14 January 2011 – Never has flat felt so good. For weeks, lenders have been living with the specter of further rate spikes looming like the sword of Damocles. Luckily the thread has held and, although the sword remains, we have lived another week without the aforementioned drop. In this “take what you can get, while you can get it” mortgage market, this is great news indeed.

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The week started a bit dicey with some disappointing treasury auctions, but, when the 10-year auction went off well, pricing improved. While this did not manifest in better mortgage rates the consumer cost the obtain the rates got better. This momentum was aided by a RealtyTrac report that foreclosures reached record levels in 2010 and that 2011 will likely be even worse. This was followed by disappointing news on the jobs front as first time unemployment claims rose.

I would like to take a moment to cover some new changes at Fannie Mae that will increase borrowing cost regardless of economic data. The mortgage giant announced that they will apply new adjustments to many loans that they purchase. These adjustments will increase consumer mortgage costs, even for borrowers with credit scores of 800. While the may help stem Fannie’s hemorrhaging, it might also put the kibosh on the housing recovery.

My mortgage rate lock advice for my clients is unchanged and still based heavily in defensive thinking. IF closing in 7 days or less LOCK. If closing in 7 to 30 days, I would suggest FLOATING with extreme caution. With this much volatility, I would LOCK on any improvements as well as any major upward repricing. You do not want to miss the boat.