watching the rates.

RateWatch 29 July 2010 – Carnac Speaks!

Welcome to RateWatch for Thursday July 29, I’m your host, Chris Jones, and here’s what’s happening:

Today’s market: The benchmark bond is up 12bps today.  We’re trading in a very narrow channel.  Economic news today was all about employment, as in, there isn’t much of it.  Unemployment benefits have been extended, so continuing claims were up, which did not surprise anyone.  New claims were down, but not very much.  The recovery continues to fail to do the one thing that would really get the economy moving again – create jobs.

What that means to you: rates are holding steady.  It’s generally acknowledged that banks would like to raise rates, but competition is making that very difficult.  Remember, they don’t make money unless they lend it out to people.  Rates are therefore critical to attracting business.  There’s no central rate-making authority in mortgages.  The banks take their cues from the bond market and from each other.  So today’s rates are in the 4.5% range on conventional and FHA, with 15-year rates in the 4% range.

At some point, obviously, this is going to change.  We’ll have a terrorist attack (which would be mixed for bonds) or we’ll have IBM invent cold fusion (which would be very, very bad for bonds), and the market will break out of this channel and start moving, almost certainly upward.  We are trading right now at the bottom of the historical range, as in, it’s never been this good.  Ever.  So it isn’t as if there is a lot farther down we can go.

How long will it last? That’s the billion-dollar question.  Here’s the answer: NO ONE KNOWS.  Only one thing is certain: rates in this range will go away.  Do not wait to talk to a professional.  You can call us.  That’s what we’re here for.

That’s RateWatch for July 29, I’m your host, Chris Jones.  You can find us at or text us at 801-850-378.