Mortgage Backs Have No Security
Friday, June 5, 2009
As a Pleasanton Realtor® an important part of my job is to team with the top professionals in the business regarding lending, home insurance, home inspectors, etc. Today I sat with one of my key team members to understand what’s going on in the mortgage market. Kurt Kessler, owner of Pleasanton Mortgage explain a bit about Mortgage backed securities to me.
”Mortgage backs or (MBS) have taken a roller coaster ride the last week and a half; as they go down, rates go up. This negative movement seems unprecedented and beyond the word ‘volatile’. Trying to advise clients as to whether to lock or float has been very difficult. Large downward movements have been followed by small corrections and then another large downward move” Kurt explained to me.
He further went on to say that “Bill Gross, the President of Pimco said earlier this week that the appetite for bonds and MBS is dwindling and we should see higher and higher rates. With China and other foreign countries not buying our treasuries and our government really becoming the only buyer of our own home grown debt, which creates more debt, it seems his outlook is very accurate”.
Kurt believes the treasury and the Fed have backed off from their position of targeting an interest rate. He said, “Last year and then Secretary Paulson stated that the treasury would target an interest rate of 4.5%. After 2.5 months and much government intervention, they were able to achieve that. Now it doesn’t seem that is their goal, so free market is now in play and more government interaction will lead to more fear of inflation”. In the opinion of Kurt Kessler, rates will go from 5.5% to high 6%’s and low 7%’s (depending on loan type, size and credit score) in the next quarter.
He also believes, the demand of money is also increasing due to the affordability of properties and that is truly the light at the end of the tunnel. “The 2 things that we know will hold true,” Kurt told me, “is the first-time homebuyers will do very well in this market and secondly, FHA and VA loans will continue to be the product of choice”.
If you’ve been on the fence about interest rates, would like to get pre-qualified or would like to ask some of your own questions, I welcome you to contact Kurt directly. The path to home ownership is still very attainable.
