Okay...so what's going on?

[ewagner]

As some of you know I am an "Outside Loan Originator" for a private mortgage company.

I just got word that rates have worsened by 77 basis points .

That's the worst single jump I've seen since October. (when I started)


What just happened? What spurred this nationally? Anybody know?

[jean]

1. I am no finance whiz but

perhaps the Medicare revelation contributed:

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=102&topic_id=338736

[ewagner]

2. I haven't been watching

is the rest of the market doing something wierd?

Bond prices, interest rates? ect....

[MsUnderstood]

3. Time to refinance?

I don't watch the markets very closely but weren't most people disappointed that nothing happened with interest rates?

[On the Road]

4. I Think it Was the Fed's Wording Changes

When they kept interest rates the same, they no longer said they would stay low "for a considerable period."

Here's a followup article. Markets do not like uncertainty:

"WASHINGTON (Reuters) - The Federal Reserve (news - web sites)'s policy panel mulled at its Dec. 9 meeting getting rid of a pledge in its post-meeting statement to keep interest rates low for a "considerable period," meeting minutes out on Thursday said.

The minutes showed "a number" of members of the Federal Open Market Committee (news - web sites) felt deleting the phrase "for a considerable period" would enhance the panel's flexibility, though a majority disagreed. At the panel's most recent meeting on Wednesday, the phrase was replaced by the observation that the central bank "can be patient," puzzling some analysts.

[Nite Owl]

5. Greenspan's words of wisdom

on Wednesday after the FOMC meeting. Removed the language 'for a considerable period' for keeping rates low. Caused quite a stir on the bond pit.

[mastein]

6. Looks like rates are dropping again, you should see at least 25 point drop

in the next day or 2 and maybe more after that. Numbers out this morning don't indicate the Shrubbery's econ plan is working, so rates might stay low a while longer, regardless of Greenspan's spook.

[NoKingGeorge]

7. What are basis points. These are not rates charged are they?

30 yr fixed at ~5...
How do basis points figure into bond rates?
Thanks

[ewagner]

8. Its a way of rating risk/value

100 basis points = 1% in interest.

[Frodo]

9. Two comments.

1) 77 basis points is too high. There may be something going on at your company. You should not expect a remarkable difference in rate changes between the 30 yr mortgage and the 10 yr treasury (different rates, but they tend to move close together). Most investors consider a 30yr mortgage to be roughly a ten year investment (the pool tends to pay off over that period). Rates have been bouncy the last few days, but maybe a third of what you are describing (or less). Check to see that you are comparing apples to apples. Maybe you're looking at a different product?

2) Keep your skills sharp. You picked the wrong time to get into the mortgage business. Not saying you can't succeed, but there will be a lot fewer mortgage brokerages and fewer loan originators a year from now than there are today. My experience is that it's a commission business where you can make a killing one year and live off of your savings the next. This is likely to be the second kind of year for most lender. Don't panic... provide a superior level of service and work harder than the other guy and you can do just fine - there will ALWAYS be some mortgage business, but there are fewer customers out there today tan a year ago.

[ewagner]

10. Thanks Frodo

I can always depend on the denizens of the economic forum for good, rational conversation.........

You sound like you have some experience in this......

[rapier]

11. notes

Long term rates spiked Wednesday on the Federal Reserves statement that removed the words "considerable period of time" from their discussion of how long they might keep rates low. That phrase had been used for several months.

This obsession with the minutia in Greenspans words is of course totally insane. His every utterance is parsed and dissected for hidden meanings as if he were some soothsayer or high priest of a bygone age. Yet, he is a stinking economist.

Even the hint that the Fed might tighten short rates, the only ones they control directly, necessarily caused the panic on the long end. The ultra low short rates allow players to borrow short and lend long using tons of leverage in what is called the carry trade, to make easy money. This sort of thing always has risk. Well it used to. Now Al essentially has guraranteed short rates forever. His slight adjustment in phrasing with the announcement was a shock but it didn't really mean a thing. He can't raise rates, ever. You don't have to belive me on that but keep it in mind.


Congratulations on being at the very epicenter of the modern economy, the mortgage market. NOTHING is more important. THe endless inflation of residential real estate and the resultant liquidity generated is the wonder of the modern age. We don't need no stinking jobs as long as we can inflate housing and extract equity. That is THE definition of wealth now.

[ewagner]

12. As always

thanks for the opinions...

the more the merrier, or, more precisely, the more opinions the better the decision.