Most real estate agents understand that mortgage rates change every day, sometimes intra-day. Fewer know that the real-time aspect is driven by global trading in bonds, and mortgage-backed securities (MBSs) are just another kind of bond.

  • Freddie Mac’s Primary Mortgage Market Survey is an industry standard, but be aware (and convey) the reality of information delay.

Most real estate agents understand that mortgage rates change every day, sometimes intra-day. Fewer know that the real-time aspect is driven by global trading in bonds, and mortgage-backed securities (MBSs) are just another kind of bond.

Every agent and their clients, especially those close to a transaction, are curious to know where rates are and how they have changed. (We would all like to know what rates will do tomorrow, but that’s beyond mankind.)

The mortgage industry and the bond market make it as hard as possible for brokers and civilians to understand, for different reasons.

Mortgage salespeople do not fear rate competition so much as the knowledge that we tend to have the same deal. Equalize fees and closing costs, and rates tend to do the same.

Internet vendors may be cheaper, some local credit union may be on the cheap side, or a megabank for a time could underprice a segment, like jumbos or ARMs (adjustable-rate mortgage), but day in, day out, the 30- and 15-fixed are commodities.

If forced to confess that all retail lenders are within a few hundred bucks of each other, what’s to sell?

The bond market is different — it is opaque because the MBS and “loan servicing” pricing models are their most-prized and secret possessions.

There is no way for civilians to get access to the MBS inside market.

There is only one way for the public to get good information about rates, and that’s by broad-market survey.

Ever since 1971, the real estate industry, media and consumers have relied on just one: Freddie Mac’s Primary Mortgage Market Survey, PMMS.

It’s easy to find at bottom left of the home page of freddiemac.com, and its weekly archive is here.

Everyone outside the mortgage business relies on PMMS; every business media outlet reports its results, but it is flawed, and in one aspect, very badly flawed and a constant source of confusion. This week into next is a perfect example.

Freddie surveys lenders each Monday through Wednesday, and publishes the results on Thursdays. Some e-media run the story on Thursday, but connected stories often don’t run until Fridays — the bigger the rate move, the bigger the stories.

But, in a real-time world, by Friday, Freddie’s rate news is Jurassic Park. An interesting statistical artifact, but “survey lag” has made it historical information, badly out of date.

Civilian consumers don’t know that!

Last week and perhaps next week, Freddie’s survey releases will be perfect misinformation. Wednesday afternoon last week, after markets had closed and after Freddie had completed its survey, bond and mortgage yields suddenly fell to their lowest levels since last November — not a lot in the grand scheme, but consumers are sensitive to fractions, and very sensitive to changes in the big number up front, “four,” or “three.

Freddie announced on Thursday “4.08 percent” costing a “0.5 percent” loan fee. A minor error lies there, too — most borrowers for 25 years have preferred no-fee pricing, but Freddie still surveys a mix of rate and fee, and does not hold the fee constant from week to week!

In reality, by Thursday morning a half-point fee would have bought a rate slightly under 4.00 percent, maybe 3.95 percent. Mortgages come in one-eighth increments, but Freddie does not follow that convention, either.

Today, the bond market will begin to move again, rates pressed down by geopolitical fear, possibly a slowing economy, and the absence of Trump stimulus — and pushed up by fear of the Fed.

If markets hold as they are, on Thursday Freddie will report news that mortgages have fallen into the high threes. Week-old news.

The world can be a cruel place. Most cruel would be a sharp increase in rates on Wednesday, missed by Freddie’s new survey, the old result trumpeted far and wide as “Mortgages drop to five-month low!” on the day after they shot back up.

Angry and disbelieving voices turn up in our phones on those days.

Freddie’s survey is a useful tool, especially to show clients where rates have been recently and historically, but every agent must understand the survey lag — or your clients will be just as mad at you as they are at us.

Lou Barnes is a mortgage broker based in Boulder, Colorado. He can be reached at lbarnes@pmglending.com.

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