After rallying multiple days, locking into rates prior to Fridays Jobs Report was a wise choice, as there was more risk of rates moving higher heading into the numbers. Economic weakness here in the States and Abroad provide long term support for Mortgage Bonds and Mortgage Rates. However that is not to suggest that Mortgage Rates will move much lower than their previous bottom.
Technically speaking, we are closely watching the 50-Day Moving average, which was a tough level of resistance a few weeks ago and is now our floor of support. A drop beneath this level could reverse the direction of Mortgage Rates and Bond Prices. Bonds could easily loose 170 basis points and that could push Mortgage Rates considerably higher. Volatility is still the key word and we think Mortgage Rates will trade in a wide range by as much as .50%. The 30 Year Fixed Rate is currently at 3.884% APR. Our bias is towards locking into rates, not floating.
Economic News
Fed Chairman Ben Bernanke stated at last weeks Fed Meeting, that the Fed may look to reinvest in Mortgage Backed Securities to provide additional support to the weak housing market.
The Bureau of Labor Statistics reported 80,000 jobs were created in October, less than expectations.
Jobless Claims Fell by 9,000 to 397,000
The European Central Bank (ECB) cut interest rates by .25%
Broker or Bank?
It’s quite astonishing how little the general public knows about what has
been happening in the lending markets. Every now and then I have a
conversation with someone seeking home financing and they believe that the
banks will give them the best terms for financing. It’s really naive when
you consider the bad publicity the big banks have had over the past three
years.
First – let’s remember that the big banks and Wall Street were responsible
for the shape the economy is in.
Second – they robbed you and I, the “Taxpayer’ of $700 Billion dollars (the
“Stimulus Package”), of which they never made loans with, as was the
governments intended use.
Third – the Banks are not required to educate, license or test their
loan originator employees as Brokers and small Lenders are.
Fourth – Banks do not disclose all their fees and revenues as Brokers &
small Lenders always have.
Fifth – Recent laws and rules make it impossible for Brokers and Small
Lenders to take advantage of the consumer. However, Banks are exempt and
are taking advantage of the consumer.
Sixth – The Banks are not Banks; rather they are Brokers, as they don’t lend
their own money. They sell the loans to Fannie Mae, Freddie Mac and FHA.
Seventh – Therefore, doesn’t it make sense that since the bank is really a
broker; why not use a broker that has many more options than those of one bank.
I strongly recommend watching the recently released HBO Movie “Too Big To
Fail”.
I was a Contributing Editor for CNBC, Bloomberg and Fox TV during the credit
meltdown and will say that the movie is pretty accurate and does a good job of
explaining who was responsible for the credit crisis and how it all unfolded,
in a way that the average person can understand.
The point is; there are better options available for home financing than
using the very banks that are responsible for the Credit Mess, Hi Unemployment,
Falling Real Estate Values, and Wiping Out a chunk of your 401k.
Copywrite John Sauro 2011 All Rights Reserved
Reproduction of this report without written permission is strictly prohibitted.