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The last thing I want to do in my newsletters is sound like a broken record but the reality is that mortgage rates are extremely low right now and worth paying attention to. Chances are you know this but what you might not know is how this translates to you. Specifically, can your situation be improved by lowering your rate and or changing your program. Right now I am refinancing clients who purchased or refi'd as early as 3-4 months ago so you might be surprised.

This month's newsletter will address the following:

• how to interpret the data on what moves long term mortgage rates
• why waiting is not be the smartest route & the top 10 reasons I've seen deals die
• how to determine if a refi even makes sense
   

Section 1 - Yesterday morning on Bloomberg they spoke about another refi boom where 30 year mortgage rates could fall to 4% and that the FEDS will try to push the 10 year Treasury Note down to 2.5%. Currently the 10 yr. is at 2.704%. What does this really mean and is it applicable to 30 yr. money? Many people think that 30 year fixed rates are directly tied to the 10 year Treasury Note. Although they mirror each other often, they are not tied to one another directly. I've seen one go up while the other down, and vice versa. In the end, it's about where an investor(s) will place their money - somewhere safe (bond) or more risky (stocks). If the projections on the economy don't look good, you'll see money flow to safer investments such as the 10 yr. note, or Mortgage Backed Securities (MBS), or T Bills. When this happens, rates t! ypically dip. So as you hear the news, pay attention to where the money is flowing specifically. Even the safer investments compete for the same dollar.

Much of the stimulus that has been provided by the Gov't over the last year hasn't been very effective so I am not so certain the Gov't will step in again and buy in bulk. Right now we are seeing a lot of foreign participation We are going through a long, methodical recovery - and simply put, the data coming out today doesn't look good. Whether rates drop more isn't the question I'd focus on - it's whether they make sense today and are you in a position to take advantage. Even if rates drop more, are you certain you will be eligible? As you'll see in Section 2 - there are many reasons why waiting isn't the best course of action. With rates at at a historical low, locking in can make a ton of sense.

Section 2 - Low rates are good news to someone like me but as individuals take advantage of the market, our pipelines will get pushed to the max. Funding a loan requires many steps and individuals and it's a difficult business model to scale. Meaning, a loan that would typically take 20-25 days to fund, might take 45 to 60 or more during busier times. I know some of the big banks on the retail side are taking 60-90 days. I've seen this happen several times in the last 10 years and the end result is that those who get in line first, win. Locking a loan for 40 days is much cheaper as well than having to lock for 55 or 60 days. So waiting can translate to more costs and longer delays. Investors also will re-price for the worse as well when they reach a point to where their volume is significant enough to where the resources to fund those loans are exhausted.

Below are the top 10 reasons I've seen some of my client's deals die because they waited. There are ways around some of these but not always - so perhaps this is motivation enough to give me a call sooner than later.

1. drop in home values - lack of good comps based on short sales & foreclosures
2. lack of AND declining income - especially for borrowers with commission or bonus
3. stricter guidelines from investors - mostly on credit scores, loan to values and income
4. inability to subordinate a 2nd loan (e.g. HELOC) - again, tied to drop in value and strict Loan To Value Guidelines but this is huge right now
5. losing one's job - no employment
6. drop in credit score based on a late or missed payment
7. lack of reserves (savings, checkings, etc.) - especially for purchases
8. lack of employment history - clients going from w2 to self-employed (1-2 yr. requirement)
9. unique properties with no real comps (e.g. acreage, rural)
10. pre-payment penalties on existing loans

Section 3 - Most of you out there have taken advantage of rates in the last few years so I often come across this group who thinks they are good to go. Sometimes they are, but often times they are not. What I am seeing a lot of right now are clients dropping down in rate by 1/2 point or more with very little to no real costs. I understand the frustration of having to pay closing costs again, so often times the solution is to structure the rate to where there are no costs at all. I suppose the only real cost is going through the process again but if you look at the big picture, rates are as low as they've ever been and we simply might never have this opportunity again. Apart from maximizing current day cash flow, the savings in long term interest can be significant, even if you are starting the clock over. So those who are sitting on the fence hoping to gain anoth! er .125% or .25% in rate in my opinion will lose out as the pipelines begin to fill up. If rates today make sense, my advice is to always lock in and put it in perspective. If you look at the history of rates and you'll see how low we really are. 20 years ago this month we were over 10% on a 30 year fixed rate. There is also logic behind getting into ARM money if one's strategy changes. a 30 yr. fixed does nobody any good if the timeline in that home is short-term. This week I locked several deals where the client was dropping only 1/2 a point in rate with very little to no costs so you never know.

Summary - I am always here to run #'s for you and help you understand how you can take advantage, and more importantly, give you an honest take on IF it even makes sense. Likewise, I can provide a roadmap on how to put you in position to take advantage. Much of my job lately is navigating around guidelines and finding ways to put deals together. I am not always successful but most of the time I am. Some of you may simply have no option but you won't know unless you give it a try. So give me a call - I' be happy to help you, or anyone you know in need!