I wanted to address the effect of the Fed lowering rates because it is a very logical question that a lot of people are asking.

The Fed's have lowered prime six times in the past four months, resulting in a reduction of interest rates for short term money (8.25% to 6.0% for prime since October 2007). While cheaper money is a great stimulant for the economy, there is not a direct correlation to fixed mortgage rates.

Below is some real dialogue I had with a borrower this week:

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Borrower: "Hey Britt, just checking in... I am hearing that the Fed is poised to cut rates again in March and April. Does it make sense for us to wait to do the refi until then? I would be bummed to see my mortgage rate drop so siginificantly."

Britt Miller: "You raise a great point being asked by quite a few people. I am going to send out an email addressing it as a whole. But in short, mortgage rates are less impacted by prime, and more affected by bond market.

In actuality, the stock market responds well to a rate cut. This results in a sell off in the bond market as people move into the stock market. As funds leave the bond market, the US Treasury increases the interest they will pay on bonds in order to draw money back to the bond market. Mortgage rates tend to follow the trend of the 10 year Treasury bond. Mortgage rates are set depending on a number of data points, but the driver is the 10 year bond.

Net net, the market is so volatile, and there is no doubt the pinch on the consumer is going to impact wall street and a lot of companies. These potentially unfavorable reports (Payroll, job growth, unemployment, etc) will directly help us more in terms of mortgage rates, than the Fed lowering the federal fund rate another .50 pt this year.

We should proceed and see how the next 45 days shake out and if rates are compelling. I would advise you to 'lock in' -- it makes sense as of today.”

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The 10yr has risen from 3.45% (4 weeks ago) to 3.91% today -- as a result, rates have moved up as well.

If you want to "watch rates" keep an eye on the 10 year go to Yahoo Finance and review at your leisure. It's a very volatile market, and one where I have seen .50% pt swings in one day. Timing the dips can be very difficult unless the file is ready to go.

Best Regards,
Britt Miller, Vice President
Steelhead Capital

Congress passed the new stimulus plan put forth by President Bush, which allows Fannie and Freddie to buy loans up to $729,750 in Metropolitan Areas where this number represents 150% of the median priced home.

We still don't have a definitive on date and actual pricing -- probably 25-35 days out. Sources are saying that this particular "conforming" pricing may not be exact to what we are seeing at the $417,000 conforming level. Even if it isn't exact, it will most likely be an improvement of .50 - .75% vs. non conforming pricing today. It appears this elevated conforming limit will be in place until the end of 2008 -- so we will probably have a 8-9 month window to capitalize on this new limit.

To give you a baseline of comparison:

Wells Fargo Conforming Par Pricing Today
6.00% for a 30yr Fixed; 5.25% for a 5/1 ARM

Wells Fargo Non Conforming Par Pricing Today
7.125% for a 30yr Fixed; 6.75% for a 5/1 ARM

*** This is Full Doc pricing

This should illustrate the discrepancy that has been priced into the market and why there is a lot of buzz around the new conforming loan limits. The secondary market is still apprehensive about jumbo loans, which is why they are being priced accordingly -- the investors are demanding a healthy yield.

If you owe less than $850,000 on your 1st and 2nd loan, contact us today and we can review your profile to determine if this new pricing makes sense given your particular situation.

Respectfully,

Best Regards,
Britt Miller, Vice President
Steelhead Capital

SOURCE: Seeking Alpha

The first three weeks of January have brought a huge spike in residential mortgage refinancing. This can be attributed in part, to the stimulus package the government has been working on. This package has raised the limit on the size of mortgages that can be bought by the GSE's. Some of the spike could be a result of homeowners who are distressed or not taking advantage of the reduced interest rates.

Overall, financial providers have reduced their online advertising spending by 17% on a month to month basis. It isn't clear whether the reduction in advertising has been driven by the need for an overall budget cut, or if the backlog of refinances in the cue has prompted lenders to hold off on advertising until the number of people moving through the system has cleared.

No matter what, the current mortgage industry dynamics are changing and every lender will be doing everything possible to continue to provide loans for homeowners as well as achieve the lean business model that it will take to survive.

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SOURCE: The Wall Street Journal

As the real estate market tightens some agents are learning about the eco-friendly options available in the housing industry. This is helping them to stand out for many purchasers.

The knowledge base provided can be a real asset to those considering a move. Not only can new homes be constructed with green materials and products, existing dwellings can be retrofitted as well. There area wide variety of green appliances and energy solutions that an educated agent will know about.

With today's market difficulties this is a positive way for agents to not only attract potential purchasers but also to make a bigger difference via educating potential homeowners. If only a portion of these purchasers give a thought to going green it will make an impact in the long term.

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SOURCE: Forbes

The credit crisis isn't that bad according to Sam Zell. Zell has amassed a fortune due to the cycles that shape the commercial real estate industry. He feels that the current turmoil in the financial markets is more of an emotional reaction rather than a true credit collapse.

Zell says that there is still capital readily available for commercial real estate purchasers. This is unlike other real estate busts when there wasn't financing to be had at any price. Today, a commercial real estate broker still has many options for putting together a financing package. Zell argues that the excess liquidity that was available eight weeks ago is still there today.

Even though the real estate slump shouldn't have come as a surprise, Zell feels that the simple law of supply and demand still rules. This means that there is money to be made during this current real estate slowdown. Even though the financing available may have a different risk premium associated with it, a commercial real estate investor may still have access to it.

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SOURCE: CNN

As interest rates drop, refinance rise. The overall volume jumped 8.3 percent in the week ending Jan. 18th, according to Mortgage Bankers Association's latest survey.

Purchase volume fell 4.6 percent, however refinance volume rose 16.9 percent. Refinance volume accounted for 66 percent of the applications.

The average interest rate for traditional, 30-year fixed-rate mortgages fell to 5.49 percent from 5.62 percent. The average rate for 15-year fixed-rate mortgages, which are often used to refinance a home, fell to 4.96 percent from 5.07 percent.

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