Palm Beach Real Estate and Loans

Mortgage Rates Report:  Nationally syndicated from Long Beach to Palm Beach

The Fed cut .75% in an emergency move this morning.  From Bloomberg:

The Federal Reserve lowered its benchmark interest rate in an emergency move for the first time since 2001 after tumbling global stock markets and a jump in U.S. unemployment threatened to push the economy into recession.

The central bank lowered the benchmark overnight lending rate to 3.5 percent from 4.25 percent, the Federal Open Market Committee said in a statement in Washington. Policy makers weren't scheduled to gather on rates until Jan. 29-30.

``While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate,'' the Fed said in a statement in Washington. The FOMC took the action ``in view of a weakening of the economic outlook and increasing downside risks to growth.''

Policy makers set aside concerns about inflation to lower borrowing costs for the fourth time since September after unemployment hit a two-year high and U.S. stocks slumped. Chairman Ben S. Bernanke shifted the Fed's stance to a more- aggressive approach in remarks this month citing a need for ``decisive and timely'' action.

We think this will be positive for mortgage bonds and rates.  We currently reccommend that mortgage applicants lock ONLY purchase loans that are closing in 15 days or less and that all others float the mortgage rate.  No change.

Mortgage Rates Report:  Nationally syndicated from Long Beach to Palm Beach

Fed Chairman Bernanke testified before Congress today noting his "increased concerns for slow economic growth".   While he was careful to say that The Fed doesn't forecast negative growth (READ: recession), he did believe that the risks of a recession have increased.

I think the Fed Chairman is either (a) clueless or (b) practicing the art of circumspect rhetoric.  I'm inclined to believe the latter.  I think Bernanke is delivering bad news.  He offered support for radical fiscal policy (permanent tax cuts) to Congress.  When a Fed Chairman signals to Congress that the ball is in their court, to stave off a recession, he believes that monetary policy (rate cuts) have become useless.

Bernanke is saying that he has done all that he can do to stop a recession.I think a 1/2 of 1% rate cut is built into the pricing; now the Wall Street traders believe that more cuts are on their way (after January 30).  I'm splitting my recommendation to the following:

1- Purchases closing in less than 15 days:  Lock the mortgage rate immediately

2- Purchases closing in 15-45 days:  Cautiously float the mortgage rate

3- Refinance applications- lock at application

Current 30 Year fixed rate mortgage: 5.5% rate, 5.79% apr

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Mortgage rates refuse to go up, regardless of my advice to lock all loans, purchase or refinance,  at application.  Somehow, I didn't drink the Kool-Aid the Wall Street traders are drinking.  We locked one 30 year fixed rate loan at 5.375% rate today (5.59% APR) for a $400,000 purchase money mortgage.

If you listened to my advice last week, I probably cost you an eight of a percent on rate, meaning that if you held out until today, your rate would be .125% less than last week.  It is important to note that I almost am always biased towards locking rates.  Inflation is still rearing its ugly head and the bogeyman IS around each corner.

I believe that the excitement of a potential half percent rate cut, by the Fed, on January 30, is already built into the market.  This means that I believe that there is MUCH more risk of mortgage rates popping up .375%, quickly, than I believe there is reward to holding out for that last eight of one percent.  The risk just doesn't seem worth the reward, in this environment.

Tomorrow, there are two big numbers coming out, the Core CPI (prices excluding energy and food), sometimes referred to as Core Inflation, and the Industrial Production Capacity Utilization Rate, which measures the level of production in this country.  Both are expected to show that we are contracting, or in a recession.  However, if the Core CPI is higher than expected, it could throw mortgage bonds into a free fall which leads to higher mortgage rates.

Too much risk for my liking.  Lock all loans: purchase and refinances at application.

Mortgage rates have declined some 1/2 of 1% in the past two weeks.  We advised you to float your rate, back on December 27, 2007 but I warned you that the decline may be short-lived.

Lock all loans at application.  If you have a loan in processing, and are floating the mortgage rate, lock your rate.  The  worldwide liquidity injection has had its desired effect.  The anticipated Fed rate cut, on January 30, 2008, is already built into the pricing.  there is more risk to mortgage rates rising than there is reward for holding out for a lower rate.

Lock your mortgage rate.  I'll be in New York City, until Friday.  I can be reached at (858)-699-4590 after 2PM PST today.  Debra can be reached at (858)-228-0617.