Welcome to Illinois Mortgage Rates and News week in review for the week ending August 22nd, my take on the week’s financial news and how it affected Illinois mortgage rates.

This was another week in the mortgage bond market with huge volatility on a day to day basis, but an amazingly stable market when you squint your eyes and look just at the week end results. In other words, mortgage bonds went up and down like crazy , but mortgage interest rates ended the week just about where they started. This is the end of August doldrums, and there wasn’t a lot of market changing news released this week. Still, there were a couple of events that make me think that the market focus is starting to change.

The PPI (Producer Price Index) a measure of inflation, jumped 1.2% in July, the largest increase in 27 years.

Inflation hawk and Dallas Fed Chairman Richard Fisher warned in a speech that though the economy was slowing, the up-tick in inflation could lead to a “lingering inflationary fever”.

Over the last couple of months either of those items would have been enough to spark a huge sell-off in mortgage bonds. That didn’t happen this time. There was plenty of news showing the economy is still slowing, but the inflation fear would have trumped the other news. Mortgage bonds actually broke through and ended the week above a stubborn level of resistance. Some of the inflation is obviously seen through the rear view mirror, but in the past it hasn’t mattered. Bond traders have been wearing their inflation blinders and they would take any excuse to sell. The fact that the market took this news in without flinching makes me think we are likely to see better rates in the near future.

The big news this week (or really lack of news, but focus of rumors) was the condition of the big dogs in the mortgage arena, Fannie Mae and Freddie Mac. Their stocks sold off again this week as rumors of their impending demise continued. The Treasury has already announced that they will stand behind Fannie and Freddie, and a bail out has been worked into all the market equations. But knowing it is coming while not knowing when or how (or who wins and who loses) has kept the organizations in limbo. Fannie and Freddie are the biggest buyers of mortgage loans, so getting them out of limbo and in a position to buy will help stabilize the housing market. Letting it go on as it is now, with everyone knowing something is coming but waiting to see how it all pans out, makes for more fear and insecurity, which puts more pressure on Fannie and Freddie, keeping a negative loop going. I’m guessing that this will all come to a head soon, and the bailout will become official.

Here is what Illinois Home mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee. The conventional loans are based on the highest conforming loan amounts, which give the best pricing. (Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, or to get pre-approved for a mortgage, give me a call or Contact me illinois mortgage company and I’ll take the time to find the rate and program that is best for you.) :

Conventional loans up to $417,000

30 year fixed rate 6.375% 6.524% APR

15 year fixed rate 5.875% 6.014% APR

5-1 A.R.M. 5.75% 5.867% APR

7-1 A.R.M. 5.875% 5.989% APR

For Jumbo loans over $417,000

30 year fixed rate* 6.875% 6.634% APR

7-1 A.R.M. * 6.00% 6.173% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS - 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate 6.25% 6.713% APR

With no origination fee – 60 day lock

30 year fixed rate 6.50% 6.852% APR

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

These are just a few of the programs and mortgage rates available. Which option is best for you depends on your own specific goals and needs. If you have any questions or want to go over your situation in depth, let me know how I can help.

Illinois Home Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending July 11th, my take on the week’s financial news and how it affected Illinois mortgage rates.

Back in March our economy barely dodged a bullet when the Fed engineered a bail out of Wall Street giant Bear Stearns. If left to fail on its own, it was feared that this would set off a panic that could shake our financial system to its core. Since then we’ve been told that the worst was over, and even though the housing market was still a mess, our economic foundations were strong. This week the bullet we missed with Bear Stearns is looking like a pea from a pea shooter, and we have a nuclear missile headed our way (Where is Superman when we need him?) The stock of Fannie Mae and Freddie Mac, the two pillars of our mortgage finance system, dived this week as the loss of liquidity pushed these giants toward insolvency. Both stocks lost about 45% of their value this week and are down about 90% in the last year. With the stock prices this low there is no way they can raise the cash they need to continue operating in the markets. If the worst comes to pass, this means 2 possibilities: a bailout where the government funds the organizations, or a receivership or complete government takeover.

Fannie and Freddie are unique in the way they operate. They are publicly traded corporations but they are backed with the assurance of the federal government. Their mission is to buy up mortgage loans and insure that there is always money available to fund new mortgages. Combined they guarantee about 5 trillion dollars (that’s 5,000 billion) worth of mortgage loans – about half the total mortgages outstanding. To say they are the 800 pound gorillas in the mortgage market is an understatement. The panic started this week with rumors that the government was preparing a plan to step in if needed. Fannie and Freddie have lost a lot of money due to bad loans, but they still have a fair amount of money in reserve, though no where near enough to settle all the possible problems. But this isn’t news. Over the last years Fannie and Freddie have branched out beyond their core business and have moved farther along the risk curve as they tried to keep profits high while the real estate market was booming. Commentators have been saying for years that the companies were undercapitalized. So this isn’t a new thing.

Everyone agrees that Fannie Mae and Freddie Mac are too big to fail. If it gets to that point the government will surely step in and do what is necessary to keep the mortgage market going. But the question then becomes how would they do this? The debt is so huge (even backed by the homes supporting all those mortgages) that it would be equal to almost ½ our current national debt. After the panic first started, Fed officials, Treasury Secretary Paulson and statements from both Fannie and Freddie assured everyone that there was no crisis. But a panic is a panic. The market calmed down a little Friday afternoon, but this will come back as an issue. Maybe this coming week, maybe later. We are still in a severe credit crunch this fear only tightens it another notch. What it means for consumers is that conventional mortgages are likely to continue their trend of becoming harder to qualify for and more expensive for those who can qualify. On the good side, there is almost no chance that the Fed will hike rates any time soon.

The news of the troubles with Fannie and Freddie obscured some other big news. IndyMac, a big California bank which was one of the big players in what was called the Alt A mortgage market, went bust this week. This was the first major bank to fail in years, and the 3^rd largest bank failure in US history. The expectation is that there are other banks teetering on the edge, and more failures will be coming. In other news oil was up again, closing the week at $145 per barrel. Pending home sales came in worse than expected and according to RealtyTrac the number of foreclosed homes nearly tripled June.

Mortgage backed securities, which control the direction of mortgage rates were improving sharply most of the week, but turned around and gave up most of their gains on Friday. Mortgage rates are a little better on some programs, and on others unchanged. FHA is due to change to their risk based pricing model this week, but all in all it is the biggest bargain in the mortgage market. For many borrowers with less than 20% equity, or credit scores under 720, FHA financing is the best option. Here in the Chicago IL. area the maximum loan amount is now $410,000, so it fits what most borrowers need.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee.  The conventional loans are based on the highest conforming loan amounts, which give the best pricing. (Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, or to get pre-approved for a mortgage, give me a call or contact me and I’ll take the time to find the rate and program that is best for you.) :

Conventional loans up to $417,000

30 year fixed rate    6.25%   6.364% APR

15 year fixed rate    5.75%   5.922% APR

5-1 A.R.M.               5.50%   5.678% APR      

7-1 A.R.M.               5.875%   5.989% APR

For Jumbo loans over $417,000

30 year fixed rate*   6.75%    6.877% APR – Requires 20% down payment

7-1 A.R.M.*              5.75%    6.062% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS – 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate    6.125%     7.048% APR

With no origination fee –        60 day lock

30 year fixed rate    6.375%     7.056%

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

These are just a few of the programs and mortgage rates available. Which option is best for you depends on your own specific goals and needs. If you have any questions or want to go over your situation in depth, let me know how I can help.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending June 27th, my take on the week’s financial news and how it affected Illinois mortgage rates.

The Fed took the spotlight this week, and as anticipated, they left interest rates the same but talked tough about the threat of inflation. Wall Street wasn’t happy with the decision. The Dow hit a low just ticks away from a 20% overall decline, the official mark of a Bear market. Not only did the Fed not raise rates, but their announcement balanced the threat of inflation with the threat of further slow downs in the general economy. This signaled that the Fed plans to stand pat, keeping rates the same until something forces their hand. The stock market dived and mortgage bonds benefited. Mortgage backed securities moved through an area of strong resistance Friday afternoon, ending the week at their best level in the last 3 weeks.

The question this week, as it has been over the last few months is which is worse, inflation or recession? This is much like saying which way would you rather be tortured? Water boarding? Or bamboo shoots under your fingernails? If it’s all the same to you, I’d rather do without either. But the Fed doesn’t have that choice. The case for raising rates is that the low Fed funds rate has killed the value of the dollar, and oil is denominated in dollars so its rise is a direct result of the weak dollar. The argument here is that raising the rates will add value to the dollar and oil will fall once the Fed acts. This may be true, but the global economy is much more complex than this, and a raise in rates might do more harm than good. The credit crunch is still in force, and hiking rates would mean that credit goes from tight to a stranglehold, smacking the real estate market and the business climate down further. This would surely lower gas prices; with lower demand prices would have to fall. But if the economy falls into a deep recession, it could make matters much worse and killing the patient doesn’t make for a successful operation.

The other school of thought is that inflation is a problem, but the oil shock we are experiencing isn’t the same as inflationary spirals we’ve seen in the past. For one thing, there is no wage inflation. Inflation can destroy an economy if everyone thinks that prices on everything are moving higher. But wages are stagnant and with global competition no one expects wages to move up much any time soon. Prices are moving up on food, fuel and anything that uses petroleum, but if you look at the value of your home or the balance on your 401K the values are down. The other thing is that the Fed might not be able to do anything to control the inflation, even if they raised rates sharply. In a global economy there are more moving parts than in a Rube Goldberg machine, and the United States doesn’t have the economic power it once did. The cost of oil has been moving up steadily for years now. China, India and much of the developing world have been booming, and their demand for oil has pushed the cost higher. We also aren’t finding new oil supplies fast enough to replace the wells that run out. Add in a good dose of fear and speculation and it’s no wonder the price runs up higher. As the global economy slows down, speculation should ease and oil prices may come down as a result. At least a little. But the world has changed and most experts don’t think we will ever see cheap oil again. So the real question is the run up in oil inflation, or the new fact of life?

In other economic news, consumer confidence this week came in at the third lowest reading ever, and the lowest since 1980. Oil prices surged again, now up to $142 per barrel. Personal spending for last month was the best reading in the last 5 months, but if the stimulus checks are gone this is probably not a trend. New and existing homes both came in a touch better than expected, but still at low levels. Sales of homes in the Chicago area were down 29% from last year, but up from the previous month. Prices here seem to be stabilizing. The core inflation rate showed we are just over the target zone, giving the Fed some cover for their decision not to raise rates. Here in Illinois, Attorney General Lisa Madigan sued Countrywide Mortgage for abusive loan practices. I have mixed feelings on this one. I’m not a fan of Countrywide. As a company they have been arrogant and they were the leaders in some of the bad practices that got us into this whole mortgage mess. I also like Lisa Madigan. She’s done a good job as Attorney General, and I expect that she will be our next Governor. But that’s the point of this, it’s all political. Countrywide is a big target and an easy way to score political points, but unless they can show it was a corporate decision to defraud customers, I don’t see this going anywhere.

Mortgage rates are moving in the right direction, but the real improvement in mortgage bonds came at the end of the session on Friday afternoon, and most of the lenders didn’t re-price to show the improvement (it’s funny how quickly they re-price when rates are heading up, but are slower on the trigger when mortgage rates are moving down). The area of resistance that was keeping rates from improving may now act as resistance and a stopping point when rates are getting worse. It’s amazing how often points on a graph that acted as a ceiling become a floor when the market breaks through.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee.  The conventional loans are based on the highest conforming loan amounts, which give the best pricing. (Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, or to get pre-approved for a mortgage, give me a call or contact me and I’ll take the time to find the rate and program that is best for you.) :

Conventional loans up to $417,000

30 year fixed rate    6.375%   6.589% APR

15 year fixed rate    5.875%   6.124% APR

5-1 A.R.M.               5.625%   5.788% APR      

7-1 A.R.M.               5.875%   5.989% APR

For Jumbo loans over $417,000

30 year fixed rate*   6.875%    6.997% APR – Requires 20% down payment

7-1 A.R.M.*              6.125%    6.327% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS – 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate    6.125%     7.048% APR

With no origination fee –        60 day lock

30 year fixed rate    6.375%     7.056%

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

These are just a few of the programs and mortgage rates available. Which option is best for you depends on your own specific goals and needs. If you have any questions or want to go over your situation in depth, let me know how I can help.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending March14th, my take on the week’s financial news and how it affected Illinois mortgage rates.

Do you remember the scene in It’s a Wonderful Life where they had the run on the bank? In the movie Jimmy Stewart was on his way out of town, just about to go on his honeymoon, when he noticed the crowd of people swarming around the Building and Loan. The rumor was that the bank was out of funds, so the town’s people were in a panic as they tried to get out with whatever they could before they lost everything. Jimmy stepped in and calmed the people by doling out his honeymoon savings and assuring them that they were all in this together. We had a similar situation in the mortgage backed securities market this week with Fed Chairman Bernanke playing the Jimmy Stewart role, but to much less success.

The run on the bank started last week when Thornburg Mortgage and the Carlyle Group, a heavily leveraged hedge fund, were unable to meet margin calls from their lenders. Panic set in as mortgage bond investors wondered if there was any value in mortgages at all. Like any panic, this was all about confidence. As the big banks sit on their portfolios of mortgages, investors wonder how much of their holdings are junk, and with buyers in short supply the value of the mortgage portfolios deteriorate. The banks are forced to sell their good loans at fire sale prices in order to raise funds to keep their financial numbers up, but this only makes matters worse.

On Tuesday the Fed came in with a plan for a $200 billion dollar fund which banks could borrow against, using their mortgage portfolios as security. This was just what the markets needed. After the news was announced, the stock market had its best day in ages, and the mortgage bond market started to improve, too. Unfortunately, it was too little too late. The Carlyle Group was too far under (they were leveraged to the hilt with $97 borrowed against every $3 of equity) and they missed their margin call on Thursday. But that was just a hint of trouble to come. Friday morning Bear Stearns, one of the biggest players on Wall Street, got caught in the liquidity crunch and had to be bailed out by the Fed and fellow giant JP Morgan. This was truly scary news. If the big boys can be in such bad shape, who is going to be the next to crack?

The reports coming out this week confirmed that the economy is in a recession. The one good piece of news was the release of the Consumer Price Index this morning showing no increase in inflation. The CPI is a measure of inflation in the economy, and inflation has been the fear over the horizon. The low reading means the Fed is now nearly certain to cut rates again next week, a .75% cut is expected. The thing that I wonder is, what comes next? The Fed has already cut short term rates by 2 points in the last 6 months and credit still continues to tighten. Money is much cheaper but the credit market is frozen. What happens when the Fed lowers rates down to the bottom, what can it do next? The major problem in the market now isn’t that short term rates aren’t low enough; the problem is that no one wants to lend money if they think that things are going to get worse later. We are back to confidence and the Fed’s tinkering at the edges isn’t enough to do the job. I expect we will have a bailout of some sort. This is going to be a bitter pill for many, but I expect that the only way out of this mess will be through some form of political solution – probably a free pass for the big banks, a plan where the Fed buys up their troubled mortgages. What ever the solution, it won’t be fair and it won’t be pretty, but we are up the proverbial creek if we don’t get the credit machine moving again.

So how did all this mess affect mortgage rates? Volatility was again off the charts. Mortgage rates lately have been like weather in Chicago, constantly changing. The swings have been outrageously wide and it is now normal to have intra-day re-prices from our wholesale lenders. Fixed rate mortgages moved down over the week, but not nearly as much as you would expect given the state of the economy. Even as fixed rate mortgages improved, there were signs that the credit crunch was worsening. Last week adjustable rate mortgages went up sharply. This week they virtually disappeared. The rates on most ARMs is now higher than on fixed rate mortgages, even though short term interest rates are very low. (There are still a few private investors with good pricing – check out their rates below). Again this comes down to confidence. The other big move was that Fannie Mae and Freddie Mac, the 2 big buyers of mortgages in the mortgage aftermarket, came out with their second round of risk based pricing, the idea that those with the best credit scores will get the best interest rate. The idea makes sense, but they have increased the pricing on those with excellent credit and good down payments. This looks more like a way to get themselves out of the hole they dug, then a plan to price according to the risk.

With all the changes in the conventional market, one of the best deals out there is buying with an FHA mortgage. FHA, a government insured program, recently increased their lending limits. Here in the Chicago area the new lending limit for a single family home is now $410,000. With FHA there is no hit to the pricing for credit scores and you can buy with a low or in some cases no down payment. FHA used to be thought of as a loan for those who had few other options, now it is a good alternative for home buyers here in the Chicago area who could go conventional.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee.  The conventional loans are based on the highest conforming loan amounts, which give the best pricing. (Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, give me a call or contact me and I’ll take the time to find the rate and program that is best for you.) :

Conventional loans up to $417,000

30 year fixed rate    5.875%    6.147% APR

15 year fixed rate    5.25%      5.377% APR

5-1 A.R.M.               5.50%      5.659% APR       

7-1 A.R.M.               5.75%      5.879% APR

For Jumbo loans over $417,000

30 year fixed rate*  7.125%     7.262% APR

(*We have one lender at 6.125% for a Jumbo fixed rate – if you meet their guidelines.)

7-1 A.R.M.              6.00%       6.174% APR

FHA LOANS up to $270,200 with 1 point origination fee

30 year fixed rate  5.50%        5.794% APR

These are just a sampling of the mortgage rates available. We have special programs for first time home buyers and all the bond programs including the City of Chicago Bond program which offers no down payment and below market pricing.

The big news next week will be the Fed meeting on Tuesday. I expect it to be another crazy week.

Illinois Mortgage Rates and News.

Welcome to this week’s Illinois Mortgage Rates and News week in review, my take on the week’s financial news and how it affected Illinois mortgage rates.

The great physicist Isaac Newton described gravity by noting, what goes up, must come down. This week gravitational forces were at play in mortgage interest rates. After moving up strongly (and strangely) most of the month, mortgage rates are now falling like the proverbial apple. Mortgage rates jumped up based

on fear of inflation. The strange part of this has been that inflation may be a problem down the road, but the credit crunch and recession are crucial problems now. As Fed Chairman Bernanke said in congressional testimony this week, “You fight the enemy in front of you, not the one over the hill.” Inflation may become a problem, and there are signs of inflation especially in fuel and food costs, but it is harder to raise prices when the economy is slowing down. At any rate, between Bernanke’s testimony (the economy is soft and it could get softer) and some pessimistic economic reports, the focus is off of inflation and this means mortgage rates are heading back down.

New claims for unemployment insurance were up to 373,000. January durable goods orders tanked by 5.3%, much more than expected. Consumer confidence dropped 12 points, coming in at the lowest level in the last 16 years. Consumer confidence is a good indicator of future spending as consumers tighten up their wallets and only spend on necessities when times are tight. The stock market got killed this week, and that meant more money coming out of stocks and into the safety of bonds, including mortgage bonds.

In other mortgage news, The Office of Federal Housing Enterprise Oversight removed limits on the amount of loans Fannie Mae and Freddie Mac can buy.  This will allow them to sell and repackage more loans which adds liquidity to the housing market. As of tomorrow the FHA lending limits are due to increase. The limit will be based on 175% of the median home price for the area. Once it is official I’ll post the details, including the cap for the Chicago area. When I first got into the mortgage business 16 years ago, FHA was one of the few options available for new buyers or those without a big down payment. Over the years they became less and less of a factor. Part of it was their old fashioned guidelines; part of it was that too may first time home buyers bought homes above the FHA lending limit. They’ve already made some moves toward modernization with more on the way. This cap increase will help a lot of people get financing they couldn’t qualify for before.

Conventional wisdom now shows a 70% chance that the Fed will slash rates by another 75 basis points on or before the March 18 FOMC meeting. What does that mean if you are looking to buy a home or refinance your mortgage here in Illinois? Well, the last time the Fed made a big cut, mortgage rates tumbled – for about a day. Then they moved higher. I think there is a good chance that rates will be moving down some more, but once the Fed does its thing again, don’t be surprised if fixed mortgage rates get worse again. If you are thinking of refinancing your current mortgage, get your papers in to your loan officer (or give me a call) and be ready to move. Same thing if you have a contract to buy and are waiting to lock in. Rates are improving now, but there were a lot of people who got left behind while they waited for lower rates the last time. Volatility is still crazy and I expect it will remain that way.

Mortgages rates are much better this week than they were last week, and the trend is going in the right direction. Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee.  The conventional loans are based on the highest conforming loan amounts, which give the best pricing. (Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, give me a call or contact me and I’ll take the time to find the rate and program that is best for you.) :

Conventional loans up to $417,000

30 year fixed rate    5.75%       5.823% APR

15 year fixed rate    5.125%     5. 248% APR

5-1 A.R.M.               4.875%     5.179% APR       

7-1 A.R.M.               5.125%     5.267% APR

For Jumbo loans over $417,000

30 year fixed rate*  6.75%       6.862% APR

(*We have one lender at 6.125% for a Jumbo fixed rate – if you meet their guidelines.)

7-1 A.R.M.              5.50%        5.639% APR

FHA LOANS up to $270,200 with 1 point origination fee

30 year fixed rate  5.50%        5.749% APR

These are just a sampling of the mortgage rates available. We have special programs for first time home buyers and all the bond programs including the City of Chicago Bond program and the State of Illinois Bond program which offer no down payment and below market pricing.

There are a lot of reports coming out next week, but the biggest market mover traditionally is the jobs report which will be released next Friday.

llinois Mortgage Rates and News.

Welcome to this week’s Illinois Mortgage Rates and News week in review, my take on the week’s financial news and how it affected Illinois mortgage rates.

I’ve used the analogy of the mortgage bond market being like a roller coaster. Still fits. Or maybe it’s like an out of control elevator, rising upward, then without warning, plunging down in a free fall. Then when you are sure it is going to hit bottom, it shifts direction and heads back up again. Yes, it’s been another exciting week in the mortgage market.

This was another week without a clear direction. Markets, whether the stock market, mortgage rates or the market in pork bellies, typically trend in one direction, up, down or sideways. There will be day to day movement within the trend, so you can have down days in an upward trending market, but the trends usually hold until something happens which kicks them out in another direction. Mortgage interest rates have moved down a fair amount since the beginning of the year, but it’s still hard to see this as a decided downward trend. Mortgage bond traders are still bi-polar, and the swings between the highs and lows are enough to induce motion sickness. In this market volatility is King.

A lot of information came out this week. The Gross Domestic Product for the fourth quarter, a measure of strength in the economy, came in at 0.6% growth, a big drop from the 4.9% seen in the previous quarter. New home sales were anemic, consumer confidence was low, but slightly better than expected, and inflation was relatively tame. The two biggest events this week were the Fed meeting on Wednesday, and the Employment Report released this morning.

The Fed, as expected, cut the discount rate another half a point, making it a drop of 1.25% in just over a week – a jaw dropping cut. The economic data coming out is soft, but it is still mixed. Some commentators are speculating that the Fed knows more than it is letting on about the economy, and the reason for the dramatic rate cuts is the fear that something, maybe one of the big banks or the monoline bond insurers, is on the edge, and if it fell, the default would set off a domino effect of losses which would send us into a deep recession. Others think it’s just a matter of Fed Chairman Bernanke’s inexperience.

The jobs report this morning was the other big mover. The expectation was for 75,000 jobs being created last month. Instead we saw a loss of 17,000. It takes 150,000 new jobs each month just to keep even with the new people coming into the job market, so this was one weak report. It was moderated a little by upward revisions in the previous months reports, but the net difference still left a whole lot of people in the unemployment line. Mortgage bonds moved up and mortgage rates improved after the announcement, but, once again, sold off before the end of the day. It’s been that kind of week, and so far, that kind of year.

So how did all this news affect the markets? Once again we are pretty close to back where we started at the begining of the week. Still, if you are thinking of refinancing your mortgage, this is a great time to get started. I’ve been on the phone with my clients telling them to get their paperwork in so we are ready to go. With all the volatility, it pays to pick the right time to lock your rate in. You can do this easier if your paperwork is ready to go. If you don’t have a loan officer you work with, give me a call.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee.  The conventional loans are based on the highest conforming loan amounts, which give the best pricing. (Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, give me a call or contact me and I’ll take the time to find the rate and program that is best for you.) :

Conventional loans up to $417,000

30 year fixed rate    5.625%    5.734% APR

15 year fixed rate    5.125%    5.237% APR

5-1 A.R.M.               5.00%      5.187% APR       

7-1 A.R.M.               5.125%     5.263% APR

For Jumbo loans over $417,000

30 year fixed rate    6.00%       6.179% APR

7-1 A.R.M.               5.75%       5.893% APR

FHA LOANS up to $270,200 with 1 point origination fee

30 year fixed rate    5.375%       5.623% APR

These are just a sampling of the mortgage rates available. We have special programs for first time home buyers and all the bond programs including the City of Chicago Bond program and the State of Illinois Bond program which offer no down payment and below market pricing.

There aren’t a lot of reports scheduled for release next week, but my guess is that we will still see some wild swings in pricing. Stay tuned and I’ll fill you in on the details as they come available.

Illinois Mortgage Rates and News.

It was the Martin Luther King holiday Monday and the markets and banks were closed. My company was also closed for the observance, but I had some work to catch up so I put in a half day. As I said the markets were closed, so I didn’t obsessively check the mortgage bond market as I often do. The day played out quietly. An uneventful day. Maybe it was the calm before the storm.

Later that night I heard that there was turmoil in the foreign markets. The stock markets throughout Europe and Asia were selling off in a reaction to the problems here in the US of A. Maybe the catalyst was Bernanke’s acknowledgement that we were in danger of a recession, or maybe it was a reaction to President Bush’s stimulus package. Whatever it was it was trouble. We live in a global economy now. What happens in China is quickly felt in California, and what happens in Washington is felt around the world.

Tuesday morning the Fed cut the discount rate by ¾ of a point – a huge amount, and the timing, one week before the Fed meeting, added impact, and maybe a whiff of panic. Even after the cut, the stock market opened with big losses. At one point during the day stocks were off by 500 points, before recovering somewhat. It makes you wonder, what would have happened if the Fed had sat it out and waited for their meeting next week before dropping the rates? If that had been the case, we’d be talking about Black Tuesday, now.

Mortgage rates don’t always correlate with changes in the Fed rates. The Fed controls short term rates, and mortgage interest rates move up and down based on the trade in mortgage backed securities. It’s often the case that the Fed lowers the discount rate and mortgage bonds sell off, pushing interest rates higher. Not so yesterday. Mortgage bonds shot higher and mortgage rates dropped like a stone. Suddenly we were in a hot refinance market.

This morning the trend continued. The stock market continued to fall and mortgage rates dropped to the lowest point in years. I was quoting rates today in the low 5s! The year started out in the low 6s, so this is nothing short of extraordinary. But one lesson I’ve learned over the years, is that if you have a good situation, you should take advantage of it, because you don’t know how long it will last. The stock market changed direction late in the afternoon and ended up erasing its losses with the Dow gaining nearly 300 points. Money rushed out of mortgage bonds, and interest rates moved up sharply.

The sad part of this is, most people didn’t lock into the low, low rates. I signed up a fair amount of my past clients for refinances today, but many of them decided not to lock, figuring the rates would drop even lower. This still may happen. There was some good news coming out of Wall Street today, but I would bet we still have some more problems ahead. If we have the chance again, I would encourage people to jump on it.

As I’ve written before, this has been an extremely volatile market, and I expect the volatility to continue. There is an old Chinese proverb, or curse, which states, May you live in interesting times. We surely do.

Illinois Mortgage rates and News

It’s Friday, and time once again for the Illinois Mortgage Rates and News week in review, my take on the week’s financial news and how it affected Illinois mortgage rates. This week continued the knock down, drag out fight in the mortgage market between the forces of inflation and the forces of recession. The Fed has nervously watched to see which side would gain an advantage. Wall Street has called for bold, moves and massive interest rate cuts to prop the economy up and keep it from falling deeper in recession. The danger there is that cuts too big and too quickly could fuel inflation. With oil and food prices already high, this has been a problem. But this week it appears that recession has scored a knockdown, inflation might not be on the ropes, but it’s now acknowledged that recession is the bigger problem – for now. That means more rate cuts ahead.

There weren’t a lot of economic reports released this week. The big news was in a speech by Fed Chairman Bernanke, where he tipped his hand that he was prepared to take “substantive action” to keep the economy on track. The weak jobs report released last week was the factor here. Bernanke’s statement was interpreted by the financial markets as an expectation that the Fed will cut rates by a half point this month, with more cuts to come.

The other major news this week was the sale of Countrywide Financial to Bank of America. Countrywide, the nation’s largest mortgage lender, has been on the rocks since last summer when the sub prime mortgage market melted down. They were a leader in both sub prime and Alt-A lending, and when the market for these loans disappeared, they were suddenly in a whole mess of trouble. They had to get huge infusions of cash several times over the last months – including 2 billion from Bank of America – just to stay in business. This week rumors were flying about Countrywide being on the verge of declaring bankruptcy. Bank of America stepped in late in the week with an offer, and the deal came together this morning.

The mortgage bond market fluctuated over the week as money shifted back and forth between stocks and bonds. Even with the lack of news, the market was volatile and it looked like it was changing direction several times. At the end of the week more money flowed into bonds, and rates on some loans fell to a low for the week, matching their lowest point in the last two years.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock with 0 points, and no origination fee. The conventional loans are based on the highest loan amounts, which give the best pricing. (Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, give me a call or contact me and I’ll take the time to find the rate and program that is best for you.):

Conventional loans up to $417,000

30 year fixed rate 5.625% 5.734% APR

15 year fixed rate 5.125% 5.237% APR

5-1 A.R.M. 5.25% 5.395% APR

7-1 A.R.M. 5.50% 5.627% APR

For Jumbo loans over $417,000

30 year fixed rate 6.25% 6.375% APR

7-1 A.R.M. 5.625% 5.773% APR

FHA LOANS up to $270,200 with 1 point origination fee

30 year fixed rate 5.50% 5.823% APR

These are just a sampling of the mortgage rates available. We have special programs for first time home buyers and all the bond programs including the City of Chicago Bond program and the State of Illinois Bond program which offer no down payment and below market pricing.

Next week a lot of economic news is coming out. The PPI and CPI, two measures of inflation in the economy, come out Tuesday and Wednesday. Retail sales and industrial production numbers will also be released.

Illinois Mortgage Rates and News.

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