What is going on with interest rates? All the indicators are pointing to the fact that mortgage rates should be lower, in fact, much lower than where they currently are. The Jumbo programs aside, conforming pricing now seems to be arbitrary, based on how much profit the lender is looking to make. Maybe this is payback for all the losses incurred during the subprime days. Maybe it’s just greed. Sooner or later however, things are going to have to come back to normal.

Ryan Ogata
Senior Mortgage Consultant

From: Rob Chrisman Subject: Jan 16: Citi's loss, Fannie's PERS, is the Fed the only one buying mortgages? Bond market closing early, extending locks?

This morning, the Labor Department announced that U.S. consumer prices (CPI) fell by a slightly smaller-than-expected margin in December. CPI was -.7%, and the annual pace of price increases was the slowest in more than 50 years. Core prices, which exclude food and energy items, were flat for the second month in a row in December. That compared to analysts' prediction for a 0.1 percent increase. During the last year consumer prices rose only 0.1 percent, which doesn’t help Social Security recipients and others who have fixed income payments tied to the index. After the news, and even before the news, the 10-yr is at 2.35% and mortgage prices are worse by between .125 and .250.

Citigroup Inc. posted an $8.29 billion fourth-quarter loss, completing its worst year, as the credit crisis eroded mortgage-bond prices and customers missed more loan payments. The U.S. government agreed to invest $20 billion more in Bank of America, using TARP funds, along with guaranteeing an additional $118 billion of their assets.

It would appear that the Fed has been the only real buyer of mortgage-backed securities recently. Will that be enough? Unfortunately, as many agents have seen, mortgages have moved “wider” this week, meaning that mortgage rates are worsening relative to Treasury rates. Nationwide origination has been strong all week at $2.5 to $3 billion per day, and although the Fed has tremendous resources, the market is not convinced that mortgages are the place to put its money. And the market is also worried about the supply of Treasury securities that will need to be sold in order to finance this effort.

I remember when PERS stood for “Public Employees Retirement System”. Now Fannie has introduced PERS: “Project Eligibility Review Service”. In support of Announcement 08-34 - Project Eligibility Review Service and Changes to Condominium and Cooperative Project Policies – Fannie has launched the new Project Eligibility Review Service (PERS) which allows lenders to submit attached condo projects to Fannie Mae to determine eligibility. Lenders are required to use PERS, submitting the information electronically, for all new and newly converted attached condo projects located in Florida.

Rob Chrisman