Mortgage Blog

As much as I don’t like saying this, it is a blood bath out there. The stock market looses 2,000 points this week while mortgage back securities have lost about 1.7 bps which equates to .25% higher in mortgage rates! This even comes AFTER the Feds joined European banks to lower short-term rates on a global basis by a ½ pt. The intent of the Feds in this unprecedented move was to combat the fear of inflationary pressures in the US because typically when the Feds lower short-term rates it is an inflationary and Bonds hate inflationary pressures and they thought doing it with European Banks would eliminate that concern. The other reason was to make it cheaper for institutions to borrow money for their daily credit needs AND for the Global Economies to create some liquidity. The problem we are seeing today is that because banks are not lending to one another, it doesn’t really matter how cheap in may be for an institution to borrower money if they can get any money from a bank because that bank isn’t able to borrow money themselves. This vicious cycle continues and is growing like a weed!!!

As far as our mortgage bonds are concerned, here is my personal theory on what is happening. Under normal conditions and we are by far out of anything being “normal” right now, typically when the stock market crashes investors will put money into bonds as a safe haven. But because foreign investors, who probably make up at least 40% of our economy (some people say it is upwards close to 60%) don’t believe in our credit markets and have publically said that the 700 Billion relief money isn’t enough to make a difference, are pulling out completely in our market. They (foreign investors) need cash to survive because they haven’t been able to borrower money from their banks for about 1 ½ months now and are just selling everything to be as liquid as possible just to survive. This is why I think our bond market has also tanked along with our stock market because there is no other “traceable” indication as to where the money is going!

So, were do we go from here? It is a day-to-day thing quite frankly. On Monday, of this week, I was able to take advantage of mortgage improvements and lock in all my customers – thank goodness. Today, if you have a short term lock situation, you should just lock what you can. The damage has been done and it could get worse before it gets better for those clients who are closing soon.

There are only a few things we can control in our world and I am so sick and tired of all the bad news/trends that I have come to the conclusion we can only control those things we do on a daily basis. So, get out there and produce! Develop stronger relationships in every facet of your business. Get back to the very basics of our business and do what our mentors did a long time ago – become the ambassador of our community in Real Estate!

Randy Reed