Rate Watchers Dumbfounded as Mortgage Pricing Worsens

November 19, 2010

Daily Mortgage Updates

Doug Katz Mortgage Broker 19 November 2010 – “Sometimes you eat the bear and sometimes the bear eats you.” A simple quote that definitely describes the most recent week in the mortgage markets. Unfortunately it was more of the latter for those hoping for the salad days of conforming Fannie Mae and Freddie Mac conforming loans below 4.375%

Since Friday of last week, mortgage rates have gotten pummeled. The exasperating thing, however, is that there is no substantive reason for this radical a shift. There was good economic data highlighted by continued improvement in employment numbers and a gangbusters initial public offering for General Motors, but this should have been somewhat offset by the financial woes in Ireland and the understanding that incremental improvement does not a recovery make.

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Conventional wisdom is chalking up the recent spike in rates to a combination of several factors. The first is over investment into the bond market several weeks back. Simply put, too much money had migrated into the bond market and the correction that we are seeing was an expected outcome. Secondly, the Fed’s actions with Quantitative Easing have been limited to short-term Treasury Bills. This has an inverse impact on longer-term debt such as mortgages, which are most closely tied to the 10-year. In short, there should have been some movement, but not to the extent that we have experienced.

This puts us in a bad news/good news scenario. On the bad side, we may have seen the bottom of this rate cycle in late October and early November when the market was anticipating the Fed action, but had no specifics on the plan. On the good side, the bond market is now generally believed to be oversold. While we can and will likely see an overall trend upward, we should see some mild improvements creating short windows of opportunity to secure a good rate. The ability to do this will, in my opinion, be based on preparation and those rate watchers who have submitted an application will be able to lock and close in a reasonable amount of time. If you wait, you will lose.

I am recommending that my clients closing in 30 days or less LOCK as there is way too much risk and volatility. For those closing in more than 30 days, I would suggest FLOATING with a finger on the trigger to LOCK on any improvements.

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About Doug Katz

As the Senior Mortgage Banker and Sales Manager for Chicago Bancorp, Doug not only originates loans for his personal business, but also oversees affiliations with banks and other financial institutions that depend on Chicago Bancorp to meet their client’s lending needs. In this role, Doug directs the day-to-day mortgage sales operations of over 25 branches in a multitude of Chicagoland’s diverse communities. He brings to these relationships a wealth of industry experience and a dedication to an exceptional client experience that has established Chicago Bancorp as Chicago’s pre-eminent mortgage solution providers. Prior to joining Chicago Bancorp, Doug attended and graduated from West Point. Upon graduation, he was commissioned as an officer in the United States Army Artillery, where served 5 years in numerous roles and in various deployments include service in Kuwait. In addition to his Bachelor’s Degree from West Point, Doug holds an M.B.A. from Loyola University Chicago, where he was also inducted into the Beta Gamma Sigma Honor Society. He also served as President for the West Point Society of Chicago from 2003 to 2005 and still serves on the Board of Directors. When not working, he spends his time with his wife and three children in their hometown of Oak Park, as well as pursuing his passions for fitness, cooking and the banjo. Doug can be reached by phone at 312.738.6079, by email at doug@chicagobancorp.com, on his own blogs, BankerDoug.com and Vet Money Matters. He's also on LinkedIn.

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