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Mortgage Rates Fall Again in Response to Bad News from Merrill Lynch
October 24th, 2007 categories: Real Estate Finance, Real Estate News
I sincerely hope that you and your family and friends have not been affected by these devastating fires. Our hearts and thoughts go out to those families who have lost their homes.
While it is a little hard to focus on real estate right now, there has been an important development today that has caused quite a bit of movement in mortgage bonds. I am choosing to pass along this information while it is current. We saw rates improve this morning followed by an intraday price improvement.
Merrill Lynch reportedcolossal quarter losses. They had to re-value $7.9 Billion dollars in CDOs (Collateralized Debt Obligations-complex financial instruments of asset-backed securities) containing underperforming sub-prime mortgage securities. They also reported a 94% loss in 3rd quarter revenue. The entire stock market is trading lower on this news and Bond prices have improved and mortgage rates have fallen. Mortgage Bonds also benefited from weak existing Home Sales numbers.
The Feds meet next week and it is likely they will again cut the Feds Funds Rate. Rates are now near the lowest levels of 2007 coinciding with the reinstatement of several loan programs and loosened guidelines. If we see another round of bad news from companies like Merrill, lender programs may again contract or be eliminated. Rates are not the only thing to consider”mortgage liquidity and lender guidelines can affect ones ability to qualify. It may be harder to qualify for a mortgage in the future.
If I were purchasing or refinancing my home, I would cautiously float my rate lock. Keep in mind that mortgage rates often rise right after a Feds Fund rate cut. If the rate cut is anticipated, it is often built into the market and the best time to lock is usually right before or right after the Fed announcement.
Lysa Catlin
CMC Finance, Inc.
(858) 456“3000 office
(858) 456“6200 fax
