The Great Mortgage Coaster

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It is strange.

It is hard to follow.

It is hard to understand.

And sometimes it just doesn’t make sense.

pic_greatspace2.jpg

This TV show?  Well, yes.  But I was talking about the mortgage business.

Yes,  the Great Mortgage Coaster continues to add confusion to an already confusing time in the mortgage and real estate businesses.  The television (as hopefully depicted and proven in the picture above) is not to be blindly-trusted.  Your mother always told you that you can’t believe everything you hear, so, just because we pay $100 a month for cable and have 384+ channels, this does not mean that the information we receive is more accurate or that the information makes any more sense than when cable was $28 and there were 70 channels . . . or when there was no cable, a pair of bunny ears cost $5 and there were only 12 channels (again, the freaky orange-hair dude above with the big white face tells the story well). 

So why all of the confusion?  Why the roller coaster?  As much as mortgage rates have roller-coaster’d in the last month and mortgage lenders are roller-coastering out of business — emotionally borrowers and homeowners are up and down as well.  And just in case you don’t already know this . . . the media doesn’t do a lot to calm fears (speaking of fears — and I apologize for obsessing about the picture above, but why would let your kid get on a space machine with that big-eyed humpdy-dumpdy?!!?). 

Here are some points that should be cleared up . . .

People hear on the news the report that the Feds have lowered rates by 0.75% and assume that rates (mortgage rates) have gone down 0.75%.  Actually, the Feds “lowering rates” (lowering the Federal funding rate) historically causes mortgage rates to go up.  Check out my past posts on this topic. 

People hear on the news that the real estate market is bad.  To say that the real estate market is “bad” is to only look at it from the point of view of a seller.  Yes, if you are a seller who has an urgent need to get out of your home this may not be the best time to sell, but if you are a buyer in this market (especially a buyer without a house to sell) the market isn’t bad for you — it means that houses are on SALE!  Even if you ARE a seller . . . if you sold your current house for $10,000 less than you were hoping, but were able to buy your next house for $20,000 less than you were expecting, wouldn’t that still be a great situation!?!!?

People hear that mortgage brokers are to blame.  Bad mortgage brokers putting people in bad loans they didn’t understand.  While this may be true in some cases, the blame should be on the lenders who had hoped to make huge profits off of loans with big fees and steep interest rates — and on the consumers who decided to take on risky mortgage loans now to purchase a house now in lieu of taking some time to fix their credit, save some downpayment money and qualify for a conventional (not-so-risky) mortgage.  

And all these factors added to the confusing mix of economic news released every few days and you have a dangerous ride of ups and downs, good news and bad news . . . and as for the future of mortgage rates??  Warning:  the sudden movements of this market may cause nausea and headache, back-ache and neck pain.  People who have a heart condition or who are pregnant should consult a professional before participating. 

Jeffrey Pinkerton is a Mortgage Consultant and President of Hillside Lending, LLC and writer for “the Mortgage Blog.”  Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about available programs and interest rates, please visit www.hillsidelending.com.

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