Wow!! Every day seems to be more exciting than the last. Just today (8/16). The headlines warned that Countrywide could end up in bankruptcy (I don't necessarily subscribe to that), and even the institutions Fannie Mae and Freddie Mac could have solvency issues. What is important about this is not that it could happen (I just don't think it will), but that it's being bandied about. This kind of talk creates panic and, as a result, markets overreact, creating more panic.
What opportunities this creates! It's actually very exciting in a good way.
So, what is happening with rates? Conventional rates are actually doing OK. They are staying steady in the mid sixes without much fluctuation. I will come back to this when I discuss Treasury movements. Nonconforming products continue to take a beating with rates in the upper sevens. I expect Nonconforming rates to continue to stay high until the market gets its head on straight.
Now - Treasuries: This is where you really need to pay attention if you are a real estate industry professional or a consumer. If ANY lender talks to you about rates and associates it with Treasuries, run away as fast as you can. You are obviously talking to someone who has no business being in this business. And, I'll say this bluntly; if they go so far as to say Treasury "Bonds", just go ahead and push them off a cliff please. Why is this clarification so important? Connecting mortgage rates to Treasuries is like someone asking, "How is Yahoo stock doing?" and getting an answer back of, "Well, Google is up 3%." They both offer online search engines, but they are, in fact, two different companies and will not always move in tandem with each other. Get it? In mortgages, Mortgage-backed securities is where rates are determined; NOT in the Treasury Markets.
Why am I ranting about this? Right now, as I write, evidence that the two are not the same is evident. Today, Treasuries are up currently over 100 basis points while mortgage-backed securities are actually down 6 basis points. What I am really driving at is that conventional rates are staying steady because there has not been a lot of movement in mortgage-backed securities, and if someone is giving advice based on tracking the Treasuries, they are not only misinformed, they are misleading the person they are counseling by creating a belief that rates should be improving.
I don't expect you to know every aspect of the mortgage market. Heck, nobody does. But it is important to know that the person who is advising you is armed with proper intelligence. A highly qualified mortgage professional is well worth what they will earn and you will be best-served by working with a knowledgeable professional as opposed to someone who has, in effect, a .22 caliber intellect walking around in a twelve-gauge world.
Greg Polashock is a Real Estate Home Mortgage Loan Consultant and Certified Mortgage Planning Specialist with Cherry Creek Mortgage and resides in Castle Rock, in Douglas County Colorado. He can be reached via email at Greg@GregIsFinancingSolutions.com, by phone at 303-887-0672 or on the web at http://www.gregisfinancingsolutions.com/.
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