American Mortgage Blog

Sometimes borrowers ask, “Why don’t your rates match the ones I see in the newspaper?” It is easy to quote rates out there, but every borrower should remember that their loan is different, and that often the advertised, or publicized, rates are slightly higher due to a number of factors.

The Federal Open Market Committee meets several times during the year. Although they don’t set mortgage rates (supply and demand do that, although the Fed does set overnight rates that banks charge each other), the language that the Federal Reserve Board Governors use in describing their actions can often move rates that are used in the residential mortgage industry.

Heading into the last meeting, analysts predicted an 80% chance the Federal Reserve would intervene in the bond market to lower long-term interest rates, according to a Reuters’ poll, after a report showed the U.S. jobs crisis deepened in August.

Mortgage rates continue to be low – hovering around 4% for a 30-yr fixed rate mortgage – and borrowers have a renewed interest in seeing if they can refinance. Borrowers across the nation are wondering if it is the right time to buy a home or refinance. Before you apply, be sure you do your homework to ensure it makes sense financially, and to see if you’re actually able to do it. In many areas home prices have fallen and mortgage underwriting has become a lot more stringent, making it especially difficult to get approved for a mortgage.

The press is filled with news on foreclosures, borrowers turning in their keys, and bad credit decisions in the past that have made loans “go bad.” Our agents often see borrowers who ask us about this topic. But what does “go bad” actually mean for a home loan and a borrower?

Loans that go into default and/or foreclosure do so because of reasons completely apart from any feature of the actual mortgage loan. That is to say, there is nothing within the terms of the loan (or note) that cause it to be defaulted on. So, what causes a loan to go into default? And by the way, a loan is technically in default after even one payment is more than 30 days past due not just when foreclosure action is initiated.

Check with your agent - mortgage rates are the lowest they’ve been all year, despite all of the uncertainty surrounding the problems our Congress had with the budget, problems several European countries are having with their debt, and the recent downgrade of the U.S. debt by one of the rating agencies. Normally rates go higher when “the market” is nervous, but in this case the economic news points to U.S. economy that is slow enough that it won’t support higher rates. But now what? Should originators be pushing borrowers to wait until they lock?

Late last week the June employment numbers were released by U.S. Bureau of Labor Statistics. "Nonfarm payroll employment was essentially unchanged in June (+18,000), and the unemployment rate was little changed at 9.2%, the U.S. Bureau of Labor Statistics reported today. Employment in most major private-sector industries changed little over the month. Government employment continued to trend down." What does this mean for mortgage rates?

It is tough to find positive economic news in the latest jobs report, but for interest rates it is a different story. Following payroll gains averaging 215,000 per month from February through April, employment has been essentially flat for the past 2 months. At least we're still adding jobs though, not losing them, albeit at a very slow pace.  This offers more confirmation that our economic recovery is facing strong headwinds as we cross into the 2nd half of the year.