Holy Heat Miser, Batman…it’s a meltdown!

Had you taken my advice this weekend, and immediately locked your mortgage
rate yesterday, you would have lost out.  The par rate for a 30-year fixed rate
conforming
loan was 5.625% yesterday- today that par rate is 5.5%.  My advice would
have cost you .125% in rate.  Alas, my mortgage
rates report is not about “catching the bottom” as much as it is about
“avoiding the top”; it’s about mitigating market risk.  From my explanation
on the Zillow Mortgage Blog:

My approach is with an aversion to risk so I’m biased towards locking
rather than floating a rate.  What I do try to find is overreactions in the MBS
market so that you won’t lock your mortgage rate at the top nor float your
mortgage rate when higher rates are imminent.  My customers RARELY catch the
“bottom” but they miss out on many “tops” when locking their
rate.

I look for irrational exuberance or irrational fear.  If I think markets are
being too optimistic, like this week, I advise customers to lock.  The whipsaw
reaction to irrational exuberance is irrational fear; a steep rise in mortgage
rates.  THAT is what I want to avoid.

Long-term, I feel that the government
bailouts of financial institutions will result in a hefty price tag to the
taxpayer, which is inflationary in nature.  I look for markets to start reacting
to this sooner rather than later.

If you have a definitive closing date for the purchase of your home, lock-in
your mortgage rate today.  If you’re shopping for a new home. locking your
mortgage rate at contract acceptance is advisable.  If you are one of the
fortunate few with equity, good income, and good credit, and want to refinance
your home loan, today looks better than next year.  I’d love to discuss
your options with you.

PS:  In my last report, a Florida mortgage broker suggested that my risk
mitigation strategy is inferior to a “lock and pray “approach:

Bottomline, none of us knows what is going to happen, so the smartest
course is to lock with a lender that will renegotiate your rate when we
experience one of these rapid drops that occur with little advance
notice.

I’ll agree that prescience is a virtue best reserved for the Divine.  My
faith in the predictability of mortgage lenders’ actions has been shaken over
the last year.  I’ve seen lenders
flip programs to make an extra buck and back off approvals.  While
this gentleman’s strategy has proved superior to mine, this
month, I still rely on my charts and research to execute low rates for
my customers.

Long Beach mortgage rates report is offered courtesy of Brian Brady.