Rates are starting to rise.

The Obama administration released their ideas on how to overhaul Fannie Mae, Freddie Mac and the Federal Housing Administration.  Currently, all three issue mortgage backed securities that are backed  by you the tax payer.  This gives these securities very low risk and has great appeal to foreign investors that seek low risk.  This is why your mortgage rates are still historically very low.

However, the proposed changes will enable the government to ease away from being such a big player in the mortgage business, moving from 95% of the total market down to as low as only 40% of the total market.  By doing so, rates will naturally adjust upward to equalize with the new risk levels.  We'll also see more reliance on adjustable rate options (ARM).  Last week we sent out guidance on Flagstar's Adjustable Rates. Mid term ARMS are still in the mid 3% range with historic low index values.  Be sure to visit our website to learn more about our aggressive Agency/FHA and Jumbo ARMS

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -42 basis points last week which caused 30 year fixed rates to move higher and closed at their highest levels of 2011.  As we have discussed several times, mortgage rates are pushed lower when the economy is performing poorly and their is little to no risk of inflation.  So, as the economy continues its upward march out of the recession, mortgage rates are pushed upward on the stronger growth and inflationary concerns. We had a couple of strong economic reports last week. The weekly Initial Jobless Claims were much lower than expected and Wholesale Inventories saw stronger gains.  Both were positives for the economy and therefore negative for mortgage rates