Tips for Today's Volatile Market

You may be getting a little tired of all the news surrounding the mortgage market and you may be confused as to what it means to you. You are not alone! Many of us are waiting to see what kind of opportunity there will be when the new conforming loan limits are announced and when we learn more, be assured we will keep you updated. It is important you understand that it may take months before we can take advantage of the new limits due to the complexities that are being navigated at Fannie Mae, Freddie Mac and with the lenders... In the meantime, feel free to call or email us for an analysis of your needs.

Following are a couple of facts and tips for navigating today's market:

1. On the early morning of January 22, 2008, the 30 year fixed rate, owner occupied, full doc, conforming mortgage reached a bottom of 5.25% at 0 points. Only a handful of customers were able to realize that rate because there were four mid-day price changes/increases and the final rate of the day was as high as 5.625%. That was an extremely volatile day and volatility is currently the rule rather than the exception. Advice: If you see a rate that you can live with, take it! If rates improve to a point where it is compelling to refinance, great! As a successful stock broker once said - "If you treat the market like a casino, it will treat you like a gambler."

2. What the media is not telling you is that while the Fed has lowered the Fed Funds Rate significantly, rates on the conforming 30 year fixed rate mortgage reached 6.5% the day before yesterday - from 5.25% to 6.5% in under a month! How can that be? The reasons for this increase are many (see November 2007 Newsletter for deeper explanation) but as we have been telling our clients for the last month, "fixed rate mortgages may rise when the Fed Cuts the Fed Funds Rate due to inflation fears that are created in the mortgage bond market." The good news is that the Fed rate cuts are having a positive impact on the 3, 5, 7 and 10 year adjustable rate mortgages (as described in the above link) as well as your existing lines of credit. The bad news is that obtaining new lines of credit has become much more difficult as second mortgage lenders struggle to find buyers of their mortgages and as more and more lenders have closed their doors.

3. When shopping for a mortgage or talking to your existing lender, it is important that you get your quote in writing up-front and that all third party costs (title, escrow, appraisal etc) are disclosed. Many lenders like to say "we will only charge you $x." What they are not saying is what the third party costs will be. Additionally, with today's volatile market, it is important you understand that rates quoted to you in the morning may not be available in the afternoon - keep this in mind when you are shopping.

Again, if we may be of service in any way, please feel free to contact us at your convenience.

Sincerely,

Your CWC Financial Loan Team
888-711-5454 Toll Free / info@cwcfin.com / 415-454-1130 Local