As a mortgage banker I have the distinct privilege of being simultaneously a genius and an idiot. The viewpoint is reached as a matter of perspective and today I get to be an idiot because I have to, once again, undo what the news networks have done. This means I am spending extra time (15 minutes or so) with all of my customers and educate them in what most of the media needs an education. You see it's all over the news today that rates are headed to the fours. Orly?
First let me say I agree that rates are down and may stay down for a week or more. The danger of reporters (here I go again) putting forth information that "rates are headed down into the fours" is that they have no idea what would cause this or even if it is a fact. Having attended a University where many journalism majors have gone on to great things and having known some of them in school I still have to wonder if they are as ditsy today as they were 30 years ago. This is not intended to disrespect all journalists just most of them - BECAUSE they terribly muddy the waters on highly important issues by delivering information they do not understand to the masses who also do not understand.
Next let me add rates are driven by the market - the government does not (yet) mandate rates. Once we become fully socialist then the government can set rates but we are not quite there ... yet. If Mortgage Backed Securities are not producing a profit for investors rates are up - if those same securities are producing a profit for investors rates are down.
Rates are still based on risk. Riskier loans still have higher rates. FHA rates are not the same as straight Fannie rates. Rates in Florida are not the same as rates in Georgia. Rates on a $60,000 loan are not the same as rates on a $180,000 loan. Rates on a loan with 20% down are not the same as rates on a loan with 10% down. Rates with a 680 credit score are not the same as rates with a 755 score. Some investors (Fannie, Freddie, Ginnie) offer programs at Fixed 30 terms that others do not offer. It's not as simple as saying, "the mortgage rate today is 5% and tomorrow will be 4%".
The biggest lie the mortgage industry has ever told you is "Today's Fixed 30 Rate Is ..." and the second biggest lie they have ever told you is "No closing costs ..."
One thing you could see happen over the next few weeks to help keep rates down is based on the very basic economic principal of supply and demand. It is possible that so many people will be buying and refinancing over the next few weeks that rates will need to adjust to help keep the supply of money in check with the demand. This is where the rubber really meets the road and we get to see how many deep pocket investors step to the plate. I don't know the answer, CNN doesn't know the answer and the mighty supreme Congress does not know the answer (they don't seem to know the answer to many questions).
Yes, rates are down. Your local mortgage broker (the one within driving distance from your home so you can throttle them when they mislead you) is required by Federal Law to show you ALL of their income. The lender 3 states away is NOT required to show you all of their income. With a local broker from your area you should easily be able to get the best rates and best closing costs and if you can't that's simply because you don't know how to shop for a mortgage and are continually misled by the media.
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EDITED: Only five hours after posting this the rates did a U-turn and headed back up. What say ye media geniuses now, eh?
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It just seems to get more and more out of hand. No wonder newspapers are biting the dust. Thanks for the explanation...good luck on the rest of your day.
Very good post - try explaining that to a person who watched the news this morning and want to purchase a condo and will only do so if below 4.0% with 3% down. Find that product for me... please. I haven't seen it ... but maybe someone smarter than me can find it.
Thank you for helping to clarify what most do not clearly understand!
Ken,
You're really COOKing on this one...!!! Thanks, Fran
Ken, our job is not as easy as it once was! the most difficult question we can answer today is: "what is your rate" and any borrower that gets an answer to that question with out a thorough interview is NOT getting accurate info. Last count I think there were 49 different options in rate between LTV and Credit score alone! I never thought I would see the day when we would groan at a 680 credit score!
The fact is, that with the government borrowing this much money, they become a competitor in the market place against a purchaser.
I guarantee the rates are going up! We saw it happen under Carter unless similar circumstances and it will happen again!
Ken, great, great explanation here.
I am still confused at to why the Fed did this. Despite increases in housing affordability nationwide, home sales are down over the past six months.
Why then do we inject $750 billion into the market, what is this supposed to accomplish.
We've already had a refinance boom, and home buyers are reluctant to buy, I don't think this changes anything.
Indeed, rates are market driven. Sadly, the media tend to throw out 30-second sound bites that can give the wrong impression to the public; this goes for actually buying real estate, too.
Ken - As always, you have summed things up very neatly here. I am happy to see that ANY product is available in the sub-5% range. However, the media is once again playing things loose when it comes to the facts.
there is nothing sane about this market, so why should we expect anything good from the media. They don't know what side of this issue they want to be on.
Ken - The media says what the media wants to say. They think that just because they say it, it will be true. I believe the media has caused many of the problems we are having by reporting of speculation as fact. Thanks for your information.
Ken, excellent explanation. I am sure it is hard for lenders as the consumer see's it on TV, reads it on line and then calls you up and wants that rate etc..
Unfortunately it is rare when that applies. Now IMO I think this will slow things down in any already slow market. IF buyers think something is coming they sit tight and we Do NOT need that right now.
Hey where are you I am down on the Patio at HIlton if you want to come down.
"Your local mortgage broker (the one within driving distance from your home so you can throttle them when they mislead you) is required by Federal Law to show you ALL of their income. The lender 3 states away is NOT required to show you all of their income."
How I wish buyers could grasp how important a local lender is!!! Great post, Ken!
You are right. CNN and even Congress do not know how rates are established or where they are headed. I have been in this business a long time and I have a hard time trying to figure out the direction and timing.
Congrats on the feature.
Wow - thanks guys. I went to lunch and came back to an inbox full of great comments.
Crystal - thanks. In case you haven't heard rates are headed back up from this morning's low.
Ryan - amen and amen. There is no liability on the part of the media so they say whatever sounds appealing and let you and the rest of us sweep up the mess they make.
Myrick - thanks. I hope to always do good for the industry and nation.
Fran - lol, well you know me!
Robert - BINGO!
Norma - it's sure positioning to see some HUGE rate increases. Be careful saying that out loud or they'll put you under the bus with me ... or on the short bus!
Mark - muddy waters are where the big fish feed. Keep your eyes on the people who make policy ...
Steve - those 30 seconds cost us hundreds of hours every year. They want to shut Rush and those guys down I think they ought to require anyone reporting on any specialist line of work have an extensive background and liability in that industry.
Jason - did you write "media" and "loose" in the same sentence? And I thought you had a urinalism degree!
Michael - the sky is falling! no it's not! yes we are! who's on first?
Bruce and Mary - I blamed much on the media 2 years ago and was called a "drunken tool" and "mind-numb conservative" ... be careful what you write! :)
Missy - I'm at the office but I wish I was already in the middle of it! I won't be down until tomorrow morning but I look forward to meeting you. I *may* try to get down for a few minutes tonight but it will be tough.
Dawn - there are many things we all need to understand better. Thanks for your comment!
Mike - it's a bit of a whirlwind lately. Thanks for commenting.
I've looked at rates today with a 700+ credit score and can't find anything below 5% that I won't have to pay points for - yet CNN said that I could!
Ken... Great information. I had a new client today who really expected to get a 4% loan.
So far as the media is concerned, even though I have a degree in Public Relations and Journalism, I've still learned to tell everyone "Never mistake the "news" for the "truth!" Although those people still come out of J-school believing they are the "watchdogs for society," they quickly subscribe to their editors' motto... "If it bleeds, it leads!"
Ken: It is amazing that the media has so much experiance in Real Estate and Morgages these days.
This is actually pretty comical. The media tends to act as though things are better or worse than what they are
Ken, this kind of news confirms what I already knew. Rates are going below 4% soon. I'll just wait it out : )
Even for those of us in the industry me, it is hard to remember that "the rate" isn't the rate... it is just a possible rate. Keep reminding me...
I'll see you at dinner.
But...but...google said it was true. I saw it on Google. :)
Ken, I love the article. It didn't supprise me one bit when rates made the midday adjustment. Thanks JH
Being an X mortgage banker (once one always one) now Real Estate Broker/owner I really get frustrated with the media reports. It amazes me just how many folks DON'T know what is the rest of the story. I was lamenting with a mortgage banker friend this morning on this very report. Thanks for your frankness that will help us all be reminded of the real factors.
The moral to this story is there are good rates out there you just need to shop. If you are lead around by the news media you will be headed down dark alleys with no escape (just ask Kramer!). The news media reports what is hot on the plate news. They are not forecasters of any types of markets and to the best of my knowledge no one is. Gather your facts and make intelligent choices not guided by outside jibberish. You will not be right all the time, but you have a better chance going with your own research than that of the media.
Ken,
My frist response was excellent! But, I've got to reduce that to good.
"Your local mortgage broker (the one within driving distance from your home so you can throttle them when they mislead you) is required by Federal Law to show you ALL of their income. The lender 3 states away is NOT required to show you all of their income."I would have added YSP only miss leads the consumer. Your concern should be what does any given loan cost you!
Let's make it very good!
You earned the star.
Bill
When did any media start reporting the truth or anything resembling it. On CNBC last night they reported that housing starts were up for the first time is over three years and on CNN they were reporting that home sales were down 8% and on our local channel they said that housing sales were slighly up in February. They were all right but were confusing in the was it looked to the public because we only get snippets of what is going on.
Great advice Ken, and I hope buyers and buyers agents read this in spades.
Ken, after watching the non-mainstream media news tonight I discovered that the Feds created about a trillion dollars out of thin air to get people spending again.
All of my mortgage lenders that I have been working with called an e-mailed me today with the rates. I can get a 15-20- or 30 year mortgage for 4.875% and pay .25 of a point with no closing costs or pay closing costs and not pay any points. These were figures based on my actual data and individual circumstances.
This is very dangerous, and the government is walking a very fine line right now between fixing the economy and absolutely destroying the value of the dollar. This move could quite easily lead to hyper-inflation where the cost of a carton of eggs could be $25.00, or more!
You can read more about what happened yesterday here in an article from the international New York Times... the second paragraph in the article says it all.
Why isn't the news reporting more of what's really going on instead of making claims that this new cheap money is going to come easily?
Interesting to see the disparity between the requirements for local vs. non-local lenders. It's really intimidating!
Good point...if buyers think the rates are heading down more they will stay on the fence. I think they will stay in the 4's for a while..but its time to act.
Interest rates are driven by the market....
Most people don't realize that. It looks like they're govt mandated or pulled out of a hat to the public!
People who shop on pure rate alone can get burned in the closing costs, and vice versa.
Good post. Yesterday, my friend said "They say rates will be at 4% even tomorrow". I wish "they" would stick to talkin about what "they" know. The market is much more complicated than the media would have you believe.
I too will spend considerable time today educating my clients about what the "real" factors are that influence mortgage rates!
The other day a client said, "Bob I hear rates are at zero!"
Those that wait for rates to go under 4% will may miss the boat entirely....
The other day someone asked me if we had the lowest rate in the market. I said "well, there are at least 10,000 lenders in America, and only one has the lowest rate. I have competitive rates, but somewhere there is one lender who has the "lowest rate". Please let me know who they are when you find them. I don't have that much time or attention span available, as I have a couple dozen loans moving along with serious, committed clients that I need to work on.".
Funny thing, I didn't hear back from him, he must be still calling through all the bait & switch loan offer postings on the internet!
I never post rates. Why? because rates go stale quicker than a cup of coffee. And then again, I am not even sure that the customer I will be talking to even wants or needs their coffee like the coffee in the ad. They might want a carmel Jumbo Macchiato (sic) when I am putting up rates for a Vente non-fat latte. with no whip.
Loan shoppers need to find experienced, trustworthy brokers or lenders, that offer a full product offering (FHA, VA, Conventional, Jumbo, USDA, Etc) so that way they know the best loan options will be presented to Meet and Solve their needs at the best overall terms.
Brian Skaar