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Richard Glover


Friday, October 7, 2011 - Article by: Richard Glover - American Portfolio Mortgage Corporation - Message

Each week "Freddie Mac" reports interest rates and this is perhaps the most misleading piece of news that is placed into consumers hands. The full story is usually edited and we only see the blurb..."INTEREST RATES HIT ANOTHER LOW" or "INTEREST RATES REMAIN LOW" and reporting about what that indicator is. Unfortunately that is LAST WEEK's news. They are telling you what closed and what was already locked previously. As many of you who see the news and call around about rates have found out, that rate is not always available.

Mortgage rates recently hit historic lows (again) and I heard on CBS radio yesterday with a report from America's most misleading site said that interest rates are in the 3's. Oddly enough, this is not the case for the majority of people. If you are getting an FHA or VA loan then the possibility is there but if you are the standard refinance customer looking for a lower rate, the only way you are getting into the 3's is if you are doing a 15 year mortgage. (watch for my post next week about shortening your term and using your current cash flow to pay off debt and improve your own balance sheet)

I was quoting rates at 3.875 on Monday (10/3/2011) and by Friday if you structured the same 30 year refinance in a similar fashion the rate was 4.375. The bottom dropped out of the bond market, rates went up and likely every shopper who thought this looked like an opportune time to pursue the dreaded path of home refinance wound up totally discouraged when they started getting calls from brokers, they did their internet inquiry and the slick and smooth talking sharks started bombarding them with the many different ways we all sell the exact same product.

It has been a week indicative of our times. Just when sentiment turned totally sour and everyone was short the stock market, rates were incredibly low everything turned. Bonds sold off (price and rate are inversely related) and stocks rallied back over 11K. The sniff of good news out of Europe spurned the old adage: buy the rumor, sell the news. Obviously Europe is not fixed, more banks were downgraded today and the issue of Greece isn't nearly close to being resolved. Another fuel to the rally fire was the fact that everyone thought the market was going lower and they were short. When it turned on them, they are forced to "cover" their short position by buying the market. This hedge creates a lot of volatility and promotes wild market swings. And we have quite a few of those lately!

Bonds in turn were near historic highs (inversely rates were historically low). As money rotates into stocks, bonds suffer. Investors sell bond holdings to buy stocks. This causes the price to go down (more sellers than buyers) and rates to go up! That is what happened this week. Stocks mounted a big rally this week and bonds sold off...rates got worse. The especially trying thing about this is that many of you have finally been activated and are considering a refinance and as you stick your toe into the water of a business that has already frustrated the hell out of you many times over, it does it again.

Homeowner "hey rates are very low, I'll think I'll look into refinancing"
Broker "that rate you saw is no longer available
Broker "we can help you"
Broker " my company is best"
Lender "we are not a broker and we are better"
Broker "we can get you the best deal"
Lender "pick me! Pick me!"

On and on it goes and yet, nobody can offer you what you were looking for in the beginning: Monday's rates! Frustration, hassle, pestering, overpromising, ignorance, lies, demands, promises, etc all take place and you likely throw your hands in the air and say.
FORGET IT! I'll STAY WHERE I'M AT! And so it goes, your opportunity appears lost.

You didn't miss the boat! Rates change daily. Does everything look right in the world to you? Did all that bad economic news we saw before suddenly turn into a positive economy? Did I really hear someone say on the radio today: "gaining 103,000 jobs puts on the way to getting some of the 14 MILLION people employed? I'm not the best at math but it will take more than several months to put a dent in a 9.1% unemployment rate (15% is a more realistic number) that encompasses FORTEEN MILLION PEOPLE! Its like saying you can become a millionaire $14 at a time!

Now that you have decided to refinance, it is advisable to get your application in place so that you can lock when rates do come back around (they will). Locking a loan used to be a phone call away and in today's society of Consumer Protection there are several disclosures that need to be filled out before this can happen. That process can take a day or two depending on your time demands. This is a process I refer to as "rack 'em and stack 'em" because that magical day will come and you will be able to lock in and get your refinance moving. You did not miss the boat!

Near term outlook: Monday, the bond markets are closed. Tuesday, Wednesday and Thursday $66 Billion of Treasuries will hit and those auctions are unlikely to be favorable enough to garner a huge rally that brings rates back. There will be some news that is favorable to bonds over the course of the week, and some of that will be European uncertainty tied with Asian economic slowing and Friday's Retail Sales and Consumer Sentiment could prove to put us back in "rally mode" and have you in a position to lock....provided you applied for a mortgage before then!

Please review my web site: for more information and to contact me. I'm an IL licensed professional who can be your best resource for all mortgage needs.

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