As I have mentioned many times before, the only way we could get mortgage rates down this low was with the Fed buying up mortgage backed securities and creating an artificially inflated market, aka the “mortgage rate bubble”.  They have been the creators of the bubbles in the past through their actions, so why should this one be any different?

Well, the headlines not too long ago stated that Paulson and Bernanke wanted mortgage rates to be as low as 4.5%, some mortgage originators even developed their own agenda of 3.5% mortgage rates as another bait and switch advertising campaign.  But reality is quite different and the Fed knows that.  Or do they?  We can see what their MBS purchase pattern looks like and you can see they are not trying to drive mortgage rates down at all right now.  In fact, it looks more like they are trying to keep mortgage rates from spiking higher, bringing into question whether or not they are already realizing that mortgage rates are headed higher and likely quickly, so they need to dampen that burden on the economy.

Here is a chart I did that shows their actions each week, allowing you to see where their purchasing concentration is.  Click on the picture to get the full sized graph.

As you can see, the Fed was buying mortgage backed securities with lower coupon rates in the beginning.  They are still concentrating their purchases of Freddie Mac mortgage bonds in the lower coupon rates, but even here they have crept away from the 4.0 and only last week dropped back into the 4.5% MBS.  The Fannie Mae purchases are quite different, however.  The Fed’s focus on Fannie Mae mortgage bonds has drifted, and stayed in the higher coupon ranges, namely the 5.5% coupon and bleeding into the 6.0% MBS last week.

So what does this all mean?  In all likelihood, the Feds are expecting mortgage backed securities market pressure to drive mortgage rates higher.  In fact, they may even be concerned about their actions turning into inflation down the road and the market reaction to that fact.  That means they have little power to drive mortgage rates lower and the best they can do is to maintain mortgage rates, or more realistically, keep mortgage rates from spiking. 

With the shift of the purchases towards the higher coupon bonds, one of two things are taking place.  They likely are attempting to maintain stability in the markets as much as possible.  The other possibility is, in my opinion, a little less likely, that is they are purchasing higher coupon rates because those loans are likely to get refinanced and paid, thus allowing them to recoup their investment fairly quickly.  With the Fed playing with “fake” money, aka printing new money to build their balance sheet (Bernanke favors this tactic to create inflation), I doubt this is what they are focused on, not to mention that it is a gamble they may not pay off.

Decide what you may, but the reality is the Fed is not going to drive mortgage rates lower through the purchase of mortgage backed securities.  That means, all those people out there looking to refinance or even purchase homes at the lowest mortgage rates already missed the boat.

I get asked about loan officer websites quite often. As more and more people make the shift to shopping online, it’s become all but impossible to ignore! So what do you need to be aware of if you’re planning on setting up your own website?

Super Important Loan Officer Websites Tip #1

A website is not a marketing strategy! A website is an electronic storefront or sales person for you. Unfortunately, without people stopping by to chat with your new found sales person, it’s useless! Most loan officers spend good money to purchase a website package. Excited at the thought of all this new business they’re about to get, they are soon disappointed when none is forthcoming!

What’s happening? There’s no traffic! See, when someone goes to a search engine to type in what they are looking for, your website is most likely not showing up. This means no traffic, no leads, no closed loans.

Super important Loan Officer Websites tip #2

If you’re not on the front page of Google, then you’re missing out – big time! Yahoo ROBO, DMA, and other recent organizational research studies confirm that 91% of individuals do NOT click past page number 1 of the search results! Is your site on the front page of Google? If not, then 91% (Or more) of the targeted prospects searching for your services are going elsewhere… Not a good way to generate business.

Super Important Loan Officer Websites Tip #3

Is your website a pre-written purchased package? I’m sorry to tell you, but chances are a lot of money was wasted! See, one of Google’s primary criteria for ranking websites is “unique content.” It only makes sense, as how valuable would a search engine be if it kept displaying results full of the same material over and over?

If you have a pre-written website that was also purchased by other loan officers as well, then your chances of ranking well on the search engines just dropped into the basement. This is coming from Google’s mouth, not mine. If you’re violating this rule, then you need to rethink how badly you want business from the web.

There’s lots of business to be had, but you need to know what is required to rank high on the search engines for proper keywords. Want to learn more about this concept? Here’s a great video I have prepared – Click the Loan Officer Websites link below to watch. (About 10 minutes) :

Loan Officer Websites

I managed to pull off another week of writing this in the United States, and mortgage rates managed to tick higher, yet again.  I guess the Fed is waiting on something else (maybe a new infusion of cash from Congress?) before they try to drive rates lower, or even keep them level.  It does sound like Obama and his Democratic buddies are ready, willing and in all likelihood, able, to spend exuberant amounts of money to drive rates down and “lower mortgage costs”, which should likely scare you and all the borrowers out there.

Well, as I said last week, mortgage backed securities would be under selling pressure this week, and indeed they were, even in the midst of favorable economic data.  In the end, mortgage rates ended the week around 0.25%, but let’s look at what happened throughout the week. 

Treasury Auctions were rather mixed, with short term auctions meeting marginal demand and drawing slightly higher yields.  The 5-year auction went fairly well and even had fairly decent foreign participation, with yields ending at 1.82%, and the 20-year TIPS coming in at 2.50%.  Data wise, we saw continued problems in the housing market on several occasions, along with dismal numbers across the board when it came to the economy, with Friday’s list of data all missing their expectations.  The good thing is that despite the increased inflationary expectations, the data is showing recessionary concerns still outweigh inflationary ones.  And yet, mortgage backed securities fell and mortgage rates rose.

What’s in store for this week?  We start the week off with a report that is the Fed’s favorite.  Personal Consumption Expenditures (aka Personal Income and Outlays) has already come out, which I break down in detail over at Florida Mortgage Daily.  We also have several other key players, as well as more Treasury Auctions (they need to fund their stimulus packages).  And, of course, it’s will be the first Friday of the month and that means the Jobs Jamboree is coming.  Here is the rundown…

• Monday:  Personal Income and Outlays (PCE, Personal Spending and Personal Income) (8:30), ISM Index (10:00), 3-month Bill Auction (1:00), 6-month Bill Auction (1:00)
• Tuesday:  Pending Home Sales (10:00), 4-week Bill Auction (1:00)
• Wednesday:  ADP Employment Report (8:15), ISM Services Index (10:00), Crude Inventories (10:30)
• Thursday:  Jobless Claims (8:30), Productivity and Costs (8:30), Money Supply (4:30)
• Friday:  Non-farm Payrolls (8:30), Unemployment Rate (8:30), Average Work Week (8:30), Hourly Earnings (8:30), Consumer Credit (3:00)

As you can see, all eyes will likely be focused on a dismal economy with inflationary fears taking a back seat.  However, that was the case last week as well and mortgage backed securities plummeted, causing mortgage rates to rise, so what can be expected this week?

Mortgage bonds have fallen through another layer of support and now take aim at testing their 50-day moving average.  The good news is that they have moved into an oversold situation according to stochastics, so a correction is coming, it is just a question of when.  The bottom line, though, is they have broken out of their trading range that was caused by the artificially inflated prices due to the Fed’s buying, so the Fed is about the only way we will see lower mortgage rates for the foreseeable future, minus the corrective period.