On January 5th the Federal Reserve Bank began purchasing Mortgage Backed Securities. The total cost will be $500 Billion. If the Treasury yield reaction is any indication of what is to come, we should be into some real good rates by the time they are finished purchasing them in mid "09". My advice is don't wait. I have seen way too much fluctuation in the rates since last year. Also, this Friday the G.D.P. is going to fall off a cliff for the December #'s if the private sector #'s are any indication. We are in for a bumpy ride. I can't see the market sustaining its small gains in the last week and a half. This always has a direct effect on where the investor’s cash will end up. Oil, gold and other commodities have seen some surging based on uncertainty in the market. Yes, even the bond market has had recent surges based on investors and not just what the Fed is doing. What does all this mean? How does this affect me? What will happen to my rates? All legitimate questions. Here is my opinion and outlook: 1. If you have an opportunity to modify (recast) your loan, do it. This can get both the interest rate down and the loan balance down. Remember the foreclosure across the street has affected your home value. So in essence, because of their dire straights (self inflicted or not) your homes value has plummeted. Can you see how that would solve the sales price if a client could modify their loan and get a lower principle to pay-off? Now remember this isn’t a re-finance. Most lenders require a home to be off the market for 6 mos. for this to happen, this is a loan modification dealing directly with their lender. 2. Now if your loan to value is below the 80% mark because you did it right, then you need to take a strong look at your interest rate. If you are 1%above the current ZERO POINT rate (01/07/09 - 4.875 "ZERO POINT) then a refi could help. I really like to recommend that you stay within a timeframe similar to your current one. I.e. if you have been paying 10 years then just get a 20yr loan. No need to extend it unless you really need a lower payment. Just get it paid off and the fees for doing the refinance will be made up in 3 to 4 years if it is 1% lower on the rate. 3. Rates are expected to drop slowly until April but again the lowest is anticipated to be 4.5% and in this market if I have the rate I want I'll lock it immediately. It is so volatile out there. 4. No one can forecast exactly what will happen but one thing for certain is that for our economy to get going, low home loan rates have to bee a part of it. I have spoke to one self proclaimed "guru" who says 3% loans will be coming but who knows. Even if a direct style program from the Fed were in place who know what guidelines they would use! Maybe lower D.T.I. ratios or buyer's only or first time buyers only. Whatever the future holds for housing affordability let's all be ready to give the best advice possible to our clients.
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