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Long Beach Mortgage Rates Report - Thursday - February 19, 2009

By Brian Brady

At the beginning of 2009, I called borrowers to action, suggesting that it was imperative to jump on a low mortgage rate.  The Fed announced that they would inject $500 billion, to buy mortgage-backed securities, to "stabilize" the mortgage market.  I was giddy with but adamant that the low mortgage rates wouldn't be around forever, regardless of the Fed's action.    A young lady called me on the carpet for trying to incite a riot.

Maybe I was "too forceful" in my call to action.  Somewhat pensive, I clicked through to the Zillow Mortgage Marketplace Rates Chart, to see how wrong I was.  (Go to the chart, select 30-year fixed, 680 or better credit score, and 20% down payment, charted over three months).

Mea culpa.

I didn't scream loudly enough.  I should have advised that young lady that when I speak, she should be taking notes.  When I advised that the sub-5% frenzy would be short-lived, average mortgage rates* were at 5.1%.  Average mortgage rates* dropped to 4.75% (which surprises me because I locked a boatload of borrowers at 4.5%) and stayed below 5% for...

all of 9 days.

Around the third week in January, average mortgage rates* popped over 5% and have stayed above that level since then.   Today, Zillow Mortgage Marketplace quotes average mortgage rates* at the 5.1% level.

Mea Culpa

I've been telling you to hold out for 4.5%, since then, in hopes that the Fed's $500 billion support plan would work.  Well, the Fed's blown 20% of its bankroll, and they still can't keep average mortgage rates* below 5%.  While some of us are able to structure purchase money mortgages below 5%**  the Fed is losing the war.

The Obama Mortgage Plan isn't going to help new home buyers.  In fact, it might just hurt you a lot.  The cornerstone of the plan is to force lenders to compromise loan balances and original mortgage terms.  While that sounds all well and good in theory, in practice it sends a message to lenders;

The terms of the loans you write are rock-solid...unless they aren't, then the gubmint's gonna intervene.

Who suffers?  New homeowners; that's right...YOU.  New homeowners suffer because it means you've got a "weasel-out clause" if things go bad.  Lenders, will price that "weasel-out clause" into the NEW loans in the form of higher rates.

The government, in its efforts to fight the market, may have hit a tipping point.  This intervention will cause lenders to make mortgages harder and more expensive to get. Maybe not tomorrow, maybe not next month but sooner rather than later.  Higher down payments, higher rates, and higher credit score requirements are on the horizon.

What's that mean to you, the Long Beach home buyer?  If you're waiting to see if home prices come down that "last little bit", you might pay a whole lot more for your mortgage loan.

Mea Maxima Culpa

I've been absent and I know from the e-mails and calls that you've missed my advice.  I'm back.

* The term "average mortgage rates" are charted by Zillow Mortgage MarketPlace

** Why do I structure loans with terms superior to "average" ?  I ain't average.  I shop over 100 lenders to secure you the best terms.

Brian Brady is Managing Director of World Wide Credit Corporation, a San Diego-based mortgage banking and brokerage firm. Google calls him America's #1 Mortgage Broker; you can call him at (858)-777-9751