Monday, January 5, 2009

Mortgage Rates: Gamble As You Shop.

Mortgage Rate Volatility slowed a bit in December after record-breaking changes in October and November. The slowing pace of change is good news for homeowners that joined the Refi Boom that closed out 2008. It was much easier to shop for a mortgage rate in the absence of 4- and 5-Rate Sheet days.

A "rate sheet" is a mortgage lender's active, available-to-the-public mortgage rates for all of its products. This includes 30-year fixed rate mortgages, 5-year ARMs, and the like.

However, rate shopping is not like shopping for a flatscreen TV to watch the BIG game. Mortgage markets are still moving with tremendous velocity, historically. Over the last two months, mortgage rates changed 2.15 times per day, on average -- nearly 11 rate changes per week.

In December, mortgage rate quotes "expired" every 3 hours, 39 minutes.

This rapid pace of change is one reason why "sleeping on it" can be dangerous. Mortgage rates may be low in the morning, but by the afternoon, they could absolutely be not-so-low.

Look, I've heard it from enough homeowner's by now that I can safely tell you -- unless you're prepared to accept a higher rate, you may not want to gamble on getting the lower one. A good question to ask yourself is this: "Is it worth a 1/8 percent rate increase to gamble that I'll find an 1/8 percent lower rate tomorrow?"

Mortgage shopping wasn't always complicated, but it is now.

In addition to a volatile rate environment, external factors are muddying up the mortgage waters, too:

  1. Guidelines continue to tighten high income households.
  2. Falling home values are making refinances very difficult. Your area is not immune. Trust us.
  3. Rising defaults are pushing private mortgage insurance premiums higher.

In fact, there are very good reasons to consider taking the first low-rate mortgage you find that fits your long- and short-term financial goals. The most important one, of course, is that it's as likely that mortgage rates will rise in 2009 as they will fall. Forget what the experts tell you -- they're paid to make guesses and they're often wrong.

In markets like this, a sound piece of mortgage advice is to make friends with a "good lender". They're good mortgage lenders for a reason. They're fair with clients and they provide extra support that you won't get from a call center. And, most times, they're cheaper, too.

So, shop for mortgage rates every 3 hours, 39 minutes, or save yourself the trouble and work with a reputable jumbo mortgage lender who's both fair and knowledgeable. If you ever want a speedy rate quote, call or email me. We lend in all 50 states.

1 comment:

CharlieNoSpam said...

Ever since I heard Dr. Susan Wachter of Wharton talk about the problems our economy will face in 2010 when HEL loans need to be refinanced. I have been contemplating our current economic problems with foreclosures and falling home prices. The news reported recently of CitiBank’s acceptance of a proposal to allow bankruptcy judges the ability to modify payments; the problem is that this is just one lender, and it requires a case by case review by bankruptcy judges.
A proposal called the Mortgage Equity Protection Plan is for a program that is more streamlined (using the internet), not needing all the paperwork or expense of a conventional bankruptcy, not needing to have each case reviewed by a bankruptcy judge; it takes advantage of current low fixed rates and gives all the loan servicers (& lenders) the incentive to address current and future defaults. (I assume you are familiar with the problem that Loan Servicers face in renegotiating mortgages, on behalf of their investors of Mortgage backed securities).
Most importantly, the plan would almost instantaneously end the massive numbers of homes entering the foreclosure market for the next 5 years. From a populist point of view, it would sell well, as it would be directed to helping homeowners, instead of giving it to banks (hoping they will start lending again). Meanwhile the investors who are being paid from this program, can invest again in FNMA (government backed) mortgage securities. Investors have an incentive to put their money back into this market, because the plan would solve the problem of decreasing prices, and FNMA offers better returns than Treasury notes. Another reason that this will appeal to politicians and pundits, is that these investors will not be using the money to pay executive bonuses or buy other banks,
The Mortgage Equity Protection Program meets another goal of fiscal responsibility (i.e. getting the Treasury repaid).
This plan comes from my years of experience in the Real Estate industry and my work at Mortgage Reporting Service, a consumer service that published mortgage rates for all the lenders in the Philadelphia area in the 1980’s.
I am concerned that if we don’t stop the drop in home prices now, they are going to crater to absurd levels!
This information can be found at
I would be interested in your feedback.
CharlieNoSpam-Economy [at]