Jason Bernabei, TriCastle Realty: "Say Fiscal Cliff One More Time!"

Jason, Bernabei, TriCastle Realty

DEL MAR : December 17, 2012 – Goooooood Monday morning San Diego!!! … Mortgage rates going mad? Mitigated short sale balances to face taxation?  Somebody say “Fiscal Cliff” one more time! That’s where I’m at with it right now, and what its long, formless spectre of a shadow is doing to my clients who are closing on real estate and loans this January.

Yes the Fiscal Cliff continues to grow in scope, size, reality, and Legend, and forecasters are all over the place as to the prospects of what it means to go over. For all the hub-bub about mortgage rates exploding upward, I much rather this take by Matthew Graham, authored today on www.mortgagenewsdaily.com.

“To whatever extent markets perceive that a Fiscal Cliff deal is achievable or imminent, the implication is likely an initial move higher for interest rates.  How high and for how long, remain to be seen, but until we actually get a deal, bond markets have to be defensive enough to account for multiple outcomes.  There have been several pieces of news over the weekend and into this afternoon that seem to advance the prospects of a deal.  This is the 800-lb gorilla in the room as far as that "pervasive weakness" is concerned.”

“The silver lining is that MBS (the "mortgage-backed securities" that most directly influence lenders' rate sheets) are less-affected by the drama than their US Treasury cousins.  That doesn't mean that mortgage rates won't move higher if broader bond markets continue to move higher, simply that they may continue to do so at a gentler pace.”

Mr. Graham’s assessment seems spot on to me. Although there is no direct comp for this Fiscal Cliff, being that the many circumstances of multiple other markets and governments are not the same as they were the last time we flirted with disaster; our last fiasco is a basis for a broad comparison. Yes, our  U.S. credit-rating was downgraded last time Law makers couldn’t find a way to play nice while approaching the cliffside, and yes, that could happen again this time around.

What didn’t happen last time was an upward spiral of rates of the proportions that blew out loan officer’s pipelines like it was 2007 all over again, and it doesn’t stand to reason that a similar doomsday scenario will transpire should we go over this time around. Most pundits, left, right, and center expect an extension on existing financial policy, if no grand bargain can be reached to avoid going over. If we do go over, it will not be long before something is in place, and with the Fed. still at the helm of rates, with his 2 year assurance on keeping rates historically low circa August 2011, and in consideration of the last Cliff-dive, my better judgment does not have me panicked over loan-locks come the 2^nd week of January. 

Having said all that, I do feel the need for disclaimer, the paradigmatic "but" coming (and it's a big "but"). BUT, I wouldn't bet the farm on it, or my clients' rates. If we are close to New Year's, and you have to make a decision for your clients' rate's sake, lock em if ya got em is my best advice to Loan Officer Land.

Jay’s Outlook: thoroughly annoyed

 

Jason, Bernabei, TriCastle Realty