Happy Holidays.

The last few days have been a blur. The bond market closed early on Thursday. All U.S. markets were totally unplugged on Friday. Then Christmas came over the weekend and the world completely detached from the economics of money and banking.  After that we got one day off to let the holiday commotion die down and before we knew it, here we are, back at work. Blah. I bet you feel "out of it".  I certainly do.

But even before last week, thanks to a trend of rapid spikes in home loan borrowing costs, the mortgage industry was already heading into Phase II of its normal year-end loan production slow down. On several occasions over the last two weeks have we witnessed lender loan pricing strategies disconnect from the movements of mortgage-backed securities (MBS).  Reprices for the worse have been bigger than usual while reprices for the better have been smaller than usual. Some say lenders have been acting sorta stingy with their pricing strategies. Others say they're just exhausted from a busy year.

So, with that, it makes sense that we would find ourselves swimming in sea of random rate quotes today. We've heard of lenders actively quoting 4.75% to very well-qualified 30yr fixed borrowers, but 4.875% still looks more prominently offered. And complaints of 5.125% par quotes are tough to take in when you've got reports of phantom 4.625% sightings, but we're still seeing 5.125% offers. The primary mortgage market is very segmented at the moment. This puts the best execution 30 year fixed mortgage rate in a range between 4.75% and 5.00% with definite chances of phantom offers (very-well qualified borrowers) as low as 4.625% and as high as 5.125%.

Important Mortgage Rate Disclaimer: Loan originators will only be able to offer these rates on agency conforming loan amounts to very well qualified borrowers who are have a middle FICO score over 740 and enough equity in their home to qualify for a refinance or a large enough savings to cover their down payment and closing costs. If the terms of your loan trigger any risk-based loan level pricing adjustments (LLPAs), your rate quote will be higher. If you do not fall into the "perfect borrower" category, make sure you ask your loan originator for an explanation of the characteristics that make your loan more expensive. "No point" loan doesn't mean "no cost" loan. The best 30 year fixed conventional/FHA/VA mortgage rates still include closing costs such as: third party fees + title charges + transfer and recordation + escrows (things like upfront MIP (if required), property taxes, homeowners insurance, accrued interest.

The week ahead is historically slow on Wall Street. This means the potential for interest rate volatility is high and rate watchers should be prepared for the possibility of multiple intraday reprices as well as irregular lender loan pricing strategies.

For borrowers who need to lock before January 7th. 4.75% is as good as it gets for you. I would target this offer and lock when you reach it (see disclaimer above).

For anyone who is waiting for mortgage rates to inch lower, the bond market faces a major hurdle on January 7, 2011 when the December Employment Situation Report is released. If you are currently being quoted a rate that would reduce your monthly loan payment (enough to be worth the hassle of refinancing), the intermediate term direction that mortgage rates take is largely dependent on this jobs report and revisions to the previous data. Floating into and through this economic data release is a high risk event. Which means...if weak November data is confirmed when the December report prints, the best execution 30 year fixed mortgage rate could move back down to 4.50%. However if major positive revisions are made to the November Employment Report (which was released in December), then mortgage rates would be expected to remain at current levels or even move higher.

Floaters: January 7, 2011 is a high risk event

Lockers: 4.75% is your best execution target. The quote is out there, you just gotta find it. (see disclaimer above)