Rally, Rally, Rally!

That's the word of the day as the last two days have been great to mortgage rates. It seems the confidence, trust, and bearable risk in MBS (Mortgage Backed Securities) the government has instilled in this sector will do some good (at least short-term) for mortgage rates; as we have seen a .50%bps point improvement since the news broke early yesterday morning. As usual however the current market we operate in is still extremely volatile and can swing at a moments notice, however with that being said look for continued improvement in mortgage rates after the release of retail sales data tomorrow morning!

I have also started reading the very interesting (sarcastically stated) novel of "An Analysis and Description of Pricing and Information Sources in the Securitized and Structured Finance Markets". This publication although extremely hard to find really dives into the world of CDO's and MBS asset avenues' both from inception and into the secondary market. The avenues' of investing money have gotten so complicated that the individuals who even launched these products are having to educate themselves on the ongoing change, risk, pricing, structure, cash flow, pass through and other entities that make these investments tick.

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Market Update

The FED announced today that it will Lend $200 Billion in exchange for Mortgage Backed Securities (MBS). We hope this will help infuse a bit of confidence in this market and help mortgage rates. The FED is also reportedly going to drop the FED Funds rate again on 3/18. Be sure you check back to our site to monitor the market and see how mortgage rates are affected.

There are also a lot of rumors and misinformation floating around. This has to do with Boone County's market status (soft, declining, etc.), mortgage rates, program offerings, and lenders making drastic changes. While everything is extremely volatile, don't believe all that you hear. Information gets passed along and gets distorted. If you have any questions at all about what is going on in the mortgage market, please comment below or call us directly. We monitor all of this very closely and will be happy to help!

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What Will This Week Hold For Us?

It's 10:27am CST and I am already exhausted! The MBS (Mortgage Backed Securities) and 10 Year Treasury started the morning out well then in a blink everything went red and then in another split second we were back to gains and substantial ones at that. Why? Well there is not a whole lot of data until Wednesday when retail sales results are released but the market has been anything but predictable for quite some time. I believe investors are just starting to realize that the economic issues are here to stay and the efforts that the Fed, Government, and others attempt to make will not have an immediate impact on the overall economy, if at all. In fact the moves that have been made by the above bodies are being questioned by many "seasoned" economic professionals. Why? Simply put inflation. This is the value of the dollar and too much money being released into the economy. Now I am not going to go into detail but I have read, spoken to, and viewed the information and the individuals releasing it and all I can say is that their claims make a lot of sense.

So where does that leave us this week? The majority of "pertinent" data will not be released until Wednesday morning and will continue through Friday morning. Not to mention we have the Fed meeting again next Tuesday the 18th. For me to say the market will be volatile is an understatement (see my first two sentences of this post) however that does not mean it all won't be good! Keep your hands on your seat and brace yourself for another wild ride as I'm sure this week will take us on one. Below is a list of things to watch for that will (in my belief) impact the mortgage and real estate environment in some fashion.

Wednesday 3/12 Retail Sales:
Thursday 3/13 Weekly Jobless Claims:
Friday 3/14 February CPI (Consumer Price Index):

Not to mention any and all other news releases concerning any financial sector firm; (i.e. Countrywide SEC investigation)

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Links to Some Top Mortgage / Economic Stories!

There are several news reports out today that impact the economy and mortgage rates. I thought it would be helpful to link to these. With the market being so volatile, it helps to keep informed on these topics.

FED Takes New Steps

FED Projected to Make .75% FED Funds Rate Cut.

Jobs Decline!

Foreclosures at an All-Time high!


All of these stories are big news and affect mortgage rates in some way.
If you have any questions on the information contained in these articles please post your question in our comments section or call.

Have a Great Weekend!

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Are Things Getting Worse?

Wow, it is hard to imagine but it seems the national economy; and if you ask Ohfeo (Office of Federal Housing Enterprise Oversight) things locally are "declining" as well. Rates for a 30 year mortgage although still very good are at 6.5%, the price for a barrel of oil is approaching $110.00, the price for an ounce of gold has hinted at $1,000.00, foreclosures are at all-time record highs with no end in sight, mortgage delinquencies are headed for record highs, payrolls are falling as the cost of "goods" are increasing, and the unemployment rate could hit above 5%.

What is the answer for all of this? Well, mortgage rates are on the rise, foreclosures are on the rise, lending guidelines are becoming very strict and now ltv (loan-to-value) guidelines are changing before our eyes! This sounds like a recipe for the "perfect storm" leading to a strong recession! The government better get involved in deeper matters and I mean FAST! Although they have taken valiant steps to remedy the situation the bottom line is it's not enough. They (the government) must think deep and make drastic changes to get the ship righted. Otherwise we will continue to see what we have largely been accustomed to seeing over the past 18 months.

Why do I bring this up? Because I can see where the outlining decisions we've made are headed, especially for the housing and lending industry and it's not good.

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"Vigorous" Action!

It looks as though FED Chairman Ben Bernanke is finally grasping what is going on in the mortgage market. His recent comments show that he finally is realizing how severe the problem is and that these foreclosures are very hard to stop! We have these new programs in place to help curtail the problem, but they are not enough. Bernanke finally stated in a speech that all banks just need to suck it up and realize these losses are not going away! They are not going to be paid back and they need to just take the losses on their books and move forward! I think this is a great statement! These banks were so spoiled with the amount of money they were making that they just expect for things to work out so they are re-paid their money or are bailed out! It sure doesn't look like this will be the case. Bernanke stated the need to take "vigorous" action in figuring out what to do to resolve the problem. At the very core, reducing the principal homeowners owe and re-amortizing their loans to fixed rates sounds like the plan. The problem is that these loans have been packaged and sold to investors. These investors must all agree to such a plan and this is the tough part! In Bernanke's words, " the brilliant minds who cooked up the complicated financial instruments that got us into this problem can also figure a way to get us out"! I truly hope he is right and there is a solution out there!

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Four Dollar Gas? Not Too Far Around the Corner

At the current time March 3, 2008 10:01AM the price for a barrel of oil is trading at $103.65. This could equate to approximately $3.50 for a gallon of gas! Listen I am not that old and even I can remember paying .90 cents per gallon. It would cost me approximately $22-$25 dollars to fill up my 3/4 ton truck. Now this same truck (although no longer owned by me) would cost over $90.00 to fill.

After doing some research on oil prices I found some very unusual data. First, after 9/11 we experienced a cost of $20.83 for a barrel. The early 80' s experienced a significant rise in oil prices with a high of $95.50 in 1980 followed by retreats all the way to $26.45 by 1988. However, today's environment is not so lucky with continued price increases year over year since 2003' when a barrel was $31.62. That's right we are currently at $103.65 with no threshold to keep us from going any further. We have experience over a 320% increase in just over 4.5 years! What are we to do?

I have been an avid endorser of government "price fixing" of gasoline. What does this mean? It simply means the government would "eat" the cost for a gallon of gas for anything above a certain threshold for instance in this example say $80.00 and that equated to $2.25 a gallon. Any price changes above that amount the government would have to bare the expense, thus essentially fixing the price of gas so the average consumer could afford it. Now I do realize this is wishful thinking but imagine if this were the case. What if the U.S. government spent dollars on making this a reality instead of interviewing professional athletes, spending billions on shooting down a faulty satellite, or even a war overseas.

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