Greetings from Brian Daly:

 ---I am going to start posting these updates on this blog as I send this information out to my clients' emails. The market has been EXTREMELY volatile as of late, and interest rate movements have been hard to forecast, and hard to understand. I have been using these email articles to help explain everything, in an easier to understand manner, and hopefully educate and entertain in the process. Please let me know what you think. If you would like to receive these updates directly to your email, please contact me and I will add you to my list...this will ensure that you get the information right away...I don't know how quickly I will be able to update the blog. Thanks. Again, I would love any comments, questions, or suggestions...and feel free to be as brutally honest as you feel necessary :)...I can take it.---

I hope all is well!

There has been A TON of big news stories and economic reports over the past few days, and the markets (both bonds and stocks) have continued their wild streak of volatility. I am going to be as brief yet informative as possible in an attempt to explain exactly what has happened and why.

First, as you may know by now, Bear Stearns (one of the largest investment banks in the world) was minutes away from collapsing on Friday (3/14). Bear Stearns was the largest player in the secondary market for sub-prime mortgages. On Friday they announced they were insolvent, and unable to continue business in their current condition. Luckily for the economy JP Morgan, with some help from the U.S. Federal Reserve Board, stepped in and bought Bear Sterns at a huge discount which gave the company the cash they need to solve their credit issues, and stay afloat. Over the weekend, the Fed lowered the Discount Rate by another .25% in order to help with this transaction, and help solve other bank’s credit issues. The Fed has shown a lot of creativity and gusto in their dealings with the long drawn out credit crunch we have seen over the past 12 months…we just have to wait and see whether or not their actions are enough to avoid a major collapse.

By Monday, the markets were going CRAZY. Stocks tanked Friday on the news of a weak Bear Sterns. Stock investors are worried that the credit crisis is a lot worse than they expected, and are afraid of the overall ramifications on the market as a whole. When they saw Bear Sterns literally fall apart in minutes, they RAN in the other direction. As we talked about before, stocks and bonds are always competing for investment dollars…so when the dollars left the stock market, they got parked right back into bonds…which worked out VERY WELL for mortgage bonds on Monday. Bonds shot up 150 basis points, which improved conforming 30 year fixed pricing by about .25-.50% in just a day.

Even with Monday’s bond gains, shorter term fixed rate loan (3 year, 5 year, 7 year fixed mortgages) rates actually have increased over the past week. There is a number of reasons for this including rates increasing on the shorter term treasury instruments (do to steep sell-offs by the bond holders) and lack of liquidity in the secondary market among other things. If you would like

Today, the Federal Reserve Board had another Open Market Policy Meeting, at which they decided to cut the Fed Funds rate once again by a BIG .75%. This brings the Fed Funds Rate down to 2.25%, and the Prime Rate to 5.25%. This will immediately impact HELOC, student loans, ARMs attached to the LIBOR index, and some car loans…with the possibility of some credit card interest deductions as well.

Despite popular belief, this action by the Fed has a negative impact on mortgage rates. As I have mentioned before, mortgage bonds HATE inflation…and interest rate cuts by the Fed increases the money supply in the economy, and thus increases inflation pressures. Immediately following the announcement, mortgage bonds fell by 90 basis points, which ate away a lot of the gains from yesterday. Better than expected reports from other investment banks, like Goldman Sachs, also helped the stock market recover, which has assisted in mortgage bonds’ movement lower.

All in all, conforming interest rates have been recovering nicely over the last few weeks. Interest rates seem to have interrupted their trend higher, which is good news for the future outlook on interest rates. If you are still thinking about refinancing the near future, the next couple weeks may be the time to consider locking in an interest rate. With all of the recent rate cuts, inflation is going to pick up and eventually push these mortgage rates higher…probably much higher. Please contact me with any questions, concerns, or comments. I am always grateful for any feedback from you…no matter how brutal you want to be J.

I am always willing and honored to help you in any way I can, so please do not hesitate to ask. If you would like a more in depth explanation of what is going on in the markets please just give me a call.

As always, I am eternally grateful for any referrals. My goal is always to go above and beyond what you would expect from a mortgage professional in an effort to show you that not only can you trust me and my team with your finances, but also so you can feel 100% confident that I will provide the same outstanding service and advice to anyone you send my way. I prefer to grow my business via referrals, as that allows me focus all of my time on you, my valued client, and making sure all of your needs and goals are accomplished. Please contact me if you think anyone you know could benefit from my services.

Thank you for your time. I hope you the information was both educational and enjoyable.

Brian Daly

Senior Mortgage Advisor, CMPS® (What is a CMPS and why do I care?)

Phone:  619.464.5880 ext. 308

Fax:  619.639.0355

BrianD@CreativeLenders.net

The greatest compliment I can ever receive in this business is the referral of a friend, family member or associate. The gesture of recommending my services to someone you know means more to me than you can know, and will never be taken for granted.