Unzipped Mortgage Rates Report: September 19, 2008

Wednesday, I warned that MBS traders felt a “stratified debt offering” could be issued, creating “classes” of government debt:

Mortgage bond traders are starting to think that the US Treasury is going to have to start offering classes of debt, to deal with the crisis.  Stratification of debt, like the old Resolution Trust Corporation bonds, will most likely take us back to where mortgage-backed securities trade at a wide premium to Treasury debt.  This isn’t happening but mortgage bond traders are speculating that it might. If it does, then the demand for a 30 year mortgage, loaned to you, the American borrower, is not as high as a direct obligation of the US government.

I felt that might be perceived as a reason for lenders to raise mortgage rates. The Treasury Department announced this very plan, yesterday, and I was correct in my speculation but DEAD WRONG in the markets’ reaction.  The mortgage bonds market LOVED the plan, which suggested lower rates today. Then…

..they read the small print at the bottom.  As I write this the live quotes section of Zillow is showing quotes over 6%  which is higher than Wednesday’s offering.  While the mortgage bond traders loved this plan yesterday afternoon (which was counterintuitive) they hate it this morning and that means higher mortgage rates.

My mortgage rates reports aren’t some sort of psychic show.  In this case, had your loan adviser been doing his homework, he would have seen this coming. The architects of the last federal bailout suggested this very plan in Wednesday’s Wall Street Journal.

So rates will most likely be offered at 6.0% or above today.  I don’t know whether or not you can afford to wait for lower rates, so I’m holding onto the lock all loans at application recommendation.  If mortgage rates get pushed up above the 6.125% level today, it’s probably a gross overreaction and I’ll suggest you wait to lock a lower mortgage rate.

PS: I’ll take heat for this here but it’s important to say this to you, a willing borrower.  I know that you want the  information I discuss in these mortgage rates reports.  I will not treat you , the borrower, as some sort of unsophisticated yokel.  I know you hate that.  Rather, I’ll educate you, help you, and explain to you how information gathering and analysis can result in a superior execution of your mortgage rate.

There is a difference.  As my friend Russell Shaw says, “I”m not bragging, I’m applying for a job“.  I want to be your loan adviser.  As you can see, I’ll work my ass off to earn that privilege.