The Fed Buys Treasuries to Ripen Mortgage Back Securities...Mortgage Rates Better

Lets all get on the same page first. Why does U.S. mortgage interest rates benefit from the Fed buying up Treasuries?
Lets think first before I move on, the common law of supply and demand. So the Federal Reserve plans to buy up to $300 billion of Treasuries and increase purchases of mortgage-backed bonds. This will mean there is less of a supply...supply goes down, and demand goes up. So, the Fed is trying to lower rates by reducing the supply of outstanding mortgage bonds, boosting their price (when demand goes up, the merchant can increase their selling price) and lowering yields. That would allow banks to reduce the rates on new mortgages and still sell mortgage securities at a profit. Well, if the bank is getting a better "bang for their buck", they don't have to charge such a high rate when loaning us money to make their profit.
Why is everyone running around "willy nilly" refinancing if the rates are going to get better? The American government, American leaders, and American economists bleed the same color blood that we do, and if they all knew the answer beyond a shadow of a doubt, we wouldn't be where we are at right now.

Remember, the ultimate goal of all this is that rates get low enough for home buyers to come out of the wood work and buy homes. Bloomberg.com's Brian Louis reported Mike Larson, a real estate analyst of saying,

"Lower mortgage rates by themselves also may not be enough to spark demand for home purchases. For consumers who’ve lost their jobs or are worried about losing their jobs, low mortgage rates won’t be enough to prompt them to commit to buying a house, Larson said."

My advice to the families considering refinancing is, if it makes since for you to refinance with today's interest rates, and you can see a benefit for you and your family's financial future, "pull the trigger".
BEST OF LUCK IN YOUR REFINANCING!

Article From Star Telegram...Worry Free Mortgage and Linda Davidson

Andrea Jares of the Star Telegram wrote about our Worry Free Mortgage. Linda Davidson, one of our "Celebs" at Service First Mortgage was selected to be interviewed and reflect on this new loan program, and here is how Andrea Jares covered it...

Linda Davidson doesn’t want job worries to keep you from buying a house.

Davidson, a mortgage banker with Garland-based Service First Mortgage Corp., is among a group of local lenders and home builders offering a so-called "worry-free mortgage" that will pay your note for six months if you lose your job within two years.

For $525, a buyer can add this protection to a mortgage for coverage of up to $1,800 a month. It also comes with budget help and financial counseling and will spot you if a big, unexpected bill comes up.

With the "worry-free" program and the $8,000 home-buyer tax refund from the government, her business has really taken off, Davidson said.

"We are slammed," she said.

Craig Brown of Addison is among those signing up to be worry-free.

Although he isn’t particularly worried about losing his job, Brown said he believes that anything can happen. So now that he’s shopping for his first house, he’s taking extra precaution by signing up for the new option.

"I’m at the point where I’d have to be convinced out of it," he said.

Easing consumer worries

The worry-free mortgage is among the latest programs aimed at easing consumer concerns enough to get them to open their pocketbooks. Hyundai Motor America is offering a similar deal: If you buy a new Hyundai and lose your job within a year, you can give the car back.

Davidson said she received a call a couple of years ago from the Rainy Day Foundation, which administers the worry-free mortgage program. But with unemployment at less than 4 percent, she opted not to use it.

But about a month ago, after seeing a commercial advertising the Hyundai deal, she decided to give the Rainy Day Foundation a call back. The foundation is a nonprofit that offers educational services and mortgage protection for home buyers, and works with FHA, VA and USDA loans.

Davidson said the worry-free protection could be appealing to buyers hoping to protect themselves or to a seller, who might want to add it to make a home stand out to prospective buyers.

"I think this will be big for the next two to three years," she said.

She’s been offering the mortgage now for about three weeks through www.myworryfreemortgage.com.

Several options

A handful of other mortgage lenders in North Texas are offering these mortgages, with home builders such as Lennar, Meritage, HistoryMaker, Morrison Homes and Gehan adding the program to their options, said Rick Del Sontro, chief executive of the Rainy Day Foundation.

The Washington, D.C.-based foundation has been around for six years. But it was when the nonprofit launched the HELP (Homeowner Education and Loan Protection) program 14 months ago, that interest soared.

The organization is handling 2,000 mortgages a month, Del Sontro said.

But even though the job-loss protection option may catch people’s attention, it is only part of what the foundation does.

"Only a third of FHA defaults are because of job loss," Del Sontro said.

To help with the other two-thirds, the foundation offers help for a large, unexpected one-time expense, such as a car repair or a high out-of-pocket insurance deductable. In those cases, a homeowner can apply to have the bill paid by the foundation.

Last year, the foundation gave away $4 million in these grants; the foundation is on track to give away twice that amount this year, Del Sontro said.

Foundation representatives also call periodically to help with finances or budgeting.

What, me worry?

Brown, who works in pro- duct development and marketing of textile products, is looking for a home in Carrollton, Plano or Frisco under $125,000.

He thinks the peace of mind that comes from the worry-free mortgage is worth the extra price.

While he’s making lots of decisions about what his next house will be like, one thing he won’t have to worry about is how to pay the mortgage if something should happen to his job.

"You never know," Brown said. "People you’d never think would be out of a job are asking me if my company is hiring."

Give me a call if you are interested in adding this program in the purchase of your next home.
Brad Lynch
Sr. Loan Officer @ Service First Mortgage
bl@fmillc.com
469-450-2723

Rates Getting Lower and Tomorrows Employment Reports Could Help More

Rates were great today, 3/5/2009, but I need interest rates for a 30 year fixed loan to get below 4.875% and 4.5% for a 15 year fixed. The one thing that could help that scenario to happen is that there be a increase in the unemployement rate in tomorrow morning's report, a drop in payrolls, and little or no incresase in earnings.
How can I track tomorrows outcome in such reports? The forecasts for unemployment are .3% increase to 7.9%. So if you Google "todays unemployment report" after say 8:30am Eastern Time and compare the findings to the above, you will at least have hope that lenders open with better rates...they don't always follow as we plan or hope.