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Ben Bernanke and the Federal Reserve Meeting 
The much anticipated Federal Reserve Open Market Committee (FOMC) meeting starts today and ends tomorrow. You have probably heard the talking heads discussing "Tapering" of QE3. QE3, Quantitative Easing, is the FOMC policy of purchasing US Treasuries and Mortgage Backed Securities (MBS) to the tune of $85 Billion per month. It was created to stimulate the economy by droping rates to make borrowing easier. FOMC Chairman Ben Bernanke has pedged to keep the policy in place until 2014, or until Unemployment drops to 6.5%, or Inflation rises above 2.0%. Since these benchmarks have not been met, why all the talk of "Tapering"?

I believe that the FOMC desperatly wants to get out of QE3 since they never should have gotten into it in the first place. The trick is how to do it without causing further damage. Since the FOMC members started discussing "Tapering (the reduction of FOMC monthly purchases), 30 year fixed mortgage rates have risen from 3.5% (with 0.00 points) to 4.5% and the housing market has slowed. This may actuallly be the perfect time to "Taper". Why?

Because rates have risen based solely on the talk, not the action, so the action could turn out to be a non-event in the mortgage market. Since Housing has been on of the few bright spots in the economy, the FOMC could actually start to "Taper" and give Housing a boost by cutting back on the purchases of US Treasuries, but not MBS. This should cause the mortgage market to rally and cause mortgage rates to drop. One can only hope. Stay tuned.

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Summers is Over. Mortgage Rates Improve. 
Last evening, in a surprise, former U.S. Treasury Secretary Larry Summers announced that he was withdrawing his name from consideration as the next Fed Chairman. This caused the rally in the mortgage market this morning. Mortgage Bond Investors see other candidates in the running to fill Ben Bernanke's shoes as far more likely to take a gradual approach to removing economic stimulus and increasing short-term interest rates. Janet Yellen appears to be the front-runner and will be far more accomodative than Summers would have been comfortable with. The longer the Fed waits to raise their benchmark interest rate -- the longer mortgage interest rates remain at thier current levels. This is obviously great news for the possibility of stable to lower mortgage rates.

SHOULD I LOCK OR FLOAT?
A 30 year fixed mortgage between 4.50% and 4.875% is still a fabulous rate. The days of 30 year fixed rates at 3.50% may be a thing of the past. Unless you are incredibly comfortable with interest rate risk, lock your rate. Your degree of happiness at saving an 1/8 of a percent will be far outweighed by your degree of unhappiness if you lose that 1/8 of a percent!



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Mortgage Market Meltdown Melts Morgan Stanley Again 
The Mortgage Market Meltdown. Such an incendiary phrase, no pun intended. People immediately think the worst, and possibly rightfully so. The truth of the matter is that the problems in the mortgage market have come back to bite Morgan Stanley again.

Morgan released a statement announcing they have a 4th quarter loss of $3.6 billion, due mostly to a $9.4 billion write-down form their investments in mortge backed securities. Now that is a lot of money. They addressed their problem by selling the Chinese Government a 9.9% share of the company for $5 billion. The new CEO, John Mack, blamed the loss on a "small team" of employees that have been fired. Always easy to blame someone that is no longer around.

I find the size of the amounts amazing. Also, Morgan's stock price rose $2 on the news of the cash infusion from China. Interesting as well. The main impact of this news on Main Street is the sames as it has been. Certain high risk mortgage loans have ben drastically changed or eliminated.

The good news is also a recurring theme. There are still many, many programs available and rates are great.

Have a wonderful day.

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Mortgage Industry Changes 
The mortgage industry has been phenomenally fluid for the past 5 months. Lenders are still closing their doors, while others are opening new Regional Offices. Loan programs are changing daily, with guidelines typically tightening. Some programs just go away.

We all remember the "Liquidity Crisis" that happened this summer, and some people believe we still have the same problem. My opinion is that there is plenty of liquidity, read money, on Wall Street available to purchase mortgage loans. I think the institutions that would normally buy mortgage backed securities still have the cash, they just don't want to buy them.

This is especially true for Jumbo Loans (loan amounts above $417,000) at the present time. This summer, jumbo rates jumped from 6.75% to 8.00%. Then as the markets calmed, they dropped to 7.00%. Now they have climbed back to roughly 7.5%

All of this information leads me to my point, which is, don't wait and take the risk that the mortgage program which best meets your needs is no longer available or the rate has worsened. If you are looking to make a real estate purchase or refinance a mortgage, NOW is the time.

Have a great day!

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Was the Fed's Cut Enough? 
Yesterday the Federal Reserve Open Market Committee (FOMC) decided that the economy needed a little boost and reduced the Fed Funds rate by 0.25%. This is the rate banks charge each other for overnight loans. The 1/4 point was widely anticipated, but the FOMC didn't deliver the 0.50% the markets wanted on the Fed Discount Rate.

The Discount Rate is the rate the Fed charges banks to borrow from the Fed. A 1/2 point decrease in the Discount Rate would have a been a more aggressive move, providing liquidity to the mortgage market and signaling that the Fed wanted to be pro-active.

I have heard some rumors that we may see something very unique from the Fed in the next few days. Stay tuned.

Have a great day.

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