While mortgage rates are not based on US Treasuries, the Mortgage-Backed-Securities (MBS) that do influence rates are similar to Treasuries and tend to trade in the same direction. Read on for a better understanding………….

Can Rates Go Any Lower?

A huge factor in how low mortgage rates can go is the underlying Mortgage-Backed-Securities (MBS) market.  Nearly all loan products offered by lenders are sold to Fannie Mae and Freddie Mac and end up as part of MBS pools or securities.  These MBS securities are then purchased by institutional investors.

In general, the lender that services the loan will receive .375% of the rate on a 30-year fixed rate loan. The ultimate investor in the MBS will receive the rest, except for the remaining .125% that gets eaten up by a variety of fees. So, on a 4% loan, the servicing lender gets 0.375% and the investor receives 3.5% as their rate of return.  Lenders can pool loans +/- .25 of the MBS rate. So, if the MBS security being sold into is at 4%, lenders can deliver loans with rates between 3.75% and 4.25% into that pool.

If rates go any lower, there will be a need to create a 3% MBS pool with a 3.5% interest rate. But, in order for lenders, Fannie and Freddie, to create MBS’s with a lower rate, there has to be investors willing to buy these MBS’s at a lower rate. With rates so low already, there likely isn’t much, if any, demand for lower rates on Mortgage-Backed Securities.

Therefore, the nature of supply and demand for Mortgage-Backed Securities will probably prevent rates from going lower. Unless economic factors force them down even more. And, any positive signs in the economy or in Europe can make rates pop back up again in no time.

The Fed

The Fed, officially known as the Federal Reserve, had one of their regularly scheduled Federal Open Market Committee meetings this week too. Although their comments were generally non-committal, Many observers believe the Fed will step in to take steps to stimulate growth in 2012, first through communications measures that drive home their expectation that interest rates will not rise for a long time, and then through more bond buying. Some have said the central bank should resume purchases of mortgage-backed securities to help revive the depressed housing market; others would prefer to stick with purchases of U.S. government debt, i.e., Treasury securities.

In the meantime, ‘tis the season…………

To track the factors that influence mortgage rates on any given day or week, you can always click on the following link to my Daily Rate Lock Advisory:

http://www.rtcmortgage.com/DailyRateLockAdvisory

Mortgage Interest Rates*
Rates as of Thursday, 15th December, 2011:

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Sean McCracken The Orange County Realtor showing 3 Blocks from Beach, Woods Cove, Laguna Beach Charmer with Great Backyard, $1.1 Million

Sean McCracken
The OC Realtor – Eco, Fun & Sun
Laguna Beach Realtor

The number and percentage of distressed homes on the market represents the much predicted flood of new foreclosures. Any increase in the total number of distressed properties on the market represents a watermark in the tide of foreclosures, but this increase of only 19 units barely registers on our flood gage. The waters have not started to recede yet—we will keep watch.

In this article series we report on the numbers for Orange County in total. Real estate is very local and any buying or selling decisions should be based on circumstances of specific neighborhoods. This series is intended to provide information about general countywide trends in supply and demand.

All real estate data in this article is from a report published by Steven Thomas of Altera Real Estate.

This report appears on www.OC180NEWS.com every other Monday.

70% of the properties I’ve previously videoed have gone into escrow within 30 days.

But first, since the coastal market momentum is so important to follow, I want to comment that Laguna Beach and the coastal market remains strong.

First add 3 more November Laguna closings for a total of 27 sales which is really strong for this time of year. Already this month, Dec., there are 14 sales and it’s not yet mid-month.  Also, houses are going into escrow on a daily basis.

On to the videos:

North Laguna ocean view $1.2m short sale
This completely remodeled, completely turn key 2 bed 2.5 bath Craftsman. Great Convenient North Laguna location 200 steps from the sand. This beautiful home sits on a R2 Lot and has a 1 Bed 1 Bath rear unit rented for $1,400 per month.
Client Full Report with Photo/Map

Alta Vista Chris Abel designed ocean view house
Fantastic Ocean Views and a great location on Alta Vista. Three bedroom home designed by Chris Abel with large wrap around decks on both floors
Client Full Report with Photo/Map

Alta Vista, Laguna Beach, 3 bdm, ocean view
Motivated Sellers have purchased another home and reduced the price on this well maintained Laguna Beach Alta Vista home. Spectacular vista views of white water, 180 degree coastline
Client Full Report with Photo/Map

South Laguna cottage duplex with ocean views
Beautiful, Expansive, Double Ocean View Lot! Great Investment Potential with Breathtaking Panoramic Ocean Views from this Charming Laguna Beach Cottage Duplex. Duplex can be converted into Single Family Residence
Client Full Report with Photo/Map

A real, real deal
The best priced deal in Arch Beach Heights! Not a short sale. Submit all offers! Gorgeous Coastline & Catalina Sunset Views from this very large, remodeled home!
Client Full Report with Photo/Map

North Laguna fixer
Single family, ocean-view home in the highly-desirable area of North Laguna. Three bedrooms, plus bonus room, two baths and over-sized two-car garage. Home is in need of repairs: Interior work was started, but not completed
Client Full Report with Photo/Map

But then again who really knows.

Over the past 4 to 6 months I’ve been representing different investors that have been buying distressed properties – foreclosure and short

Laguna Beach Foreclosures

sales. They range from major construction companies doing significant rehab and selling to people who are buying to live in.
This has introduced me to people that have access far up the distressed property food chain. They are in the rare air of the bankers and asset managers that are in the inside.
Orange County Coastal Foreclosures Client Short Page
CMA Page
What are they saying?

They’re saying that since the bank’s year end in coming up, they are going to be ‘dumping’ (a strong word) on the market. They say it’s going to be around the November timeframe but I already see some signs of this happening.
For the last 6 months the distressed property level from Newport Beach to Dana Point has been around 225 properties and it’s been staying in equilibrium. However, over the past 3 weeks it’s popped up to 260 properties.
In Laguna Beach alone, for the last 12 months there have been 1 to 2 foreclosures on the market at any one time . Now there are 6 to 8.
Time to ‘Pay the Piper’

What a bummer! Things have been stabilizing, at least on the low end. People confidence is going up.
But what happens if this product is put on the market all at one time. Everything the banks have achieved by holding back their foreclosure inventory maybe for naught.
Orange County Coastal Foreclosures Client Short Page
CMA Page

What do you do?

Be prepared! I’ll help you.

Watch the distressed properties on a weekly basis. Talk to people like myself that have some insight. Watch the trends? Per sqft cost trends are a great way to get the most accurate trends.

Keep you ‘powder dry’. (I love that term) Get your loan preapproval and keep it current. Read all you can on the subject. Pick out your market area and watch it closely. What types of house are you looking for and focus in on it. Go to open houses in the area….
You are not going to time the bottom. This is most important. Change that mindset.

If you believe in Orange County real estate and are going to live in the house for a while, then you feel the values are going to come back over time. If you ‘time’ you’re going to see it in the rear view window.

Subscribe to my newsletter and you’ll be kept abreast of what is happening.

Orange County Coastal Foreclosures Client Short Page

CMA Page