Real Time

When interest rates move in the New York bond market, so do mortgage rates nationwide — instantly. That’s real time as in no down time, lag time, lead time, rag time, tea time, or tee time. Right now!

When rates rise during any business day, within minutes every mortgage lender in Boulder receives a pile of faxes with little sad faces drawn on them (which makes an already over-stressed mortgage lender turn homicidal).

Electronic money moves at the speed of light, and so does the price of money. This speed often causes confusion and bad feeling among borrowers and lenders.

Let’s suppose you’re looking for a house, and you have begun to shop for a mortgage. If you are a sophisticated shopper, you will soon figure out that newspaper lists of rates from different lenders are approximations at best. Most of the approximation problem comes from time lag: rates are surveyed on Wednesday and Thursday, and printed in weekend editions.

Internet postings remove the typical print media time lag, but net lenders are difficult to evaluate for quality and honesty, and rarely reflect intra-day price changes. Rates are still virtual time on the web, not real time.

Any time lag at all creates a terrible lender temptation to fib. Not misrepresent (certainly not that), but no rate is firm until locked (and sometimes not then…). “That was this morning’s price; this is afternoon.”

If you run an ad for shoes you don’t have in stock, or to sell them at an artificially low price, you go to jail. Offer a mortgage at 7.25% in a 7.50% market, and you get clients. Money is a sharp-elbowed game.

The real estate industry is the nation’s largest single business, and the mortgage business is its finance component. You would think that somebody would do a real time, honest pricing survey so that borrowers would have a reasonable benchmark for comparison shopping.


The national news media rely on two survey sources for their interest rate stories: HSH Associates, Butler, NJ, and Freddie Mac (the Federal Home Loan Mortgage Corp.), Washington, DC. You will find these outfits noted as sources for nearly all newspaper charts or TV graphics.

HSH is trying hard, but suffers from a three-day, survey-to-publish lag which is never mentioned by the media running the survey as “news”. Keith Gumbinger, HSH’s publisher and a good guy, knows when he writes his Friday report that the bond market has made his survey obsolete, and often concludes, “We expect rates to be higher next week” when he knows they already are.

HSH also shares a traditional problem with pricing methodology. Should a mortgage survey include an origination fee, and hence report rates on the low side? How should a surveyor account for higher rates on Jumbo loans (bigger than $300,700), and lower rates on smaller ones?HSH’s current solution is to average rates for all loan sizes. While the HSH reports are useful for week-toweek trend, its single reported “rate” has no market meaning at all.

Freddie’s Thursday news release also suffers by lagging its Monday-Tuesday survey. In addition — worse — Freddie’s weekly “rate” is based on an antique assumption: that everybody still pays a one percent origination fee and about three-quarters of a discount point. The fee business means Freddie always announces a rate which is .25-.50% under the “zero and zero” pricing most borrowers prefer.

“Mr. Barnes, I think you’re lying to me. Why, Tom Brokaw told me I could have 6.75%.”

Imagine if the national media reported the Dow Jones Average three days late, and got it wrong every time.

If you are net-savvy, will give you a reasonable benchmark: they are honest, and set their prices near the lowest level at which rates can be delivered without sacrificing quality.

If you are determined to compare, pick a few well-recommended local lenders, and then call ’em all within a 15-minute span on a stable bond market afternoon. If you can find one, real time.