{"id":16296,"date":"2013-04-01T12:43:54","date_gmt":"2013-04-01T19:43:54","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=16296"},"modified":"2013-04-01T12:43:54","modified_gmt":"2013-04-01T19:43:54","slug":"can-bernanke-keep-mortgage-rates-this-low-into-2015","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/16296\/can-bernanke-keep-mortgage-rates-this-low-into-2015\/","title":{"rendered":"Can Bernanke Keep Mortgage Rates This Low Into 2015?"},"content":{"rendered":"<p>I&#8217;ve been a vocal critic of Ben Bernanke.\u00a0 I thought his Quantitative Easing schemes would eventually <a title=\"higher mortgage rates\" href=\"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=13550\" target=\"_blank\">create a bubble in the Treasury and mortgage-bond markets<\/a>.\u00a0 Bernanke has committed to <a title=\"bernanke 2015\" href=\"http:\/\/abcnews.go.com\/Business\/federal-reserve-interest-rates-low-mid-2015\/story?id=17226149#.UVna0VdrZ2Y\" target=\"_blank\">keeping rates low for another 18-24 months<\/a>.<\/p>\n<p>I was wrong.\u00a0 I violated the first rule of market prognostication (<em>from the late Marty Zweig<\/em>):\u00a0 <strong>Don&#8217;t Fight the Fed<\/strong><\/p>\n<p>Let me give you some background.\u00a0 Mortgage rates are driven by the secondary market (which is a fancy word for bond buyers on Wall Street).\u00a0 I offered an <a title=\"abbreviate history of mortgage backed securities\" href=\"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=1147\" target=\"_blank\">abbreviated history of secondary mortgage marketing<\/a> , six years ago, here on Bloodhound Blog.\u00a0 Essentially it works like this:<\/p>\n<ul>\n<li>Home buyer applies for a loan with a mortgage originator<\/li>\n<li>Originator processes the loan for submission to a lender<\/li>\n<li>Lender underwrites the loan to agency guidelines (FHA, FNMA, FHLMC, VA)<\/li>\n<li>Lender funds the loan<\/li>\n<li>Lender secures guaranty from agency<\/li>\n<li>Lender retains servicing rights but assigns rights to principal and interest to an investment bank<\/li>\n<li>Investment bank packages loans in a pool, carves up the pool into bonds, and sells them to individual investors<\/li>\n<\/ul>\n<p>Two things are important in secondary marketing:\u00a0 the agency guaranty and the ability to sell the bonds.\u00a0 The agency guaranty offers a sense of security to the investors and the demand for the bonds must be there.\u00a0 When I thought rates would rise, because of runaway inflation, I posited the the Federal Reserve Bank&#8217;s power was quickly deteriorating.\u00a0 What I hadn&#8217;t anticipated was that central banks, all over the word, were in even worse shape.\u00a0 <strong>The Fed might be ugly but she&#8217;s the prettiest gal at the dance.<\/strong><\/p>\n<p>Last month, I asked Alan Nevin, <a title=\"london group\" href=\"http:\/\/londongroup.com\/about\/alan-n-nevin-2\/\" target=\"_blank\">economist with the London Group,<\/a> &#8220;What if the buyers run away?&#8221;\u00a0 To which, he replied, &#8220;Where will they go?&#8221;.<\/p>\n<p>This is not a pollyannish answer.\u00a0 Where WILL investors go?\u00a0 I offered these options:\u00a0 Hong Kong, Australia,\u00a0 and Canada<\/p>\n<p>Then it hit me&#8211;the world wide capital market is huge and the options for capital investment are limited.\u00a0 Imagine the global capital market as a 64-gallon trash can.\u00a0 The Hong Kong, Australian, and Canadian bond markets are like a shot glass, a pint bottle, and a quart can.\u00a0 Even if you tried to dump all that <a href=\"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/16296\/can-bernanke-keep-mortgage-rates-this-low-into-2015\/#more-16296\" class=\"more-link\">Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>I&#8217;ve been a vocal critic of Ben Bernanke.\u00a0 I thought his Quantitative Easing schemes would eventually create a bubble in the Treasury and mortgage-bond markets.\u00a0 Bernanke has committed to keeping rates low for another 18-24 months. I was wrong.\u00a0 I violated the first rule of market prognostication (from the late Marty Zweig):\u00a0 Don&#8217;t Fight the [&hellip;]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[26,5],"tags":[],"class_list":{"0":"post-16296","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-lending","7":"category-real-estate","9":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":761,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/761\/why-the-fed-matters-to-real-estate\/","url_meta":{"origin":16296,"position":0},"title":"Why The Fed Matters to Real Estate","author":"Dan Green","date":"December 12, 2006","format":false,"excerpt":"The Federal Open Market Committee meets today and will keep the Fed Funds Rate unchanged at 5.250%. It is not what the Fed does, however, that should concern Americans. It's what the Fed says. First, a clarification. The Fed Funds Rate is directly tied to Prime rate which impacts lines\u2026","rel":"","context":"In &quot;Enduring Interest&quot;","block_context":{"text":"Enduring Interest","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/enduring-interest\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6154,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/6154\/ben-bernanke-is-now-one-of-us-booyah\/","url_meta":{"origin":16296,"position":1},"title":"&#8220;Ben Bernanke Is Now One Of Us&#8221; Booyah !","author":"Brian Brady","date":"December 17, 2008","format":false,"excerpt":"\"I demand that you refinance your home in three months and buy a bank stock\"- Jim Cramer Cheerleader Jim Cramer is now certifiably confident that housing will bottom in 2009 and the economy is saved because of the Fed's recent action. Cramer was, of course, ecstatic. This is exactly what\u2026","rel":"","context":"In &quot;Real Estate&quot;","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":8627,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/8627\/lower-june-2009-mortgage-rates-rely-on-central-bank-action\/","url_meta":{"origin":16296,"position":2},"title":"Lower June, 2009 Mortgage Rates Rely On Central Bank Action","author":"Brian Brady","date":"May 28, 2009","format":false,"excerpt":"May Day in the mortgage rates market is over.\u00a0 The market got spooked by triangulated opinions about the viability of the US Treasury as a going concern.\u00a0 In response, mortgage traders sold off mortgage-backed securities, some 3-4%, in 4 days, to drive mortgage rates from 4.75%\u00a0 to the 5.375% current\u2026","rel":"","context":"In &quot;Lending&quot;","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":9293,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/9293\/whats-an-exit-strategy-and-why-does-it-matter-to-the-housing-market\/","url_meta":{"origin":16296,"position":3},"title":"What&#8217;s an &#8220;Exit Strategy&#8221; and why does it matter to the housing market?","author":"Tom Vanderwell","date":"July 24, 2009","format":false,"excerpt":"I originally wrote this and posted it on my new site, Straight Talk About Mortgages - The Bigger Picture, but I've been urged to post it here as well.\u00a0\u00a0\u00a0 So, I'm doing that.\u00a0\u00a0 Why have I set up another site?\u00a0\u00a0 It's pretty simple..... The financial and real estate world that\u2026","rel":"","context":"In &quot;Real Estate&quot;","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1928,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1928\/nobody-behind-the-curtain-cookies-and-milk-judo-and-not-repeating-history\/","url_meta":{"origin":16296,"position":4},"title":"Nobody Behind the Curtain &#8212; Cookies and Milk &#8212; Judo &#8212; And NOT Repeating History","author":"Jeff Brown","date":"September 17, 2007","format":false,"excerpt":"What went on with the speculation about the Fed Funds Rate all last week, and will surely intensify today and tomorrow, has been almost, but not quite analogous to the scene in The Wizard of Oz, when we discovered there was a man behind the curtain. The characters were told\u2026","rel":"","context":"In &quot;Group Therapy&quot;","block_context":{"text":"Group Therapy","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/group-therapy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":982,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/982\/peeking-into-bernankes-crystal-ball\/","url_meta":{"origin":16296,"position":5},"title":"Peeking into Bernanke&#8217;s Crystal Ball","author":"Brian Brady","date":"February 2, 2007","format":false,"excerpt":"Do you want to look into the crystal ball through the eyes of Federal Reserve Chairman, Ben Bernanke? Will that help you predict mortgage rates and housing prices for 2007? I try to outguess the Fed all the time and I've decided that we'll see a significant decline in short-term\u2026","rel":"","context":"In &quot;Real Estate&quot;","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/16296","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=16296"}],"version-history":[{"count":1,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/16296\/revisions"}],"predecessor-version":[{"id":16297,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/16296\/revisions\/16297"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=16296"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=16296"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=16296"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}