February 11, 2010

Mortgage Market Conditions

Mortgage bonds lost some steam and have put a bit of a damper on the previous rally.  Looking at the bonds you can see  that in the last 3 days, bonds have fallen in price. And, as we all know by now, falling bond prices are adverse to mortgage rates…remember, opposite relationship of bond prices and interest rates.  Although stocks have remained volatile and have not regained much of recent losses, bonds have not done their usual rally in the wake of stagnant stocks.  This may be attributed to the chitter chatter coming from the Fed.  Although Chairman Ben Bernanke has not laid down his hand regarding credit tightening ( raising rates ), other Fed members have expressed concerns that there may be a need to raise rates sooner than later.  We need to keep in mind that one of the Feds primary objectives is to control inflation, and raising interest rates is the primary method of controlling inflation.

Although we still have yet to see any real signs of inflationary concerns, their have been a few indicators that the
economy may be beginning to breath a few signs of life.  Next week the Consumer and Producer Price Indexes will be released which are gauges of inflation.  In any event, it does appear that the Feds are beginning to
get their ducks in a row for an exit strategy from from the current accommodative and low rate policies.

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Feds Seeking Measures to Control How Loan Originators are Compensated…

Speaking of the Fed, their latest target is now being directed at Loan Originators and are looking at proposals to limit compensation and/or control how Loan Originators are paid.  Hearing from Paul Mondor, Attorney for the Federal Reserve Board, Division of Consumer and Community Affairs – one would be surprised and find the news
down right frightening as well as eye opening.  It is becoming quite apparent that the Federal Reserve, who controls many of the lending regulations and policies including Regulation Z, have no clue what goes on in the lending  industry.  However, I can assure you if the Fed’s get their way and begin limiting compensation of loan officers, there will be a huge shortage of quality loan officers.  Be prepared for nothing but paper pushers, lengthy closings, delayed closings, poor to zero service and a host of unhappy consumers.  Naturally, we’ll be monitoring developments with this matter and keep everyone up to date.