Long-term rates are moving up this morning, mortgages rising toward 6.25 percent, the definitive 10-year T-note to 4.61 percent, out of a three-week rest in the four-fifties.

Long-term rates are moving up this morning, mortgages rising toward 6.25 percent, the definitive 10-year T-note to 4.61 percent, out of a three-week rest in the four-fifties.

The bond market got so low in gleeful observation of a global stock-market dive, and stayed in anticipation of a slowdown in the U.S. economy. GDP guesses for the first quarter are weak, just as they were in several fleeting episodes of lower rates last fall. The rates-up turnaround clincher came today in news of a 3.9 percent February jump in sales of existing homes and stable inventories of unsold homes. Earlier in the week, bearish traders ignored a 9 percent rebound in new-home starts, instead seizing on a decline in new building permits.

Shoulda known better: housing is weak, but not collapsing. Some small indicators are more useful than the traditional national aggregates. Example: tightening credit standards are supposed to shut out hundreds of thousands of buyers. However, the MBA’s loan application count is steady, and there’s no news of increased turn-downs. Lower-quality borrowers are finding substitutes for extreme subprimes.

Another one. Fremont General, one of the idiot subprime providers (not redundant; Fremont made the loans and kept them as investments, bad banking but free of hypocrisy), this week dumped $4 billion of its subprime portfolio, taking a $140 million loss. In a true foreclosure meltdown, loans uncollectible, the discount would have been a hell of a lot deeper than 3.5 percent.

This week’s comic relief came courtesy of the Fed. After each meeting since the early 1990s, the Fed has made clear its bias: to ease, to tighten, or balanced. On Wednesday, for the first time in 15 years, Fed Chair Ben Bernanke was unable to explain which of the three he had in mind, and a two-day argument ensued.

At first, confident gods of bonds announced that the Fed had retreated from bias-to-tighten to balanced, and a further switch to easing lay soon ahead. Mere mortals read the statement a few more times (the damned thing is only six sentences long), and couldn’t miss the obvious: “…The predominant policy concern remains the risk that inflation will fail to moderate.”

Inflation is still out of the box, core north of 2.5 percent, and the Fed can’t ease. The mangled statement did acknowledge the obvious in its reference to housing: January’s mention of “stabilization” gave way to this week’s “adjustment … ongoing.” The housing worst is obviously not over, but nobody has a good grasp of linkage from housing to the real economy — many say they do, but don’t trust ’em.

In the new, everybody-is-an-expert land of mortgage meltdown analysis, here is one way to detect a poseur. Any story that makes reference to “Liars’ Loans” — just toss the whole thing. You’ve found an author who might accidentally have something accurate to say elsewhere in the article, but no wisdom.

“Stated-income” loans go back a long way. In earliest form, in small towns, a common borrower statement to a banker looking for merit in an application was, “My Daddy plays golf with your Chairman.” Many borrowers have significant financial resources beyond paychecks.

By 1980, the first modern SI loans opened mortgage credit to borrowers whose incomes were sheltered from IRS view in dozens of legitimate ways, or whose cash-flow defied traditional definitions of income. Making a loan to a documented high-net-worth borrower putting 25 percent down is the soul of prudence. Recent abuse of the approach has these hallmarks: little or nothing down, or failure to document assets or track record.

“Liar’s Loan” is a gratuitous insult to both borrower and banker, and exposes an ignorant author piling on in a tough situation.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription