Take it easy on us, folks.  Mortgage rates are tough to predict on a  quarterly basis let alone a weekly one.  Three times this year, I changed my long-term bias from floating, to locking, then back to floating.  Moreover, a long-term floating bias is still going to have times when it makes sense to “get while the getting’s good” and lock immediately.

My September 2009 mortgage rates outlook examines that very conundrum.  In short, I’m locked for all closings before October 7, 2009 but floating longer-term closings.  There is a substantial pricing difference between a 60-day rate lock and 30-day rate lock (usually as much as a .5% discount fee).  That means that it would cost $1500 more to lock a rate, for a $300,000 loan, for 60 days rather than it would for 30 days.  That’s why we try to “play the rate game” with y’all when we offer mortgage rates prognistications.

Rate lock management is about managing RISK, not trying to manage the rate. Simply put, we KNOW we can’t catch the absolute bottom of the market but we try to analyze how economic, political, and financial markets’ forces might affect those rates between the time you apply for a loan and when you close.  THAT is the mark of a true mortgage professional.

In August, you saw a difference between Tom Vanderwell’s bias and mine.  Tom advises that the inflationary pressures, not limited to but including the increase in money supply, higher taxes, and commodities-push inflation could propel mortgage rates higher.  I ultimately agree with Tom but believe that the probability of a prolonged (or double-dip) recession will keep conforming mortgage rates below 6% for the rest of the year and possibly into the first half of next year.

…and I can STILL be wrong. If I am, you’ll see me change my bias faster than Madonna changes lovers.  I’ll give you an example of where Tom’s current bias will save his customers money while my current bias will cost my customers money; when the federal mortgage rates subsidy expires.  We could wake up Tuesday to find out the Fed prematurely arrested that program.

Let me reiterate what I said at the beginning of my tenure on Mortgages Unzipped; professional mortgage originators WILL understand:

Look for the mortgage professional with the guts to answer the all important question:

What do you think mortgage rates are gonna do, in the next 30 days?

It could save you, literally… thousands of dollars to your closing costs.  What we write in public isn’t as important as the personal advice you receive when engaging us for your next mortgage transaction.  What we write in public demonstrates HOW we develop our lock management strategy.

If you think working with a real mortgage professional is expensive, wait until you see how much an amateur can cost you.

About the Author

I'm Brian Brady, a 19 year veteran of the industry. I started my career with Merrill Lynch, as a financial adviser, right after I graduated Villanova University. I worked in the downtown Philadelphia office. I moved out west in 1992 and have worked in residential real estate lending since 1994. I have originated loans, managed branches, was the National Sales Manager for a regional mortgage bank, and successfully turned around an ailing mortgage banking firm to profitability. I'm back to my first love; working with clients in a financial advisory capacity. I consider myself a Mortgage Planner, which is a new title for mortgage originators who have expertise in financial planning. This means that you'll get a whole lot more than rate and points from me. I'll show you how to properly structure your debt so as to increase your liquidity, safety and return on your investments. I'll even show you a tax trick or two to run by your CPA. Call me at my office at (858)- 777-9751

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