Mortgage Rate Forecast: February 2009

My Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Float if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on the qualification requirements from mortgage program to mortgage program. If you like the rate today, then the safe bet is to lock in. Even if rates improve, most likely they won't improve enough in the short term to make you cry about it. But if you are an ardent market bear and believe that we'll keep hearing more bad economic for a while, and you have the money to risk, then you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking in now and watching rates get a little better.

Prices of Mortgage Backed Securities (MBSs) prices spiked higher (yields and mortgage rates lower) at the opening bell this morning and continues the rally that started last yesterday afternoon. MBS prices rose on speculation the Fed will begin purchasing "toxic debts" from banks in yet another effort to cut long term interest rates. The plan is also expected to include fresh capital injections for the banks as well as a new homeowner aid program.

There is the potential for high volatililty in the markets today as Treasury Secretare Geithner unveils the revisions to the TARP program, as Bernanke testifies before Congress, and as the 3-Yearnote auction results could bring dramatic swings in MBS prices.

My Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on the qualification requirements from mortgage program to mortgage program. If you like the rate today, then the safe bet is to lock in. Even if rates improve, most likely they won't improve enough in the short term to make you cry about it. But if you are an ardent market bear and believe that we'll keep hearing more bad economic for a while, and you have the money to risk, then you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking in now and watching rates get a little better.

My Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on the qualification requirements from mortgage program to mortgage program. If you like the rate today, then the safe bet is to lock in. Even if rates improve, most likely they won't improve enough in the short term to make you cry about it. But if you are an ardent market bear and believe that we'll keep hearing more bad economic for a while, and you have the money to risk, then you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking in now and watching rates get a little better.

Prices of Mortgage Backed Securities (MBSs) are nearly unchanged this morning while Treasuries are down 13/32 as traders brace for a record $67 billion in new supply of Treasuries. The 30-Year FNMA 4.5% coupon is currently up 1/32. Meanwhile, stocks opened down on concerns the deepening recession will decimate consumer spending, but have revered course and are now up on the day's trading.

The financial rescue plan to be released by Treasury Secretary Geithner tomorrow is expected to include setting up ‘bad bank' to purchase toxic assets from banks. The government and the rescued banks will each bear some of the risk in the transaction to help ensure that the taxpayers don't overpay for the toxic debt. It's anticipated that the ‘bad bank' could purchase up to $500 billion in toxic assets.

The plan is also expected to include fresh capital injections for the banks as well as a new homeowner aid program.

Mortgage Backed Securities (MBSs) opened lower after the release of January employment report showed that another 598,000 jobs were lost, and the jobless rate rose to 7.6%.

Bond traders are now returning their focus to the $67 billion of new debt scheduled to be sold next week. Meanwhile, the Fed purchased $22.28 billion of MBS this past week, with little emphasis in 4.0% coupons. The bulk of their buying was in the 4.5% through 6.0% coupons with 30 year maturities.

FNMA has announced an expanded eligibility guideline for limited cash out refinances, allowing more borrowers to take advantage of today's lower rates.

My Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on the qualification requirements from mortgage program to mortgage program. If you like the rate today, then the safe bet is to lock in. Even if rates improve, most likely they won't improve enough in the short term to make you cry about it. But if you are an ardent market bear and believe that we'll keep hearing more bad economic for a while, and you have the money to risk, then you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking in now and watching rates get a little better.

Mortgage Backed Securities (MBSs) continued their volatile trading today. MBS prices are higher (rates lower) this morning as traders focus more on the acceleration of job losses than on the flood of new supply of bonds that is overwhelming demand.

In the last 5 days, the Fed purchased a little more than $22 billion in MBSs. That brings the total purchased to date to $91billion, and averages out to $4.5 billion per day.

MBS traders will focus on the employment numbers on Friday. They are looking for evidence the recession is deepening while at the same time digest the expected record amount of debt needed to finance the myriad of anticipated government spending. On Wednesday, we get the Challenger & ADP job reports. This will provide a glimpse at the employment and layoff situation. The jobless claims report comes out on Thursday, while the Employment report for January comes out on Friday.

My Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 30 days
• Float if my closing was taking place between 31 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on the qualification requirements from mortgage program to mortgage program. If you like the rate today, then the safe bet is to lock in. Even if rates improve, most likely they won't improve enough in the short term to make you cry about it. But if you are an ardent market bear and believe that we'll keep hearing more bad economic for a while, and you have the money to risk, then you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking in now and watching rates get a little better.

After the sell-off in Mortgage Backed Securities (MBS) yesterday, and after the release of the ISM data this morning which showed an improvement in services, construction and financial industries, mortgage pricing and yields have stabilized pretty much for the day.

I do not expect any changes in mortgage rates later this afternoon.