Danny Salas

Welcome to Access Real Estate Lending

Welcome, Real Estate Agents & New Readers, to AccessLoans.net  Our top two articles, Industry Updatesand Interest Rate Updates, are updated regularly.  Industry Updates is primarily a Real Estate Agent’s Informative site, educating Real Estate Agents as to current changes in the Real Estate Lending Industry.  Interest Rate Updates are for all readers to follow.  It helps understand what makes rates move up and down and what drives that market.  Scroll below to enjoy the most recent articles from similar topics.

Chico Real Estate Loan Industry Updates

Chico Real Estate Interest Rates Updates

Chico, CA Interest Rates Market Report – Economic Influences – March 16, 2010

Careful Floating Into The Morning

FOMC Day

That’s right!  At 11:15 pm PST, Good ‘Ole Ben Bernanke and The Federal Open Market Committee will be rolling out the Interest Rate Decision and Monetary Policy Statement, from their meetings over the past two days.  It’s anticipated that the Fed will leave the overnight rate at 0.0% – 0.25%.  What will be of particular interest will be if the Fed changes their stance on their “extended period” statement regarding leaving interest rates low for an “extended period of time.”  The Fed, if not now, may very shortly be, in quite a precarious position regarding juggling inflation concerns and an economy that’s not creating jobs.  When do they pull the trigger?  Some say sooner, rather than later.  However, it’s expected that the statement will remain, with inflation concerns not too prevalent, currently.  It’s important to note, that some feel as though the “extended period” language should change somewhat.  Remember, that once the language changes, the writing’s on the wall and will effect many things, including the Carry Trade that Banks have been able to capitalize on and assist in getting out of the pickle that they were in, after the mortgage credit crisis.

$1.25% Trillion Purchase Program

The world will also be interested in a solid confirmation that the government is not interested in extending that $1.25% Trillion Government Mortgage-Backed Security Program.  With this major player out of the purchase market, rates will suffer.

Housing Trajectory

Housing Starts were 575,000 for February.  Building Permits were reported at 611,000.  The government said that the overall housing starts were down 5.9% and permits were down 1.6%.  This is somewhat confusing, because housing starts are up 39%, on a year-over-year basis.  Building permits are up 32% on a year-over-year basis.  So, the housing trend trajectory is moving in the right direction, it just might be gradual.

This Afternoon, Things Could Change To A Lock Mode

Locking Advice

I would feel comfortable locking, however, it’s okay to float into the Fed Policy Statement.  We have support at the 50-Day Moving Average, but pricing is already built into a near certain decision to leave the fed-funds rate at 0.0% – 0.25%.  So, there would have to be a huge surprise to have any significant movement to lower interest rates.   Either way, it’s a good time to buy!

YOU DON’T WANT TO MISS THIS EVENT!!!

Scott St. John will be speaking at The Big Room At Sierra Nevada, Friday, March 26, 2010.  Scott is a 3rd-Term Governing Board Member of Freddie Mac.  You’ll have an opportunity to inquire into expected economic future of the United States, Real Estate and its REO future, and what’s happening behind the scenes that is making closing loans to more timely and difficult, these days.   REGISTER AT THE CHICO OR PARADISE BOARD OFFICES.  $10 includes appetizers.  $15.00 AT THE DOOR!

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Related Must Reads

Extended Period
Carry Trade: The Investment Opportunity of a Lifetime
Why Higher Rates?

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FHA MI Premium Increasing

1.75% Financed Premuim Is Going Away

Per HUD Mortgagee Letter 2010-02, the upfront mortgage insurance premium for FHA loans will increase to 2.25% on all loans for which the case number is assigned on or after April 5, 2010.

Carry Trade…The Investment Opportunity of a Lifetime…

Loss of The Carry Trade...Why Rates Will Go Up This Year

More Writing On The Wall

So, we’ve been talking about interest rates, inevitably, moving up; that the writing’s on the wall.  What are some of the writings on the wall, and how do we know?  We’ve talked about the Government’s Mortgage-Backed Security Purchase Program drying up in March.  We’ve talked about some of the financial troubles occruing in Greece, and throughout the world;  that the safe-haven for US Treasuries and Mortgage-Backed Securities will eventually reverse.  But what’s the Carry Trade?  How does it work, and how will it effect rates?

The Fed Funds Rate

So, remember that the Fed Funds Rate has been significanly lower, for quite some time.  The Fed increased the Discount Rate, however, has been mentioning that the Fed Funds Rate will remain low, “for an extended period,” of time.  This “extended period” quote was lost, at a more recent meeting.  However, Good ‘Ole Ben Bernanke brought it up again, with his talk to Congress and the Senate, last week.  Why is this back and forth mentioning of “extended period” so important?

The Writing On The Wall

The Fed’s not in the business of tricking people.  They’re significantly more transparent than that!  They want you to get the writing on the wall comments.  Here’s what’s being said:  We’ve mentioned Kansas City Fed President Thomas Hoenig, recently.  ”Fiscal policy is on an unsustainable course…”  Also, the Fed’s own Vice Chairman, Donald Kohn, has recently dissented from the Fed’s Policy, actually warning banks to be prepared for interest rate changes.

The Carry Trade Phenomenon

Think of it like this…You have $1 Million to invest and you’re interested in the 4.5% Mortgage Backed Security (which is currently being used to measure 30 Year Fixed Rate Mortgages).  4.5% on $1 Million is $45,000.  The Government Allows you to only put 10% Down on your investment.  So you only have to write a check for $100,000.  So, you can borrow the other $900,000 at the current Fed Funds Rate, plus .25%.  That equates to 2.25% or $20,250.  So, $45,000 minus $20,250 is a profit of $24,750.  Or a 24.75% return on your investment.  Now, when the Fed Funds Rate Increases…even just 0.5%, think of this;  your profit is significantly jeopardized.  That 1/2 percent alone can cost you $27,000 cost, from $45,000 earnings, is only a profit of $18,000.  So your rate of return is leveraged down to an 18% gain.  Still significant, however, quite a loss, for just 0.5% in rate increases.

Come On People, Now…

So, with the MBS Purchase Program ending, dissenting Fed Members and Presidents warning of higher rates, Greece on the Path to a financial rescue, I just don’t see how much writing can be on the wall, before everyone understands that rates are moving up.  The temporary fixes WILL NOT LAST!