Friday, March 20, 2009

Rates and the Markets Drop Amid Concerns over AIG fiasco and looming deficit bulge....

It must have been one heck of a finish today on Wall Street and on Capitol Hill. I would like to be downtown or along the K and M Sts, N.W. corridor sharing a pint with some of the folks who are in the thick of it all.

Just a bit of a recap:

This week, the Fed meeting announced that Federal funding rates would remain constant between 0.00 - 0.25 percent -- unchanged since the last Fed meeting while stocks closed down to finish the week in the doldrums. You'd think this would be good news, but with any law of supply and demand, there is an upside and a downside that has caused a chain reaction of multitudinous proportions. The markets had a roller coaster ride once again this week; heavily relying upon confidence-shattering reports from the Hill to corporate America to Kalamazoo and other parts unknown.

Some key factors influencing the market include anger and rage over the AIG compensation packages to executives while further reports in the New York Times and other major national dailies conclude the nation's deficit budget will reach up to $2.3 trillion more between 2010 and 2019. Pretty staggering. But wait, don't dwell on the negative....

Hang on to your hats folks because there is a silver lining in every cloud.

According to Patricia Gabriel (pgabriel@prospectmtg.com), senior loan officer with Prospect Mortgage (http://www.prospectmtg.com/), the unchanged Federal Fund rate means great news for home buyers -- and even sellers get a piece of the action. Here are some key points shared by Patty:

LMC: What happened at the Fed meeting the other day? Can you give some detail?

Patty: "WELL, THE FED DELIVERED A DOUBLE WHAMMY. They said they'd buy an additional $750 billion on Mortgage Backed Securities and do it for the rest of the year. That more than doubles their original commitment. But they didn't leave it there. They also decided to commit to purchasing $300 billion in longer term Treasuries over the next 6 months. This double whammy gave the 10 year treasury the largest 1 day decline in yield in over 50 years. Mortgage Backed Securities dropped significantly in yield as well. This is GREAT NEWS for mortgage rates. "

LMC: We saw a trending downward in January, Patty. But as you have noted in previous discussions, lower rates only lasted for 3 days. What conclusions should we draw from this recent drop in rates to 4.75% for a 30-fixed with a credit score of 740 and higher?

Patty: "Just because they'll be buying through the end of the year doesn't mean rates will continue to drop. We have great rates now. They are better than they've been in decades. Take advantage while they're low. Don't get greedy waiting for them to drop another 1/8%."

LMC: Any other advice for buyers and sellers?

Patty: "Yes. If you are looking to buy or sell, make sure you are timing your future closings. Ask your real estate agent and your closing attorney as well as your lender to make sure they are watching out for this in order to lock-in and take advantage of this rate. This also applies to those looking to refinance. Focus on lenders you know and trust and work with dates that are realistic. "

No comments: