The media has done it once again. Trust me on this one. This past week has seen a surge of mortgage refinance applications as rates have dipped. This will help the beleaguered mortgage industry, the banks, the title companies, the appraisers and everyone else connected with the real estate market that has been functioning on life support for quite a while now. But there is trouble brewing. Trust me. I have received a few calls already from clients I have locked an interest rate in over the past few days saying they want to bail on the deal.
You see, they read in the paper or saw on TV that the Fed is going to make rates go to 4.5% and the world will become a better place. This could potentially be destructive. When a loan originator locks a loan with an investor, for ease of explanation, it becomes somewhat of a "forward commitment" where investors hedge their money on the future market. When rate lock fallout becomes large bad things happen. Investors judge mortgage shops on rate fallout and are actually terminating shops who exceed a certain percentage.
If you delve into exactly what the Treasury Department is attempting to do, you will notice the low rate target is aimed at the Purchase money market. It is also aimed at reviving the big banks. There is no certainty this would even be available for refinances as of yet. Besides, when or if this will ever take place is an uncertainty as well, especially with the new guns coming to Washington to take over in about a month.
Don't take the points off the board! Ever watch a football game where the team kicks a field successfully but there is a penalty and they choose to take the points off the board and try and score a touchdown. Do not fall into that trap. If you have locked into the low rates that are available this very second and are second guessing whether to bail and wait, you better think long and hard. If you have a deal in hand that makes sense, do you want to take the points off the board and risk losing the football?
Comments(5)