Holden Lewis, senior reporter, Bankrate.com

Tuesday, Feb. 24
Posted 10 a.m.
THE NUMBERS: Yields are exactly where they were one week ago. The yield on the 10-year Treasury is 4.02 percent this morning, down from Monday's close at 4.05 percent and exactly the same as last Tuesday's yield. Fannie Mae's and Freddie Mac's required net yields -- another barometer of mortgage rates -- are down slightly from Monday, but virtually unchanged from a week ago. Rates have plateaued.

THAT'S JUST BUENO: The unemployment rate of 5.6 percent is a "good number," the president says -- twice. He tells governors that the number isn't good enough, but considering the recession and Sept. 11 and corporate scandals and war, it's good.

Perhaps he wishes he had phrased it differently.

IF IT AIN'T BROKE: The Wall Street Journal's Greg Ip asks: Is it time to forgo a fixed-rate mortgage? Actually, that's a question that Alan Greenspan, chairman of the Federal Reserve, asked in a speech Monday. Greenspan noted that adjustable-rate mortgages carry lower monthly payments, and that, in effect, you're paying insurance against rising rates when you get a fixed-rate mortgage. The question is whether you need that insurance.

Greenspan also said that households are in good financial shape, despite rising bankruptices.

Monday, Feb. 23
Posted 10:30 a.m.
THE NUMBERS: The yield on the 10-year Treasury is 4.09 percent early this morning, down almost imperceptably from Friday's 4.10 close. Fannie Mae and Freddie Mac have posted similarly small changes in their required net yields, another good barometer of the direction of mortgage rates.

HUD HOMES: The federal Department of Housing and Urban Development frequently sells houses at auction. They are FHA-insured houses that have been foreclosed upon. Usually, the bidders are experienced investors who buy the homes, fix them up and sell them quickly. Non-investors are welcome to bid on HUD homes, but most are sold to investors who know the ins and outs and pitfalls of HUD auctions.

This month, HUD is making an effort to open up the home sales to the public via an Internet auction. About 4,000 houses are expected to be sold in the auction, which starts Friday and ends Sunday. HUD has posted questions and answers about how the auction process works, and has a list of states and territories where houses are up for auction. Click on your state and you can look for a house in your area.

If you find a house that you're interested in, you can inspect it now and decide how much to bid before the auction ends Sunday. You'll have 30 to 60 days to arrange your own financing. You don't have to get an FHA-insured loan.

CHEAP REFI: The Wall Street Journal's Jonathan Clements describes how he cut his mortgage rate in half, and all it cost was $90.38.

Friday, Feb. 20
Posted 8:45 a.m.
THE NUMBERS: The core Consumer Price Index for January was up 0.2 percent. Wall Street had expected core consumer prices to rise 0.1 percent. When you include energy and food, consumer prices rose 0.5 percent.

Inflation is still relatively tame, but it's higher than investors and economists had expected, so don't be surprised if Treasury yields rise and mortgage rates follow.

Early this morning, before trading, the yield on the 10-year Treasury is 4.03 percent, down 2 basis points from Thursday's close at 4.05 percent.

Thursday, Feb. 19
Posted 3:30 p.m.
THE NUMBERS: For me, the big number this week is 14.3, which is how many gallons of diesel fuel a Volkswagen Jetta TDI holds. Another important number is 600, which is the mileage I typically can get out of a tank before refueling. Yet another important number is 586, which is how many miles the car went before it ran out of fuel and sputtered to a halt on the way to work. Less than 41 mpg! That's terrible for a TDI!

For you TDI owners out there, words of advice for what to do when you run out of fuel: Get a couple of gallons of fuel and pour three-quarters of it in the tank. Open the hood. Bolted to the fender on the passenger side, next to the coolant overflow container, is a cylindrical object. That's the fuel filter. Unscrew the bolt on the bracket, lift up the filter, turn it over, unscrew the plastic thingie, and pour diesel fuel into the tiny hole. You may need to grow another pair of hands to do this properly. Put the fuel filter back together and back in the bracket. Don't try to start the car immediately. Instead, turn the key so that all the accessories turn on, then turn everything off. Do that about 15 times. Then start the engine. It will take a while.

This is especially fun when your cellphone (Nokia model 3595, to give you another number) is broken and you're waiting for a replacement to come in the mail. For an extra challenge, make sure this happens on the busiest day of your workweek, and refrain from cursing.

You're probably impatient now, selfishly wondering when I'm going to stop talking about my life and start talking about yours -- namely, what's going on with Treasury yields and mortgage rates. Fine. Rates haven't changed much in the last couple of days. The yield on the 10-year Treasury is up 4 basis points from Wednesday, at 4.05 percent. Fannie and Freddie haven't changed much in the last few days.

WEEKLY SURVEY: Mortgage rates have dropped to their lowest point since July. The average rate on a 30-year mortgage is 5.58 percent, according to Bankrate.com's weekly rate survey, conducted each Wednesday. That's down 13 basis points from the previous week.

Every week, I guess in the Rate Trend Index what direction I believe rates will go in the next 30 to 45 days -- up, down or about the same (plus or minus 2 basis points). Every week, I look back at my prediction five weeks earlier and grade myself. Five weeks ago, when the average 30-year rate was 5.68 percent, I said they would remain unchanged. "The disappointing employment report for December will reverberate through the markets for weeks," I wrote. "The economy just isn't creating jobs. Until it does, inflation and interest rates will remain low." I was more right than I knew -- rates dropped. Technically, I was wrong, so I'll score it as a loss, although I would have recommended then that you not lock, and that would have been correct advice.

I have guessed correctly 17 times in the last 52 weeks, for a batting average of .327. We're at the level where someone guessing at random -- or a dart-throwing monkey -- could do better. I'm still guessing that rates won't change much.

Tuesday, Feb. 17
Posted 9:30 a.m.
THE NUMBERS: Rates and yields are catching some Zs. Early this morning the yield on the 10-year Treasury is 4.02 percent, down 3 basis points from Friday's close at 4.05 percent (markets were closed Monday). A key required net yield of Freddie Mac is up 2 basis points from Friday. Bottom line: Rates have changed little since Friday and hardly at all since Wednesday.

Friday, Feb. 13
Posted 10:30 a.m.
THE NUMBERS: Treasury yields and Fannie Mae and Freddie Mac required net yields haven't changed much from Thursday. The 10-year Treasury is at 4.03 percent this morning, down 1 basis point from Thursday's close.

But compared to Tuesday, yields are down substantially. The 10-year Treasury closed at 4.13 percent on Tuesday, the day before Fed Chairman Alan Greenspan gave his assessment of the economy to Congress. He described an economy that he expects to grow fast, with low inflation. Treasury yields fell. He did express grave concern about the federal budget deficit, and said that the deficit must be reduced, preferably by cutting spending but, if necessary, in combination with tax increases. The bond market hasn't paid much attention to those remarks, or Greenspan's warning that big budget deficits will cause long-term rates to rise.

GRADE: Every week I predict where mortgage rates will go in the next 30 to 45 days, and I grade myself by comparing the rate then with the rate five weeks later. On Jan. 7, when the average 30-year mortgage rate was 5.87 percent, I said mortgage rates would be little changed -- plus or minus 2 basis points. This week, the average rate on a 30-year mortgage was 5.71 percent. I was wrong, and I have guessed correctly 18 times in the last year, for a batting average of .346.

PRODUCTIVITY: Information technology probably drove the big increases in labor productivity in the last few years, the New York Times reports. That's not surprising, but the economic data appear to confirm the conventional wisdom.

AUCTION: The federal housing department will use an Internet auction to sell up to 4,000 houses that were acquired through foreclosure. The auction begins Feb. 27 and ends just before midnight Eastern time Feb. 28.

The Department of Housing and Urban Development will list the properties on its Web site starting Feb. 15. That gives bidders almost two weeks to inspect the houses, check out the neighborhoods and comparison-shop. I hope HUD publishes more information about financing requirements; it appears that HUD will give you 30 to 60 days to arrange financing and close on the loan. It's probably best to obtain preapproval from a lender up to a certain loan amount before bidding.

I'll post more details when I get them. HUD plans to run ads in major newspapers that might explain the process more fully. Meantime, you can check HUD's Web site.

Wednesday, Feb. 11
Posted 11 a.m.
THE NUMBERS: The yield on the U.S. Treasury and Fannie Mae's and Freddie Mac's required net yields haven't changed enough to warrant much attention. But you want to know anyway, so here it is: the 10-year yield is down 1 basis point from Tuesday's close, to 4.12 percent. It is down 3 basis points since last Wednesday. The Fannie Mae required net yield that I track is up 5 basis points from Tuesday and unchanged from last Wednesday. The Freddie Mac version is up 2 basis points from Tuesday and down 3 basis points from a week ago.

This all means that, when Bankrate.com conducts its weekly mortgage survey today, the average rate on the 30-year fixed will barely budge. Last week I predicted (to my boss, alas -- not to you) that rates would not change, and I was correct. In my nerdy world, this was cause for fist-pumping celebration. Today I think the average 30-year rate will decline 2 basis points, to 5.70 percent. But I wouldn't be surprised if it remained at 5.72 percent for the third week in a row. The change will be negligible.

NO BASEMENT LAUNDRY ROOMS: Kenneth Harney reports on a study of what features add the most to the value of a resold home. A hint: add a full bathroom, and make sure the laundry room isn't in the basement.

Tuesday, Feb. 10
Posted 9:45 a.m.
THE NUMBERS: Mortgage rates have gone down as much as one-eighth of a percentage point since Friday. The yield on the 10-year Treasury is 4.08 percent this morning, down 1 basis point from Monday's close and down 4 basis points from Friday's close. Not much of a decline; on the other hand, a key required net yield of Fannie Mae is down 13 basis points since Friday; its Freddie Mac counterpart is down 6 basis points. You very well might see lower rates from a few lenders.

COLD BLOODED: Wild creatures run rampant in and around my South Florida home. Tiny lizards scurry around the house; we frequently find them in the bathrooms and in the kitchen. One lived for a while in the dishwasher. No, I don't know how it survived the wash cycles. Hawks often keep watch from our pine in the backyard. Moles tear up the front yard. A corn snake once took up residence on our enclosed patio. Experts sagely tell us that the hawks and snakes are after rodents (mice, rats and moles, I guess), the moles are after grubs that gobble the lawn, and indoor lizards eat ants. Our modest lot supports an entire ecosystem.

Sunday my son and I were driving to the beach. Nathaniel was playing with his Bionicles in the back seat. As we were coming to a stop at a red light, he said, "There's a lizard on the door."

I said, "You mean a lizard that you made with your Legos?"

"No, a real lizard. Now it's on the side of your seat."

With that, the tiny lizard jumped onto my bare thigh. I am sorry to say that I squealed like a little girl.

When we got back home we shooed the lizard out of the car.

Friday, Feb. 6
Posted 9:30 a.m.
YIELDS FALL: The 10-year Treasury yield, a barometer of long-term mortgage rates, has fallen to 4.13 percent in response to the mildly disappointing employment report. The 10-year Treasury closed at 4.20 percent Thursday.

Fannie Mae's and Freddie Mac's required net yields -- another barometer of mortgage rates -- went in different directions this morning. A key Fannie yield is up 2 basis points from Thursday. Freddie Mac initially posted a slightly higher required net yield, but then revised it downward, 4 basis points below Thursday's final yield.

So far this morning, the mortgage market is shrugging off the employment report. You can view the January employment report positively, by noting that the unemployment rate went down, that nonfarm payrolls had their biggest increase since December 2000, and that the economy has had a net increase in jobs for five months in a row.

You can view the January employment report negatively by noting that payrolls didn't grow as much as had been expected, the average workweek increased by just 12 minutes, average hourly earnings by nonsupervisory workers increased by 2 cents, and that nonfarm payrolls have increased for five months in a row instead of six. The Labor Department revised its data from last year, and the revised data show that the economy shed jobs in August instead of gaining jobs.

In past days, Wall Street had priced U.S. Treasuries based on expectations that the January employment report would bring better numbers. Treasury yields are dropping because those expectations weren't met. Wall Street isn't reacting to the numbers themselves; Wall Street is reacting to how the numbers matched up to expectations.

Posted 8:45 a.m.
MUDDLED: The employment report is hard to sort out. On balance, the news isn't very good, and it might not have as much of an effect on mortgage rates as I thought it would.

Nonfarm payrolls increased by 112,000 jobs in January, according to the Department of Labor. Wall Street had expected the economy to expand by about 165,000 jobs. The December job-creation number was revised upward from 1,000 to 16,000. The unemployment rate fell from 5.7 percent in December to 5.6 percent in January.

It's a weak report. Over the next couple of hours I will assess the effect on mortgage rates. Despite my warnings of this week, it looks now like rates won't go up. If they do, it won't be by much. More likely they'll stay about the same or fall slightly.

THE NUMBERS: The 10-year Treasury yield closed at 4.20 percent Thursday, roughly back to where it was a week earlier, and that's about where it stands before trading opens today. Freddie Mac has raised a key required net yield by 4 basis points this morning.

Thursday, Feb. 5
Posted noon
THE NUMBERS: The 10-year Treasury yield is down from Wednesday's close, to 4.12 percent from 4.15 percent. Fannie Mae's and Freddie Mac's required net yields are up very slightly -- an indicator that rates might be slightly higher today, despite the small downward direction in the Treasury yield.

ECONOMY: Productivity rose at an annual rate of 2.7 percent in the final three months of 2003, the slowest quarterly rate of growth in a year. Worker productivity during the three-month period before that was revised upward to 9.5 percent. Reuters reports that the slowdown in productivity could mean good news for unemployed people, which undoubtedly will soothe the 356,000 people who filed jobless claims last week. Economists had expected the number of unemployment claims to be more like 340,000.

"The sharp deceleration in productivity is nothing to be worried about," says economist Joel Naroff, because "it signals that firms are adding workers and increasing hours worked. That is needed if this expansion is to be sustained."

LOCK TODAY: I don't know if Naroff is right. If companies are hiring more, then why did jobless claims rise last week? We're getting mixed signals. But Naroff isn't alone; his is pretty much the consensus view among economists.

If you plan to close on a mortgage in the next few weeks, I think you should take Naroff's analysis seriously, and that means you should lock today.

The January employment report will be issued at 8:30 a.m. eastern time Friday, and if it describes a big jump in hiring, mortgage rates will shoot upward. Economists such as Naroff imply that the decline in productivity in the fourth quarter was the result, at least partly, of an increase in hiring.

A month ago, the employment report for December was released, and it estimated that the economy created just 1,000 net jobs in the last month of the year -- a pathetic number. That initial estimate will be revised. The falloff in productivity at the end of 2003 should be taken as a hint that the December payrolls number will be revised upward, not downward. News of that sort would put upward pressure on mortgage rates.

When Friday's employment report is issued, don't pay a whole lot of attention to the unemployment rate. A month ago, the December unemployment rate went down; bizarrely, that was bad news because it implied that the job market was so bad that people had given up looking for work. If the January unemployment rate rises, it could be a sign that those people felt encouraged to search for jobs again. The unemployment rate could be a bit misleading.

The numbers to look at are the nonfarm payrolls for December (revised) and for January. If those numbers rise dramatically, so will mortgage rates. The Labor Department estimated that Americans held 130,124,000 jobs in December.

Remember that on Jan. 28, the Federal Reserve's rate-setting committee kept short-term rates steady and said this in its after-meeting statement: "Although new hiring remains subdued, other indicators suggest an improvement in the labor market." I'm tempted to read between the lines and conclude that the Fed believed that the December payrolls figure would be revised upward. That's a bit of a leap of logic, and I'm probably overrelying on intuition, but I suspect that the employment report will be followed Friday by a rise in mortgage rates.

COUNTERPOINT: Then again, the employment report might yield terrible numbers and mortgage rates could drop. I think it's more likely that rates will rise, and that it's better to risk a rate drop by locking today than to risk a rate rise by continuing to float.

WHAT ABOUT THE LONGER TERM?: A reader writes: "My wife and I are purchasing our first home. Construction will be finished early in March, and we have set March 31 as the day we will close on the loan. Most of the information in your Mortgage Matters weblog concerns those wishing to lock within 30 days or so. We are in a position to do a 60-day lock. If we lock on Thursday, that would take us until April 5.

"However, we could also float and take our chances. I'm inclined to float right now, thinking that between now and the middle of March, rates could return to where they are (even if they spike upward this Friday). What advice would you give?"

I replied: "I would be inclined to float, too, for the same reason you gave. I just don't think rates are moving substantially for a while. Of course, you know my track record when it comes to guessing rates."

I wasn't sure when I wrote that reply two days ago, and I'm less sure now. If the January employment report is really positive, mortgage rates might establish a new floor. On the other hand, a 60-day lock requires taking a rate that's slightly higher than today's rate, or paying a fee, or both. On balance I think it's probably prudent for my e-mail correspondent to float, but it's a close call. And you know my less-than-sterling track record. Speaking of that…

GRADE: The average rate on a 30-year mortgage was unchanged at 5.72 percent in this week's Bankrate.com mortgage survey. Five weeks ago, when the average 30-year was 5.88 percent, I predicted that rates would remain essentially unchanged. They fell instead, and I have guessed the direction of mortgage rates correctly 19 times in 52 weeks, for a batting average of .365.

Tuesday, Feb. 3
Posted 11:30 a.m.
THE NUMBERS: The yield on the 10-year Treasury is 4.10 percent this morning, down from Monday's close at 4.18 percent. Fannie Mae and Freddie Mac are requiring lower yields on the mortgages they buy, too, by smaller margins.

CONSIDER LOCKING: If you plan to close on a mortgage in the next two or three weeks, you should strongly consider locking before the end of business Thursday. Discuss it with your broker or lender, then make a decision. Friday morning will be too late, because the January employment report will be issued at 8:30 a.m. Eastern that day.

Whatever the employment report says, mortgage rates will move. The question is whether they will move up or down. They could go either way. I think it's better to lock in a good rate now. If rates drop on Friday, you haven't really lost anything by locking before Friday. You'll still have a good rate and you might feel a little rueful that you didn't get an even better rate. If rates rise on Friday, you'll be glad you locked before then.

I'm not saying that I think rates will rise dramatically on Friday. But there's a risk that they will, and it's safer to insure against a rapid rate rise by locking before Friday. If rates drop, you can remind yourself that nothing in life is guaranteed, and you can't win every time.

The last employment report contained discouraging news. The unemployment rate for December declined to 5.7 percent from 5.9 percent, but apparently because people had given up trying to find work. People who no longer are seeking jobs are not counted as unemployed, even if they want jobs. That was dismaying enough, and on top of that, the federal government reported that the economy had created 1,000 jobs in December. A paltry number. Mortgage rates plunged in reaction to the poor news.

It's possible that the January employment report will contain disappointing news that will cause rates to fall again. It's also possible that the disappointing December job-creation figure will be revised upward, maybe dramatically, and that the economy created lots of jobs in January. If we get that kind of employment report, mortgage rates will spike.

RESCISSION DECISION: I'm writing an article explaining the right of rescission. I'm looking for people who have exercised the right of rescission on a home equity loan or an equity line of credit. If you have done so, and you're willing to be interviewed for a story, drop me an email.

UNSUSTAINABLE: The invaluable Brad DeLong notes that the president's own budget document (Page 191 of the Analytic Perspectives volume [2.1 megabyte PDF file]) says, "These long-run budget projections show clearly that the budget is on an unsustainable path, although the rise in the deficit unfolds gradually." You would think that maybe that would have been in the first paragraph of the articles about the budget proposal. As deficits rise and more people become employed, long-term interest rates, including mortgage rates, almost surely will rise.

GOOD JOB: Homeowners refinanced $5 trillion in mortgage debt during the refinancing boom, and most of them used their freed-up money responsibly, writes Kenneth Harney, summing up a study by three economists at the Federal Reserve Bank of New York.

Monday, Feb. 2
Posted 12:30 p.m.
THE NUMBERS: The yield on the 10-year Treasury is 4.14 percent this morning, down 2 basis points from Friday's close. Not much of a change from last week.

The president's proposed budget projects a $521 billion deficit next fiscal year (which begins Oct. 1), investors seem a bit worried about corporate earnings, and today's economic reports were just OK and not stellar. That has kept a lid on the stock and bond markets.

The Institute of Supply Management's index for January was up 0.2 to 63.6, about what analysts had expected. Economist Joel Naroff, president of Naroff Economic Advisors, points out that this is the ninth straight month that the ISM's manufacturing index has increased. "I think it is fair to say the manufacturing sector is now one of the leading lights of the economy," he says. He expects companies to start hiring again.

Construction spending in December was up 0.4 percent, according to the Commerce Department. Economists had expected better than that. The Commerce Department revised the November number downward, meaning that construction spending in November increased 0.5 percent instead of the original estimated 1.2 percent rise. That sort of bummed the market out.

Data and anecdotal information tell conflicting stories about the job market, writes USA Today's Barbara Hagenbaugh.

Friday, Jan. 30
Posted 10:30 a.m.
THE NUMBERS: The most important number is 4. The economy grew at an annual rate of 4 percent in the last three months of 2003. Wall Street and economists had expected faster growth than that in the fourth quarter after the stratospheric growth of 8.2 percent in the third quarter.

A growth rate of 4 percent is impressive except when it follows one quarter of 8.2 percent annual growth. Most economists expect the economy to grow a little faster than 4 percent this year, and that would make this a good year indeed. I know I'm repeating myself here, but I want to stress that 4 percent growth isn't bad; it just doesn't look so hot when it follows 8.2 percent growth. A car moving at 100 mph looks impressive until you compare it to a jet flying overhead.

Treasury yields tumbled upon the news of merely 4 percent annual growth from October through December. The 10-year Treasury yield closed at 4.22 percent Thursday, the same as Wednesday's close, and in before-hours trading this morning the yield is 4.15 percent. The 10-year Treasury is back to where it was Monday, when it closed at 4.16 percent. The bounce caused by the Federal Reserve's statement on Wednesday didn't last long.

A key Freddie Mac required net yield -- an excellent indicator of the movement of mortgage rates -- is down 4 basis points from Thursday afternoon.

LOCK OR NOT?: The January employment report will be released next Friday, and that will move markets too. You'll be rolling the dice if you don't lock by Thursday. Mortgage rates probably will drop Friday if the December job-creation number of 1,000 is revised downward and the January job-creation number is poor. Mortgage rates will rise if the December number is revised upward a lot and if many jobs were created in January.

Keep in mind this sentence from Wednesday's statement from the Fed's rate-setting committee, and ask yourself what the Fed knows that the public doesn't yet know: "Although new hiring remains subdued, other indicators suggest an improvement in the labor market."

I take that as a hint that the Fed expects a moderately encouraging January jobs report to be issued Friday. Keep your eyes open and strongly consider locking on any rate dips between now and Thursday afternoon.

I have read speculation that the "improvement in the labor market" mentioned by the Fed was a reference to declining numbers of jobless claims. Maybe the committee members were referring only to the unemployment-claims numbers, or maybe someone whispered in their ears that next week's employment report will look promising.

BIG TICKET: About 250,000 Massachusetts households spend more than half their monthly income on house payments, the Boston Globe reports. Generally, lenders don't want borrowers to spend more than 28 percent of their income on house payments, including taxes and insurance, and they don't want borrowers to spend more than 36 percent of their income on all debt payments, including the home loan, credit cards, student loans, auto payments, child support and alimony.

THE FED AND THE BUBBLE: Stephen Roach, an economist for Morgan Stanley, went to the Davos Economic Forum and was surprised to find that the Bubble Thinking of the late 1990s is alive and well. Roach worries that the Fed, with its low interest rate policy, could be inflating a bubble in home values.

Brad DeLong, an economist at Berkeley, isn't entirely convinced and will keep an open mind.

I highly recommend both of these economist-bloggers. Roach posts here every Monday and on other days (like today) when he feels like it. He expresses himself clearly in a restrained way. DeLong is accessible, witty, and partisan -- he thinks the president is doing a terrible job and the press is doing even worse.

REAL ESTATE LISTING OF THE WEEK: Wouldn't you like to live on an estate on eastern Long Island with access to the bay and the ocean?

Thursday, Jan. 29
Posted noon
THE NUMBERS: The yield on the 10-year Treasury is 4.21 percent, down just a tad from Wednesday's close at 4.22 percent. The 10-year Treasury has jumped 10 basis points from Tuesday's close at 4.11 percent. Fannie Mae and Freddie Mac have increased their rates, too, and that will happen all down the line.

Rates are higher in reaction to the Federal Reserve's announcement yesterday that it merely will be patient before raising interest rates, instead of waiting a "considerable period." The surface meaning is little changed, but the subtext is that the Fed will raise rates when it is satisfied that the economy has heated up sufficiently -- and the Fed says the economy is improving briskly.

Memo to self: Urge people to lock before Fed meetings.

WHAT ASTERISKS ARE FOR: In this week's Bankrate.com mortgage rate survey, the average rate on a 30-year fixed mortgage was 5.72 percent, up 5 basis points from the previous week. Rates surely went up after the Fed made its announcement, which caused Treasury yields to spike by 10 to 15 basis points. The Bankrate.com survey was conducted before the Fed's announcment. So our rate survey was out-of-date within hours. I don't think that's a flaw; our rate survey is news, and news, by definition, goes stale quickly. This time it went stale faster than usual.

Bankrate surveys 10 lending institutions in 10 metro areas (New York, Los Angeles, Chicago, San Francisco, Philadelphia, Detroit, Boston, Houston, Dallas and the District of Columbia) every Wednesday. The same 100 institutions are queried each week. We ask them the rate they charge on a plain-vanilla mortgage, then we compute the average.

Our survey here at Bankrate works as a snapshot of where rates are every Wednesday. Over time, it's an accurate and excellent indicator of the broad movement of mortgage rates.

REGARDING FREDDIE: The other mortgage survey you often read about is the one conducted by Freddie Mac. It is released every Thursday. Freddie Mac gathers information from lenders nationwide about the rates they charge when borrowers lock or close. The survey lasts all week and consists of data from hundreds of lenders.

To put it concisely: Bankrate takes a snapshot of the rates offered by the same 100 large lenders every Wednesday. Freddie Mac paints a picture of the rates accepted by consumers from hundreds of lenders of all sizes over a week's time.

The two surveys don't measure exactly the same thing, but both are accurate and valuable, and they come up with similar numbers. This week, Bankrate's average 30-year rate is 5.72 percent and Freddie Mac's is 5.68 percent. Last week, Bankrate's average was 5.67 percent and Freddie Mac's was 5.64 percent. Bankrate says rates went up 5 basis points and Freddie says they went up 4 basis points.

THE GRADE: Every week, I predict the direction of mortgage rates over the next 30 to 45 days. And every week, I review my prediction from five weeks ago to see if I was correct. On Christmas Eve, the average 30-year mortgage had a rate of 5.86 percent and I predicted that rates would remain relatively unchanged, give or take 2 basis points. (The way I score myself, I would be correct if rates were between 5.84 and 5.88 percent, inclusive.)

"With inflation subdued for now, and the economy creating jobs at around the same rate that the workforce grows, mortgage rates will remain about the same," I wrote. But rates dropped. I was wrong, and I have guessed the direction of mortgage rates correctly 19 times in the last 52 weeks, for a .365 batting average.

Rates have risen since Bankrate.com's research department conducted its weekly survey Wednesday morning. The survey was completed before the Fed's announcement drove up rates about 10 to 15 basis points. If the survey had been conducted today instead of Wednesday, I probably would have been right with my Dec. 24 guess. I wish my grading system could take that into account, because I'm tired of having this dismal batting average.

Every once in a while I feel sorry for myself and toy with the idea of no longer keeping track of my prediction results. I never consider it seriously. I take these predictions seriously, and it bothers me that I don't do better. I worry that I harm my credibility by exposing my poor track record. On the other hand, I enhance my credibility by being straight with you. The pluses outweigh the minuses, if only barely.

Also, I had a hot streak last year and it'll happen again and I'll be right here, bragging about it.

Wednesday, Jan. 28
Posted 4:30 p.m.
FED UPDATE: The Federal Reserve's rate-setting committee removed the words "considerable period" and left short-term rates alone, and Treasury yields zoomed higher.

Right before the Fed's announcement, the 10-year Treasury had a yield of about 4.06 percent, and it rose immediately to 4.18 percent. Since then, it has dropped slightly, to 4.16 percent. There was no reaction from Fannie Mae, and Freddie Mac raised a key required net yield 14 basis points. Think of a required net yield as a wholesale mortgage rate; that's an oversimplification, but you get the idea.

If you're in the market for a mortgage, your lender might quote a higher rate tomorrow if not today. No one knows how long this will last, though. I wouldn't be surprised if rates slowly decline back to where they were this morning.

Speaking of this morning, Bankrate.com conducted our weekly mortgage rate survey today. The research got most or all of the 100 rate quotes before the Fed's announcement. The average rate on a 30-year mortgage went up 5 basis points, to 5.72 percent. I'll link to that article when it is posted Thursday.

Posted 10 a.m.
THE NUMBERS: Happy Fed Day! The Federal Reserve's rate-setting committee meets eight times a year, and today is one of them. They will keep short-term rates steady. After each meeting, the Fed issues a statement explaining its decision on short-term interest rates. They'll probably issue a statement much like the last one, tinkering with a word here or there. If that's what they do, mortgage rates won't be affected much.

The yield on the 10-year Treasury is 4.08 percent this morning, down from Tuesday's close at 4.11 percent. Not much of a change. One week ago, the 10-year Treasury closed at 4.08 percent. In today's Bankrate.com national survey of mortgage rates, we won't see much of a change. Maybe a point or two higher or lower. My guess is that the average rate on a 30-year mortgage will stay unchanged at 5.67 percent.

Tuesday, Jan. 27
Posted 3:30 p.m.
THE NUMBERS: Short 'n' sweet, 'cause I just arrived at work after chaperoning some of my son's classmates to the South Florida Fair, and much work awaits. The 10-year Treasury yield is 4.10 percent this afternoon, down from Monday's close at 4.16 percent. Fannie and Freddie are up a bit.

Monday, Jan. 26
Posted 9:30 a.m.
THE NUMBERS: The yield on the 10-year Treasury spiked Friday afternoon, ending the day up 10 basis points at 4.09 percent. Late in the day, Fannie Mae and Freddie Mac each raised a key required net yield by 14 basis points. A required net yield is an excellent barometer of mortgage rates.

Early this morning the 10-year Treasury yield is 4.07 percent, and Freddie Mac continues to increase its required net yields. The one I track, the rate for a 30-year mortgage for delivery in 30 days, is up 2 basis points. Fannie Mae hasn't posted its required net yields yet, and I have a busy day so I don't know when I'll have a chance to check it and update this weblog.

CNNMoney reports that the Treasury yield spiked Friday afternoon because investors began to fear that Japan and China would slow down their purchases of Treasury notes.

Friday, Jan. 23
Posted 11 a.m.
Holden Lewis:
THE NUMBERS: The yield on the 10-year Treasury is 3.95 percent this morning, down from Thursday's close at 3.99 percent. Fannie Mae's and Freddie Mac's required net yields are down, too. They are excellent barometers of the direction of mortgage rates.

CNNMoney says Treasury yields are falling because Japan's central bank keeps buying U.S. Treasuries. That drives up prices and drives down yields. Essentially, the Bank of Japan is frantically lending money to the United States so we can continue to buy Japanese products.

CAMPAIGN TRAIL: Howard Dean says Alan Greenspan should be replaced as chairman of the Federal Reserve because he's too political. With some justification, Dean believes that Greenspan had serious doubts about tax cuts that caused the federal budget to swing from a surplus to $500-billion-a-year deficits, but that Greenspan held his tongue publicly for political reasons.

SPEAKING IN TONGUES: In an absorbing Bankrate.com article about various religions' attitudes toward money, I got a kick out of a passage about languages. The Hebrew and Arabic words for charity are similar, yet a rabbi and a muslim cleric say they come from completely different roots.

The article says: "Rabbi Blesofsky points out that the Hebrew word for charity, 'tzedakah,' comes from the word 'tzedek.' The translation is 'righteousness,' Rabbi Blesofsky explains."

Later, the article says, "In Islam, the word for charity -- 'zadak' -- means 'to grow,' says Imam Ali Salman Ali of Muslim Family Services in Detroit. 'It means to grow spiritually,' Imam Ali says."

And a Protestant minister says the word "charity" comes from the Greek word "agape," meaning "unconditional love." ("Agape" is pronounced "ah-GAHP-eh.")

So let me get this straight: tzedek, zadak and charity all come from different roots meaning, respectively, righteousness, to grow, and unconditional love.

I don't know about you, but I think "charity" sounds more like "tzedakah" than "agape." And "tzedek" and "zadak" sound, to my uneducated ears, like essentially the same word. I have a hunch that they all come from the same root, whatever it means.

Anyway, it's an interesting article and I recommend it.

REAL-ESTATE LISTING OF THE WEEK: Super Bowl visitors, why stay at a hotel or dude ranch when you can rent a three-story townhouse in downtown Houston for $3,500 a night (three-night minimum)? Better yet, bid on the use of the townhouse for up to two weeks.

Thursday, Jan. 22
Posted 10 a.m.
Holden Lewis:
THE NUMBERS: The yield on the 10-year Treasury is 4.00 percent, down 5 basis points from Wednesday's close. The required net yields of Fannie Mae and Freddie Mac, another barometer of rates, have barely budged.

In this week's Bankrate.com index, mortgage rates barely moved at all. The benchmark 30-year fixed rate fell 1 basis point to 5.67 percent. In the last six weeks, the average 30-year rate has been as low as 5.67 percent and as high as 5.88 percent. That's a narrow range.

THE GRADE: Every week I guess the direction of mortgage rates in the weeks to come, and every week I look back at my prediction five weeks earlier to see if I guessed right. On Dec. 18, when the average 30-year rate was 5.81 percent, I predicted that rates would rise.
"Mortgage rates have their comfort zone, and that zone is right around 6 percent, give or take 10 basis points," I wrote. They did stay in that comfort zone for another three weeks, then dropped and entered a lower comfort zone. I predicted wrong. I have been right 19 times in the last 52 weeks, for a batting average in the last year of .365.

Careful readers might note that I keep guessing wrong, and my batting average never changes. That's because I had a losing streak a year ago. Stay tuned, though: In two weeks, my batting average will start to drop. I have guessed wrong seven weeks in a row and that streak probably will stretch to more than 12 weeks, unless by some miracle the average 30-year rate on Feb. 25 is anywhere from 5.65 to 5.69 percent. I have predicted for four weeks in a row that rates will remain relatively unchanged.

METAL MANIA: On Wednesday, Pat Curry posted an item from the International Builders' Show about one company's efforts to popularize steel framing for houses. Only 2 percent of homes have steel framing because it costs more than lumber, even though steel has advantages: it is impervious to water and termites, and it doesn't burn.

As do many Floridians, I live in a steel-framed single-family house. I like having a steel frame because I imagine that it's stronger in a hurricane, and it won't rot if it gets wet. Steel seems more high-tech and environment-friendly. There are disadvantages, though. You can't nail shelves and towel bars to the wall studs, and the steel framing interferes with radio reception. I think the advantages outweigh the disadvantages.

Wednesday, Jan. 21
Posted 1 p.m.
Holden Lewis:
THE NUMBERS: Yields on 10-year Treasuries are down slightly from Tuesday. The 10-year yield closed at 4.08 percent Tuesday and is at 4.05 percent early this afternoon. Fannie Mae's and Freddie Mac's required net yields register virtually no change, either.

When the results of today's weekly Bankrate.com mortgage rate survey come in, I predict that we'll see an average rate for 30-year mortgages that is 4 basis points higher than last week's. Translated into English, I think the average rate this week will be 5.72 percent, up from last week's average of 5.68 percent.

Posted 11:30 a.m.
Pat Curry, blogging from the International Builders' Show in Las Vegas:
THE SKINNY ON DISHWASHERS: As senior editor for products at Builder Magazine, Nigel Maynard is quite possibly the busiest and most heavily courted member of the media at the International Builders' Show. From early morning until well into the evening, he has appointments scheduled every 30 minutes with exhibitors showing off what they hope is the latest and greatest in building materials.

On Day 2 of the show, we asked Maynard what he'd seen that he found interesting so far. Among his observations were innovations in the kitchen: refrigerated drawers and an 18-inch wide dishwasher, items that work for smaller households in smaller houses. It's a trend he says he thinks he'll see more of.

He liked a new system he saw from Pittsburgh Corning for installing glass blocks. It could save builders a lot of money, he says, because it's a product that normally requires hiring a skilled mason. This process could be done by a much less expensive trade contractor; it also could be used by an experienced do-it-yourselfer, he says.

In the bath, he noted a new dual shower stall from Jacuzzi. Dual shower heads are nothing new, but this one has a hot air drying tower. It's not so much a full-body blow dryer, he says, as a way to keep warm after you turn off the water.

MOBILEMODULAR: Builders appear interested in exploring modular, factory-built houses as a way to build starter homes, which they often shy away from because of the cost of land and governmental fees. Those costs are the same whether you're building $100,000 first-home townhouses or $1 million estates.

Modular housing isn't just for trailers anymore. Several modular builders are at the show, including Genesis Homes, which has a full-sized, fully furnished, two-story house as its booth. Modular homes are built in factories and delivered to the site in panels or pieces. Builders are attracted on several levels. First, factory-built houses can slash the amount of time it takes to complete a house and get paid. Second, they aren't delayed by weather conditions. They reduce the number of trade contractors the builders have to hire, reduce the amount of waste on the job site, and finally, they improve the consistency and quality of the houses. Factory-built to computerized specifications, they eliminate the variations in quality that come from trade contractors making on-the-spot decisions on the site with regard to materials, particularly lumber.

STEEL IS REAL: One man who'd like to revolutionize modular building is Phil Ellis, president of FrameMax. A Kiwi with a big vision, Ellis is trying to convince builders that they can build steel-framed houses as cost effectively as they do with lumber. Steel framing is considering superior to lumber for several reasons, not the least of which is that it's impervious to termites and water damage that is giving large builders liability headaches. But since it typically costs 30 percent to 50 percent more than lumber framing, it captures only 2 percent of the market, Ellis says.

His plant in Mexico takes a builder's plans, computerizes them and automatically cuts them to specifications. His crews there have the capacity to crank out enough framing a day to build 12 houses. It's easy to teach framing crews how to erect the panels. It's not much different from setting up wood walls; you just use a screw gun instead of a hammer.

"This is the first time steel's got a chance (of increasing its market share)," he says. "There have always been steel fanatics who didn't care about the price. Getting the right price will make the difference."

Tuesday, Jan. 20
Posted 1:30 p.m.
Pat Curry, blogging from the International Builders' Show in Las Vegas:
Misconceptions about the home-buying process are keeping millions of minority families from getting a home, according to studies from Freddie Mac and Fannie Mae.

Craig Nickerson, vice president of community development lending for Freddie Mac, told an audience of home builders at the International Builders Show that 50 percent of African American and Hispanic respondents believe that a person needs perfect credit to qualify for a mortgage.

"How many of you had perfect credit when you got your first house?" he asked the audience. "Not me."

Several other myths persist in minority communities regarding buying a house. About half the people surveyed thought that:

• home buyers need 20 percent of a home's price as a down payment,
• that they needed to be in the same job for five years, and
• lenders are required by law to offer the lowest available interest rate, which keeps them from shopping for the best loan.

As many as 60 percent of those surveyed also believed lenders share personal financial information with the government.

Misinformation is just one of several reasons that the homeownership rate of minority families is less than 50 percent, while the rate for white families has risen above 75 percent, says Nickerson and Mercy Jimenez from Fannie Mae.

The other obstacles they face are lack of funds for down payment, language and cultural barriers, and lack of credit history or blemished credit. Plus, less than 20 percent of immigrants from Latin or Central America ever had a bank account in their home countries, and even fewer ever had obtained a loan.

"Should we expect them to walk into this country and understand how they get a loan?" Nickerson says.

Both Freddie Mac and Fannie Mae offer $500 down payment-programs for first-time home buyers, and HUD is proposing a zero down-payment mortgage for its fiscal 2005 budget, eliminating FHA's requirement of a minimum of 3 percent down. The zero-down loans would cost the borrowers an extra $50 a month in mortgage insurance premiums on a $100,000 loan. HUD estimates that about 150,000 families will use the program the first year.

Freddie Mac also is using an expanded approval process to qualify more buyers, and offering rewards for timely mortgage payments as well as incentives for buying in the inner city in the form of equity protection if a home's value falls.

Posted 10 a.m.
Holden Lewis:
THE NUMBERS: The yield on the 10-year Treasury closed at 4.04 percent Friday and is trading at 4.03 percent early this morning. The market was closed Monday. A key Freddie Mac required net yield, another barometer of mortgage rates, is up 3 basis points from Friday. I wouldn't be surprised if the tide has turned and mortgage rates are on the way up a bit.

ZERO DOWN: The feds' plan to offer a new option for first-time home buyers who get FHA-insured loans: a zero down-payment mortgage.

Right now, loans insured by the Federal Housing Administration are required by statute to include at least a 3 percent down payment. "Offering FHA mortgages with no down payment will unlock the door to homeownership for hundreds of thousands of American families, particularly minorities," the federal housing department's acting secretary, Alphonso Jackson, said Monday. "President Bush has pledged to create 5.5 million new minority homeowners this decade, and this historic initiative will help meet this goal."

The Department of Housing and Urban Development would require slightly higher FHA insurance premiums for buyers using the zero-down option, and they would have to undergo housing counseling before buying.

I'll write about this in depth this week. One thing I wonder: What will this mean for down-payment charities?

WELCOME, PAT: I am pleased that Pat Curry, who writes frequently for Bankrate.com, is sending dispatches for this weblog from the International Builders Show in Las Vegas. While she's there, we will append the writer's name at the top of each entry, below the "Posted" time stamp.

Monday, Jan. 19
Posted noon, Pacific time
EDITOR'S NOTE: Holden Lewis has Martin Luther King Day off. Today, and all of this week, he'll have help: Longtime Bankrate contributor Pat Curry, who is attending the International Builders' Show in Las Vegas, will be providing daily notes from the show. Here's her report:

Greetings from the International Builders' Show in Las Vegas. Monday morning registration is an event all its own with 90,000-plus people converging on the Las Vegas Convention Center. The attendees coming off shuttle buses are greeted by celebrity impersonators -- everyone from Dolly Parton to Elvis Presley himself. It's very, very weird.

The show features more than 1.6 million square feet of exhibit space. That's roughly 40 football fields' worth of products and services for home builders. Chair massages are a coveted perk by the media covering the show. A popular option is the foot massages. More than 1,600 manufacturers and suppliers are on hand to promote products in categories from adhesives and access control to wine- storage systems and wood-burning stoves. It takes five tractor trailers just to carry the 240,000 pounds of paper that the National Association of Home Builders ships to Las Vegas for convention handouts, programs and meetings. This thing is huge.

Among the innovations showcased this year are tankless water heaters that deliver unlimited hot water on demand, soy-based foam insulation and outdoor refrigerators for entertaining. Many of the latest products are spotlighted in the Ultimate Family Home -- a 53,000-square-foot, four-bedroom Spanish-style villa. The tri-level home actually produces more energy than it consumes and received kudos from the EPA and the Department of Energy. The house is built to meet the wants, needs and desires of a most-demanding clientele -- kids 16 to 18 years old. The parents got a say, but the kids really called the shots on this one. They asked for, and got, a kids-only media lounge, a resort-style pool slide, a backyard cave with a fire pit, and an Epcot-style fountain with water that spurts out of the ground. Equally unique is a getaway room hidden behind a door that looks like a full-length mirror tucked away in a girl's bedroom. It's a place to play dress-up, have a good pout or just chill out. Of course they can't really hide because the entire house is wired for parental surveillance.

Friday, Jan. 16
Posted 3 p.m.
THE NUMBERS: The yield on the 10-year Treasury closed below 4 percent for the first time in about six months Thursday. It closed at 3.99 percent. Now it's trading at about 3.94 percent. Yikes! It's not what I expected.

A key Fannie Mae required net yield -- a good barometer of mortgage rates -- is down 4 basis points today. But its counterpart at Freddie Mac is up 3 basis points. Is this a signal that mortgage rates have hit their trough? I think it could be. If you lock today, you're going to get a great rate. Even if rates fall a little bit more, you still locked in a rate that people in most years would envy.

LONG, FLOWING LOCKS: A reader asks this: "We are building a home and it has been taking longer than expected. We have been approved for a mortgage and we were considering a six-month lock at a higher rate but have not done so yet. Our home should be completed sometime between May 15 and June 15. Since rates are dropping again, should we wait to do a 90-day lock at a lower rate or go ahead and lock in for the six months? (Our lender quoted us 6 percent on Wednesday and today quoted us 5.875 percent for the six-month lock.) Better yet, in your opinion, should we wait a couple of days or weeks before we lock?"

I'm leery of wading into these waters, since I'm just as good as a dart-throwing monkey at predicting the direction of interest rates, but here's my answer: It depends on your personalities. Specifically, whether you are bold or timid. Are you willing to float now and risk a spike in interest rates for the opportunity to wind up with an even lower rate than you can get today? Or would you rather be safe than sorry?

When it comes to money, I'm the safe-and-sorry type, and I don't consider "timid" to be a pejorative word. I don't know about you, but I would regret locking too late more than I would regret locking too early. In the case of couples, when one person is bold with money and the other person is timid with money, I think it's better for the relationship if the timid one prevails on big-ticket items such as mortgages. You can compromise, and let the bold one choose the next vehicle you buy, or the next vacation destination.

If you really want to know what I think will happen to mortgage rates in the next 90 days, I think they'll go up, but not by much. This week's decline seems like a bit of an overreaction.

CALL FOR WEBLOG: My boss forwarded me an e-mail from the PR firm for a headhunter. The e-mail goes like this:

According to Stephen Mader, CEO of leading global search firm Christian & Timbers, Donald Trump fired the wrong person on the January 15, 2004 airing of "The Apprentice" on NBC.

"In the real world, bosses fire the person that no one can work with first, not someone who makes one big-time mistake," said Stephen Mader, CEO of Christian & Timbers, the firm responsible for bringing Carly Fiorina to Hewlett Packard.

In the January 15th airing of the show, Donald Trump chose to fire Jason because he failed to meet Marquis Jet Card's top executive prior to having his team create an advertising campaign. "Firing Jason to teach him a lesson is best for ratings and shock value. But, getting rid of him before Sam is not the wisest move for the men's team. In fact, it's a short-term handicap for them to retain someone who is a chronic problem and disruptive to the group," Mader concluded.

Mader also noted, "There is one lesson for everyone from last night's episode. In order to survive, you have to go straight to the top -- straight to the key decision maker." That was the main point that Trump made at the beginning of the episode.

I'm addicted to the show. I beg Stephen Mader to please, please, create "The Apprentice Weblog." Wouldn't it be great to read a headhunter's blog about "The Apprentice"? I would read it.

SPEAKING OF BLOGS: My favorite online movie critic, James Berardinelli, now has a movie weblog, although he doesn't call it that. Check out ReelThoughts.

Thursday, Jan. 15
Posted 11 a.m.
THE NUMBERS: The yield on the 10-year U.S. Treasury slipped below 4 percent Wednesday before closing at 4.01 percent. This morning it is trading at 3.98 percent. A week ago it closed at 4.27 percent. That's how much the economic outlook changed with Friday's release of the employment report for December.

Fannie Mae and Freddie Mac's required net yields are down slightly, too.

THE SURVEY: The weekly Bankrate.com survey of mortgage rates shows that rates dropped dramatically in the last week. The average rate on a 30-year mortgage declined 19 basis points to 5.68 percent. Read why in the article.

Five weeks ago, when the average rate was 5.92 percent, I predicted that rates would be higher now. I wrote: "The Fed says 'output is expanding briskly' and that an 'unwelcome fall in inflation' is less probable now than it was six weeks ago. Corporations are issuing bonds. These are signs that long-term rates are headed upward -- perhaps not immediately, and probably not swiftly, but upward nonetheless."

Yeah, well, they will rise someday. But they haven't lately. I was wrong -- rates have dropped a quarter of a percentage point since then -- and I still have guessed mortgage rates correctly 19 of the last 52 weeks, for a .365 batting average. This week I predict that mortgage rates will stay the same, so they'll either rise or fall in the next five weeks.

Q&A ON INTEREST-ONLY: A reader named Gavin writes: "I read your article and had a question about the interest-only mortgage products. I am currently engaged (my fiancée and I will be married in May) and we are looking for a house. She is a law student with two years to go and I make $52,000 gross annually. She plans to join a private law practice after graduation (average starting salary is $62,000). I have about $30,000 in cash that I would use as a down payment. I was thinking that either an 80/10/10 or 80/15/5 would be good products for us, but would there be an advantage with an interest-only mortgage for five years? That would get us through the period where we have only one income, and then we would be able to make a more sizeable contribution once we are both employed."

My reply: "You aren't likely to stay in that house for many years; newlyweds tend to buy a house and then move up to another one within five years. And with that income boost, you're even more likely to trade up to a bigger house after your fiancée joins a law firm. So I would think that either a 5-year ARM or an interest-only loan would be a good fit for you.

"Try to make sure the Realtor and lender understand your situation and, especially, the situation you will be in in two years. If your fiancée has student loans, it will affect the amount you can borrow in future mortgages. Here's what I mean. Let's say you get an interest-only or 5-year ARM, and a few years from now, you decide to stay in the house and refinance the loan (to get a fixed-rate mortgage). If she has a lot of student loan debt, you might not qualify for a big-enough mortgage to pay off the old mortgage, preventing you from refinancing."

ANOTHER Q&A: I get depressing e-mails, and this is one of them. A lot of people are in this letter-writer's situation: "My husband has been laid off since February and we are behind on our mortgage by two months and have talked to a debt consolidation place -- no go there. We also called a place that helps with a loan on preforeclosures and they said no, that there are too many 60-days late. Our credit is far from perfect. I can't find anyone to help. I am so afraid we are going to lose our house."

My reply: "I wish I could give you words of encouragement, but your best course of action might be to sell the house. I know you don't want to lose the house, but if you can't keep it, you might as well move out on your own terms.

"Your first step should be to figure out how much you can pay each month, even if it's just $100, and then call the loan servicer and ask to talk to someone in the department that handles loan delinquencies. Tell them how much you can afford to pay per month, and ask if you can pay that amount until your husband finds a job. They probably won't go for that because you're already behind two months, but it gives you an opportunity to negotiate.

"The servicer probably is going to push you to sell the house, or walk away from it (called a 'deed in lieu of foreclosure'), or they'll foreclose on the house and evict you. If the servicer is willing to give you time to market and sell the house without having to worry about imminent foreclosure, you can work to get the best price possible."

In September I wrote about the options that people have when they fall behind on mortgage payments and how those options dwindle with the passage of time.

Wednesday, Jan. 14
Posted 9 a.m.
LIKE A ROCK: When I look at Treasury yields, I think of that old Bob Seger tune that's now a jingle for Chevy trucks. Yields are falling like a rock. The 10-year yield closed at 4.05 percent Tuesday, down from the previous day's close at 4.11 percent. Early this morning it's trading at 4.00 percent. A week ago, the 10-year yield closed at 4.27 percent.

Fannie Mae's and Freddie Mac's required net yields, another strong indicator of the direction of mortgage rates, have dropped a lot, too. A key Fannie Mae required net yield is down 19 basis points from a week ago, and a key Freddie Mac required net yield is down 27 basis points.

Fannie and Freddie haven't released today's required net yields yet, so it's hard for me to guess what the average 30-year rate will be in the weekly Bankrate.com survey of mortgage rates, which will be conducted today by our research department. Right now, with imperfect information, I would guess that the average rate on a 30-year mortgage will drop 24 basis points from last week, to 5.63 percent. The last time it was lower was the week of July 9, when the average rate was 5.61 percent. So we're talking about the best rates for fixed-rate mortgages in six months.

WHAT TO DO: All this week I've been advising people to lock if they plan to get fixed-rate mortgages. I still recommend locking if you haven't already, even though rates continue to drop.

According to the Mortgage Bankers Association, more than one-quarter of borrowers got adjustable-rate mortgages last week. With fixed-rate mortgages so low, I think you should get a fixed-rate loan unless you have a good reason to get an ARM. A lot of mortgage bankers strongly disagree with me on this. They prize thrift above security, and that is a valid viewpoint.

One banker whom I interview frequently, Bob Walters of Quicken Loans, says a lot of borrowers choose their loans out of fear. They think, he says, "Oh, no -- what would happen if interest rates rose?" Walters favors ARMs. "The average mortgage stays around for six or seven years," Walters says. "It's a pretty mobile society. Even if you don't move, you get a lot of opportunities to refinance, for various reasons."

Walters says you should look at the numbers, play the odds, and lean toward getting an ARM because it will save you a lot of money in the short term, and probably will save money in the long term. He is absolutely correct, and people who don't mind taking that risk should heed his advice. I'm more risk-averse than he is, which makes him impatient with me, but I truly would rather be safe than sorry, so I favor fixed-rate loans.

Man, there is so much stuff to blog today, and so little time. When I have a spare moment, I'll tell you what the nation's most prominent housing economists said Tuesday about the prospects for the economy, home prices and mortgage rates this year.

Tuesday, Jan. 13
Posted 10 a.m.
THE NUMBERS: It's martes el trece -- Tuesday the 13th -- the equivalent to Friday the 13th in Mexican culture. As they say in Ciudad Juarez, an old haunt of mine: Watchale!

The yield on the 10-year Treasury closed Monday at 4.11 percent, same as Friday's close. The Freddie Mac required net yield that I look at -- a good indicator of the direction of mortgage rates -- is up just 1 basis point from Monday, but the equivalent required net yield from Fannie Mae is up 7 basis points this morning. I take this as an indication that mortgage rates have bottomed out.

If you haven't locked, lock. That's my advice. As always, don't take my word for it, as I am far from infallible. I am very fallible, if there is such a word. The rule of thumb is to lock on the dips, and rates have dipped and I believe that we hit the dip's low point Friday or Monday.

IN DEBT: The Washington Post reports that consumer debt is growing at an alarming rate. Consumer debt has topped $2 trillion for the first time. That doesn't include mortgage debt.

Here at Bankrate.com, we pay attention to the words and phrases that readers search for, and words such as "debt" and "bankruptcy" are especially popular right now. I think people are worried about their debts, but I wonder if something else is going on: if citizens are projecting their anxiety about government debt onto their personal lives. $500 billion a year isn't chump change.

We will see how this affects mortgage rates when Bankrate.com conducts its weekly survey on Wednesday. In the last few weeks, the average rate on a 30-year fixed mortgage has been 1.60 to 1.66 percentage points higher than the 10-year Treasury yield. If that holds, we're talking about an average 30-year rate of around 5.70 to 5.76 percent.

The difference, or spread, between the 10-year Treasury and the 30-year mortgage might grow a bit. The last time the Treasury yield was this low was Oct. 1, when the 10-year Treasury yield closed at 3.96 percent and the average rate on a 30-year mortgage was 5.79 percent. The spread between the 10-year yield and the 30-year mortgage was 1.83 percentage points, considerably greater than the 1.60 percent spread we saw last week.

TIME TO LOCK: We have seen Treasury yields decline this morning, and they could continue to drop. But if you're deciding whether or not to lock on a 15- or 30-year fixed-rate mortgage, I think you should take the safe route and lock today. A fixed-rate mortgage is a conservative home loan for safety-minded people, and if you have that "safety first" mentality, go ahead and lock.

Yes, it's possible that the rate could drop another eighth or quarter point -- maybe even further -- but it's also possible that rates could stabilize or rise. When it comes to guessing the direction of mortgage rates, my track record isn't the best, so of course you should discuss your options with the lender. I don't think a "wait-and-see" attitude is sufficient. If the lender has a readily explainable theory as to why rates are likely to decline further, and you understand the theory and agree with it, then go ahead and float.

To put it more simply, I think you should lock unless your lender convinces you that you should float. That differs from my usual position, which is that you should float unless someone convinces you that you should lock.

Friday, Jan. 9
Posted 5 p.m.
BIG DROP: The yield on the 10-year Treasury fell to 4.08 percent at today's closing, down from Thursday's close at 4.27 percent. According to CNNMoney, it was the biggest one-day decline since November 2001.

Posted 2:30 p.m.
LOUSY TIP: You know, this terrible jobs-creation number -- 1,000 net jobs created in December, when economists were expecting 130,000 -- reminds me of a way to insult a waiter. When you've had really bad service, you don't stiff the waiter. You leave a single penny as a tip.

That's what the 1,000-jobs-created figure feels like.

Twenty jobs created per state in December. Wow!

Posted 1:30 p.m.
MORE ABOUT EMPLOYMENT: Treasury secretary John Snow sees the market's reaction to the mixed employment report and says this: "Following five months of job growth, the unemployment rate fell in December to a 14-month low. Regardless, today's report on December job growth demonstrates that while the fundamentals are in place, we must continue our efforts to strengthen the environment for job creation.

"The fact is that while an index of manufacturing orders is at a 50-year high, construction spending is up, housing starts are at a 20-year high, retail sales are solid, and GDP growth is strong, the administration will not be satisfied until every American who wants a job can get one."

President Bush calls the employment numbers "not good enough," and a Wall Street banker tells the New York Times that, "There are structural impediments to job creation."

The main structural impediment to job creation is the productivity phenomenon, whose importance is hard to overstate. American workers already are among the world's most productive, and are rapidly getting more efficient. I noted earlier today that worker productivity grew at an annual rate of 8.1 percent in the third quarter of 2003. Let's take a look at what this means.

Let's say worker productivity grows 8.1 percent this year. (That won't be the number, but play along.) At the beginning of the year, a company with 1,000 employees produces 1,000 widgets an hour. At the end of the year, with 8.1 percent productivity growth, those same 1,000 employees can produce 1,081 widgets an hour. At the end of the year, 1,000 people are doing what it would have taken 1,081 people to do at the beginning of the year. All that extra production without the need to hire anyone.

I'll bet you would like to own stock in that company. You might or might not enjoy being an employee, depending on how hard the company works you to wring out that productivity; right now, wages are not rising as fast as productivity. Wages grew 2 percent in 2003, the slowest rise in wages since 1987.

And why should wages rise? If you don't like what you're earning, quit; there are millions of unemployed people willing to take your job at your current wage or even less.

Productivity growth holds down employment, which holds down wage growth, which holds down inflation, which keeps interest rates low. It will be a good, long while -- maybe next year -- before the Federal Reserve raises short-term interest rates.

THE NUMBERS: By the way, the 10-year yield is 4.11 percent, down from Thursday's close at 4.27 percent.

PRODUCTIVITY: Roger Ferguson, vice chairman of the Federal Reserve Board, delivered a fascinating speech over the weekend titled "Lessons from past productivity booms."

"Since 1995, labor productivity has risen at an average annual rate of about 3 percent, up from an average annual rate of around 1.5 percent between 1973 and 1995. And in the past two years alone, output per hour has increased more than 5 percent per year," he said, adding (I shamelessly swiped the phrase above), "The significance of the improvement since 1995 can hardly be overstated."

Ferguson traced three other productivity booms in U.S. history: the 1870s and 1880s, 1917 to 1927, and 1950 to the early 1970s.

Technology had a lot to do with these productivity spurts, Ferguson said. In the late 1800s, it was the widespread introduction of steam engines, railroads and the telegraph. From 1917 to 1927, it was the "spread of electrification to the factory floor," allowing each machine to be powered by its own electric motor, and allowing the adoption of assembly lines. And the telephone largely replaced the telegraph. Productivity growth from 1950 to the early 1970s was led, believe it or not, by the introduction of plastics, according to Ferguson. (He didn't mention the construction of the interstate highway system, which I think had a lot to do with it, too.)

The current rise in productivity was made possible by the personal computer, fiber optics, wireless communications and the Internet, Ferguson said. (I would add something related: the introduction and refinement of relational database programs.) These innovations have altered how businesses interact with their customers, and how businesses manage inventories, saving huge amounts of money and making customers happier.

Ferguson pointed out that productivity booms are led by innovations that were invented long before. For example, railroads were being built in the 1840s, long before they heralded the productivity boom that began in the 1870s.

Business structures changed with each productivity boom, Ferguson said. Companies got bigger in the 1870s and 1880s to take advantage of economies of scale; vertically integrated corporate behemoths such as General Motors and General Electric were born in the next boom; and after World War II, companies began to split their operations into separate divisions while corporations became multinational. The boom since the 1990s has been accompanied by outsourcing and entrepreneurship, Ferguson said.

Ferguson also traced changes in financial markets that accompanied productivity booms, including corporate bonds in the late 1800s, common stock in the 1920s, and, most recently, junk bonds, venture capital and initial public offerings.

Ferguson said the role of government varies in all this: Generally, it shouldn't try to pick winners in technological innovation, and tariffs are bad, but prudent securities regulation and public education help.

As far as why productivity booms end, Ferguson has found some theories, but he says none of them appear sufficient by themselves.

Posted 9:45 a.m.
THE NUMBERS: The big, big number is 5.7. That was the unemployment rate in December. That's huge news, because most economists had expected the unemployment rate to remain at 5.9 percent. On the face of it, this drop in the unemployment rate is good news for the economy and is reason for Treasury yields and mortgage rates to rise.

But that hasn't happened. So far early this morning, the Treasury yield has plunged to 4.13 percent from Thursday's close at 4.27 percent.

I asked Richard DeKaser, chief economist for National City Corp., why Treasury yields would drop when the unemployment rate falls. He hasn't looked at the complete employment report and hasn't had time to ponder it, but here's his quick conclusion, which he might revise later: The Treasury market is looking at the employment number more than the unemployment number.

And the employment number is rather shocking: According to the Labor Department's estimate, the U.S. economy added a grand total of 1,000 net jobs in December. The department estimates that people held 130,124,000 jobs in December, up from 130,123,000 jobs in November.

Growth of a thousand jobs a month ain't gonna cut it. Then again, the department says the civilian labor force declined by 309,000 from November to December. That's not what you would expect, since the nation's population continues to grow.

DeKaser believes that the economy continues to have strong growth. Most economists estimate that the economy grew at an annual rate of 3.5 percent to 4.5 percent from October through December, and DeKaser thinks the final number will be on the high end of that range. The economy is growing strongly because workers are increasing their productivity -- their output per hour -- at an amazing rate. Productivity grew at an annual rate of 8.1 percent from July through September, the latest period in which productivity was calculated.

"What are the implications of these kinds of productivity gains?" DeKaser asks rhetorically. "It is not, in my opinion, a serious threat to the economy, because mathematically, as long as economic ouput is increasing, productivity growth must result in either higher real wages or higher profit margins." Most people believe that it's going to higher corporate profit margins, which will result eventually in more business investment.

"If, in fact, you're seeing heightened labor productivity growth, and the expansion is not jeopardized … what it means is that as we go forward in 2004, you're not likely to see the labor market tighten, which would take up the slack that would give us increased compensation that gives us inflation," DeKaser says.

In short, the anemic job growth holds down wages and salaries, and that keeps inflation bottled up, which keeps Treasury yields and interest rates low. When you're wearing your stockholder hat, this is good news. When you're wearing your mortgage-shopping hat, this is good news. When you're wearing your job-hunting hat, or your hoping-to-get-a-raise hat, this is bad news.

Thursday, Jan. 8
Posted noon
THE NUMBERS: The yield on the 10-year Treasury note has dropped to 4.24 percent this morning from Wednesday's close at 4.27 percent. The required net yields of Fannie Mae and Freddie Mac -- think of them as the rates that they require on mortgages they buy -- are almost unchanged today.

Another number is 5.87 percent. That's the average rate on a 30-year, fixed-rate mortgage this week, according to the Bankrate.com weekly survey, conducted Wednesday. That's down 1 basis point from the previous week. Yields and rates are straitjacketed within a tight range because inflation lies moribund and the Federal Reserve has hinted that it won't raise short-term rates for months.

THE GRADE: Five weeks ago, when the average mortgage rate was 6.07 percent, I predicted that they would remain unchanged. I explained my reasoning this way: "The economy has been sending positive signals for months, but mortgage rates haven't gotten the message. Rates are about where they were a year ago, even though the economic outlook is stronger now. Rates on 30-year, fixed-rate mortgages will settle in the 6 to 6.1 percent range for a while."

Instead, rates dropped and have remained in the 5.81 to 5.92 percent range five weeks in a row. I was right that rates would stay in a tight range, but I was 20 basis points off. My prediction was wrong, and I have guessed the direction of mortgage rates correctly 19 of the last 52 weeks, for a batting average of .365.

JOBLESS CLAIMS: The Labor Department says that 353,000 people filed unemployment claims last week, up 14,000 from the previous week. The four-week average of jobless claims has fallen to 350,250, the lowest such number since the first week of February 2001, a couple of weeks after the president was sworn in.

I'm not inclined to take these jobless claims numbers too seriously because they are distorted by noise. We had two short work weeks in a row (when unemployment offices were closed), and even recently fired people go out of town for the holidays. I wouldn't be surprised if some of those people waited until the New Year to take that depressing trip to the unemployment office, deflating the jobless-claims numbers.

IMMIGRATION: While I'm talking about unemployment, I'll muse a bit on the president's immigration proposal. Analysts say the proposal is part of the White House's effort to reach out to Hispanic voters, but I'm not convinced. Hispanic voters are, by definition, citizens, so they won't directly benefit from the opportunity to cross the border and work for low wages.

I think the president's real agenda is to drive down wages for low-income people and, by extension, all blue-collar Americans. Here's the money graf from the Washington Post article that I linked to above: "Business groups, made up of some of Bush's biggest financial backers, welcomed the plan as a way to create a stable workforce and alleviate labor shortages for low-wage and dangerous jobs that Americans disdain in agriculture and the hotel, health, restaurant and construction industries."

Ask yourself: Why do "Americans disdain" those jobs?

Hint: Maybe it has something to do with wages.

Ask yourself another question: Who benefits? The answer is easy: "Business groups, made up of some of Bush's biggest financial backers…"

If foreigners are invited to come into the country legally to take low-wage jobs, driving up unemployment among unskilled Americans, it should help keep mortgage rates down.

KOHN SPEECH: Donald Kohn, a member of the Fed's Board of Governors, spoke Wednesday night in Atlanta about the trade and current account deficits, exchange rates, the United States' role as an importer that keeps people employed in exporting countries, the federal budget deficit and the need to increase savings in this country, which would entail strengthened economies in other countries.

Here's the passage that interests me the most:

(T)he prospect of large federal government deficits stretching out into the future looks worrisome. In the second half of the 1990s, we had both foreign and government savings to finance investment; a few years from now we may have less of the former and none of the latter--indeed, the government sector is projected to be a net user of savings not a net supplier. The fiscal stimulus of the past few years has been quite helpful in promoting recovery, but we do need to consider the longer-term implications of the policies put in place.

If the fiscal path does not change, unless private savings rise considerably to compensate, interest rates will be higher than they otherwise would be to ration the scarcer savings, and we will have slower growth in the capital stock and in the number of houses and autos. .... We need to be saving and investing to build our economic potential and to alleviate the burden on our children and grandchildren.

This is not a task for monetary policy. In the long run, monetary policy cannot do anything about the current account deficit or about the lack of savings from government policy or private choices. Our manipulation of the overnight interest rate helps to keep the overall economy in balance--promoting price stability and production at the economy's potential. ... Promoting savings is a job for fiscal and tax policy.

REAL ESTATE LISTING OF THE WEEK: Wouldn't you love to own a house on a coffee plantation on Hawaii's coast?

Tuesday, Jan. 6
Posted 11 a.m.
THE NUMBERS: The yield on the 10-year Treasury note is 4.31 percent early today, down from Monday's close at 4.41 percent. Fannie Mae and Freddie Mac have posted little change in their required net yields, an indication that there hasn't been much movement in mortgage rates today.

KERCH'S VIEW…: Steve Kerch of CBS Marketwatch has written a pair of columns that summarize what happened in the mortgage and real-estate worlds in 2003 and what he expects in 2004. He says 2003 will be known as "the year of the refi" and not to expect an encore, even though rates remain near historic lows. He says to expect more sales pitches for home equity loans (and, I would clarify, equity lines of credit); technology to steamline the mortgage process more, and Fannie and Freddie to keep getting lots of congressional attention.

In the second column, Kerch says skeptics will continue to wait for a housing bubble to pop, the market in vacation homes will remain strong, houses will keep getting bigger even as average family size shrinks, FSBOs and discount real-estate brokers will chip away at the 6 percent sales commission rate, and the influx of immigrants and the aging of the population will drive much of the housing market in the coming years.

…AND MINE: I believe Kerch is right on the mark. I'm especially interested in the demographic shifts he talks about. We are in the midst of a gigantic immigration boom, and it is the policy of the Bush Administration to encourage homeownership among immigrants. Their sheer numbers drive up housing prices in places such as Southern California and Miami because the demand for housing is so high and there's little room to increase supply. Realtors and loan officers who speak Spanish, Korean or Chinese can carve out nice niches in Southern California. Banks, especially those on the west coast, are marketing to immigrants and coming up with loan programs for them. These trends will show up on the east coast and spread inland.

As for the aging population: Their housing needs will become a huge factor -- not only for lenders and Realtors, but for builders and politicians. Occasionally you'll hear politicians (especially Democrats) complain about sprawl. But I think retirees want sprawl, because sprawl implies one-level houses away from city centers, but close enough to big cities for the best medical care, cultural amenities and shopping.

FORT WHAT IT'S WORTH: The Washington Post lists my hometown of Fort Worth as a hot spot for travel in 2004. "Fort Worth, the cultural capital of the Southwest? Don't laugh," the Post says, and they're right.

MORE FOR POOR: The Bush Administration is considering requiring Fannie Mae and Freddie Mac to devote more of their business to affordable housing.

Monday, Jan. 5
Posted 5 p.m.
THE FED SPEAKS: Ben Bernanke, a member of the Federal Reserve's board of governers and of the rate-setting Open Market Committee, spoke over the weekend at the American Economic Association meeting in San Diego. The speech, titled "Monetary policy and economic outlook: 2004," is probably a good reflection of the Fed's thinking, despite his customary statement that "the views I will express are my own and are not to be attributed to my colleagues on the Board of Governors or the Federal Open Market Committee."

Bernanke says he won't argue with economists who predict 4 percent economic growth this year, so he feels fairly optimistic. He says today's low-rate ("accommodative") monetary policy is appropriate because inflation is low, workers continue to increase their productivity, and the job market is lousy. Indeed, he says, "when one looks at the full range of information available, the labor market looks (if anything) weaker than a 6 percent unemployment rate suggests." He thinks some job-losers are giving up and aren't counted in the unemployment rate.

Mainly because of the poor employment situation, Bernanke believes that the loose interest-rate policy isn't likely to cause excessive inflation. In fact, he says today's inflation is "perhaps at the bottom of the acceptable range." He doesn't want inflation (1.1 percent in November) to fall further. "On the other side, as I have already noted, the achievement of price stability must not and will not be jeopardized," he concludes.

Don't expect the Fed to raise short-term interest rates anytime soon.

QUOTH HE: 'HUH?': Brad DeLong, a professor of economics at Berkeley, has a series of fine posts this week in which he questions what the heck Bernanke means. DeLong does not quarrel with the Bernanke speech I summarize above. But in the Q&A session afterward, Bernanke said, according to a Reuters brief, that the Fed can still boost the economy even if it lowers short-term rates to zero.

DeLong also notes statistical discrepancies between national income and goods and services sold, wonders why the ratio of employment to population is shrinking so fast, and shows in a graph that jobless people are remaining unemployed for a long time -- a median unemployment duration that hasn't been seen in 20 years.

Posted 10 a.m.
THE NUMBERS: The yield on the 10-year Treasury is 4.40 percent early this morning, up from Friday's close of 4.38 percent and way up from Wednesday's year-end close at 4.27 percent. Another barometer of mortgage rates can be found in the required net yields of Fannie Mae and Freddie Mac; those yields have risen about half as much as the U.S. Treasury's yield.

CALENDAR: There's not much of note in this week's economic calendar until Friday, when the employment report for December is released. The pundits expect the unemployment rate to remain steady at 5.9 percent. I'll be interested to see what happens to interest rates if the unemployment rate rises to 6 or 6.1 percent. Would rates fall, or have they hit their floor?

FED SPEECHES: Several Federal Reserve officials, including members of the rate-setting Open Market Committee, spoke over the weekend at a conference in San Diego. Unfortunately, I haven't had time yet to read those speeches to tell you what those people said. I'll read them early this afternoon and summarize them here in an update. Justin Lahart of CNNMoney says the Fed has signaled that it intends to keep rates low for a long time.

Wednesday, Dec. 31
Posted 2 p.m.
THE NUMBERS: The 10-year Treasury yield is down 4 basis points from Tuesday's close, to 4.25 percent. Not much of a change.

In Bankrate.com's weekly mortgage survey, the average rate on a 30-year mortgage was 5.88 percent, up from 5.86 percent the previous week. And that's where the average 30-year will end 2003 -- at 5.88 percent. The average rate one year ago? 5.96 percent. So we've gone 52 weeks and the average rate on a 30-year fixed has gone down 8 basis points.

Five weeks ago, when the average rate was 5.90 percent, I said rates would rise. I was wrong. I have guessed the direction of mortgage rates correctly 19 of the last 52 weeks, for a .365 batting average.

I have a four-day weekend and will return Jan. 5. Have a Happy New Year.

Tuesday, Dec. 30
Posted 10 a.m.
THE NUMBERS: The 10-year Treasury yield is 4.28 percent early this morning, up from Monday's close at 4.24 percent. Fannie Mae's and Freddie Mac's required net yields, an even more reliable indicator of mortgage rates, are up slightly, too. You might get quoted the same rates today as you were quoted Monday, but some lenders might not give you as much of a break when you pay points.

WITH INTEREST: The federal government's budget deficit, and the interest to be paid on it, are not the end of the world, but "not the blithe beginning, either," writes financial consultant Peter Brimelow in CBS Marketwatch.

RICH TIDINGS: Holiday sales were strong at Neiman Marcus and not as strong at Wal-Mart, demonstrating that "the economic recovery is an exclusive party, and most people weren't invited," New York Times op-ed columnist Paul Krugman writes. (Registration required.) This could explain why, during an economic expansion, inflation and interest rates have remained almost flat: because working people's wages aren't going up.

"The bottom line, then, is that for most Americans, current economic growth is a form of reality TV, something interesting that is, however, happening to other people. This may change if serious job creation ever kicks in, but it hasn't so far," Krugman adds.

Monday, Dec. 29
Posted 11:30 a.m.
I'M BACK: It's nice to be back home in sunny Florida after a delightful week visiting in-laws and friends in Toledo. We had a white Christmas, had long conversations, felt the love of family, and I spotted Katie Holmes at the mall.

THE NUMBERS: Rates and yields haven't changed a whole lot in the last week and a half. The yield on the 10-year Treasury is 4.20 percent late this morning, up 3 basis points from Friday's close. Every Wednesday, Bankrate.com conducts a mortgage rate survey. On Dec. 17, the average rate on a 30-year mortgage was 5.81 percent, and last week it was 5.86 percent. If we conducted the survey today, the average 30-year rate probably would lie somewhere between the last two numbers. Rates have plateaued.

CNN/Money quotes analysts as saying that trading volumes are light because people are on vacation, so you shouldn't read too much into the fact that rates and bond yields aren't moving much. That sounds about right. A big terrorist attack would affect markets, but it's difficult to predict how. In the weeks after Sept. 11, 2001, mortgage rates fell.

MAKING THE GRADE: Last week, long-term mortgage rates inched upward from the previous week to 5.86 percent, and the 1-year ARM rate dropped. Five weeks previously, the average 30-year rate was the same -- 5.86 percent -- and I predicted that rates would rise. I have predicted the direction of mortgage rates correctly 19 times in the last 52 weeks, for a .365 batting average.

Intuition tells me that rates will rise at the beginning of the year, stabilizing in the range of 6 percent to 6.1 percent.

CALENDAR: There's nothing of great importance on the economic calendar this week. Tuesday brings the December consumer confidence survey results. I don't pay much attention to consumer confidence because consumers don't always back up their talk with action. I mean, when people say they lack confidence in the economy, then continue buying houses and cars and DVD players, it makes me think that they have more confidence in the economy than they tell pollsters. Tuesday also brings a report on existing home sales for December, and Wednesday brings the jobless claims report for last week. Holiday weeks, especially Christmas week, introduce noise into the jobless claims numbers.

Thursday, Dec. 18
Posted 3 p.m.
THE NUMBERS: Sorry I'm late today. Had to replace the car battery (and had to buy it at the far-away Volkswagen dealership -- Pep Boys and NAPA don't carry it; maybe it's made of unobtainium mined from the Bavarian Black Forest or something), then I went to my son's second-grade class, where I helped the kids make "gingerbread houses" by using cake frosting to paste graham crackers onto half-pint milk cartons. When I observed that my son had made a minimalist gingerbread house, a classmate piped up: "So that's why Nathaniel uses so many big words. His dad talks like that, too!"

Oh yeah, the numbers. They're about the same as they were Wednesday. The yield on the 10-year Treasury closed at 4.19 percent Wednesday after spending most of the day at 4.17 percent. Now the yield is 4.16 percent.

Mortgage rates fell in Bankrate.com's weekly survey. The average rate on a 30-year fixed mortgage dropped 11 basis points, to 5.81 percent. That's what happens when inflation disappears, which it did in November.

My prediction track record continues to stink. Five weeks ago, when the average 30-year rate was 6.08 percent, I said that rates would be the same, give or take 2 basis points, five weeks later. They dropped 17 basis points in that time. I have predicted the direction of mortgage rates correctly 19 times in the last year, for a .365 batting average. That would be great if I were a baseball player.

RESPA: I haven't got hold of a copy of the final RESPA rule that the federal housing department has sent to the Office of Management and Budget for review. RESPA, the Real Estate Settlement Procedures Act, is the law that spells out how mortgage offers are made to consumers. The Department of Housing and Urban Development proposed new rules governing RESPA. That proposal was made in the middle of 2002, and people and businesses sent more than 40,000 responses, most of them critical. Presumably, HUD made some changes before sending along the final rule, but officials there are keeping their mouths shut while the OMB reviews it.

Wednesday, Dec. 17
Posted noon
THE NUMBERS: 27-17. That's the score by which the University of North Texas Mean Green lost to Memphis in this season's Least Prestigious Bowl, otherwise known as the New Orleans Bowl. North Texas is your humble blogger's alma mater, home of a wonderful journalism school and a good football team that has gone to bowl games three years in a row, winning last year's game.

The yield on the 10-year Treasury is 4.17 percent late this morning, down from Tuesday's close at 4.24 percent. The 10-year yield has dropped 13 basis points in the last week, which means that Bankrate.com's weekly mortgage survey, which is conducted today, will show a drop in rates. I predict that the average 30-year rate will drop 8 basis points since last Wednesday (to 5.84 percent), and my colleague Greg McBride thinks the average rate will drop 10 basis points. The loser of this wager will be handcuffed and cast into the Intracoastal Waterway.

On Tuesday, the president signed the American Dream Down Payment Assistance Act. He used the occasion to comment about reforming the rules regulating the Real Estate Settlement Procedures Act, which governs how lenders propose mortgage deals to consumers.

RESPA

According to the housing department, President Bush said:

We understand that buying a home for the first time is complicated and we want to simplify the process. We want to help people to understand the pros and cons of buying a home and be fully aware of what it means to buy a home and what it takes.

We need to make the home buying process more affordable. Some of the biggest upfront costs in a home purchase are the closing costs. Sometimes they catch you by surprise. Many home buyers do not have the time to shop around looking for a better deal on closing costs. You're kind of stuck with what you're presented with. So they end up paying more than they should. So we have proposed new rules to make it easier for buyers to shop around and to compare prices on closing costs so they can get the best deal and the best service possible....

...we want to make buying a home simpler. Many first-time buyers look at the paperwork from a loan application and frankly get a little nervous about all the fine print. Those forms can be intimidating to a first-time home buyer. They can be intimidating to the second- and third-time home buyer! This Administration has proposed new rules to simplify the forms home buyers and homeowners fill out when they apply for a loan or close on a mortgage. We understand that buying a home is a big step and so these recommendations we're making, these changes in the rules, will make that step easier...will enable people to make that step to buying a home...they'll be able to do so with more confidence.

These are practical ways we are working to expand homeownership across the country. The dream of homeownership should be attainable by every hard-working American.

Posted 9:30 a.m.
SEEKING LEAKS: The federal housing department has finished its proposal for reforming the rules governing the way mortgages are presented to consumers. The department hasn't released the proposed new RESPA reforms to the public; it has sent them to the Office of Management and Budget. Someone out there has a bootleg version of this newest version of RESPA reform. Your mission is to tell me where I can find it. The email address is hlewis@bankrate.com.

Tuesday, Dec. 16
Posted 10 a.m.
THE NUMBERS: Treasury yields and Fannie Mae and Freddie Mac required net yields are all down slightly today. The yield on the 10-year Treasury is 4.24 percent, down from Monday's close at 4.28 percent. The change is so slight that you might not see a difference in the rates and terms that are offered.

The Consumer Price Index for November was released this morning, and it makes you think the Federal Reserve has a point when central bankers worry publicly about an unwelcome fall in inflation. The CPI fell 0.2 percent in November. The core CPI -- excluding food and fuel -- dropped 0.1 percent, the first decline in the core rate since December 1982.

Monday, Dec. 15
Posted 11 a.m.
THE NUMBERS: One hole, six by eight feet. One ex-dictator. Lots of laughs at his deserved humiliation. Sic semper tyrannis.

Saddam Hussein's capture doesn't seem to have affected the bond market. The 10-year Treasury yield closed at 4.26 percent Friday and is 4.26 percent now. Market fundamentals will eclipse news of the arrest, CNN Money reports.

HELOCs: Debt in home equity lines of credit has increased 31 percent this year, according to another article by CNN Money. An expert counsels caution.

CALENDAR: The highlight of this week's economic calendar comes Tuesday, when the November inflation numbers are released. The consensus is that the Consumer Price Index rose 0.1 percent in November, both in the broad measure and in the core measurement, which excludes fuel and food.

MIES MASTERPIECE: Farnsworth House, a tour de force of modernist architecture, was bought at auction over the weekend by preservationists who raised millions of dollars in the final hours before the gavel fell. Mies van der Rohe's architectural gem will remain on its 58-acre lot near the Fox River in Plano, Ill. Preservationists wanted to keep the house on site, rather than allow a billionaire to buy it and move it. There is a problem with keeping the mostly glass house on site, though -- the Fox River floods. Not long ago it flooded Farnsworth House to the roof, requiring a $10 million restoration. The winning bid was for $7.5 million.

SLIP-SLIDIN': Economist/blogger Brad DeLong poses the "Muddy Parent Problem." Not about mortgage or real estate, but recommended anyway.

The yield on the 10-year Treasury is at 4.24 percent, continuing its tranquil course.

Posted 1:15 p.m.
THE NUMBERS: The yield on the 10-year Treasury is trading at 4.23 percent, down from Thursday's close at 4.27 percent. In the last week the 10-year yield has hovered between 4.23 percent and 4.32 percent, a rather narrow range.

BYE BYE, HUD: Housing Secretary Mel Martinez bade farewell to the department's employees Thursday. He stepped down at noon today. He is expected to run for the open U.S. Senate seat in Florida. The scuttlebutt here in the Sunshine State is that the White House wants Martinez to run for the Senate to head off fellow Republican Katherine Harris, whose name on the Senate ballot next November would guarantee a gargantuan Democratic turnout and harm the president's re-election effort.

Martinez didn't do much because his boss doesn't believe the federal government should have a role in housing. Martinez did propose major changes in the regulations that govern the way mortgage rates and fees are offered to consumers, but that proposal seems to have been put in the deep freeze.

B vs. B REDUX: A couple of people responded to the bankers vs. brokers letter posted here yesterday. Mortgage professional Steve Grimes says, "Go with your local broker -- you have a face, an address and recourse with the state banking department if anything goes wrong. Try getting some response from the Comptroller of the Currency, who handles banks."

You won't get a response by the Comptroller of the Currency, by the way. You know how the Securities and Exchange Commission never uncovers scandals on Wall Street, and instead New York's attorney general does? The Comptroller of the Currency is like the SEC, a do-nothing agency that harms ordinary people by lulling them into thinking that a vigilant regulator is watching.

Another broker makes this assertion, which I will dispute a little: "Another point is if you have to start over at each bank, your credit is being pulled each time, whereas a broker has to pull it only once -- and then repackage it if necessary -- with that same credit report, restoring the credit scores and creditworthiness of the client."

Fair Isaac, the company that designs credit-scoring models, says that several auto-loan or mortgage inquiries within a short timespan shouldn't ding your credit. Mortgage inquiries within the past 30 days don't count against your credit score, and if you applied for a mortgage more than 30 days ago, all mortgage credit inquiries within a 14-day span are treated as one inquiry. It's true that if you apply at a bank and go through the loan process and then the loan falls through, forcing you start over again with another bank, you will end up with multiple loan inquiries on your credit record, and that might lower the score some. So the e-mail writer has a point when she warns about the effect on your credit score "if you have to start over at each bank."

FED AND RATES: An e-mailer in the witness protection program, where his career has had a renaissance, asks: "I have a question about an interesting tidbit I read on your site long ago. I need it to back up a bet/argument I was having with someone about how often in the past two years mortgage rates went up as well as down after Fed pronouncements."

Whew, that was hard to find! I've written about this subject several times, but it's almost impossible to find the articles. The last time I wrote about this phenomenon, in a mortgage analysis in May, I noted: "The Fed has cut short-term rates 12 times since the beginning of 2001. When you look at what happened with mortgage rates one month after each Fed rate cut, there is no clear-cut trend. Seven times, mortgage rates dropped in the month after a Fed rate cut. Four times, mortgage rates went up. One time there was no change."

Since then, the Fed cut rates one more time, on June. 25. The average rate on a 30-year fixed mortgage was 5.31 percent that day; on July 23, the average rate was 5.99 percent. Now you can say that the Fed has cut short-term rates 13 times since the beginning of 2001, and that a month later, mortgage rates had dropped seven times, had risen five times, and remained unchanged once.

Thursday, Dec. 11
Posted 1:30 p.m.
THE NUMBERS: The yield on the 10-year Treasury note is 4.32 percent, up 2 basis points from Wednesday's close but the same as Tuesday's close. Not much change there.

Bankrate.com conducted its weekly mortgage survey on Wednesday, and long-term rates dropped. The average 30-year mortgage was down 15 basis points, to 5.92 percent.

GRADE: Five weeks ago, when the average rate was an even 6 percent, I predicted that rates would rise. Wrong-o. I have guessed the direction of mortgage rates correctly 20 of the last 52 weeks, for a .385 batting average.

This time I'm predicting that rates will rise over the next few weeks. If you're smart, you will take that as a virtual guarantee that rates will drop even more. I say you should lock. So don't lock, for pete's sake.

Maybe, at the end of the year, I should stop posting my accuracy rate here. What do you think? It's kind of lonely, being one of the world's only soothsayers who publicizes his accuracy week after week. No one else does, so maybe I shouldn't, either. Would I appear more trustworthy?

VEXING QUESTION: A newspaper editor asks the following question and wants me to answer it for publication in his newspaper: "How reliable are the companies who advertise on tv for refinancing, home equity loans: ie, Dietech, Lendingtree, etc."

Aside from criticizing the poor spelling, capitalization and punctuation displayed in the newspaper editor's question, I don't know exactly what to say. I don't recall ever talking or corresponding with anyone who got a loan from ditech.com. As far as LendingTree, well, that's not a lender; it's a referral service. It seldom occurs to me to question a company's reliability based upon which medium it uses to advertise. I mean, I don't think a company is more reliable because it advertises in newspapers instead of on television.

If you have any thoughts about lenders and brokers that advertise on TV, let me know. I'm supposed to reply to the newspaper Friday afternoon.

CIVIL DISAGREEMENT: Jesse Frederick, a mortgage broker in California, comments on a story I wrote in September about mortgage brokers vs. mortgage bankers. I want to pass along his comments because I think he makes some good points and because he's not nasty and insulting, unlike the real-estate agents I hear from. Man, real estate agents are petulant!

Frederick objects to this passage from the article:
"Part of (Quicken Loans vice president Bob) Walters's job is working with Wall Street, developing new loan programs. For example, he recently introduced a home equity line of credit that can be used in the first lien position to refinance a loan or even buy a home. Brokers, he notes, don't conceive new types of loans and bring them to market. They just shop for what's available on behalf of the consumer.
"On the other hand, your loan officer at the local bank branch doesn't brainstorm new loan types around a Wall Street conference table, either. The loan officer does what a broker does: recommends an available loan type and takes the application.
"'There's really no difference' between a broker and banker, says (Brian) Peart, the broker. 'The key is choosing a company that is referred by people whom you know and trust.'"

Frederick writes:
I think there's three major things missed here in your article in the discussion of bank vs. broker:
1) If I go to, say, Wells Fargo, they can only offer Wells Fargo rates, even if they have the same types of loans which a broker offers or the same type of loans the borrower is interested in. On the other hand, if I go to a broker, the broker has access to the rates of multiple lenders, not just one, so there's a good chance the broker can get better terms.
2) If I get turned down by, say, Wells Fargo, I have to start over at another bank or broker. If I get turned down by a lender who a broker brokered to, the broker can repackage the loan and send it to another lender. Or, since the broker has access to multiple types of loans and lenders, maybe he can do a better job packaging and targeting the loan in the first place so it doesn't get turned down the first time.
3) None of this even gets into some of the customized services and attention a broker can offer a borrower. As a broker I have called borrowers at night after the company Christmas party, from foreign countries while on vacation, and on weekends. They get my cellphone and e-mail address. I have met them at their homes at their convenience and run automated underwriting on their loan the first day to make sure they will qualify. Compare all this with the order-taker at the major bank whose job, while well-intentioned, is often just to pass the application on to the underwriting department elsewhere, whose job is business hours only, and who takes no personal responsibility if the underwriting department turns the loan down or takes six weeks to do so. (I have funded loans where the borrowers have been turned down by big banks, so I know.)

He gets the last word.

Monday, Dec. 8
Posted 9:45 a.m.
THE NUMBERS: The November employment figures, released Friday, disappointed Wall Street, and bond yields tumbled. The yield on the 10-year Treasury dropped 15 points, closing at 4.23 percent on Friday. That's where it stands now, before the bond market opens. Freddie Mac cut a key required net yield -- basically, the rate it demands on certain loans it buys -- by 17 basis points Friday, and then raised it 8 basis points this morning. So, roughly speaking, the average rate on a 30-year fixed mortgage has dropped about a tenth of a percentage point since Friday morning.

CALENDAR: There's lots of stuff on the economic calendar this week, but not a lot of importance. The biggie is Tuesday's meeting of the Federal Reserve's rate-setting committee. The panel won't change short-term rates, but Wall Street will keep an eye on whether the committee changes a phrase in its after-meeting statement. Since May, the Fed has been saying it can keep rates low "for a considerable period," and someday the Fed will have to acknowledge that it eventually will raise rates.

Thursday brings reports on retail sales in November and jobless claims from last week. Friday brings a report on producer prices for November. That's probably the most important statistical report to be issued this week. Investors expect that producer prices didn't change much.

Friday, Dec. 5
Posted 10 a.m.
THE NUMBERS: Yields are down a bit, but not enough to make much of a difference. The yield on the 10-year Treasury is 4.34 percent early this morning, down from Thursday's close of 4.38 percent. Treasury yields have held remarkably steady this week. A key required net yield from Freddie Mac -- another indicator of mortgage rates -- is down 6 basis points.

Two numbers of great importance were released this morning. The unemployment rate in November dipped to 5.9 percent, according to the Department of Labor, and non-farm payrolls increased for the fourth month in a row, by 57,000. You might consider this good news, but Wall Street appears to be underwhelmed. Investors and economists had expected the economy to add much more than 57,000 jobs last month. Wall Street had expected the unemployment rate to hold steady at 6.0 percent as discouraged jobless people returned to the job hunt. But apparently a lot of jobless people are still discouraged.

"This is a disappointing number from the payroll side," Jared Bernstein, labor economist at the Economic Policy Institute, a Washington think tank, told CNNfn. "Many of us thought there was considerable pent-up demand for hiring among employers, [but] it appears that caution is still in play."

THE FED: The Federal Reserve's rate-setting committee meets Tuesday, and I usually have a story on the Friday before the meeting that discusses what the experts believe the Fed will do. I didn't have time to write that article this time around. The Fed isn't expected to change short-term interest rates. The Washington Post has a fine Fed advance today, speculating whether officials will signal that they intend to raise rates early next year.

GOING NEGATIVE: "I see that you are forecasting rates as being unchanged. Bold move! Because with only a paltry +/- 2 basis points definition of unchanged, even if you are basically 'right,' you will probably unfortunately by 'wrong' by the official tally scoring," e-mails Jim Postma in his cruelly incisive way.

"I agree with your analysis as to rates likely settling into a 6.0 - 6.1 holding pattern, but it will be tough to improve your batting average in five weeks," he continues. "But you have served such a very important function in the overall economy by your consistency in being a 'negative indicator.' I can personally attest that I have advised my clients on several occasions to act the opposite of your recommendations with a pleasing degree of success. It makes it easy for me, I don't have to struggle with the economic data, I just read your recommendations and act accordingly. I'm glad I don't have your job, and I'm glad that you are a good sport."

Ouch! Ouch!

Thursday, Dec. 4
Posted 1:30 p.m.
THE NUMBERS: The yield on the 10-year Treasury remains becalmed. It's 4.39 percent early this afternoon after closing at 4.41 percent Wednesday and at 4.38 percent Tuesday. Boooo-ring! The required net yields of Fannie Mae's and Freddie Mac's -- which constitute even better barometers of mortgage rates -- are in sleepyland, too.

Bankrate.com's weekly survey of mortgage rates shows that the benchmark 30-year rate rose 17 basis points this week, to 6.07 percent. I believe that this is about where mortgage rates want to be for a while -- in the land between 6 percent and 6.1 percent. So I'm predicting in this week's Rate Trend Index that rates will be relatively unchanged 30 to 45 days from now. What I mean is this: I think rates might rise a bit in the next two or three weeks, then fall back to near where they are today. I'm not talking about a big rise in the interim -- I don't think the average 30-year rate will exceed 6.20 percent this month. That brings us to my track record:

THE GRADE: Every week, I predict which way mortgage rates are headed in the next 30 to 45 days, and every week, I look back at the average 30-year rate five weeks earlier and my prediction at the time. Five weeks ago, when the average rate was 5.94 percent, I said rates would rise. I was correct. I have been correct 20 times in the last 52 weeks, for a regrettable .385 batting average. I know that's bad; no need to taunt. That would be bad sportsmanship.

QUESTION TIME: In an e-mail with the subject line, "Can you help me get a loan if I have some late payments?," Sally asks, "If my debt to income is a little high, can I still qualify for a loan?"

No, I can't help people get loans. Yes, you can get a loan if you have some late payments. And if your debt-to-income ratio is a little high, you might still be able to qualify for a loan. But the combo of late payments and high debt-to-income ratio means that you'll get a subprime loan at a high interest rate. The issue is how much you'll be qualified to borrow. Probably not as much as you want. Verily, I say to you: Talk about this up-front with the lender or broker. Count how many late payments you've made (auto loans, credit cards, rent and so on) in the last two years and let the loan officer know. Be truthful about your debt and your income. Don't waste the loan officer's time.

Mark asks: "Holden, I would like to see your comments about a practice that I think is unfair. I closed on the sale of my property on Oct. 17. I had paid my October payment, which paid my principal and interest up to Oct 1. When I received my settlement statement I was charged interest by my lender for the entire month of October. What gives my lender the right to charge me for any interest past the 17th? I was told by my agent that this is a common practice."

Good question. I was about to explain that mortgages are paid in arrears, but upon a closer reading, it's clear that Mark understands that concept. I know a lot of mortgage loan officers read this. Would one of you be so kind as to e-mail me an answer Mark's question, so I can post the reply here? I've e-mailed Mark to ask him if this is an FHA loan. I don't know if it is or not.

Wednesday, Dec. 3
Posted 10 a.m.
THE NUMBERS: The yield on the 10-year Treasury hasn't moved much this morning. It closed at 4.38 percent Tuesday and that's where it stands at mid-morning. The 10-year yield has gone up 19 basis points in the last week. Bankrate.com conducts its weekly mortgage survey today, and I expect it to show that the average 30-year rate has risen about 16 basis points since last week, when the average 30-year rate was 5.90 percent.

Tuesday, Dec. 2
Posted 12:30 p.m.
BACK IN THE SADDLE: It's nice to return after a few days off. I really missed pontificating here about mortgage rates. What could be better than thinking and writing about mortgages and mortage rates every day, helping people understand the biggest purchase of their lives?

Roasted a turkey on the gas grill for Thanksgiving; sliced my thumb while carving the bird. I read somewhere that emergency rooms are filled with men with cut thumbs on Thanksgiving. Perhaps that's just an urban legend, like the myth of an epidemic of wife-beating on Super Bowl Sunday. But I prefer to believe that I belong to a grand tradition of guys who slice into their thumbs on Thanksgiving.

It's healing well, thanks.

THE NUMBERS: It appears that rates have gone up about one-fifth of a percentage point since my last blog posting, last Tuesday. The yield on the 10-year Treasury note is 4.39 percent late this morning. It closed at 4.19 percent a week ago. It closed at 4.40 percent on Monday, so it actually has declined very slightly today.

I got a question a week and a half ago that I want to share with you. Dawn asks: "When the Treasuries are up, the yields are down; therefore, mortgage rates tend to go in the same direction as the yields, correct?" Further, she wants to know how mortgage rates would be affected if we move more troops to Iraq and Afghanistan.

I don't know the answer to Question 2. As far as the first question, the way Treasury prices and yields are reported can be confusing. When Treasury prices rise, yields fall, and when Treasury prices fall, yields rise. Sometimes you'll see or hear a broadcast report that Treasuries are up or down. That doesn't mean much if you don't know whether they're talking about prices or yields. Here, I take care to specify that I'm talking about Treasury yields.

Treasury notes are probably the safest investment you can make because they're backed by the full faith and credit of the U.S. government. The risk is low, and so are the yields. Other, riskier forms of debt are often based loosely on the yields of Treasury notes of similar duration, and move in the same direction.

Why do 30-year mortgage tend to follow the yield on the 10-year Treasury note and not the yield on the 30-year Treasury? Because relatively few people hold their mortgages for 30 years. Historically, homeowners held their 30-year mortgages for an average of eight to 10 years or so. That's an average, remember; some people held their mortgages for 30 years and then held note-burning parties, while others sold their houses or refinanced after two or five or 10 years. On average, people held their 30-year mortgages for closer to 10 years than 30 years, and that's why rates tend to move in the same direction as 10-year Treasuries.

I don't know how the refinancing wave of 2001-2003 affected this. People refinanced loans multiple times during the refi boom, and I assume that the average time that people have held 30-year mortgages has gone down.

The mortgage secondary market has grown so much that you might make a case that the 10-year Treasury yield follows the 30-year mortgage rate instead of the other way around. That's just speculation, though. When I have time I'll ask experts whether they think the mortgage market is the dog and the 10-year Treasury is the tail, or if the 10-year Treasury is still the dog that wags the mortgage market tail.

Tuesday, Nov. 25
Posted 10:30 a.m.
THE NUMBERS: Today's big number is 8.2 percent. That's the annual rate at which the economy grew from July through September. A month ago, the Commerce Department estimated that the economy grew at a 7.2 percent annual clip during the third quarter. That gross domestic product number was revised upward by a full percentage point this morning.

Markets have reacted with yawns. The yield on the 10-year Treasury is down this morning, to 4.21 percent from Monday's close at 4.23 percent.

Growth at an annual rate of 8.2 percent is astonishingly fast, and can't be sustained. In January, when GDP for the fourth quarter of 2003 is announced, it will be lower. That shouldn't be taken as bad news. The economy has to slow down from its rapid growth in the third quarter lest inflation become a concern.

The Conference Board announces that its index of consumer confidence increased 10 points this month to 91.7, the highest reading in a year. The National Association of Realtors says home resales rose 3.6 in September at an adjusted annual rate of 6.69 million units.

Monday, Nov. 24
Posted 9:30 a.m.
THE NUMBERS: The yield on the 10-year Treasury is up slightly. It is 4.20 percent early this morning, up from Friday's close at 4.15 percent. A key required net yield of Freddie Mac's -- another barometer of mortgage rates -- is up more sharply, by 10 basis points. Fannie Mae's equivalent is up 6 basis points.

CALENDAR: The economic calendar for this week has everything packed into Tuesday and Wednesday. Tuesday brings preliminary numbers for the third-quarter chain deflator, a measure of inflation. Reports on existing home sales for October and consumer confidence in November also are due Tuesday.

Wednesday brings reports on new home sales in October, jobless claims from last week, personal income and spending in October and another consumer confidence index.

Friday, Nov. 21
Posted 2 p.m.
THE NUMBERS: Yields on the 10-year Treasury continue to decline. The 10-year yield is 4.12 percent, down from Thursday's close at 4.16 percent, which was down from Wednesday's close at 4.24 percent. Fannie Mae and Freddie Mac's required net yields -- another barometer of mortgage rates -- haven't moved as much this week.

Reports are linking lower Treasury yields to ye olde "flight to safety." Investors are worried about terror attacks over the weekend, which could indirectly harm stock prices. When investors sell their stocks and by supersafe U.S. Treasuries, they drive the price of Treasuries up and yields down.

COMPARISON SHOPPING: E*Trade Mortgage has introduced an online tool it calls Fair Compare. It allows you to plug in information from a competitor's good faith estimate to figure out who is offering a better deal -- E*Trade Mortgage or its competitor.

The tool allows consumers to shop anonymously and decide for themselves, says Rob Bernabe, president of E*Trade Mortgage: "It's not sales-y at all."

Instead of being "sales-y," the tool is straightforward and informative. You type in the numbers for the home's estimated value (I would change it to say, "Purchase price or estimated value"), the amount you want to borrow, the competitor's interest rate, and the estimated costs of the credit report, processing fees, appraisal and so on. There is a glossary, so if you don't understand what, say, a tax service fee is for, you can find out.

In the end, if the competitor's quote is better, E*Trade's online tool tells you so, but urges you to double-check the figures -- especially for the categories where you didn't enter a dollar amount. E*Trade asks, in effect, "Are you sure that the competitor isn't charging a wire transfer fee?" It also suggests that you find out if the competitor will promise that its interest rate, points and various lender fees won't change from what is written on the good faith estimate. That's where E*Trade finally gets a bit sales-y. But it's not pushy.

"What we really want the consumer to do is pick the best deal for them," Bernabe says. "We're not going to catch all the fish in the ocean." But the tool allows E*Trade to cast a wider net, because if you want to compare a competitor's offer with E*Trade's offer, you've got to apply with E*Trade.

Bernabe says the online tool does the same thing that the call center has always done. You can fax a good faith estimate to the call center and they'll conduct a line-by-line comparison to tell you who can offer a better deal. Any scrupulous lender will do the same: When we were shopping for an equity line of credit, my wife faxed a competitor's offer to National City Mortgage, which holds our primary mortgage. Our banker at National City told us to take the competitor's deal. That's one way that our banker has earned our trust.

The difference between the online comparison and using the call center is that, online, you don't have to talk to anyone and you can compare anonymously. Bernabe believes this is important.

E*Trade Mortgage plans to advertise Fair Compare next year, together with what it calls its Up-Front Price Promise, in which it vows to stand by the rate and certain lender's fees written in the good faith estimate.

Thursday, Nov. 20
Posted 1:15 p.m.
THE NUMBERS: The yield on the 10-year Treasury, a barometer of mortgage rates, is 4.21 percent early this afternoon. It had closed at 4.17 percent Tuesday and at 4.24 percent on Wednesday.

In Bankrate.com's weekly mortgage survey, the benchmark 30-year rate averaged 5.86 percent, down 22 basis points from the previous week. That's the lowest rate since the first week of October.

I was wrong five weeks ago when I said mortgage rates would rise. I have guessed correctly 21 times in the last 52 weeks, for a .404 batting average.

I wrote this week about abusive mortgage servicers and what you can do about them.

Tuesday, Nov. 18
Posted 9:30 a.m.
THE NUMBERS: The yield on the 10-year Treasury fell slightly Monday, finishing at 4.18 percent compared to Friday's close at 4.22 percent. This morning it's back up to 4.21 percent. In other words, Treasury yields are drifting but not going anywhere. Fannie Mae and Freddie Mac are holding mortgage rates steady, too.

Core consumer prices -- the core CPI -- rose 0.2 percent in October, slightly faster than economists had expected. The Labor Department said the increase mainly was due to increases in the cost of housing.

The broader Consumer Price Index was unchanged; economists had expected a slight rise. The CPI includes the prices of food and fuel, while the core CPI does not. The government says the cost of gasoline went down in October and the cost of food went up.

Monday, Nov. 17
Posted 9 a.m.
THE NUMBERS: The yield on the 10-year Treasury, a barometer of the direction of mortgage rates, dropped almost a quarter of a percentage point Thursday and Friday last week. The 10-year yield closed at 4.22 percent Friday and it looks like that's where it's opening this morning.

CALENDAR: Briefing.com's economic calendar lists some big reports this week. Tuesday brings the report on consumer prices for October. The consensus is that inflation was 0.1 percent in October. Wednesday brings reports on housing starts and building permits in October. It probably will show a slight cooling in the home construction market. The jobless claims numbers from last week are released Thursday.

Friday, Nov. 14
Posted 9:45 a.m.
THE NUMBERS: Yields on 10-year Treasury notes plunged Thursday, to 4.30 percent from the previous day's close at 4.44 percent. Early this morning the 10-year yield is down slightly at 4.28 percent.

With mortgages, the rule of thumb is "lock on the dips," and I believe this dip is sufficient to persuade many mortgage-shoppers to lock. This is especially true in light of this morning's Producer Price Index report for October, which showed that wholesale prices rose faster last month than expected. The core rate of wholesale inflation rose 0.5 percent in October, and Wall Street economists had expected the number to be more like 0.1 percent.

Normally, I would expect Treasury yields -- and mortgage rates -- to rise because of this news. But the report on retail sales in October was released this morning, too, and the news wasn't very good. Total retail sales fell 0.3 percent in October, a bit more of a drop than economists had expected. Much of that drop was due to poor auto sales. When you ignore autos, retail sales rose 0.2 percent in October, in line with expectations.

EARTH FRIENDLY: It's not easy building green, the New York Times (registration required) reports.

Thursday, Nov. 13
Posted 11:30 a.m.
THE NUMBERS: It looks like mortgage rates could be headed down slightly today. The yield on the 10-year Treasury is down to 4.32 percent, compared to Wednesday's close at 4.44 percent. Required net yields of Fannie Mae and Freddie Mac, which are even better barometers of mortgage rates, are down, too.

In Bankrate.com's weekly survey, mortgage rates rose slightly in the last week. The benchmark 30-year rate averaged 6.08 percent this week, compared to 6.00 percent last week. Five weeks ago, when the average rate was 6.01 percent, I guessed that rates would rise. I was right, and I have guessed the direction of mortgage rates correctly 21 times in the last 52 weeks, for a batting average of .404. No need to waste keystrokes telling me how lousy that is. I know.

ECONOMY: Initial unemployment claims last week clocked in at 366,000, about what economists had expected. The number is well below 400,000, so it's an encouraging sign unless you're one of those people who filed a jobless claim last week.

80/20 MORTGAGES: A few days ago I said I wanted to interview people who got 80/20 mortgages and I got quite a few replies. I tried to contact a couple of people but I was unsuccessful, and then I ran out of time. Here's the article. One problem I often run into is that readers send e-mails saying that they're willing to do an interview, but don't tell me their phone number. On a related matter, I sometimes ask people if it's OK to quote their e-mails here, and they fret about typos and spelling and grammatical errors. I fix those, so don't worry. On the other hand, I do appreciate it when people make the effort to spell well and write clearly.

Several readers asked what I think about 80-20 loans. I would feel nervous about getting one in a market where prices have been rising rapidly -- places such as Southern California, South Florida, Long Island and the suburbs north of New York City, and southern New Jersey -- because home values in those areas could fall within a few years.

I'm not saying that I think home values in those places will fall, or that if prices drop, they will fall in all of those areas. I'm saying that it's possible that those places are in a real-estate bubble, but I'm not saying that it's probable. I live in one of these places -- the white-hot housing market of Jupiter, Fla., where my home's appraised value increased 40 percent in three years -- and I don't think I'm in the midst of a real-estate bubble. Then again, few people realize it when they're inside a speculative bubble.

Let's say you buy a house during a real-estate bubble. You pay $200,000 for the house and borrow all $200,000 with an 80-20 loan. You plan to refinance in three to five years, combining the two loans into one. Or maybe you plan to sell the house in three to five years. But home values fall, and three or four years later, your house is worth $180,000. Whether you refinance or sell, you'll have to scrounge about $20,000 to repay the loans.

An 80-20 loan isn't as risky if you're sure you'll live in the house a long time, or you're buying a house in an area where home values have been rising, but at a modest rate.

A reader named Derek writes: "I … recently applied for an 80-15, not an 80-20. I'm seeking your expert opinion on whether these are beneficial to avoid private mortgage insurance? I ask this because these tend to be interest-only loans and the thought of paying the interest on a $35,000 loan over 10 years and then getting a bill for a balloon payment of $35,000 at the end of the term seems to not make any sense."

I think it is beneficial to avoid paying for mortgage insurance if it means that your house payments, minus income tax deductions, are lower. Usually, that's the case. As far as the interest-only loan with a balloon payment, there are a couple of strategies to pursue. First, you can make more than the minimum monthly payment on the interest-only portion of the loan. That way, you pay down some of the principal. Second, you probably will find a lender -- the current lender, most likely -- who will be willing to refinance that loan just before the balloon payment is due.

That secondary loan is probably a home equity line of credit. As you pay down principal on that loan, it becomes available to you as a credit line. You can use that money to improve your house and increase its value.

Todd Lewis explains how he used an 80-20 mortgage as a bridge loan: "I closed on my house about a month and a half ago," he writes. "We needed this type of loan because we weren't closing on our existing house until nine days later. We were going to use the equity from the existing house as the down payment, but due to the gap in dates, we had no other option. The 80 percent was a standard 30-year loan; the 20 percent was in the form of a home equity line of credit that we paid off as soon as our existing house closed. We have since left the HELOC open with a zero balance owed."

That strikes me as a useful and creative way to use an 80-20 loan. Whoever suggested it deserves referrals, Todd.

A reader named Paul says he just closed an 80-20 loan, and he is concerned about the next one. "I need to lock a rate soon," he writes. "Would you say lock it ASAP or wait a week and see what plays out? From your article I thought I saw that some news comes out Friday that might shoot rates up."

I think rates will be relatively steady for the next week or two, mostly because they've been so steady over the last month despite better-than-expected news about a strongly recovering economy. Friday brings a slew of reports about the economy in October: wholesale prices, retail sales, industrial production. If wholesale prices (officially called the Producer Price Index, or PPI) rose faster than expected, mortgage rates might rise. According to Briefing.com, the consensus is that PPI rose 0.2 percent in October and core PPI, which excludes volatile oil and food prices, went up 0.1 percent.

Wednesday, Nov. 12
Posted 9 a.m.
THE NUMBERS: The yield on the 10-year Treasury is 4.42 percent in before-hours trading. That's down from Monday's close at 4.49 percent. A week ago, the 10-year yield was a little lower, at 4.38 percent. Rates probably will be up slightly in this week's Bankrate.com index.

HAMMER TIME: The federal housing department and the Federal Trade Commission are announcing a big RESPA enforcement action today. RESPA is the law that governs the way mortgage deals are put together and presented to consumers. The federal agencies haven't given details yet, but they probably will announce a $55 million settlement with Fairbanks Capital, the biggest servicer of subprime mortgages. Among other things, Fairbanks Capital was accused of letting customers' on-time payments languish in the in-basket past the due date, then charging for late payments. When the government started investigating Fairbanks Capital, the company fired its CEO and some other executives and pledged to clean up its act.

Tuesday, Nov. 11
Posted 11 a.m.
THE NUMBERS: Bond markets and Fannie Mae and Freddie Mac are closed today, so I don't have fresh yields and rates today. The yield on the 10-year Treasury, a barometer of mortgage rates, rose on Monday to 4.49 percent from Friday's close at 4.48 percent.

SHOUT OUT: Do you have an 80/20 mortgage, in which you borrowed 100 percent of the home's price, cutting the loan into two pieces so you didn't have to pay for mortgage insurance? I'm doing a story on these loans and I would like to talk to someone who got one. Also, I'm interested in talking with someone who had problems dealing with Fairbanks Capital, a prominent mortgage servicer that has been under investigation by federal regulators. My email address is hlewis@bankrate.com.

My belated thanks to the folks who responded to my plea for interview sources last week. A bunch of people responded after my deadline, and I haven't gotten back to all of you yet to thank you.

Monday, Nov. 10
Posted 10:30 a.m.
THE NUMBERS: Bond yields are fairly steady. They have dropped slightly since the end of last week. You might get a slightly better deal on discount points than you could have got at the end of the week. The yield on the 10-year Treasury note is 4.42 percent this morning, down from closing at 4.48 percent Friday. That closing number from Friday is probably a statistical blip; the 10-year yield was trading at 4.44 to 4.46 most of the day Friday. That's my long, confusing way of explaining that yields haven't changed much since Friday, and rates haven't changed much, either.

UPCOMING: The economic calendar is quiet until Thursday, when the report on last week's initial jobless claims comes out. Economists expect that number to fall well below 400,000, signaling a strengthening economy. Friday brings reports on retail sales and industrial production in October, and a poll of consumer sentiment in November.

Friday, Nov. 7
Posted 9 a.m.
THE NUMBERS: The really important numbers have to do with the employment report for October, which was much better than expected.

The unemployment rate slipped to 6.0 percent in October, down from 6.1 percent. Back in June the unemployment rate crested at 6.4 percent.

Non-farm payrolls increased by 126,000 in October -- meaning that the total, net number of jobs in the economy increased by that much. The consensus among economists was that job growth would amount to about half that.

Perhaps more importantly, the preliminary non-farm payroll number from September was revised upward. A month ago, the government estimated that non-farm payrolls had increased by 57,000 in September. Now the government says the number was 125,000. If you view it from my cockeyed perspective, that's like adding 68,000 jobs to the 126,000 new jobs in October.

This excellent news probably will cause mortgage rates to rise. Most of the time, I would say that it's a slam-dunk certainty that rates will rise, but lately the market has reacted passively to good news. Investors should get excited over that revised number of new jobs in September, because now the economy has added more than 100,000 new jobs for two months in a row. The news could hardly be better for workers and for the economy, but it's probably not-so-great news for people who were waiting to lock their mortgage rates.

THE OTHER NUMBERS: So far, an hour before the markets open, the 10-year Treasury yield is up 2 basis points, to 4.47 percent. Another barometer of mortgage rates, a key required net yield of Freddie Mac, is actually down this morning by 1 basis point. I'm surprised, and I think those numbers will go up substantially. If your lender hasn't raised rates this morning, I think you should lock immediately.

Allow me to add that I'm often wrong. In the last year I've been right only 40 percent of the time when guessing the direction mortgage rates will take in the next five weeks, and I thought this employment report would bear disappointing news, not the excellent news that it actually delivered. Investors in bonds and mortgage-backed securities know a lot more than I know, so maybe they knew this good news was coming and they already had priced it into the bond yields and mortgage rates.

Posted 8:40 a.m.
LOCK: If you're sitting on the fence and you're scheduled to close in the next week or two, try to lock within a few minutes. You might catch a good rate before rates rise. The employment report was much better than expected, with the unemployment rate down to 6.0 percent and 126,000 new jobs created. I'll post details in a few minutes.

Thursday, Nov. 6
Posted 11:45 a.m.
THE NUMBERS: There are lots and lots of numbers to talk about this morning. Let's start with 10-year Treasury yields, an important barometer of long-term mortgage rates. They're up to 4.40 percent this morning from Wednesday's close at 4.38 percent. The 10-year closed at 4.33 percent on Tuesday and 4.40 percent on Monday. So you can look at it a couple of ways: Treasury yields are up for the third day, or Treasury yields are back to where they were Monday afternoon.

Mortgage rates were up a little in the last week. In the Bankrate.com weekly national survey of large lenders, conducted yesterday, the average 30-year fixed-rate mortgage was 6.00 percent.

OTHER NUMBERS: The government says business productivity rose at an 8.1 percent annual rate from July through September. Productivity hasn't jumped that much in more than 10 years.

I get a kick out of this passage from a Reuters story (link might expire soon) about the rise in productivity: "The sharp rise in productivity helped business keep a lid on the costs of production. Unit labor costs, a gauge of potential wage pressures, fell at a 4.6 percent pace, suggesting a good quarterly corporate profit performance."

This is an example of how most business journalists write, and I guess that's fine for their readership. But what the Reuters report is saying is that employers aren't giving pay raises to their employees that match their increased productivity. To put it even more simply, it means that the average worker might produce 8.1 percent more per hour this year than a year ago, but that worker's wages might go up only 3.5 percent.

Last year, maybe you earned $100 for making 100 widgets. This year, you might earn $103.50 for making 108.1 widgets. The difference goes straight to the company's profit.

Is that good news? It is if you get most of your income from investments. But the news isn't really that great if you're a wage earner. With productivity rising so fast, and with unemployment at 6.1 percent, employers are in control. They can take their time hiring, and they don't have to offer much pay to new hires. They can force employees to accept small raises or no raises at all, even as employees are producing much more.

On the other hand, the increases in productivity might help to keep interest rates down, benefiting wage earners who have mortgages, car loans and credit card balances.

GREENSPAN: Alan Greenspan, chairman of the Federal Reserve, spoke this morning at the annual meeting of the Securities Industry Association and had quite a lot to say about productivity. "In any event," he said, "one consequence of these improvements in efficiency has been a temporary ability of many businesses to meet increases in demand while paring existing workforces and continuing to exercise restraint on capital spending."

He said there are various explanations for the huge rises in productivity in the last two years: businesses are pressing employees to work harder, businesses have focused on cutting costs after allowing inefficiencies to creep in during the boom years of the late '90s, and advances in technology finally are showing results. Greenspan believes each of those explanations has some truth, and the combination has yielded all these productivity gains.

Greenspan added that the odds "increasing favor a revival in job creation."

Greenspan added that he is concerned about the federal budget deficit.

"Recent budget deliberations are not encouraging," he said. "The current debate appears to be about how much to cut taxes or how much to increase spending. No significant constituency seems to support taking the actions that will be necessary to move toward, and one hopes achieve, budget balance."

Greenspan said tax increases are not the answer to the budget problem, and that he would prefer to see spending cuts instead.

REPORT CARD: Every week in the Mortgage Rate Trend Index, I predict what direction mortgage rates will take in the next 30 to 45 days. I can say they'll go up, down or about the same (within 2 basis points). I grade myself by comparing the current rate with my prediction five weeks earlier. On Oct. 2, when the average 30-year rate was 5.79 percent, I predicted that rates would rise. I was right for the first time in nine weeks. I have correctly guessed the direction of mortgage rates 21 times in the last 52 weeks, for a batting average of .404.

MORTGAGE FEES: An exclusive national survey by Bankrate.com shows why comparing mortgage closing costs is such a frustrating exercise.

IN MEMORIAM: I got a newspaper clipping in the mail yesterday from my mom. It said that Eugenia "Gene" Thompson, my journalism teacher at Arlington Heights High School in Fort Worth, Texas, had died.

Miz T was my most influential teacher in high school. Thanks to her, I entered college with more writing and editing skills than most journalism students had after four years of college. She was a great and formidable teacher. I and hundreds of her former students will miss her.

Wednesday, Nov. 5
Posted 5:45 p.m.
UPDATE: The Bankrate.com weekly mortgage survey says that the average 30-year fixed mortgage rate rose 6 basis points to an even 6 percent. More tomorrow.

Posted 9:10 a.m.
THE NUMBERS: The yield on the 10-year U.S. Treasury, a barometer of mortgage rates, is down this morning to 4.30 percent from Tuesday's close at 4.33 percent. A key Freddie Mac required net yield, another barometer of rates, is down a similar amount. I doubt these are enough to cause lenders to drop rates, but they might offer you a slightly better deal on discount points.

Today is the day when Bankrate.com's research department conducts the weekly mortgage rate survey. Each week we survey 10 lenders in 10 large cities -- the same 100 lenders each week -- on the rate they charge on a $165,000 purchase loan to someone with excellent credit who puts 20 percent down and pays zero points or the minimum points that the lender charges. (Some lenders always charge origination points in lieu of some other fees.) I'm guessing that, in today's survey, the average rate on a 30-year mortgage will be 6.02 percent, up from 5.94 percent last Wednesday.

Each week in the Rate Trend Index, I predict whether mortgage rates will be up, down or about the same (within 2 basis points) five weeks hence. After an eight-week streak of guessing wrong, it looks like I'll be right this time. Five weeks ago, on Oct. 1, I guessed that mortgage rates would rise from that week's average of 5.79 percent. Next week I'll start another long losing streak, just like I'm about to do in fantasy football.

I'll update late this afternoon with results of the Bankrate.com weekly mortgage survey.

Tuesday, Nov. 4
Posted 9:45 a.m.
THE NUMBERS: Yields and rates are bobbing in calm seas. The yield on the 10-year Treasury, a barometer of mortgage rates, is 4.34 percent this morning, the same as Tuesday afternoon. Usually I consult this U.S. Treasury Web page to come up with the previous day's "official" rate, but something seems to be wrong. It lists the previous day's date as Nov. 1, and says the 10-year closed at 4.40 percent.

CALL FOR CALLS: I'm looking for more "regular people" to interview about mortgage fees. Bankrate.com recently surveyed six lenders from each state, plus the District of Columbia, to find out what fees they quoted. I'm writing about that survey and I want to talk to some consumers today. I want to talk to folks who got a mortgage recently and who were confused by all the fees. I especially want to talk to people who compared good faith estimates, asked questions, and figured out which lender was offering the best deal.

If you would like to be interviewed, send me an email at hlewis@bankrate.com.

APPRAISAL WATCH: Banks shouldn't let borrowers or loan officers hand-pick appraisers, bank regulators say. The FHA has started an electronic monitoring system to keep appraisers honest.

Monday, Nov. 3
Posted 4:45 p.m.
AFTERNOON UPDATE: I'm looking for "regular people" to interview about mortgage fees. Bankrate.com recently surveyed six lenders from each state, plus the District of Columbia, to find out what fees they quoted. I'm writing about that survey and I want to talk to some consumers Tuesday. I want to talk to folks who got a mortgage recently and who tried hard to figure out all the fees. I especially want to talk to people who compared good faith estimates, asked questions, and figured out which lender was offering the best deal.

If you would like to be interviewed, send me an email at hlewis@bankrate.com. I'm looking for people who are available for interviews during east coast working hours on Tuesday.

By the way, the 10-year Treasury was 4.34 percent late this afternoon. That implies that mortgage rates have been at a standstill for a few days.

Posted 10:15 a.m.
THE NUMBERS: Yields and rates are mostly unchanged from Friday. The yield on the 10-year Treasury, an important barometer of mortgage rates, is unchanged this morning from Friday's close, at 4.33 percent. A month ago, it was 4.21 percent.

The Institute for Supply Management's index of manufacturing activity for October came in at 57, better than economists had expected. But the bond market appears to have anticipated the slightly-better-than-expected news, so yields won't react much.

ON THE CALENDAR: This week's economic calendar will be dominated by Friday's employment reports for October. Wednesday brings the report for September factory orders and Thursday brings the report for last week's jobless claims. Then comes Friday's employment data for October, including the unemployment rate and total employment. Economists expect that 65,000 jobs, more or less, were created in October. If they're right, it will be the second month in a row in which more jobs were created than eliminated.

Friday, Oct. 31
Posted 5:15 p.m.
FIRES REVISITED: The Mortgage Bankers Association is urging lenders "to offer mortgage relief to borrowers who have lost their homes, suffered damage to their properties or have incurred a loss of employment due to damage to their workplaces" from the California wildfires.

The MBA isn't just asking lenders to offer help to customers who ask, but "to reach out to potentially affected customers to inform them of the relief options available to them and to assist them where possible."

Unfortunately, mortgage companies might not know who has been affected by the wildfires, and people who lose their homes can be difficult to reach. If you know someone who lost a home or a job because of the wildfires, let that person know that mortgage relief might be available. Borrowers may be able to get their payments suspended or reduced for a time, or have the terms modified.

Borrowers should call their loan servicer's customer-service number. Usually it's a toll-free number printed on the coupon book or monthly bill. Borrowers also can try calling Fannie Mae's consumer resource center at (800) 732-6643. That line is open between 6 a.m. and 2 p.m. Pacific time.

Posted 10:35 a.m.
THE NUMBERS: I thought mortgage rates would shoot up as a result of the third-quarter GDP number released Thursday, but there is little evidence of that happening. In fact, this morning the 10-year Treasury yield, a good barometer of mortgage rates, is 4.31 percent -- the same as Wednesday's close. Sure, Treasury yields went up Thursday, but not by a lot, and only for a day.

Fannie Mae's and Freddie Mac's required net yields -- an even better barometer of mortgage rates -- haven't changed much, either.

TAKING CREDIT: President Bush says the economy's rapid growth is a result of his tax policies, and economist, op-ed columnist and all-around-thorn-in-Bush's-side Paul Krugman says one good quarter doesn't make a trend. (Registration is required for both links.) What's interesting is where Bush and Krugman agree: They both say that the tax cuts stimulated consumer spending. Krugman says the surge in spending is a one-time result of tax-rebate checks. Bush says the renewed consumer spending will be as permanent as the tax cuts.

REAL ESTATE LISTING OF THE WEEK: They call it a "derelict mansion." It's the "Hilltop House" in Apple Valley, a town in California's parched Inland Empire. The seller says Howard Hughes and J. Paul Getty owned it. The "now" and "then" photos are rather confusing -- has the roof been removed from parts of the house? It's hard to tell. You can bid in this eBay auction or buy it outright for $2.25 million.

Thursday, Oct. 30
Posted 10 a.m.
MORE ABOUT GDP: The government says increased consumer spending was responsible for much of the rise in gross domestic product. GDP, a measure of all the goods and services produced, increased in the third quarter at an annual rate of 7.2 percent. Quarterly GDP growth hasn't been that strong since 1984.

Sales of motor vehicles and computers were way up from July through September, and strong home sales also helped boost the GDP number.

Personal consumption expenditures -- the money spent for goods and services by individuals, plus the value of goods and services given to people as charity -- were up at an annual rate of 1.8 percent when you take away food and fuel spending; the comparable figure from April through June was 1.1 percent.

About 386,000 people filed unemployment claims last week. The four-week moving average of jobless claims remained at 392,250. It generally is taken as a hopeful sign when those numbers are below 400,000.

Despite all this good news, bond yields haven't risen as much as I thought they would. It's still early in the day, though. The 10-year Treasury yield is trading at 4.35 percent at about 9:50 a.m., up slightly from the previous day's close at 4.31 percent. Perhaps yields and mortgage rates won't rise as much as I thought they would.

Still, if you're closing on a 15- or 30-year mortgage within two or three weeks, I think it would be a good idea to lock the rate this morning if your lender hasn't raised rates yet. I'm not absolutely certain that mortgage rates will spike today, but I think it would be prudent to lock right now if your fixed-rate mortgage is closing within two or three weeks.

Posted 8:50 a.m.
THE NUMBERS: The big number, in terms of the number itself and the attention that will be paid to it, is the third-quarter gross domestic product. The nation's output of goods and services increased at a 7.2 percent annual rate from July through September, an astonishingly high number that won't be sustained. I would expect bond yields and mortgage rates to rise today in response.

The 10-year U.S. Treasury closed at 4.31 percent Wednesday and was trading at 4.29 percent early this morning. I expect that 4.29 percent yield to be left in the dust later today. I predict that it will rise this morning, and so will long-term mortgage rates.

Most economists had been expecting third-quarter GDP growth at an annual rate of 6 percent.

Doug Duncan, senior economist for the Mortgage Bankers Association, talked to reporters last week about the economic outlook. He was paying a lot of attention to the upcoming GDP number, and predicted that it would be 6 percent or higher. As for the 30-year fixed mortgage rate, he said it "will probably be close to 6 percent at the end of the year, although you might see a short run-up if, in fact, the GDP number comes out to better than 6 percent."

It came in a lot better than 6 percent.

How long is a "short run-up"? Think weeks instead of days.

Wednesday, Oct. 29
Posted 5:10 p.m.
AFTERNOON UPDATE: According to Bankrate.com's weekly rate survey, the average rate on a 30-year fixed mortgage dropped 10 basis points this week, to 5.94 percent from 6.04 percent. My witty and perceptive article on the rate survey will appear in tomorrow's Bankrate.com. Don't miss it.

Every week, I predict what will happen to mortgage rates five weeks hence: whether I think they'll rise, fall or stay about the same (plus or minus 2 basis points). Yr obdnt srvnt has now guessed wrong eight weeks in a row.

I keep insisting, stubbornly, that rates will rise. That's my story and I'll stick to it, even through the eight-week losing streak. I have predicted mortgage rates correctly in only 20 of the past 52 weeks, for a batting average of .385. Yeah, yeah, I know … you don't need to send a taunting, sarcastic e-mail pointing out my prognosticatory futility. If you don't like the show, change the channel.

See? I feel defensive about this.

CALIFORNIA FIRES: Fannie Mae, the nation's biggest buyer of mortgages, is putting mortgage relief into effect for homeowners who face hardship because of the wildfires in San Bernadino, Riverside, San Diego, Los Angeles and Ventura counties.

Fannie Mae is telling loan servicers to give fire victims a break. Some homeowners might need a temporary suspension or reduction of their monthly payments. In some cases, the lender might modify the terms of the existing loan -- extending the loan's term, or reducing the interest rate. Fannie Mae urges lenders to inform homeowners of disaster relief available from federal agencies.

Wildfire-related mortgage relief may be available to homeowners who suffer uninsured losses, extended unemployment, or extraordinary expenses that temporarily affect the ability to make full mortgage payments.

Fannie Mae says affected homeowners should contact their lenders or Fannie's consumer resource center at (800) 732-6643. That line is open between 6 a.m. and 2 p.m. Pacific time.

Pass this information on to whomever might need it.

Posted 11:30 a.m.
NUMBERS: The Federal Reserve's rate-setting committee met Tuesday and said exactly what bond traders wanted it to say -- that short-term rates will remain low "for a considerable period," that there still is a risk of deflation, and that the economic outlook is improving, but not wildly so.

Mortgage markets reacted by relaxing long-term interest rates. The yield on the 10-year Treasury went down, too. It closed at 4.23 percent, down from Monday's close at 4.30 percent. Late this morning, it's trading at 4.24 percent.

I'll update this afternoon with a summary of Bankrate.com's weekly mortgage rate survey, which is conducted every Wednesday.

Monday, Oct. 27
Posted 12:35 p.m.
MORE ON THE FED: If you're interested in the workings of the Fed's rate-setting committee -- heck, even if you aren't -- you must read Greg Ip's utterly fascinating article on the front page of today's Wall Street Journal. (Link is for subscribers only. If you don't subscribe, go out and buy a copy.)

Ip describes how the Fed panel's announcements evolved. This summer, the committee came out and said that short-term rates would remain low "for a considerable period." By saying explicitly that it planned to keep rates low for months, the Fed demonstrated how much had changed from the days when it didn't even announce rate moves.

"The Fed's new candor has created a new challenge: signaling when the 'considerable period' is coming to an end," Ip writes. "Officials know that dropping or changing the words could roil markets as much as, if not more than, the rate increases that would follow."

That is as succinct and elegant a summary of the Fed's predicament as you'll find.

Posted 10:55 a.m.
THE NUMBERS: The yield on the 10-year Treasury is up slightly this morning, to 4.27 percent. It closed Friday at 4.24 percent. An even more accurate barometer of rates can be found in Fannie Mae's and Freddie Mac's required net yields, which, to oversimplify things, is the rate that they demand on mortgages they buy. A key Freddie Mac required net yield is up 13 basis points (a basis point is one-hundredth of a percentage points) from Friday.

FED WEEK: The Federal Reserve's rate-setting committee meets Tuesday. Everyone thinks they'll keep short-term rates steady. But what about long-term rates, such as those for 30-year, fixed-rate mortgages? If you're on the fence, undecided whether to lock in a rate this week, I think you should lock before the Fed makes its announcement at about 2:15 Eastern time Tuesday.

Here's why: When the Fed makes its announcement, three reactions are possible. The Fed could say something that makes mortgage rates go down (a slim possibility, in my opinion), it could mollify the bond markets and keep rates steady (the most likely possibility), or the rate-setting panel might say something that spooks bond traders and causes mortgage rates to spike for a few days. I don't think that will happen, but it could.

Since June, the Fed has surprised the bond markets a couple of times with its rate pronouncements. When the Fed met in August, Treasury yields went up, and didn't fall back to their pre-Fed levels for a month. The Fed meeting before that, on June 25, the rate-setting panel cut short-term rates by one-quarter of a percentage point, and Treasury yields have been higher ever since.

So here's the deal: If you plan to close on your 30-year, fixed-rate mortgage in the next couple of weeks, you should consider locking the rate today or early Tuesday, before the Fed's announcement. The Fed is more likely to inadvertently cause mortgage rates to rise than to make them fall. By floating through the Fed announcement, your risk exceeds your probable return. Discuss this with your lender, who might have a different (and more convincing) perspective.

If your closing date is more than two weeks away, the Fed's meeting might not affect you as much because rates will have time to fall back if the Fed causes them to spike upward.

HELP, PLEASE: I got this question from a loan officer in Texas, and I wonder if any readers can answer: "In my area, 95 percent of my clients are Hispanic, and many of them are undocumented couples trying to purchase a home. Banco Popular is the only choice for us to use if these couples have no 'good' Social Security number. But with their minimum 4-6 percent down payment and beginning interest rate at 10-11 percent, it makes it kind of discouraging for some couples with little or no money. I am writing to ask if there's any other lending option or company with better rates for families with no Social Security numbers."

If you know of lower-priced alternatives to Puerto Rico-based Banco Popular, let me know.

Friday, Oct. 24
Posted 10:25 a.m.
BACK AT THE DESK: I have returned from a trip out west: A few days of losing money in Las Vegas, a weekend in Palm Springs (just in time for Bike Week, when aging motorcycle rebels amble along the town's tony shopping avenue), then a few days at the Mortgage Bankers Association convention in San Diego. I'm glad to be back in the skin-friendly humidity of sunny South Florida, where people don't look at you funny when you cheer for the Marlins.

THE NUMBERS: The yield on the 10-year Treasury is 4.27 percent this morning, the same as it was two weeks ago. More saliently, it's down from Thursday's close at 4.34 percent.

ZIP: Steve Kerch of CBS MarketWatch remarks on the lack of news coming out of the MBA convention.

Robert Bruss, syndicated columnist, offers a five-point guide for first-time home buyers.

LISTING OF THE WEEK: This hilltop house is set just below the Big Meadows Visitor Center of Shenandoah National Park in Virginia. If you've been there on a clear day, you know how spectacular that area can be. Plus, the house is Halloweeny-looking.

Tuesday, Oct. 21
Posted 10:44 a.m.
THE NUMBERS: The yield on the 10-year Treasury is down this morning to 4.35 percent from Monday's close at 4.41 percent. Key required net yields of Fannie Mae and Freddie Mac -- even more reliable indicators of mortgage rates -- are down by even bigger margins.

Investors have digested comments that Treasury Secretary John Snow told a British newspaper: "Higher interest rates are an indicator of a strengthening economy. I'd be frustrated and concerned if there were not some upward movement in rates."

This is a perfectly understandable sentiment. But Snow's statement confused investors for a while. They worried for a moment that Snow was trying to drop a hint to the Federal Reserve. But he wasn't saying that he wanted the Fed to raise rates; he merely was saying that higher rates are an indicator of an improving economy, and therefore are a welcome sign.

MBA: This year's Mortgage Bankers Association annual convention has a different atmosphere from last year's gathering. Last year, the refinancing boom was on, and mortgage bankers were succeeding in business without really trying. This time around, they're focused on remaining in business. The refi boom has crested, and fewer people are applying for mortgages, which means that lots of employees of mortgage companies are going to lose their jobs and some mortgage companies will go out of business.

How do mortgage bankers expect to compete? By selling transparency and honesty. The industry has accepted the federal government's intention to reform the mortgage application process to make it less confusing. Whenever the government adopts its proposed revision of the rules enforcing the Real Estate Settlement Procedures Act, or RESPA, many lenders and brokers will make the best of it by using it as a marketing tool.

Monday, Oct. 20
Posted 10:35 a.m.
THE NUMBERS: The yield on the 10-year Treasury is 4.41 percent this morning, the same as Friday's close. Rates and yields have been relatively steady since the big rise early in the month. On Oct. 1, the 10-year yield was 3.96 percent.

It will be interesting to see if rates rise in the next few days. It is being reported today that U.S. Treasury Secretary John Snow told a British newspaper that he would welcome higher interest rates because they would indicate a strengthening economy. I understand the sentiment, but it's an odd thing to say.

CONVENTIONAL: I'm writing from San Diego, where the annual convention of the Mortgage Bankers Association is being held. People here are really, really enthusiastic about mortgage lending.

Friday, Oct. 10
Posted 11:05 a.m.
THE NUMBERS: The yield on the 10-year Treasury is down slightly this morning, to 4.27 percent from Thursday's close at 4.32 percent. Fannie Mae's and Freddie Mac's required net yields -- the rates they require on mortgages they buy -- have gone in different directions. One of Fannie's key required net yields is up slightly, and Freddie Mac's is down by an eighth of a point.

If you're applying for a home loan today, you better shop around. You should, anyway, but today it could be especially important because lenders that do business with Freddie Mac might offer better deals.

The Treasury yield dipped because wholesale prices, excluding food and energy, were flat in September, the federal government reported this morning. With nary a sign of inflation, there is reason to believe that the Federal Reserve will keep short-term rates steady for a long time, and that exerts a calming influence on long-term rates.

AWAY: Starting Monday, I'll be out of town for a week and a half, and I won't blog the week of Oct. 13-17. I will try to post updates Oct. 20-22, when I'm attending the Mortgage Bankers of Association convention.

I keep track of current Treasury yields on this CNNMoney page. I track the previous day's 10-year Treasury close on this U.S. Treasury page. And Briefing.com's economic calendar is invaluable.

That economic calendar shows that a lot of reports will come out the week of Oct. 13-17. Wednesday brings the report on September retail sales; Briefing.com's economists expect sales to have risen modestly, while the consensus of other economists is that they fell a little bit. I have a hunch that Briefing.com is correct, and that some of the increase in retail sales resulted from hurricane preparation and repairs. If retail sales were much stronger than expected, mortgage rates could bump up a little bit.

Thursday is the big day, bringing reports of jobless claims for this week, industrial production and capacity utilization for September, and the big report of the week: consumer prices in September. Today we got a report of flat wholesale prices, but that doesn't mean that next week's report on consumer prices will be flat, too.

Oct. 17 brings reports on September's housing starts and building permits, as well as the preliminary results of the University of Michigan's monthly index of consumer sentiment.

The report on last week's unemployment claims came out this morning and the number was surprisingly low. The good economic news has driven the yield on the 10-year Treasury upward to 4.30 percent as of 11:35 a.m. The 10-year yield closed at 4.27 percent Wednesday, unchanged from the day before.

JOBLESS CLAIMS: Good news on the job front keeps coming. Initial unemployment claims fell to 382,000 last week, according to the Labor Department. That was down 23,000 from the previous week's revised figure of 405,000, and is the lowest number of weekly jobless claims since February. The consensus among economists, according to Briefing.com, was that last week's jobless claims would be about 395,000. So the news was unexpectedly good.

The dark lining in the silver cloud is the previous week's figure of 405,000, which was revised upward from 399,000. When the number is above 400,000, it's a sign that the job market is lousy.

Overall, though, it looks like the jobs picture is improving. The economy added 57,000 jobs in September -- the first time the economy had gained jobs since January -- and last week the jobless claims number was well below 400,000.

It's too early to conclude for certain that the jobless recovery has turned into a hiring recovery, but a turnaround is starting to look likely in the coming months. The rise in Treasury yields and mortgage rates reflects a feeling among bond traders that businesses are poised to start hiring, and that wages eventually will rise.

LISTING OF THE WEEK: This Chicago co-op in a building designed by Mies Van Der Rohe looks authentic to my unschooled eye. The owner is asking for about half a million for this corner unit on Lake Shore Drive.

The Bankrate.com weekly survey of mortgage rates was conducted today, and rates shot upward. The average rate on a 30-year, fixed-rate mortgage went up 22 basis points this week. The previous week, it had fallen 22 basis points, so we're back to where we were two weeks ago, at an average mortgage rate of 6.01 percent.

VEGAS: I'm going to Las Vegas next week, and I've been so busy doing other stuff (like procrastinating) that I haven't set up any interviews. I'm looking to talk to professional poker or blackjack players about how they conduct their personal finances -- do they pay themselves a salary, and bet the rest of their cash? How do they financially cushion themselves for the lean times? Do they keep detailed records for their taxes? Do any financial planners in Vegas specialize in clients who make a living at the card table? I also want to do a story on how to find good deals in town and how to meet a casino host. If you have suggestions for people to interview, drop me an email.

MORTGAGES AND STUDENT LOANS: Real estate columnist Kenneth Harney explains that a Sallie Mae policy could cause student loan recipients to pay higher interest rates on their mortgages. Sallie Mae is the biggest provider of student loans. It now provides on-time payment information to only one of the Big Three credit bureaus. This means that a student loan recipient could pay all student loan bills on time for years -- but Trans Union and Experian would not be able to report that fact. That could lower a mortgage applicant's credit score enough to warrant a higher mortgage rate.

When it cut Trans Union and Experian out of the loop, Sallie Mae started providing payment information to an obscure credit bureau, Innovis Data Solutions. Something doesn't smell right.

onday, Oct. 6
Posted 11:15 a.m.
THE NUMBERS: They're mixed. The yield on the 10-year Treasury note is down slightly from Friday's close, to 4.19 percent from 4.21 percent. But that's misleading, because Fannie Mae and Freddie Mac have increased their required net yields -- the rates they require on mortgages they buy. They're up a little bit today, and they are up by about one-quarter of a percentage point in the last week.

You can trace the rise in long-term rates to last week's employment report, which showed that nonfarm payrolls increased by 57,000 in September. That sign of an improving economy encouraged investors to sell Treasury notes and buy stocks -- and the selloff in Treasuries caused yields to rise.

COMING UP: This week's economic calendar is relatively light this week, and ends with the week's most important report. The report in last week's unemployment claims comes in Thursday. Friday brings the reports on wholesale prices for September. According to Briefing.com, the consensus is that producer prices rose 0.1 percent in September. If prices rose faster than that, expect a rise in mortgage rates.

Friday, Oct. 3
Posted 11:58 a.m.
UPDATE: The yield on the 10-year Treasury note remains at 4.13 percent. If enough investors sell bonds to buy stocks because of the unexpectedly rosy employment report, the Treasury yield could still creep up even further today.

RAISING HELOCs: As rates have risen, home equity loans have gained in popularity, writes Ruth Simon of the Wall Street Journal.

RUSH MOVES: If you have ever had a moving company haul your belongings across the country, you know how nerve-wracking it can be. People tell you stories about van lines that misplace entire houseloads of furniture, and movers who shake people down with surprise extra charges.

In 1988, I was an Associated Press correspondent in El Paso and I listened to the local news-talk station all day so I wouldn't miss anything. That summer, the station brought on a new nationally syndicated show -- Rush Limbaugh's. Rush had just moved from Sacramento to New York, and he spent a lot of time in those first few weeks complaining about his moving company. It had lost track of all his household goods.

Rush repeatedly threatened to reveal the name of the errant moving company. As far as I know, he never did. He had a national audience, and he knew what kind of damage he could do by embarrasing the moving company nationally.

Flash forward five years, when Rush has a TV show. One day, he says, "Everyone knows the Clintons have a cat. Socks is the White House cat. But did you know there is a White House dog?" And he holds up a picture of Chelsea Clinton.

She was 13 years old.

So if you have an urge to feel compassion for the guy for his alleged drug addiction, don't. He deserves no one's sympathy.

The Palm Beach Post reports that Lorcet is linked to sudden hearing loss.

The economy had 130.4 million jobs in January, the last time payrolls increased over the previous month. Now the economy has 129.9 million jobs. Those are rounded numbers; the bottom line is that the economy has shed 494,000 jobs since January if you include this month's increase.

The yield on the 10-year Treasury spiked upward when the employment report came out, then fell back a couple of basis points. The yield is 4.13 percent this morning, up from Thursday's close at 4.03 percent. Fannie Mae and Freddie Mac are requiring a similar increase in rates on the mortgages they buy.

hursday, Oct. 2
Posted 11:20 a.m.
THE NUMBERS: They're up today. I don't know why -- jobless claims are higher and North Korea announced that it's making nuclear bombs. Nevertheless, the yield on the 10-year Treasury is 4.05 percent this morning, up from Wednesday's close at 3.96 percent. Fannie Mae and Freddie Mac are demanding similarly higher rates for the mortgages they buy.

The Department of Labor says unemployment claims rose last week to 399,000, up from a revised figure of 386,000 from the previous week. Neither number is reliable, because Hurricane Isabel closed unemployment offices a couple of weeks ago. That artifically depressed one week's numbers and artificially increased last week's numbers. I'm guessing that, without the hurricane, last week's unemployment claims would have been between 390,000 and 399,000.

RATES: Mortgage rates fell below 6 percent this week for the first time since July. The average 30-year fixed rate this week is 5.79 percent.

Every week in the Rate Trend Index, I predict which way mortgage rates will go in the next 30 to 45 days -- up, down or about the same (plus or minus 2 basis points). I grade myself every week by looking at my prediction five weeks previous. Five weeks ago, when the average 30-year rate was 6.44 percent, I said rates would go up."Rates are low by historical standards, and they will continue to rise as the economic outlook improves," I wrote. For the fourth week in a row, I guessed wrong.

I have predicted correctly 21 of the last 52 weeks, for a batting average of .404. Go ahead and taunt me by e-mail if you must; I've heard it before. It's the price I pay for keeping track of my (in)accuracy and telling you about it. I don't see any other financial prognosticator keeping a weekly score on his accuracy, though. I wonder why not?

My guess this week is that mortgage rates will rise in the next 30 to 45 days.

BREAKING LOCKS: We've been getting quite a bit of e-mail lately from readers who want to know how to break their rate locks, now that rates have dropped. That's a change from the e-mails we got a few weeks ago from people who were indignant that their lenders didn't get the loans closed before the locks expired. Consumers want to break their promises, but they don't want banks to break their promises

BROKERS vs. BANKERS: I got a couple of e-mails from a mortgage broker who really hated the story I wrote last week about the differences between brokers and bankers. Then I got a more sober email from another broker, Phil Steinacker, who wrote the following (edited for brevity):

I am a mortgage broker with a POV I hope you will mention in any follow-up to your article in the pros & cons of using brokers vs. bankers.

I hate to start off my disagreement with Bob Walters by repeating his words, but Mr. Walters' contention that "a good mortgage banker like us has every program that a broker might have access to is "just not so."

Mr. Walters is correct only in the sense that any good banker can develop a loan program comparable and competitive with any other program already on the market. As you point out, this is what he does for a living. Common sense supports his basic contention, and I defer to his judgment on the details.

However, a borrower can only select a loan from a banker's available portfolio in real time. I mean by this that the banker cannot match - on the spot - another program available through a broker or even another banker that at that time is not yet available from his own institution.

It is in this way that brokers can legitimately claim to "have access to a broader range of loan programs because they work with multiple lenders." It is necessary to look beyond one's own unique needs and what it would take to fill them to see that mortgage loans are not always about the rate; in fact, a significant number of loans are more about program. That is, rate/term reduction refinances don't cover the whole spread of loan types. …

In sum, the broker has far more options available than the loan officer at a bank, who is limited by the portfolio provided by his firm - one product, limited flavors. The broker also minimizes the damage to the borrower's credit score by doing the shopping for them. I would add that it is essential that borrower's shop brokers to find one with whom they are comfortable enough to authorize to pull their credit, and not before.

I edited out the part in which Steinacker says a borrower's credit score drops every time a mortgage bank pulls the score. That's not true if the scores are pulled by several mortgage lenders in a short period. Credit-scoring formulas don't punish you for shopping around. At least, that's what Fair, Issac says.

DOWN PAYMENT GIFTS: This week I wrote about how to choose the right down payment assistance program. It's not exactly the article that I started out intending to write. I also wanted to explore the costs and benefits to society of the programs, but I realized that that subject would be tackled better in a separate story. I will write one soon.

What do I mean by "the costs and benefits to society"? An auditor for the Department of Housing and Urban Development says that people are more likely to default on their mortgages if they got their down payment money through nonprofit down payment assistance programs. The nonprofits argue that HUD's study is flawed, and that auditors should look at foreclosures, not defaults -- which are accounts where the payments that are at least 30 days past due.

The nonprofits' fallback position is that, even if these loans are riskier, they allow thousands of people to become homeowners who otherwise would continue renting, and that society benefits by an increase in the homeownership rate. I think that this can be a convincing argument. So does Scott Syphax, president of the Nehemiah Corp., the oldest down payment assistance nonprofit.

Syphax says: "Here's my message on the stump, very succinctly: Folks, there ain't no free lunch in improving homeownership in this country. The reason that homeownershp rates are low for minorities and female heads of households and eastern European immigrants is that these people need help."

He adds that "we have to understand as a society that we're going further out on the risk curve if we're going to give people the chance to build prosperity."

VEGAS: I'm going to Las Vegas in about a week and a half to report on a story that I've been assigned about money management Las Vegas-style. I'll try to find some professional poker and blackjack players to ask them how they handle their personal finances as they make such a precarious living. I'm trying to come up with other ideas. Maybe talk to some people with the Vegas credit counseling service? I don't know. I usually prefer to come up with my own ideas, but if you have suggestions, let me know.

Bankrate.com conducts its weekly mortgage rate survey today, and I predict that the average rate on a 30-year home loan will drop to 5.74 percent, a decline of 27 basis points from last week's average of 6.01 percent. This is a blind guess, because Fannie Mae hasn't updated its required net yields yet.

The Mortgage Bankers of America says there was a slight decrease in mortgage purchase applications last week, but that was offset by an increase in refinancing applications. Almost one-quarter of applicants plan to get adjustable-rate mortgages. I infer that some of these folks refinanced not long ago with fixed-rate mortgages, and are now cutting their monthly payments by getting ARMs.

WHAT A CARD: This item has nothing to do with mortgages, so feel free to skip to the next bold-faced item.

My son is in second grade. Every Monday he gets a list of 15 spelling words that will be on Friday's test. On Tuesdays, his homework assignment is to write the words in sentences of his own creation.

I was helping him with his homework Tuesday night. One of the spelling words was "goes." Nathaniel wrote the following sentence: "This goes with card b." I asked him what goes with Card B. He said, "Anything. It goes with Card B."

I absorbed this for a few seconds. Then I asked, "Well, then, what goes with Card A?"

He gazed steadily at me and said with strained patience: "There is no Card A."

TARGETED INFLATION: Ed Gramlich, one of the members of the Federal Reserve's rate-setting committee, delivered a speech today in Toronto about maintaining price stability. He says he doesn't favor adopting a formal target for inflation, but he doesn't feel strongly about it either. A debate has been humming along for years over whether central banks should explicitly target an acceptable range of inflation, and the debate will continue.

Gramlich offers an interesting thought experiment to ascertain the true degree of inflation: "In principle the right test is to offer a sample of the population a constant amount of currency, say $1,000, along with the opportunity to spend it on a menu of all goods and services available this year or a menu of all goods and services available a while back, say five years ago."

Sure, prices have risen in the last five years -- but so has the quality of goods and services. A brand-new Toyota Camry that you buy today is better than a brand-new Camry was when you bought it five years ago. Medical care is better. New houses are bigger. Gramlich's thought experiment takes into account not only the prices of goods and services, but quality. Personally, I would rather buy today's basket of goods and services, which indicates that I think that the true costs have declined.

I shouldn't call it Gramlich's thought experiment. He says he first heard it in graduate school from a Yale professor named Richard Ruggles, a prominent economist who died in 2001.

FEELING FLUSH: A USA Today/CNN/Gallup Poll shows that most Americans believe this is a good time to buy a house.

LOAN STAR: Last month, the voters of Texas amended the state constitution to allow home equity lines of credit. Bankrate.com surveyed some financial institutions and found that Bank One and Compass Bank will have HELOCs ready to close on Oct. 11 -- the first day they can close on such loans.

Bank of America and The Frost National Bank plan to start taking HELOC applications today, so they won't be far behind. Wells Fargo plans to start offering them sometime in October, and JP Morgan Chase says it will begin offering them in the first half of November.

Comerica, Washington Mutual and Southwest Bank of Texas will add HELOCs next year. A few other banks say they plan to offer HELOCs, but they don't know when.

The Conference Board's consumer confidence index fell in September to 76.8, the lowest level since November 1993. Consumers were concerned about the job market.

On top of that, the Chicago purchasing managers' index fell to 51.2 in September, a five-month low. The index is greater than 50, so it indicates an expanding economy. But it's not expanding as fast indicated in the August index, which was 58.9.

The consumer confidence and Chicago indexes were much lower than expected, and Treasury yields dropped in reaction. Also, the dollar dropped to a three-year low against the yen.

If you're deciding whether to float or lock a mortgage rate, you should lean toward floating for right now and prepare to lock at the first sign of positive economic news. I'm not sure we'll see such news this week. As always, don't just take my word for it. Seek the advice of broker or banker, and take that advice seriously.

RESPA REFORM: The federal Department of Housing and Urban Development soon will reveal what it plans to do about the rules governing mortgage pricing. More than a year ago, HUD proposed changing the regulations surrounding RESPA, the Real Estate Settlement Procedures Act. Tens of thousands of mortgage bankers and brokers, as well as real-estate agents, title searchers, title insurers and lawyers sent in their comments.

HUD proposed that lenders be allowed to negotiate volume discounts with title companies, credit bureaus and the like. In exchange, lenders would put together guaranteed-cost settlement packages -- a guaranteed mortgage rate, plus guaranteed costs for title insurance, credit reports, flood certifications, and other goods and services. Consumers would benefit by being able to shop guaranteed costs upfront, without being surprised by unexpected fees at the closing table.

Mel Martinez, the housing secretary, got the idea for RESPA reform when he moved from Florida and bought a house in Washington, D.C., to join the Bush administration. He was astonished at the complexity of the mortgage process, and he has hinted that he got a financial surprise at closing. RESPA reform is personal for Martinez.

Maybe that's why Martinez has kept mum about the direction that RESPA reform will finally take after those tens of thousands of comments from people in the mortgage business. My guess is that he will announce something before the Mortgage Bankers Association's annual convention, which begins Oct. 19. He plans to attend the convention, and it would be the perfect time for him to answer questions.

A HUD spokesman told me Monday that no one at the department knows Martinez's timetable. He could issue a revised final rule to the Office of Management and Budget, or he could submit another set of proposals and request comment. I assume he will issue a revised final rule. If he submits another proposal, subject to another round of comment, it will be buried in next year's presidential campaign and disappear.

HIGHER RENT: Landlords raised rents last year on all types of properties, even as low mortgage rates propelled many renters into homeownership, Steve Karch of CBS MarketWatch reports.

MORE JUMBOS: Cash sales of expensive houses are plummeting because mortgages are cheap, USA Today reports.

ON THE CALENDAR: The big items on this week's economic calendar fall late in the week. Results of a consumer confidence survey and the Chicago Purchasing Managers Index come Tuesday. Wednesday brings reports on vehicle sales and an index of manufacturing activity.

On Thursday, we get reports on initial unemployment claims for last week and factory orders in August. Friday brings the employment and hourly earnings reports for September. The unemployment rate could nudge upward a tick, partly because of people returning to the job hunt after spending a few discouraged weeks sitting on their couches.

The fallout from Thursday's jobless claims numbers could prove interesting. According to Briefing.com's economic calendar, the consensus is that 395,000 filed claims last week. I think the number will be higher because Hurricane Isabel closed some unemployment offices the previous week. Those closings artificially depressed the number of claims from the week ending Sept. 20, and should artificially boost the number of claims from last week. If the news surprises bond traders, bond yields might dip briefly. I'm being very speculative here, and even if I'm right, there's no assurance that mortgage rates would dip, too.

The yield on the 10-year Treasury has dropped to 4.05 percent this morning. The 10-year yield is within striking distance of dropping below 4 percent for the first time in more than two months.

RANDOM MUSING: I saw this headline in the Chicago Tribune's online edition: "Home sales surge to a record high despite rate rise." My thought is: "despite?" This summer's rise in mortgage rates contributed to the August surge in home sales, in my opinion. Shoppers hopped off the fence and bought, because they were afraid rates would keep rising. The headline writer should have written "because of" instead of "despite."

REAL ESTATE LISTING OF THE WEEK: The Benjamin Lundy Home in Mount Pleasant, Ohio, is for sale. The house, built in 1814, was a stop on the Underground Railroad. More important, it was the site of the first "free labor store," where nothing grown or produced by slave labor was bought or sold. It is designated a national historic landmark. Opening bid is $50,000.

Thursday, Sept. 25
Posted 11:45 a.m.
THE NUMBERS: The yield on the 10-year Treasury is 4.09 percent, down 7 basis points from Wednesday's close. It just keeps dropping and dropping. I keep thinking it will stop, but it doesn't.

Mortgage rates dropped for the third week in a row, according to the Bankrate.com weekly survey of large lenders. The average 30-year rate dropped 5 basis points, to 6.01 percent. An economist I talked to says this drop is a cyclical thing.

THE GRADE: Five weeks ago, when the average 30-year rate was 6.35 percent, I predicted that rates would rise over the next 30 to 45 days. "Mortgage rates are rising like a tide, and you can't push back the tide," I said, cluelessly. The tide has turned. I have guessed the direction of mortgage rates correctly 21 of the past 52 weeks, for a batting average of .404.

An unkind, but intelligent reader named W. Fox recently thanked me for being his "negative indicator" -- I said rates would go up, so he floated his rate for another week on the assumption that I would be wrong. He made the right call. Good for you, W.

This week I'm predicting that rates will rise over the next 30 to 45 days. I have the minority view; most of our panel of experts believe that rates will stay the same or fall.

THE ECONOMY: Fewer people filed unemployment claims last week: an estimated 381,000, down 19,000 from the previous week's revised estimate of 400,000 jobless claims. The four-week moving average is 407,000. The decline might be a bit misleading because some unemployment offices were closed due to Hurricane Isabel, preventing people from filing claims.

Durable goods orders in August declined for the first time since April. Orders were down 0.9 percent.

Sales of new homes in August were at a seasonally adjusted rate of 1.15 million, according to the Census Bureau. That's close to a record. The median price of new homes was $184,500.

Resales of existing houses were at an annual rate of 6.47 million in August, according to the National Association of Realtors. That's a record high sales rate. The median price of a resold home was $177,500, up 9.8 percent from a year ago.

WHICH KIND?: Should you use a mortgage broker or a mortgage banker? Focus instead on who offers a better deal, I write.

Wednesday, Sept. 24
Posted 4:50 p.m.
AFTERNOON UPDATE: The average rate on a 30-year fixed mortgage is 6.01 percent, down 5 basis points from last week. I am mildly surprised, as I keep thinking that rates will go up.

I talked to an economist who says that every economic recovery has a bump in long-term rates, such as the one we saw in June and July, and it's always followed by a decline in rates. We're in that decline now.

Posted 9:45 a.m.
THE NUMBERS: Not much change. The yield on the 10-year Treasury is 4.21 percent early this morning, down from Tuesday's close at 4.24 percent. Because Bankrate.com's weekly mortgage survey is conducted on Wednesdays, I tend to look at the movement of mortgage rates from Wednesday to Wednesday. Judging by that, this week's average 30-year rate won't be much different from last week's rate of 6.06 percent.

I'll update late this afternoon, after our mortgage survey results are in.

Tuesday, Sept. 23
Posted 10:15 a.m.
THE NUMBERS: The yield on the 10-year Treasury is 4.26 percent this morning, same as Monday's close. Yields rose Monday in response to a hint by the G-7 finance ministers that Japan and China should strengthen their currencies against the dollar.

If the U.S. dollar weakens against the Japanese and Chinese currencies, American-made products will be more competitive at home and abroad. Why will U.S.-made goods be more competitive? Because they'll be cheaper overseas, and foreign-made goods imported into the United States will be more expensive. This has the double-barreled effect of increasing inflation and boosting production, both of which would tend to cause long-term interest rates to rise.

There's another thing to watch out for. Japan and China would strengthen their currencies by selling less yen and yuan and buying fewer dollars. How would they buy fewer dollars? By buying fewer U.S. Treasury notes. Responding to the law of supply and demand, the prices of U.S. Treasuries would decline, so yields would rise.

This is what happens when we Americans buy more than we produce. We have to borrow the money from someone, and we're borrowing it from China and Japan when they buy Treasuries.

WHETHER TO FILE: If you're picking up the pieces after Isabel, should you file an insurance claim? It depends, the Washington Post reports.

Monday, Sept. 22
Posted 9:40 a.m.
THE NUMBERS: The yield on the 10-year Treasury is unchanged early this morning compared to Friday's close -- 4.17 percent. But Freddie Mac has bumped up its required net yields, which are the rates that it requires on loans it buys. If you are floating your rate, and are scheduled to close on the loan in the next week or two, you might want to lock early this morning. Talk it over with your lender.

I wouldn't be surprised if Treasury yields rose today and this week because the G-7 nations met over the weekend and called for more flexibility in exchange rates -- implying that the U.S. dollar should weaken against the currencies of China and Japan. A weaker dollar makes U.S.-made goods cheaper abroad, and it makes imports into the United States more expensive. That has the effect of stimulating the U.S. economy and raising consumer prices. A stronger economy with inflation will push up Treasury yields and other long-term rates, such as those for mortgages.

China essentially is financing our huge federal budget deficit by buying Treasuries. No one is suggesting that the Chinese will react to a weaker dollar by dumping Treasuries. If that were to happen, Treasury yields would shoot skyward. But no one expects that to happen right now. Keep in mind, though, that our $500 billion budget deficit is in the hands of foreigners who are in economic and political competition with us, and your mortgage rate hangs in the balance.

Friday, Sept. 19
Posted 3:45 p.m.
INTEREST-ONLY LOANS: I'm grateful and amazed at the generosity of readers. On Sept. 5, I ran a letter by a reader named Mark, who was thinking about getting a 10-year interest-only mortgage indexed to the LIBOR. Mark figured that he could take advantage of the low LIBOR rate (starting at 3.25 percent and adjusting every six months) and pay extra every month, thus paying down principal with an interest-only loan. He calculated that, over 10 years, he would contribute $30,000 more toward principal with the interest-only loan than with a 30-year fixed mortgage at 6.5 percent.

I said it was largely a matter of having the discipline to pay principal every month. A mortgage broker emailed me later to point out that most interest-only loans penalize you for paying principal. That, right there, shot down Mark's idea. On the other hand, there's nothing that would stop Mark from investing those would-be principal payments so he would have a huge lump sum after 10 years.

Today I got an email from a reader (unsigned, but I think the name is M.L. Henderson) who generously took the time to survey what happened to LIBOR rates over the last 120 months and plugged them into a spreadsheet:

I was intrigued by the man who thought he could gain equity faster by using a loan with a 10-year interest-only period and applying the difference between the normal 30-year payment and his interest to principal. The attached spreadsheet shows what would happen if you calculated the last 10 years in reverse. I used the historical one-month LIBOR with a margin of 2 percent and a cap of 5 percent vs. a 6.5 percent 30-year payment on a $150,000 loan. I ran a normal schedule from your loan calculator (not shown) and the gain to principal would only be a couple thousand dollars over the 10-year period. How the LIBOR will really track is anyone's guess but I think this guy is fooling himself if he thinks he is going to accumulate a lot more principal.

To summarize what the spreadsheet demonstrated: On a 30-year, 6.5 percent fixed-rate mortgage, the monthly principal and interest totals $948.10. Now, let's say Mark had borrowed $150,000 in October 1993 at the LIBOR plus 2 percent, with the interest (and payment) recalculated monthly. He would have started out paying 5.188 percent, so his first month's interest payment would be $542. He would have paid $406.10 toward principal (ignore, for now, that the lender probably wouldn't allow him to do that).

Over 10 years, this reader calculates, Mark would have contributed a little over $25,000 toward principal. With the 6.5 percent 30-year mortgage, he would have contributed about $22,800 toward principal. Is it worth it to gain $2,200 at the risk of paying LIBOR rates that could go sky-high? I don't think it is, although it's a judgment call.

The reader's comparison isn't perfect. He assumes that the LIBOR loan changes monthly, when the one that Mark considered changed every six months. The loan amounts and interest rates vary. And the LIBOR was higher 10 years ago than it is now. Still, it illustrates that it's not a slam-dunk money saver to take a 10-year LIBOR-indexed interest-only loan and setting aside extra principal payments.

Here's my bias: I'm pretty conservative when it comes to personal finance. (I have a 30-year, fixed-rate mortgage, I buy cars on borrowed money instead of leasing, the credit card balances are paid off every month under my wife's wonderful financial stewardship.) Razzle-dazzle financial stuff arouses my suspicions.

My rule of thumb is that I won't enter into a financial transaction that I can't explain easily to my mother and my in-laws over the dinner table. I can imagine my father-in-law asking me what the LIBOR is. My answer would be, "Um, well … I think it stands for London Interbank Offer Rate, and it's sort of like the federal funds rate, I think, and, uh, well …" Then he would ask me what the federal funds rate is.

Posted noon
THE NUMBERS: Treasury yields and required net yields have settled on a moment of stasis. The yield on the 10-year Treasury is 4.16 percent this morning, down from 4.19 percent at Thursday's close. Fannie Mae's and Freddie Mac's required net yields -- the rates they require on mortgages they buy -- have barely budged. There has been little change in mortgage rates since Wednesday morning.

GOING BI: If you want to pay your mortgage every two weeks to save money, do it yourself, advises Chuck Jaffe of CBS MarketWatch. One intriguing suggestion: "(L)ook into opening a bank account that you use exclusively for mortgage payment. Direct-deposit the appropriate amount, including the pre-payments you want to make, from each check into the mortgage account, so that it's always there and ready when needed."

BEWARE THE ODD JOB: There are red flags to watch for when you hire a contractor to remodel your house, the Washington Post reports.

AFTER THE FIRE: Part 2 of a series of articles written by a man whose house burned after it was struck my lightning in June. He and his wife have a lot of insurance paperwork to complete, and they procrastinate by watching remodeling shows on HGTV. They are flabbergasted by the damage that smoke can cause. This is a fascinating read.

EARLY BIRD: Paying off the mortgage early is a good conservative investment, business columnis Humberto Cruz writes. And he does a good job of explaining that the mortgage interest tax deduction isn't as hefty or important as so many people think.

Thursday, Sept. 18
Posted 11:50 a.m.
THE NUMBERS: The yield on the 10-year Treasury is slightly up late this morning, to 4.22 percent. It closed Wednesday at 4.20 percent.

It appears that yields are up because the number of unemployment claims went down last week. But the jobless claims number isn't good -- 399,000 people filed for unemployment last week.

GRADE: Last week I honestly believed that mortgage rates would rise, so they dropped again. The average 30-year, fixed-rate mortgage fell to 6.06 percent, compared to last week's average of 6.22 percent.

Five weeks ago, when the average rate was 6.37 percent, I predicted that rates would rise over the next 30 to 45 days. Color me wrong. I have guessed the direction of mortgage rates correctly 21 of the past 52 weeks.

In this week's Rate Trend Index, I predict that rates will rise. The majority of our experts voting this week believe that rates will fall or stay the same over the next 30 to 45 days. You probably should follow the sure-fire "always bet against Holden" strategy and float your rate. Oh, sure, I'm right every once in a while. Just like a stopped clock is correct twice a day.

EQUITY QUESTION: How much home equity debt is too much?, I ask in this week's mortgage article. The answer depends on how much you owe to other creditors, whether you get a home equity loan or a line of credit, what you're using the money for and whether you have self-discipline.

Coincidentally, just as I was finishing up that article, a magazine reporter called to ask the same question. Maybe anxiety about home equity debt is hanging out there in the ether.

IN THE BOX: Here on Florida's coast, where Bankrate.com has its office, we used to have a homeowners insurance concept known as "in the box." When a tropical storm or hurricane was in a box drawn on a map, insurance companies wouldn't sell new policies or increase coverage. That meant that if you were scheduled to close on a home during hurricane season, your closing might be postponed because a hurricane was hundreds of miles offshore. Why? Because hazard insurance was unavailable while the storm was in the box.

Now Florida's main windstorm insurer stops underwriting coverage only when a storm watch or warning is issued in any part of the state. That seems more sensible. That box was big.

Texas still relies on the concept of the box (see the final question and answer on this page), where you can't get coastal windstorm coverage when a hurricane is in the Gulf of Mexico or within 80 and 105 degrees longitude west and 15 to 34 degrees latitude north. That box is big.

Tuesday, Sept. 16
Posted 4:45 p.m.
THE NUMBERS: The yield on the 10-year Treasury is virtually unchanged today, at 4.26 percent. The Federal Reserve's rate-setting committee met this afternoon and kept short-term rates unchanged. The Fed worded its announcement in a way that kept the bond markets unruffled.

Bankrate.com conducts its weekly mortgage rate survey on Wednesday, and it looks as though rates will drop for the second week in a row. The 30-year fixed rate averaged 6.22 percent last Wednesday and it probably will average about 6.15 percent, maybe even 6.10 percent, in Wednesday's survey. It's probably a good time to lock.

Monday, Sept. 15
Posted 11:30 a.m.
THE NUMBERS: The yield on the 10-year Treasury is 4.30 percent this morning, up from Friday's close at 4.27 percent. Not enough to force a change in mortgage rates, I believe.

THAR SHE BLOWS: Hurricane Isabel is headed toward the East Coast. Forecasters are saying it will hit somewhere between the Carolinas and Maryland's Eastern Shore, or maybe up to Long Island. Pretty soon they'll be talking about how it might hit Cape Cod or Newfoundland or Greenland.

Four years ago, a weak hurricane called Iris made a direct hit on Jupiter, Fla., where I was renting a townhouse. Officially, Iris was a tropical storm because the winds were just below the hurricane threshold of 74 mph as recorded at the airport in West Palm Beach. But I'm sure the winds were hurricane force where I was staying a block from the ocean.

If Iris was considered weak, I don't want to go through a strong hurricane. I don't want to go through another weak hurricane, either. When the wind blows in the 60s and 70s for hours, the noise is frightening.

In 1999, I covered the aftermath of Hurricane Floyd in North Carolina. The main lesson I took away from it was the necessity of having flood insurance, even if you don't live in a floodplain. I'll never forget interviewing Charles Dew in his flood-ravaged house and looking up and noticing that the light bulb in a ceiling fixture was filled with water.

Robert, I'm truly awful at predicting the direction of mortgage rates several weeks out. I console myself by noting that no one else is good at it, either.

I think this drop in mortgage rates is a dip in a long, upward trend. A good rule of thumb is, when rates are rising, to lock on the dips. My advice, Robert, is to alter your thinking about rates. Instead of thinking, "What's the absolute best rate I can get between now and November?," ask yourself, "If I lock at the current rate, is it a fair rate? Can I live with it? Will the payments be affordable?"

When getting a mortgage, at some point you have to make a choice and forsake all others. Yes, it's sad to belong to someone else when the right one comes along. Commitment brings risk.

And thank you for your service to our country.

By the way, the yield on the 10-year Treasury has taken back some of this morning's loss and is at 4.26 percent late this afternoon.

Posted 11:50 a.m.
THE NUMBERS: The yield on the 10-year Treasury is sharply down this morning, to 4.18 percent. It closed at around 4.31 percent Thursday. Yields went down in reaction to the poor retail sales report for August. Retail sales were up 0.6 percent in August, and forecasters had been expecting a rise of 1.5 percent. Retail sales excluding autos were up 0.7 percent, which was much closer to forecasts.

I would have expected investors to shrug off the report on total retail sales and concentrate on the sunnier except-auto sales. But the University of Michigan's index of consumer sentiment for August fell, too. Most economists had expected a slight uptick. The two shots of disappointing news will probably drive mortgage rates even lower.

I wrote Thursday that you should lock on the dips, and that I thought Thursday was a dip. It looks like this dip is going lower and longer than I had expected. Next week is full of important economic reports that could buffet mortgage rates. It's possible that they will drop farther, or that a spate of positive economic news could drive them up. Please excuse the banal observation, but I just have no idea what we'll hear next week. Maybe industrial production and capacity utilization will rise, and so will housing starts, while jobless claims fall. Those events would tend to push rates upward. But if next week's reports point to continued poor economic performance, rates could drop even more.

FED WATCH: The Federal Reserve's rate-setting committee has changed the way it assesses the economy to give itself more flexibility. When it meets Tuesday, it's expected to keep short-term rates unchanged. Investors will read the committee's statement closely.

GOOD ROOKIES: Common wisdom says you should hire a real estate agent with lots of experience. The Washington Post reports on a couple that ignored the advice and hired a rookie agent. They were glad they did. The upshot: "Look past the number of years someone has worked in the business to the bigger issue of what kind of skills and talents a prospective agent can bring to the process."

REVERSE IN TEXAS: The Texas constitution doesn't allow homeowners to take out reverse mortgages or home equity lines of credit. Texans have a chance to eliminate those restrictions when they go to the polls Saturday.

MODERN IN ASMARA: The New York Times (registration required) reports on the Italian Art Deco and Futurist architecture found in Eritrea's capital. Check out the slide show.

Thursday, Sept. 11
Posted 10:59 a.m.
THE NUMBERS: The yield on the 10-year Treasury is 4.32 percent this morning, up from Wednesday's close at 4.28 percent. That's a surprise, considering today's discouraging news about jobless claims. The Department of Labor says 422,000 people filed for unemployment last week. Last week's jobless claims figure of 413,000 was revised to 419,000.

That's bad. My colleague Greg McBride jokes that "we're just too darn productive." He suggests we remedy the situation by taking the rest of the day off. Indeed, workers' rising productivity does allow employers to delay hiring new employees. A lot of economists expect the economy to expand briskly in 2004, but for the unemployment rate to barely drop -- all because of rising productivity.

MORTGAGE RATES PLUNGE: The average rate for a 30-year, fixed-rate mortgage dropped one-quarter of a point this week, according to Bankrate.com's weekly survey of 100 large lenders. It fell to a seven-week low of 6.22 percent. As I explain in the afore-linked article, the employment reports for August, which were released late last week, had a lot to do with the drop in mortgage rates.

With mortgages, the rule of thumb is to "lock on the dips" -- when floating a rate, to lock if rates drop markedly. I believe that we are in such a dip. Rates could drop further, but I don't think that's the way to bet. I think they're more likely to rise in the coming weeks than to fall.

ZERO-LOT LINES: Two weeks ago, freelancer writer Steve McLinden wrote an article for Bankrate.com about zero-lot line homes. Since McLinden isn't a staff writer here, his byline carries my email address, so when readers responded, I'm the one who got their responses. I didn't receive any email about the article until this morning, when I got two -- one from a reader in California and another from a reader in Illinois. They could have scarcely had more-different reactions.

I'm going to quote from and comment about the emails to make two points: first, that journalism and journalists have an oft-misunderstood role, and second, that some things are just a matter of taste.

First is a letter from Jim of Corona, Calif., who lives on a 27-acre property that is bounded on three sides by land where up to 52,000 zero-lot line homes are destined to be built. Put yourself in his shoes. You probably wouldn't feel happy if you lived in the country and a bunch of developers decided to build a city around you.

"I suppose you're being paid or by whatever means are well-served talking up the advantages of such homes; maybe homebuilders, Realtors and those who benefit the most from such high-density development are who you are siding for, and [therefore] why you don't mention all the horrible impacts and results such homes create and bring upon the surrounding communities," Jim writes.

It's a misconception to believe that all reporting is advocacy. McLinden wrote about the increasing popularity of zero-lot line homes. As I read the article, he wasn't cheerleading. He was describing why people like these houses and the surrounding developments.

Jim continues: "Zero-lot line, high-density development such as those you have promoted" (I must interrupt to repeat that McLinden was describing, not promoting) "are an outrage, a wholesale betrayal of the existing communities whose roads, schools, infrastructures and communities are sold off to these homebuilders, the politicians and greedy few. These homes are not just for the urbanites you have mentioned but at the communities where children are raised with no yards, only the streets to play in or a pissant park with a few basketball hoops. These kinds of homes condense populations in such a way that they overwhelm road and freeway systems that were never designed to accomodate such large volumes of traffic -- traffic that spills over onto our residential streets to an extent they are no longer safe for our children to walk, let alone ride a bike."

To boil it down, Jim believes that neighborhoods should have yards where children can play, and safe streets where children can walk and ride bikes. He believes it's crazy to overwhelm existing communities with traffic from new, high-density developments. Later in his email, he describes zero-lot line homes as "ugly, oversize crackerboxes without exception."

I hear some of you cheering in agreement.

But check out this e-mail from another Jim (I'll call him James), an architect in Rockford, Ill., who notes that zero-lot line homes are nothing new; they've been around since the birth of the nation in the form of row houses in cities such as Philadelphia.

"Just a personal opinion, but this country needs to learn how to live in higher density living," he writes. "It's going to be a cultural change. Americans think that the goal in life is to own their own 5,000-square-foot home sitting on a half-acre lot. Why -- so that they can spend the rest of their life cutting grass and maintaining the house? Wouldn't you like to have back all the hours you spent cutting grass, trimming hedges, and the money on landscaping and fertilizer and aeration services? We can't continue to allow urban sprawl so that Americans can reach this goal. We can't afford to give up the farmland. We can't afford to reinforce our reliance on the automobile and oil. We have to begin a cultural revolution and accept as a goal a more intelligent lifestyle."

When you reflect on it, Jim and James agree on important points. They dislike mindless suburban sprawl and the disappearance of farmland. Jim in California doesn't think an urban lifestyle is the proper way to raise children, especially when the urban lifestyle is squeezed into a suburb instead of in a big city. James in Illinois is more comfortable with city life.

I have rented three row houses in my lifetime -- two in Baltimore and one in Toledo -- and I really liked them. Especially one in Baltimore that commanded a view of the intersection of Charles and Biddle streets. Gosh, that was a cool place. But when my wife and I were house-hunting in the vast suburbia of Palm Beach County, Fla., we looked at two row houses -- excuse me, I mean "zero-lot line homes" -- and we didn't like them at all. Row houses are fine in a city. I find them unappealing in suburbia. The residents of those houses disagree.

WHEN LIGHTNING STRIKES: Dave McIntyre describes the aftermath of a lightning strike that sparked a fire in his basement and extensively damaged the house.

Tuesday, Sept. 9
Posted 10 a.m.
THE NUMBERS: The yield on the 10-year Treasury is 4.36 percent this morning, which means we're roughly back to where we were on Friday. The 10-year Treasury closed at 4.41 percent Monday as Wall Street digested the $87 billion bill for rebuilding Iraq.

RATES AND PRICES: Even as mortgage rates rise, home prices in most parts of the country will rise, too, experts tell CBS Marketwatch's Steve Kerch.

NO-FLY ZONE: The Washington Post reports that CAPPS II, a new computer system to screen airline passengers, will be tested next year. If a credit bureau has ever goofed up your credit report, be very afraid.

"The TSA will check each passenger in two steps," the Post reports. "The first will match the passenger's name and information against databases of private companies that collect information on people for commercial reasons, such as their shopping habits. … The second step matches passenger information against government intelligence combined with local and state outstanding warrants for violent felonies."

I think the first step entails a check with one or more of the Big Three credit bureaus -- Equifax, Experian and Trans Union -- as well as other corporate information repositories such as the incredibly powerful but low-profile Acxiom and little-known Innovis Data Solutions, which I have written about.

If the credit bureaus have never reported anything erroneous about you, I guess you don't have anything to worry about. Both of you. The rest of us often find credit reporting errors when we apply for mortgages, and now we might discover credit reporting errors when we're prevented from getting on a plane.

Maybe the revised software will make planes safe again for men named David Nelson.

Monday, Sept. 8
Posted 10:50 a.m.
THE NUMBERS: The yield on the 10-year Treasury has dropped more than a quarter-point in a week. It is 4.33 percent this morning, down from Friday's close at 4.35 percent. Last Tuesday, the 10-year Treasury yield closed at 4.61 percent.

Last week's employment reports apparently threw the market for a loop. If you're wondering whether to lock, ask your lender or broker whether he or she thinks the bond market overreacted to the jobs numbers last week. I don't have a strong opinion, although I lean toward believing that there was an overreaction last week and that Treasury yields and mortgage rates might inch up in the next couple of days. But, really, that's an off-the-cuff guess and I might revise it later after I've had time to read more.

ON THE CALENDAR: The economic calendar is light at the beginning of the week, but there is lots of stuff Thursday and Friday. On Thursday we get the report on last week's jobless claims. Friday brings reports on wholesale prices and retail sales in August, and the University of Michigan's preliminary index of consumer sentiment in September.

Friday, Sept. 5
Posted 10:30 a.m.
THE NUMBERS: The yield on the 10-year Treasury was down sharply Thursday, finishing at 4.52 percent. It had closed at 4.60 percent on Wednesday. This morning it is trading at 4.40 percent. So it has gone down one-fifth of a percentage point in a little more than a day.

A lot of this can be attributed to dismal job numbers. Thursday, the government announced that 413,000 people filed of unemployment last week. Anything over 400,000 is considered to be a sign of a declining job market.

This morning, some really bad news came in. The number of non-farm jobs in the United States decreased by 93,000 in August. Most experts had expected an increase in payrolls, so it was quite a shock when it turned out that there was a decrease of almost 100,000 jobs. This isn't a count of layoffs in August. It's a count of jobs that disappeared. Ironically, the unemployment rate fell, from 6.2 percent in July to 6.1 percent in August. The unemployment rate doesn't count unemployed people who are discouraged and have given up looking for a job. It appears that at least 10,000 people gave up job-hunting, and that accounts for the lower unemployment rate.

INTEREST-ONLY: I got an email from a reader named Mark that goes like this:

I have read your statements a number of times that you feel that for the average, middle-class family, the best option is a fixed-rate loan. I understand your reasoning up to a point. I would consider myself in the average middle-class family category. I have been in discussions with two friends who are financial investors regarding the interest-only loan for a home I will close on in October. They feel that my thinking is correct. Since your advice differs, I am curious as to your thoughts.

Let's assume I were to get a 6.5 percent fixed-rate 30-year loan on $165,000. My payments would be around $1,032 a month (without taxes and insurance). With an interest-only loan (based on the LIBOR) at 3.25 percent, which adjusts once every 6 months, my payments will be around $449 a month. If I were to still pay the $1,032 a month, I would be applying $583 a month toward the principal. At the end of the first year, with the interest-only loan I would have paid my principal down by $6,996 where the 30-year fixed would have only paid my principal down by $1,800. As long as I am disciplined enough to apply the extra principal payment every month, it seems to me that the interest-only loan makes complete sense. At the end of 10 years when the loan begins to require interest and principal payments, I will have already paid the principal down nearly $30,000 more than where I would be with a 30-year fixed. I realize my calculations have not taken into account the potential for my interest rate adjusting up. But historically speaking, since 1991 the LIBOR has never gone above 7 percent and even then it only stayed that high for a short period of time with the average over the past 12 years being around 5 to 5.5 percent. Assuming future performance follows historical data, this would mean, worst-case, my rate would be slightly higher than the 6.5 percent fixed I could have opted for.

Please help me understand, if my thinking is flawed, how so? If my goal is to pay down my principal as fast as possible, why would this scenario with an interest-only loan be a bad idea?

IT'S ABOUT SELF CONTROL: To answer Mark's question: The main factor here is discipline. Will Mark have the discipline to write a check for $1,032 every month, even when his invoice says he owes $449? Some people have that kind of self-discipline. I think most people don't. They might stick with such a plan for a few months or even a couple of years, but eventually most people would pay the minimum, at least for a while, because of an unexpected expense such as a car repair, or to reward their good behavior with an expensive vacation.

If Mark and his wife are the kind of people who stick to a diet, and who follow up on New Year's resolutions, and who drive cars that are much less luxurious than they could afford, they might have the self-control they need to make their interest-only plan work.

I asked my colleague Greg McBride, a Bankrate.com financial analyst, to ponder Mark's question, and Greg has some other concerns. First: If their pre-tax interest (at the beginning) is 3.25 percent, why hurry to pre-pay? Assuming that they're in the 28 percent tax bracket, their after-tax interest is 2.34 percent. Over the next 10 years, they probably could earn a higher return (albeit at a higher risk) on their money if they invest the money elsewhere instead of in home equity.

Greg also wonders what the margin on the LIBOR loan is. Something less than 2 percentage points? That seems low. Is Mark being quoted an introductory late with a low margin, and if so, what will the margin be in the future? And Greg says the "normalized" range of LIBOR rates that Mark mentions do not make an appropriate worst-case scenario. If the LIBOR exceeds 7 percent, will Mark be able to handle that in his budget?

Finally, when Mark says that his interest-only plan would result in $30,000 more in equity over 10 years than a fixed-rate loan, he is assuming that his rate will remain at 3.25 percent for 10 years. That's not realistic.

The main thing, though, is self-discipline. If Mark and his wife have enough of it, they indeed might be better off getting the interest-only loan.

By the way, I wrote about interest-only loans this week.

PANTYWAISTS: The Democratic presidential candidates gathered for a debate in Albuquerque Thursday night. As far as I can tell from the news coverage, they didn't say anything about housing policy. I think Americans are worried about the cost of housing, as well as the cost of higher education and of health care. But the Democratic candidates ignored housing and higher education. They did talk about what they would do about making health care more affordable. In other economic comments, they said they would repeal all or most of the Bush tax cuts.

President Bush, on the other hand, has paid attention to housing. Bush behaves rather like a Democrat when it comes to housing policy. His housing secretary, Mel Martinez, wants to reform the way mortgage rates and closing costs are pitched to consumers. It's a consumer-friendly proposal that is opposed by some elements of the mortgage industry.

But the Democrats didn't have anything to say about the Bush administration's proposal, or how to encourage the construction of affordable housing, or whether private mortgage insurance premiums should be tax-deductible, or anything else about housing.

These politicians don't live in the same world that we live in. A debate on the NFL's opening night? Don't they realize how wimpy that makes them look? A friend of mine, a liberal like me, scornfully calls them the Bookworm Party. White men seldom vote for Democrats for president. Do the Democrats think they'll attract those voters by applying makeup and earnestly debating on TV during the NFL's first game of the regular season?

Thursday, Sept. 4
Posted 12:30 p.m.
THE NUMBERS: The yield on the 10-year Treasury is 4.56 percent this afternoon, down from Thursday's close at 4.60 percent. Fannie Mae's required net yield -- a measure of the rates that the mortgage giant demands on the loans it buys -- is unmoved.

Mortgage rates rose slightly this week. The average 30-year fixed is 6.47 this week, compared to 6.44 percent last week.

KEEPING SCORE: Five weeks ago, when the average rate was 6.26 percent, I predicted that rates would rise in the next 30 to 45 days. "Yields on mortgage-backed securities and yields on Treasury notes are on a mutually reinforcing upward trend," I wrote. "There will be peaks and valleys during this upward movement; lock on the valleys." I was right. There were peaks and valleys, and rates are higher now than the were then. I have guessed correctly 22 of the last 52 weeks, for a batting average of .423. Looking back to the last quarter, I have been correct seven of the last 13 weeks. Actually, I've been correct seven of the last 10 weeks.

This week, I'm predicting that rates will continue to rise.

I'm also predicting that my beloved Dallas Cowboys will defeat the Atlanta Falcons.

OTHER NUMBERS: 413,000 people filed for unemployment last week, according to the Department of Labor. That's up from the previous week's 398,000 jobless claims (and that number was revised upward from 394,000).

The service sector is doing better than expected, according to the Institute for Supply Management. That's generally good news, but I don't put as much stock in squishy numbers, such as consumer confidence and the ISM indexes, as in hard numbers, such as jobless claims and Treasury yields.

FAT OF THE LAND: Do suburbs contribute to health problems such as obesity, high blood pressure and depression? asks the New York Times.

EVERYTHING ABOUT THE KITCHEN SINK: I was fascinated by this lengthy Washington Post article about kitchen sinks because I will probably buy one soon to go with a new kitchen faucet. We have a stainless-steel sink, which I detest because of the noise. Also, brushed stainless is ugly. I want a quiet cast-iron sink. Preferably enameled in Cowboys colors.

Tuesday, Sept. 2
Posted 10:45 a.m.
THE NUMBERS: The 10-year Treasury is trading at 4.54 percent this morning, compared to Friday's close at 4.45 percent. Fannie Mae and Freddie Mac are demanding higher rates on the mortgages they buy, too.

The Institute for Supply Management says the manufacturing sector expanded in August, although factories aren't hiring big bunches of people.

The economic calendar is rather light until Friday, when the government releases employment data for August. According to Briefing.com, experts believe that nonfarm payrolls increased in August, and that the unemployment rate will remain at 6.2 percent. If the news is better than expected, mortgage rates should rise; if the news is worse than expected, rates should fall.

Friday, Aug. 29
Posted 11:25 a.m.
THE NUMBERS: The 10-year Treasury is trading at 4.42 percent this morning, the same as Thursday's close. Fannie Mae and Freddie Mac are demanding slightly lower rates on mortgages they buy, though. All in all, it looks as though rates have been relatively steady this week.

PREDATORY LENDING: Local and state anti-predatory lending laws are burdensome and increase costs to consumers, according to a national poll of registered voters who have taken out mortgages sometime in the past.

I'm fascinated by polls that ask people about matters of fact rather than matters of opinion. Do anti-predatory lending laws increase costs? That's like asking, "Do airbags increase the costs of cars?" Of course they do. Why is that a matter of opinion? The real question is whether the benefits are worth the costs.

The poll was conducted in July on behalf of the Coalition for Fair and Affordable Lending, a Washington lobbying group that represents the subprime mortgage industry. Subprime mortgage loans are for people with fair or poor credit histories. These loans have higher interest rates because they're riskier.

Some subprime lenders are ethical, and offer a valuable product for people with poor credit. Some subprime lenders take advantage of homeowners by charging higher-than-necessary rates and including outrageous pre-payment penalties. A few subprime lenders are predatory: They knowingly lend to people who can't afford the payments, just so they can foreclose for a profit.

CAFL opposes unfair and predatory lending, but its member lenders want one national predatory lending standard instead of a patchwork of local and state laws. The organization supports the Responsible Lending Act, a bill sponsored by U.S. Rep. Bob Ney (R-Ohio) that would invalidate local and state anti-predatory lending laws in favor of a national standard. (If you want to read it, go to Thomas and type "HR 833" in the search box.) I think Ney's bill would result in an increase in predatory lending. As I said, CAFL supports the Ney bill and it commissioned its poll to bolster its case for the bill.

The poll results find that homeowners see anti-predatory lending laws as important. That implies that people believe that anti-predatory lending laws have benefits that are worth the costs. The CAFL's spin goes like this: People want one national standard, not a bunch of local and state laws that make it difficult to offer mortgages to people with fair or poor credit histories.

The survey found that three-quarters of respondents believe it is important to preserve access to subprime home loans to people with imperfect credit. Four-fifths say it is extremely or very important to have regulations in place to protect consumers from unfair or predatory mortgage lending. Three-quarters say it's extremely or very important for consumers to have a wide choice of mortgages. A little more than half say it's extremely or very important for people with low incomes or poor credit histories to have access to mortgage credit.

Wright Andrews, CFAL's executive director, points to the fallout early this year from Georgia's anti-predatory lending law. The statute made secondary-market investors liable for unfair loans in their portfolios, and some types of loans were rendered unavailable in Georgia. "It's clear that people don't want that to be the effect of the laws," Andrews says.

Georgia's law was amended later.

The survey found that three-quarters of respondents agreed with this statement: "When various state and local governments have overlapping and inconsistent laws to regulate mortgage loans, it is burdensome and increases costs to consumers." When the question is phrased that way, it's no surprise that so many people agree.

Pollsters Fairbank, Maslin, Maullin & Associates surveyed 800 people from July 24 to July 31. The results have a 3.5 percent margin of error at a confidence level of 95 percent.

Thursday, Aug. 28
Posted 5 p.m.
AFTERNOON UPDATE: The yield on the 10-year Treasury is down even more today, to 4.42 percent, because of the jobless claims numbers.

ARMs REDUX: I got a few emails from people who wanted to explain their thoughts about adjustable-rate mortgages, and a question. First, the question, from Nancy:

I need some verification that we did the right thing going with a five-year, interest-only ARM. We have moved three times in seven years. My husband is in the pharmaceutical industry and gets frequent promotions. We are closing on our house Sept. 5 and we are putting 20 percent down (rate of 4.25 percent).

I have looked at amortization schedules and figured if this were a fixed loan approximately $400 a month would be going toward principal the first year, of course increasing in subsequent years. Our plan is to invest the $400 a month that we would have been paying in principal with a fixed rate in some type of investment vehicle. We suspect that we will be relocating in less than five years, or if we did stay we would build a new custom home.

At that time we would take the money we had invested and use it toward a down payment for our next house. By the way, we always try to pick a property with good resale. When we relocate with a company they usually pay all closing costs on both ends and usually there is a guaranteed buyout offer for selling the house. This is pretty standard in upper management in the pharmaceutical industry. Did we make a good choice with the five-year interest-only loan? My family thinks we were crazy to go this route!

There are two parts to Nancy's question: Is the 5-year ARM a smart thing to get in her situation? And is it smart to get an interest-only loan? Based on what she says, the 5-year ARM is a good idea because she doesn't think they'll be in the house much longer than five years, if that long.

As far as the interest-only, and investing the $400 a month that would otherwise go toward principal, I'm not educated enough or qualified to say whether that's a good idea. I have a hunch that a financial planner would say it's responsible and appropriate in her family's situation, but I could be wrong.

When I talk to lenders who do such loans, they say these loans are appropriate for high-earning professionals and managers who are climbing the career ladder, and who have sophisticated investments and rather complex financial lives, and who plan to step up house-wise within a few years. Often these borrowers need to entertain business clients at their homes. It sounds like Nancy's family fits some of these criteria.

That's why I mentioned that fixed-rate loans are best for "regular middle-class" people. I would put Nancy's family a step above that, socio-economically. I cut out the part of her letter that said how much the house costs, but it's pretty substantial.

Here are some comments from other readers about ARMs. Perhaps these remarks will clarify your thinking, if you're confused whether to get a fixed-rate or adjustable:

Kyu writes:

I saw your article on Bankrate.com and wanted to get your perspective on getting an ARM over a fixed rate mortgage. I just sold my home and am building a home that will be finished in April of 2004, so I am currently waiting a few months to lock an interest rate. I've been going back and forth, whether or not to get an ARM or a fixed rate.

I guess the negatives (in terms of interest rates) that I see are rising federal deficits and the growing economy. The only way to see interest rates coming down is if the recovery stumbles or an increase in uncertainty, in terms of world events, occurs. An ARM would free up cash flow over the short term and the ceiling that's placed on the ARM would protect you from getting cleaned out in case interest rates skyrocketed. The fixed rate mortgage would take advantage of historically low interest rates, but would be approximately $500 extra per month less in the short term.

I'm leaning towards getting a fixed rate mortgage as long as interest rates don't skyrocket in the next few months. Just wanted to see what your opinion was.

Keith writes:

I'm going to start shopping for a house around the first of the year, and I'm going to be seriously considering a 1 year ARM with a relatively low maximum cap even though I'm going to be in the house for a while. Right now, my credit union is offering:

30 year fixed, 1 point, 6 percent
30 year fixed, 0 points, 6.25 percent
1 year ARM, 1 point 3.62 percent, with a maximum rate of 8.625 percent
1 year ARM, 0 points, 4 percent with a max of 9 percent

I'm looking for a house that I can afford at 8.5 percent or 9 percent, but I'll be happy to pay 3.625 until and unless rates get up that high. (And I'll probably put the savings compared to a 30-year into some safe investment, and be prepared to pay down the mortgage if rates go up as well. If you can pay off 10 percent more of the mortgage in the first 5 years, that cuts the worst case payment.)

So with only a 2.75 percent spread between the current fixed and the max on a 1-year ARM, I think that's a gamble I'm willing to take. Especially for 2.25 percent a year that I can pay towards my principal or put into savings.

Now a 5/1 or 7/1 ARM with no cap and less than a 1 percent lower rate just doesn't make any sense to me unless you're expecting to move within 5 to 7 years.

NOT SILLY AT ALL: "This may be a silly question, but anyway..." a reader writes. "In your main story today, the national average for the 3-yr fixed mortgage is 6.44 percent. At the same time, the 'Your Best Interest Report' says the national average for the 30-year is 5.97 percent. Both figures are supposedly current as of today, August 28. Can you please explain the discrepancy?"

Sure. I have an automated e-mail response to this question, which goes like this:

Every Wednesday, Bankrate's research department contacts 10 large lenders in 10 large markets. We query the same 100 lenders every week. We ask what rate these lenders charge to a borrower with excellent credit, borrowing $165,000 with at least 20 percent down, with zero discount and origination points or the fewest total points the lender allows (some charge origination points on all loans). The benchmark rate is the average rate from those 100 lenders.

We ask for information on a $165,000 loan amount because the Federal Housing Finance Board announced that the average US mortgage loan for 2002 was $163,400.

The overnight average that's on our home page is an average of, for want of a better term, I would call lenders' "daily specials." When lenders want to publicize especially low rates, they tell us, and we average those rates daily in the overnight average. Those rates come to us, and might include lots of points, whereas the weekly benchmark survey is info that we gather from the same lenders every week with the fewest possible points.

To track the general trends of mortgage rates up and down over time, the benchmark index is the one to watch for.

Posted 10:15 a.m.
THE NUMBERS: The yield on the 10-year U.S. Treasury is 4.48 percent this morning, down from Wednesday's close at 4.54 percent.

Experts attribute this morning's decline to a gloomy jobless claims report. The Department of Labor says 394,000 people filed for unemployment last week. The previous week, 391,000 people had filed jobless claims (and that figure was revised upward from the previous estimate of 386,000 claims).

RATES AND ARMs: Rates rose slightly this week, according to Bankrate.com's weekly survey. The average 30-year mortgage rose 9 basis points to 6.44 percent. The 15-year was up 13 basis points, to 5.81 percent, and the 1-year ARM was up 7 basis points to 4.21 percent. In the article, I delve again into the significance of the popularity of ARMs. I'm troubled. I have a hunch that some home buyers are getting adjustables when it's not appropriate to their situation.

I believe that some ARM borrowers chose a house in June or July, or signed a contract earlier this year to have a house built. They made these decisions when fixed mortgage rates were near once-in-a-generation lows. They decided to buy houses at prices that stretched their budgets, even at these very low rates. Now that interest rates have gone up, they are going with low-rate ARMs so they can afford the houses that they have decided to buy.

That's my theory. If I'm right, some of these home buyers are making a mistake. They would be smart to back out of their purchase contracts, citing the rise in fixed mortgage rates, and find less expensive houses to buy with fixed-rate mortgages.

For regular, middle-class people who plan to live in their houses indefinitely, fixed-rate mortgages are the best and least risky option. If you're a middle-class person who plans to live in the house for more than five to seven years, you shouldn't buy a home that you can't afford on a fixed-rate mortgage. It's as simple as that. If your lender or mortgage broker or real estate agent disagrees, think about whose interest is being served.

No one wants to get his or her heart set on a house, only to have to settle for a smaller house or a less attractive neighborhood just because prices and interest rates are rising quickly. But you can't always get what you want.

GOING NARROW: Zero-lot line homes are becoming more popular, Steve McLinden reports for Bankrate.com.

READY TO ROOMBA: Roomba, the vacuuming robot, has come out with two improved models, the New York Times reports (registration required). I want one. Maybe when the price goes down.

The yield on the 10-year Treasury was trading at 4.52 percent late this afternoon, up slightly from Tuesday's close at 4.50 percent. I believe that this is part of a slow, long-term rise in rates. There will be dips, sudden drops and abrupt spikes along the way, but the long-term trend is upward. Kind of like a restaurant critic's weight.

THE GRADE: Every week, I predict whether rates will rise, fall or stay about the same over the next 30 to 45 days. I test my accuracy by comparing the average rate on the day of my prediction with the average rate five weeks later. Five weeks ago, when the 30-year mortgage averaged 5.99 percent, I said rates would rise. I was right. I have guessed correctly 22 times in the last 52 weeks, for a batting average of .423.

I think that's a pretty accurate record, considering that I have three choices. If I guessed at random, you would expect my batting average to be .333. If you disagree -- if you point out that I rarely predict that rates will stay about the same, so I should shoot for an accuracy rate of better than 50 percent -- you certainly have a point.

On the other hand, I don't know anyone else who publicizes his prediction accuracy every week. I would like to see a stock picker or weather forecaster try it. But they don't, so I'm cutting myself some slack.

SHOW OF ARMs: A couple of days ago I asked readers to explain why they got adjustable-rate mortgages during this time of low rates. I heard from five people. One paid me a head-spinning compliment and left his phone number, but I got a recording that said the phone was off the hook. Another didn't give me a phone number, and asked me to reply to a different email address than the address he sent it from. I replied to the wrong address. One email arrived too late. Another was from someone who refinanced into a 5/1 ARM and plans to sell the house within three years. I was hoping to hear from people who were buying houses and planned to live in them indefinitely.

And the fifth guy? He left his phone number, and when I called and said I was from Bankrate.com, he hung up. Thought I was a telemarketer.

Later, in an email, he said to call back on Thursday. But my deadline was today. That's a reporter's life for you.

Posted 9:10 a.m.
THE NUMBERS: The yield on the 10-year Treasury note is down slightly in very early morning trading. It's at 4.47 percent, compared to Tuesday's close at 4.50 percent. As far as mortgages are concerned, that's more or less steady.

Bankrate.com conducts its weekly mortgage rate survey today, and the average rate will be up from last week, when the 30-year fixed rate mortgage averaged 6.35 percent nationwide. The 10-year Treasury's yield is up about 12 basis points from last week, and I expect the average 30-year rate to rise a little higher than that compared to last week. I think it will average 6.50 percent, plus or minus two basis points.

Through the end of the year, I expect an upward trend in mortgage rates. They might go up one week and down the next, but overall, they will rise. I doubt we will see 7 percent this year, so I'm not expecting an abrupt rise.

I'm a fool for predicting mortgage rates publicly. I'm accurate less than half the time. So be skeptical about my predictions. At the same time, be skeptical of anyone who advises you to float because rates will fall or remain steady. Rates have been rising since late June. When rates have been rising almost every week for more than two months, why would you expect them to fall?

This is my long way of saying that you should lean toward locking a rate. There's a clear upward trend in rates, and if you lock now, you're going to get a rate that borrowers will envy a year or two from now.

CAPITOL COMMERCE: Capitol Commerce, a midsize mortgage lender, went belly-up abruptly two weeks ago and left 2,000 borrowers stranded. They will have to find loans at current rates -- higher than the ones they locked in June and July. CBS MarketWatch warns in this article that a "handful of other companies may also fail as a result of rising rates, and some of those that survive may try to avoid their promised rate locks."

TURNABOUT: A Realtor tells columnist Barry Stone that she is disappointed when a client hires an inspector with a reputation as a "deal killer," but changes her mind when the inspector finds that the house is "a disaster waiting to happen." The Realtor concludes, "I consider my clients fortunate" -- and they found a better house, hiring the same inspector.

Good real-estate agents share that attitude -- that pleasing the client is more important than closing the sale.

EBAY ITEM OF THE WEEK: You can't judge a house by the road that leads to it.

Tuesday, Aug. 26
Posted 10:40 a.m.
THE NUMBERS: The yield on the 10-year Treasury has jumped this morning. It's trading at 4.57 percent. It had slipped to 4.48 percent at Monday's close, down from Friday's close at 4.53 percent.

Yields rose after the release of today's report on sales of durable goods in July. Durable goods orders rose 1 percent last month, which was what economists had expected. More important, durable goods orders have risen in two consecutive months. That hadn't happened in more than two years. Signs of an improving economy tend to push Treasury yields upward.

ECONOMY: House resales rose to a record monthly pace in July, according to the National Association of Realtors. Houses sold at an annual pace of 6.12 million, vs. the previous record, set in December and January, of 5.38 million.

The Realtors' chief economist guesses that some people jumped off the fence and bought houses when mortgage rates started rising in late June and in July. The median house price nationally increased 12.1 percent in the last 12 months -- to $182,100 in July.

This morning, the Commerce Department reports that new home sales in July were at the second-highest annual pace on record -- behind only June. New homes sold at a seasonally adjusted annual rate of 1.165 million.

This could mark the peak of the housing market for this cycle.

A SHOW OF HANDS ON ARMs: In last week's mortgage analysis, I wrote about the growing popularity of adjustable-rate mortgages, or ARMs. I want to talk to an ARM borrower or two to find out why they decided to get an adjustable rather than a fixed-rate mortgage. If you're willing to be interviewed for attribution today or Wednesday morning, let me know.

MOVING VIOLATIONS: Steve Kerch is my favorite journalist covering real estate, and he has written a gem about the stress surrounding his family's move to the suburbs. He didn't do as well as he had hoped.

LOCK MISERY, CONT'D: Borrowers who locked in low rates early this summer, only to watch their lenders break their locks, are asking, "Who do we sue?" the Washington Post reports. I assume that this question is not asked by the large number of politicians and policymakers in Washington who constantly complain about "frivolous" lawsuits.

Monday, Aug. 25
Posted 12:10 p.m.
THE NUMBERS: The yield on the U.S. Treasury and the required net yields of Fannie Mae and Freddie Mac are a little lower this morning compared to Friday. The differences are pretty small. The 10-year Treasury is trading at 4.46 percent, compared to Friday's close at 4.48 percent.

MORE ABOUT RATE LOCKS: This from reader Chris Andino:

Your suggestions are useful, but may not be the best tack to take at this time. As an escrow agent, I know what title companies, underwriters, processors, and closers do to try to close a loan. In this time, when everyone in the industry is trying to close all of the loans locked in June and July, many are working 80 hours a week or more. The client who calls persistently takes valuable minutes away from the person they most want to be working efficiently. Very often, a phone call or email reminding the bank that you're still there will serve the opposite effect that was desired: you'll get put on the bottom of the pile and will receive slower service.

Quite often, those that call the most know the least. Only when a borrower really knows the insides of the mortgage process (e.g. underwriting, title, closing, etc.) will their call satisfy them without aggravating the over-worked processors. More than calling, it is important to familiarize yourself with the process that holds up your loan closing. The longer the call you make--and the more you have to understand--means the underwriter has that much less time to complete the work you're pestering them for.

AUTUMN RATES: I've got a couple of emails in the last week from readers who are having houses built. They're going with lenders who won't allow them to lock rates right now. "The loan officer said, 'Don't worry,' citing that interest rates for 30 yr fixed usually go down in the early fall months," one reader writes.

I looked at what has happened to mortgage rates the last five Octobers and Novembers, and I don't see a trend of falling rates in those months. It clearly happened once in the last five years, but in the other four years, rates remained relatively steady or went up.

As I wrote earlier this summer, some lenders let you lock a construction loan far in advance. The ones I mention in the article are IndyMac and Wells Fargo Home Mortgage.

Friday, Aug. 22
Posted 11:10 a.m.
THE NUMBERS: The yield on the 10-year Treasury finished at 4.53 percent Thursday, and it's at 4.50 percent this morning. Conversely, Fannie Mae and Freddie Mac are demanding higher rates on the mortgages they buy. They have raised these required net yields by about 10 basis points this morning compared to Thursday afternoon. This means that the rate you're quoted might go up, or your discount points don't buy as much of a discount, even though the Treasury yield has dropped.

LOCKS: My article Thursday, headlined "Aggressively defend your rate lock," got quite a response from readers who say they went through rate-lock hell or worry about going through it. "I'm glad to hear I wasn't the only one who went through this," a reader named Yvette says. "My husband and I locked in on June 5th but didn't close until August 14th! I was constantly on the broker for a closing date - they filed for not one, but two extensions and they didn't dare ask me to pay for it after the arguments I had with all of them."

A reader named Mark tells this story (by the way, to "escalate" means to move a complaint up the chain of management):

I had a 30-day mortgage lock that expired and I agreed to a 15-day extension. It expired as well. The lender's underwriting agent did not want to extend it due to company policy.

I fought with the broker and lender on it. The broker's comment was that it happened to about 10 different people at the same time and they could do nothing to persuade the lender to honor the agreement. With a "Won't take no for an answer" attitude, I engaged the lender's underwriter. I actually had to go and search the Internet for the office phone number. I called two offices before finding the underwriter and she said it was company policy not to allow a second extension even though we could close it within a week. She would not give me a branch manager or corporate office number to escalate my claim. So I checked the Web site and got the corporate number for the lender.

I called and talked to a customer service's rep, who then forwarded the problem the manager of the rate locks. Two days later, my paperwork was back on track and the cost was one-quarter of a point. I paid it since I had no additional points, with the final outcome of a 30-year conventional mortgage at 5 percent. We actually just closed on this loan on Aug. 8.

In conclusion, the lender blamed the broker for my escalation and took all of their fees away from them. It was a stressful process for us but worth the $175 savings a month in the end.

As I wrote in my fair and balanced article (I report, you decide), the mortgage process isn't for the faint-hearted. Do you hate to buy a car or complain about lousy service because you dread negotiation and confrontation? That describes me, and if it describes you, you have to get over it when you're getting a mortgage. If you have to confront someone over a rate-lock runaround, and you feel anxious about it, practice beforehand by role-playing with someone who plays the role of the broker or loan officer or customer-service rep or manager.

A few more suggestions: Know what you want and ask for it clearly -- and do it early in the conversation. If you can't get everything you want, know what you will settle for. Be succinct; you don't need to recite the history of your dealings with the broker or lender for five minutes before getting around to asking for what you want. And don't lose control of your emotions. You can act emotional as a calculated strategy to get what you want, but stay in control. Document everything: Take notes and confirm any mutual understandings with a short e-mail to the person you talked to.

BUSTED: A reader named Eric notes that I said Thursday that I have guessed mortgage rates correctly 21 of the last 52 weeks, for a batting average of .404. I said this was better than random guessing because I have three choices when I predict mortgage rates: that they'll go up, down or stay about the same.

"Your logic on a .404 batting average being better than random because you have three choices has me thinking," Eric writes. "Maybe I am wrong, but I would guess that you rarely predict that rates would stay the same, and additionally it must be rare that rates do stay exactly the same to the decimal level at which it is measured. Therefore, I would think 50 percent -- either up or down -- should be your target, shouldn't it?"

Yes.

I rarely predict that rates will stay about the same because that's usually a bad bet. When I say "about the same," I mean that in five weeks, the benchmark rate will be within 2 basis points, up or down, from the current rate. For example, if the average 30-year rate this week is 6.35 percent and I say it will remain relatively unchanged in five weeks, I count myself correct if the rate ends up between 6.33 and 6.37 percent, inclusive. That's a 5 basis point spread, and it happens a few times a year.

For three weeks in a row in April, I predicted that rates would remain unchanged and I was wrong every time. Twice in the last year -- last September and last October -- I predicted correctly that rates would remain relatively unchanged.

FREDDIE GETS FINGERED: Federal regulators have told mortgage giant Freddie Mac's chairman that the company's chief executive must quit because of his involvement in an accounting scandal, the Washington Post reports. I kinda doubt this will affect mortgage rates.

SWAMPING AND SNOWBALLING: Runaway growth in the mortgage market means that mortgage securities affect Treasury yields more than vice versa, writes Gretchen Morgenstern in the New York Times (registration required). This causes violent swings in mortgage rates.

Thursday, Aug. 21
Posted noon
THE NUMBERS: I was so busy Wednesday that I didn't take the time to post here. The yield on the 10-year U.S. Treasury finished up Wednesday, to 4.45 percent compared to Tuesday's close at 4.38 percent. This morning, the 10-year Treasury is trading at 4.48 percent.

Mortgage rates inched down this week. The average 30-year fixed rate was 6.35 percent nationwide, down from 6.37 percent the week before. Not enough of a change to notice, really. Each week, Bankrate.com surveys 10 banks and thrifts in each of 10 big markets. The lowest of those 10 markets was Detroit, where the average 30-year rate was 6.16 percent with an average of 0.49 points. The highest market was Boston, averaging 6.48 percent with zero points.

Every week, in the Mortgage Rate Trend Index, I predict which way I think rates will go in the coming 30 to 45 days. Every week I grade myself by looking back at my prediction from five weeks before. Five weeks ago, when rates averaged 5.83 percent, I predicted that rates would fall. Wrong. I've predicted correctly 21 of the last 52 weeks, for a batting average of .404. That's better than random, because I can guess that rates will go up, down or remain about the same.

ECONOMY: Unemployment claims fell last week to 386,000, according to the Department of Labor. That was down from the revised number of 403,000 last week. I notice that most of the news media count today's data as good news, pointing out that jobless claims below 400,000 point to an improving employment situation. But they forget that the previous week's tally of jobless claims was revised upward to 403,000.

Wall Street insists on viewing last week's 386,000 jobless claims as good news, though. Stock prices and Treasury yields are up. Investors are forgetting that last week's blackout probably prevented some people from filing for unemployment, or unemployment offices from reporting complete data. And investors are ignoring the previous week's jobless claims data.

PYGMY OWLS: I like the people at the National Association of Home Builders. But sometimes I wonder if they consider how they come off to outsiders. They're forever crowing over court decisions that allow them to pave over wetlands. Now they're chirping merrily over a court decision that might allow them to kill cactus ferruginous pygmy owls. They successfully challenged the bird's listing as an endangered species as arbitrary and capricious. Basically, the NAHB argued that there are plenty of pygmy owls in Mexico, so it's OK to kill them in Arizona. It's an issue of affordable housing, the NAHB says, so I hope builders are true to their word and build only low- and moderate-priced houses in owl habitat.

BANKRUPTCY: The number of personal bankruptices filed in the 12 months ending June 30 set a record, according to the American Bankruptcy Institute. Personal bankruptcy filings were up 10 percent over the previous 12-month period, to 1.6 million.

Samuel J. Gerdano, executive director of the ABI, says: "The latest bankruptcy record reflects the continuing hangover from the binge consumer spending and consumption of the late 1990s. Consumers, aided by historic low interest rates, helped make the last recession a shallow one, but at the cost of adding to already high household debt burdens. This can lead borrowers to consider bankruptcy as a solution to their debt problems."

Gerdano is the expert, but I would quibble with his judgmental assertion that the increase in bankruptcies is a "hangover from the binge consumer spending and consumption of the late 1990s." What about lost jobs? When Bill Clinton left the White House, 132.4 million Americans had nonfarm jobs. In July, 129.9 million people had nonfarm jobs, according to the Department of Labor. Could the vanishing of 2.5 million jobs in two-and-a-half years have something to do with the rise in bankruptcies?

Home foreclosures and bankruptcies tend to move in the same direction, so foreclosures probably will continue to rise.

DECLINE AND FALL: You have to have a subscription to the Wall Street Journal to read this, but here's a priceless report on rich people who buy new or recently renovated McMansions just to tear them down and build even bigger McMansions.

Tuesday, Aug. 19
Posted 3:10 p.m.
AFTERNOON UPDATE: The yield on the 10-year Treasury has dipped to 4.40 percent. Fannie Mae's and Freddie Mac's required net yields, another barometer of mortgage rates, are down about 10 to 15 basis points today. If you have decided to float, and then lock on a dip -- well, this is a dip. I don't know how long it will last, or how low it will go. But it looks like there's a noticeable dip today, compared to early Monday or last Friday.

The 10-year yield is now a bit higher than it was a week ago, when the Fed had its regularly scheduled meeting and left short-term rates alone.

Housing starts in July were at an annual rate of 1.87 million, the strongest pace of housing construction since April 1986. Low mortgage rates were one reason, says the National Association of Home Builders.

QUICK TAKES: UNPRINCIPALED: Interest-only mortgages are catching on as rates rise, the New York Times reports (registration required).

LIKE YOU AND ME, ONLY DIFFERENT: Who buys million-dollar-plus houses? People with lots of money, sasses Steve Kerch of CBS MarketWatch. And 31 percent of those buyers pay in cash!

Posted 10:50 a.m.
THE NUMBERS: Here are the fair and balanced yields and interest rates. I report, you decide and all that stuff.

This morning the 10-year Treasury yield is at 4.50 percent, virtually the same as Monday's close at 4.51 percent. Fannie Mae's and Freddie Mac's required net yields -- the rates they require on bundles of mortgages they buy -- are down a bit more than that, which is an indication that lenders might be offering slightly better deals on their discount points.

CAPITOL COMMERCE: A Sacramento-based mortgage lender, Capitol Commerce, abruptly went out of business late last week. Capitol Commerce didn't lend directly to consumers, but mostly through mortgage brokers. It did almost $4 billion a month of business toward the end, and thousands of people have discovered that their loans won't close. Their brokers either will have to find a loan with another lender at current rates, or these customers will just have to forget about getting a loan.

The top managers of Capitol Commerce have kept a low profile, so we don't know exactly what happened. The conjecture is that Capitol Commerce bet wrongly in June and early July that interest rates wouldn't rise, or at least wouldn't rise much, so they did not hedge their risk by buying Treasuries and other bonds. When Treasury yields (and mortgage rates) rocketed upward by more than a percentage point in five weeks, Capitol Commerce couldn't fund its promised loans without losing thousands of dollars on each one. So it closed up shop. That's the conjecture, anyway.

It was kind of like owning a log house in a tinder-dry forest during a drought, but not having fire insurance.

Over time, we'll see if what happened to Capitol Commerce was just a civil matter, or if it will turn into a criminal investigation. Some people might not be able to buy the houses they wanted because of this, and someone at Capitol Commece should answer for that.

Monday, Aug. 18
Posted 10:35 a.m.
THE NUMBERS: I'm back from a three day weekend, prepared to give you another week of fair and balanced coverage of the mortgage world. I report, you decide.

Early this morning the yield on the 10-year Treasury is down to 4.51 percent. The yield closed at 4.55 percent Friday. A week ago, the 10-year Treasury was at 4.33 percent, so it has gone up almost a fifth of a percentage point in a week. You find the same thing with Fannie Mae's and Freddie Mac's required net yields, which are the rates they require on bundles of mortgages that they buy.

HELP: I'm doing a story this week about rate locks -- how to get them extended, what to do when a lender tells you that you're not going to be able to close on time. If you have recent personal experience in heading off a rate lock debacle, or if you're a broker or lender who has some tips for dealing with the expiring rate lock problem, shoot me an email at hlewis@bankrate.com.

A WARNING: If you're renting, and you're thinking about buying, please consider my weekend. I should have had a relaxing Friday, hanging out with my son, who was home from school with a cold. (Yes, school started last week in Palm Beach County, Fla. No, the school year doesn't end early. This year, summer vacation lasted from June 4 to Aug. 12.) Friday should have been a relaxing day, but I got anxious about all the housework I knew I needed to do, then I got stressed out because I was procrastinating when I should have been working on the house. Then I told myself, "Dude, don't get so stressed out. Jeez, you always procrastinate and get anxious about your procrastination. Why do you do that?" So I got stressed out about my anxiety about procrastination.

The weekend consisted of mowing the lawn in August in Florida after a week of torrential rain that caused the grass to grow to shin height, cutting down a tree that was rubbing against the neighbor's roof, chopping the tree into logs (did I mention it's August in Florida?), cleaning the pool for the first time in two weeks (I couldn't do it before because of the constant threat of lightning), replacing a bathroom faucet (two trips to The Home Depot), tidying up the living room so my son could mess it up again, rearranging the kitchen to free some more counter space (I'm the cook in the family), and continuing the three-weekend project of tidying up and rearranging my bedroom closet. Never got around to cleaning the bathrooms.

Before you buy a house, think about the time and expense and hassle of doing yardwork and replacing bathroom faucets (a small project that takes longer than you might think). Then continue renting, so you can live your life and have fun on weekends.

CALENDAR: There's nothing much on the economic calendar this week. Jobless claims data comes out Thursday, as well as the index of leading economic indicators. Tuesday brings the preliminary University of Michigan index of consumer sentiment for August, but I don't put much stock in it.

QUICK TAKES: TASTELESS: They don't make despots like they used to, Pilar Viladas writes in the New York Times: Witness Saddam Hussein's horrible taste in furnishings and art. (Registration required)

IT PAINT EASY: Help is available if you're freaking out about what color to paint the exterior of your house, the Washington Post reports.

SELLING: What you should do now if you plan to sell the house in the fall.

Thursday, Aug. 14
Posted 4:57 p.m.
AFTERNOON UPDATE: Treasury yields went up, then down today. After peaking at around 4.60 percent, the yield on the 10-year Treasury is at 4.52 percent. One of Freddie Mac's key required net yields, a good barometer of mortgage rates, fell 10 basis points today, essentially tracking the 10-year Treasury.

Q&A: Gregory from Warner Robins, Ga., asks:

"I don't need to move right away. I have a contract on a house, but the seller is still looking for a place to live. At best, closing day (not yet set) seems a month or more away. The yields on 10-year Treasuries are so high and prices so low, it must eventually convince some investors to buy Treasuries and push down mortgage rates. When and how should I look for mortgage rates to fall? What kind of economic news would suggest that mortgage rates are about to adjust downward?"

Greg, every morning I read lots of stuff about the economy, and somewhere I came across an economist who said that Treasury yields went up a little higher than warranted, and that they would settle down a bit. That's probably what we saw today.

There were two major economic reports today. Core producer prices went up 0.2 percent in July; economists had expected them to rise by 0.1 percent. And 398,000 people filed for unemployment benefits last week. In our economic climate, it's considered good news when the number is below 400,000, so a number just below that is neutral news.

Friday brings the report on the Consumer Price Index, and if that's much higher than expected (the consensus is that consumer prices rose 0.1 percent in July, according to Briefing.com), Treasury yields and mortgage rates probably will rise.

Retail sales were better than expected in July, and producer prices rose more than expected, so it wouldn't surprise me if consumer prices rose more than expected, too.

Next week's economic calendar is light, so I don't know what kind of economic news would suggest that mortgage rates are about to move downward. I think they might settle down a little bit more if the CPI doesn't surprise anyone. But I don't foresee a big drop.

Bob from Wayne, Pa., asks:

"After four months of searching, we finally bought our first single family home July 18. Unfortunately, our settlement isn't until Dec. 12. We've found a 120-day lock program, which currently is at 6.375 percent with zero points. Would you lock today or wait until late October or November, when rates historically drop a quarter of a point or more?"

Bob, I'm looking at a graph of mortgage rates that goes back to August 1998. The average 30-year rate went up in in October 1998 and was more or less steady through year's end. Rates dipped 30 basis points in the first two weeks of November 1999, then took back half of that over the rest of the month. Rates stayed within a 10-point range in October and November 2000. Rates rose in November 2001. Last year, rates dropped 40 basis points from Oct. 23 to Nov. 13, then rose 25 basis points over the next three weeks.

I wouldn't say that rates historically drop a quarter of a point in late October or November. I would lock today if I could get a 120-day lock at 6.375 points.

Posted 10:25 a.m.
LIES, DAMNED LIES, AND STATISTICS: I've got some explaining to do, but first, let's do the basic numbers. The yield on the 10-year Treasury jumped 20 basis points Wednesday and is down slightly early this morning. The 10-year closed Tuesday at 4.37 percent and closed Wednesday at 4.58 percent. This morning it's trading at 4.60 percent.

The yield jumped quickly on Wednesday in reaction to a strong retail sales report. Consumers bought more stuff than economists had expected. High retail sales could augur inflation. Bond traders are sensitive to inflation, so they sold U.S. Treasury notes. That raised Treasury yields. Mortgage rates followed.

While that was happening Wednesday, Bankrate.com's research department was gathering data from 100 lenders in 10 big markets. (We survey the same 100 lenders each week.) Our researchers calculated that the average rate on a 30-year mortgage went down 6 basis points from the previous Wednesday. The average rate was 6.37 percent.

Our weekly mortgage report is a snapshot. A snapshot is accurate, but sometimes it gives the wrong impression. For example, if you took 50 pictures of a 15-year-old girl on an outing with her mother, you might end up with one or two photos of the girl smiling. If the mother makes copies of pictures of her daughter smiling, and sends them to friends and family, she is giving them an accurate account, because she didn't doctor the photos. But it's a misleading account because she didn't copy the 48 or 49 pictures of her daughter sneering and pouting and rolling her eyes.

To be more concise, if you took a photo of the space shuttle lifting off the launch pad, it would look like the rocket is standing still in mid-air. But of course it's moving upward fast. That's what happened Wednesday with Bankrate.com's mortgage rate survey. We took a snapshot while rates were on the launch pad, and by the time the picture was developed and our survey results were published, rates were higher.

If we conducted the rate survey today, the average 30-year rate probably would be higher than 6.5 percent, significantly higher than the 6.37 percent we got in Wednesday's survey.

Fannie Mae's and Freddie Mac's required net yields -- a measure of the rates that they demand for the mortgages they buy -- are up are up about 15 basis points from Wednesday.

QUICK TAKES: STILL MAKING SENSE: Some people still could benefit from refinancing, I report.

NO THANKS: In this column for real estate agents, real estate broker Walter Sanford describes how "to discreetly repel clients that have little ability or an energy-draining ability."

In other words, how to brush off time-wasting potential clients. Although Sanford's intended readership consists of real estate agents, it's valuable reading for home sellers and buyers, too. If you're a nightmare client, you won't get the best service, and you have yourself to blame.

Among Sanford's peeves: buyers who won't spend an hour with him, describing what they're looking for, and who just point to an ad in the paper or a listing on the MLS screen and say, "Show me the property." How is he supposed to help them if they won't tell him why type of property they're looking for? Other peeves are "sellers who will not allow easy property access or proper pricing on their property."

GOING BUNKERS: "For families seeking ways to maximize sleeping space in a child's room, loft and bunk beds combine efficiency and fun," the New York Times reports (registration required).

UNLOCKED: When rates started rising, locks started breaking, the Washington Post reports.

BREAKING WAVE: Home prices in coastal communities have risen the fastest, and those prices might get dragged down as rates rise and the market for second homes cools down, USA Today reports.

Wednesday, Aug. 13
Posted 11:02 a.m.
MORNING UPDATE: A key Fannie Mae required net yield is up 11 basis points this morning. Long-term mortgage rates are nudging upward today. Your lender might quote you a higher rate, or your discount points might not buy as low a rate as they did Tuesday.

QUICK TAKES: MORE WITH LESS: It takes nine workers to do what 10 did in March 2001, according to USA Today's Barbara Hansen and Del Jones. A story about productivity growth sounds boring, but this is a fascinating article. It points out that productivity doesn't apply just to human beings: the nation's dairies produce 17 percent more milk with 25 percent fewer cows than 20 years ago.

The rising productivity of American workers is one factor behind the "job-loss recovery," as Jack Guynn, president of the Federal Reserve Bank of Atlanta, calls our economic climate.

NO KIDDING: The suburbs draw families with children, "each like an invoice addressed to taxpayers," Laura Mansnerus of the New York Times reports (registration required). Many suburbs, aware of the cost of running schools, are trying to draw childless couples, retirees -- anyone but children.

Posted 9:50 a.m.
ADVICE: I am very reluctant to say, "Now is the time to lock." If I were better at forecasting rates, I would feel more confident about advising people whether to lock or float. So, instead of telling you that today is a good time to lock, I'll tell you that I think you should seriously consider it, and talk it over with your lender or broker. If I were getting a mortgage now, I would be torn whether to lock today or hope for a dip in rates Thursday. I probably would decide to lock before Friday.

I say this because today's strong report on retail sales (more about that below) could herald more positive news later this week. Thursday brings reports on producer prices and jobless claims, and now I wouldn't be surprised if producer prices rose more than expected, and jobless claims were under 400,000 for the fourth week in a row. Friday morning -- 8:30 a.m. eastern -- brings the report on the consumer price index. Experts expect the core CPI to have risen 0.1 percent in July. If it's much higher than that, long-term rates will rise. The number can't get much lower than 0.1 percent, so the risk is on the upside.

Talk this over with your lender or broker and ask for his or her advice. My opinion here should be one of several sources of information that you use to decide whether to lock.

THE NUMBERS: Yields have risen this morning. The yield on the 10-year Treasury is 4.46 percent, up from Tuesday's close at 4.37 percent. One of Freddie Mac's key required net yields -- the interest that the company demands on new mortgages -- is up 16 basis points, or hundredths of a percentage point. I'm not sure what's going on with Fannie Mae's required net yields -- the folks at Fannie apparently have just got around to sitting at their desks, leisurely sipping coffee and resolving to get around to updating their yields sometime this morning, after a round of gossip around the water cooler. Fannie is supposed to update its required net yields at 9 a.m., but coffee and gossip come first, apparently. Sheesh.

Treasury yields and long-term interest rates are up because retail sales were better than expected in July. All retail sales were up 1.4 percent in July. Excluding automobiles, retail sales rose 0.8 percent. Revised sales numbers for June were up, too.

Higher sales equate to increased demand, and increased demand translates into inflation, and inflation causes higher Treasury yields. And mortgage rates tend to move in the same direction as Treasury yields.

Tuesday, Aug. 12
Posted 4:40
AFTERNOON UPDATE: The Fed didn't change short-term interest rates and said explicitly that it doesn't plan to raise rates "for a considerable period." With that statement, the Fed demonstrated that it didn't want to spook the investors who set long-term rates. The tactic succeeded. The yield on the 10-year Treasury bumped up three basis points, to 4.39 percent, which is what the yield was late in the morning. It looks as though mortgage rates didn't change during the day today, either.

Bankrate.com conducts its weekly mortgage survey on Wednesday, and my preliminary rough guess is that the average rate on the 30-year, fixed-rate mortgage will drop about 12 basis points, to 6.31 percent. That would break a six-week streak of rising rates. The good news is mixed; rates are still higher than they've been since October.

Posted 11:15 a.m.
THE NUMBERS: The market in U.S. Treasuries seems to be taking it easy, waiting for the Federal Reserve's announcement of its rate- policy decision this afternoon. The Fed is expected to hold short-term rates steady, and investors will pay close attention to the rate-setting committee's policy statement. It will be issued about 2:15 p.m. eastern time.

The yield on the 10-year Treasury closed at 4.38 percent Monday and is 4.39 percent in early trading today. Fannie Mae's and Freddie Mac's required net yields -- the interest rates they require on new mortgages -- haven't changed much, either.

OFF THE GRID: High in the mountains of southern Coloroado sits a house powered by the sun and wind (with a backup propane generator for cloudy, calm spells). It's on 36 acres and you get your own trout pond. All for a little over a quarter of a million dollars. I wonder if you can get a break on the mortgage because you don't have to pay electric bills?

Monday, Aug. 11
Posted 10:55 a.m.
THE NUMBERS: Yields on U.S. Treasuries are up a bit today, and so are required net yields from Fannie Mae and Freddie Mac. All of these indicate upward pressure on mortgage rates, but slight. A lender might not raise rates, but you might have to pay a bit more in discount points to get a lower rate.

The 10-year Treasury has a 4.33 percent yield this morning, compared to 4.27 percent at Friday's close. The jumps in required net yields -- to oversimplify, the "wholesale" cost of money through Fannie Mae and Freddie Mac -- are a little bigger than the rise in the Treasury yield.

ECONOMIC CALENDAR: The Federal Reserve's rate-setting committee meets Tuesday and is expected to keep the overnight rate at 1 percent. The prime rate will remain at 4 percent. After that, the economic calendar gets rolling. Wednesday brings reports on retail sales for July. If retail sales, excluding autos, increased by more than 0.5 percent, expect mortgage rates to increase a bit.

Thursday brings reports on producer prices for July and jobless claims for last week. Friday brings reports on consumer prices, industrial production and the University of Michigan's preliminary estimate of consumer sentiment in August.

I think the reports on retail sales and consumer prices might have the biggest effect on mortgage rates. If the Fed shocks us by cutting short-term rates, it probably would cause a drop in long-term mortgage rates, too. When the Fed cut short-term rates by a quarter of a percentage point on June 25, mortgage rates went up, but that's because the mortgage market had expected a half-point cut.

POINTER: A quick bit of advice: Don't expect a lender to lock a rate if you don't have a signed, valid purchase contract. I have received a few emails lately from people who were indignant that their lenders refused to lock in the current rates. These buyers were house-hunting seriously, and in some cases had narrowed their search to two houses. They wanted to lock their mortgage rates now, before rates rose further, and then agree on the prices and terms of their home purchases.

It doesn't work that way. Think of it from the lender's perspective. Would you promise to lend a certain amount at a certain interest rate without knowing which house the borrower was buying and how much they were paying for it? Not if you were careful with your money.

Friday, Aug. 8
THE NUMBERS: Yields on U.S. Treasuries have fallen three days in a row, and are down again today in early trading. The yield finished at 4.30 percent Thursday, down from Wednesday's close at 4.32 percent, so the $18 billion auction did not drive up yields. This morning, the 10-year yield is 4.23 percent.

QUICK TAKES: WORST-CASE SCENARIO: An alarming number of homeowners could end up owing more than their houses are worth if rising interest rates cause home values to fall, says John Talbott, author of "The Coming Crash in Housing Markets."

I'm skeptical of Talbott's theory. It might happen -- indeed, probably will happen -- in some markets, but I doubt it will happen nationwide.

HAPPY HUNTING: Because of the Internet, anyone (even parents), anywhere (even across the country) can help buyers to house-hunt, says the New York Times (registration required).

SMART WALLS: In the future, walls will be plastic, and they'll be embedded with electronic devices that insulate, heat and provide power and light, a pair of architects tells the New York Times (registration required).

PLATEAU: Mortgage rates might take a breather and might actually drop a bit next week, says USA Today. I think that's correct, although I believe rates generally are on an upward path.
Posted 9:25 a.m.

Thursday, Aug. 7
THE NUMBERS: U.S. Treasury yields continue to slide downward, to 4.23 percent this morning compared to Wednesday's close at 4.32 percent. Fannie Mae and Freddie Mac are reflecting that decline in the interest rates they require when they buy mortgage debt.

RATES: Mortgage rates continue to rise this week. The average 30-year fixed-rate mortgage in Wednesday's Bankrate.com weekly survey was 6.43 percent, up from 6.26 percent the previous week.

Every week I predict whether mortgage rates will go up, down or stay the same over the next 30 to 45 days. I grade myself by comparing my predictions to what happens to the 30-year rate five weeks later. On July 2, when the average rate was 5.50 percent, I predicted that rates would rise. They did, and I have guessed the direction of rates correctly 21 times in the last 52 weeks, for a .404 batting average -- better than the .333 you would expect if I guessed at random. Just not a whole lot better.

TREASURY AUCTION: On Tuesday, the U.S. Treasury auctioned $24 billion of 3-year notes, and the yield rose by 20 basis points. On Wednesday, the Treasury auctioned $18 billion of 5-year notes, and the yield dropped 12 basis points. Today, the Treasury auctions $18 billion in 10-year notes -- the ones that most closely affect long-term mortgage rates. It's anyone's guess how today's auction will affect mortgage rates.

QUICK TAKE: IN A BIND: As rates rise, people with homes under construction have three options: float the rate, pay to lock a rate months in advance, or get an adjustable-rate mortgage.
Posted 9:59 a.m.

There was little demand in Tuesday's Treasury auction of 3-year notes. The low demand caused prices for 3-year notes to drop, and that resulted in a rise in the short-term Treasury yields. Today brings an auction of 5-year notes, and Thursday brings an $18 billion auction of 10-year notes. If there is low demand for 10-year notes, their yields will rise, and that could cause long-term mortgage rates to rise, too.

QUICK TAKE: TWO TRACKS: The New York Times (registration required) reports that the housing boom of the last 20 years has caused the housing market to cleave in two, "and the break has helped create two very different economies in one country." The Times story has links to a spreadsheet on home prices, plus a graphic that shows price appreciation by county.

Speaking as someone who once owned a house in Toledo, Ohio, I can vouch for the Times's assertion. We bought a two-story brick house with a full basement and a big, shady backyard with a stream for something like $86,000 in 1997. In Florida, our much-smaller ranch house is worth more than twice as much, and has a smaller, noisier backyard. You can live like a king in the Midwest if you make a decent salary. Where I live now, in Palm Beach County, you live modestly on a decent salary. But it doesn't snow, and the beach is a short drive away.
Posted 9:25 a.m.

Tuesday, Aug. 5
THE NUMBERS: The yield on the 10-year Treasury is 4.34 percent this morning, down just a tad from Monday's close at 4.35 percent. Fannie Mae's and Freddie Mac's yield spread premiums -- another barometer of mortgage rates -- aren't much changed from Monday, but they're down about a tenth of a percentage point since late last week. This might not translate everywhere into lower rates, but you might find that your lender is quoting a slightly better discount when you pay points.

The Institute for Supply Management reported this morning that the services sector expanded in June. This didn't do much to raise Treasury yields, even though the rise was unexpected, perhaps because the report is based upon what happened in June.

This afternoon, the Treasury prepares to deal with the record federal budget deficit by holding an auction of 3-year notes. This morning, the yield on 3-year notes is 2.15 percent. That yield probably will rise after the $24 billion auction of 3-year notes this afternoon. On Thursday, the Treasury will auction $18 billion in 10-year notes, which probably will cause yields to rise.

QUICK TAKE: SWAMPED BOAT: If cheap mortgages kept the economy afloat, the economy might have sprung a leak because of higher rates, the New York Times reports (registration required).
Posted 11:20 a.m.

Monday, Aug. 4
THE NUMBERS: Early this morning, the yield on the 10-year Treasury is 4.40 percent. It finished at 4.44 percent Friday. One of Freddie Mac's key required net yields -- another indicator of the direction of mortgage rates -- is virtually unchanged from Friday.

THE CALENDAR: This week's economic calendar looks rather light. This morning brings a report on factory orders in June, then Tuesday brings the services index from the Institute of Supply Management. Thursday has reports on worker productivity in the second quarter, plus initial jobless claims from last week.
Posted 9:45 a.m.

Friday, Aug. 1
IN THE MAIL: Amy writes:

Could you please include some advice in your column for those of us who are building homes, unable to lock a rate and are frantically watching interest rates rise day after day? Like many others, we decided to build based on record low rates this summer. We understood that there was a good possibility that rates would rise, but unfortunately, we believed all of the "experts" who claimed that rates would not rise above 6 percent before the end of the year. Every day for the past 3 months I have read everything I can find on mortgage rates, the economy and where things were headed. My husband feels I was obsessive.

I felt all along I was doing everything right, but now I realize we should have paid a point and locked in a higher-than-market rate about a month ago (probably could have gotten about 5.625 or so at that time). Now I log on my computer each day to see rates have risen another .25 points.

Can you offer any advice to us? I'm assuming I can still lock in a higher rate now for a point (probably somewhere around 7 percent). Is it reasonable to expect that rates will go above 7 percent in the next 2 months (we should be able to lock sometime in mid to late September)? Would it be prudent to pay $2,000 to lock in 7% now? Of course no one thought they would rise as fast as they have in the last few weeks, but is there anything happening that will sustain this rise? Is there any chance rates might drop back a bit?

Any insight you can offer would be most appreciated. At this point I am left wondering (and stressing about) how we will be able to afford the house we are building if rates go up much further.

Please understand that I'm not offering advice here, merely my opinion. I have no formal education in financial matters.

The first step is to figure out how much you're willing to pay each month for the house. It might help to punch in various interest rates in the Bankrate.com mortgage calculator. After you play around with the numbers, you are likely to come up with a maximum interest rate that you're willing and able to pay. If rates rise above that, you'll walk away from the house, even if you forfeit earnest money.

Think of that maximum interest rate as something you could live with. A rate below that is a bonus. By doing this, you are shifting your frame of reference. Instead of fretting about missing the rock-bottom rates of June, you will be thankful, when you finally lock, for every eighth of a percentage point you get below your maximum.

Identifying your maximum rate also helps you decide whether to pay to lock in a lower rate. You can ask yourself, "Am I willing to pay $2,000 to lock in a 7 percent rate and ensure that I don't pay my maximum rate?" I don't think there's a right or wrong answer, just as there's no right or wrong answer to the question: "Am I willing to pay $2,000 for a huge-screen TV?" For me, the answer to the latter question is no, but to my best friend, it's yes. Neither of us is right or wrong.

You ask if it's reasonable to expect that rates will go above 7 percent in the next two months. I don't think they will. I just don't see a sustained jump in mortgage rates until the U.S. economy stops hemorrhaging jobs. Some 71,000 manufacturing jobs disappeared in July, according to the Bureau of Labor Statistics. Many of those jobs went to China and won't come back.

NUMBERS: The yield on the 10-year Treasury is down to 4.41 percent, from Thursday's close at 4.49 percent.
Posted 4:45 p.m.

YOUR GOVERNMENT INACTION: The Office of the Comptroller of the Currency wants national banks to be exempt from state and local laws that aim to curb predatory lending.

A few cities and some states -- most notably, Georgia, New York and North Carolina -- have ordinances and laws that restrict certain lending practices. Among the forbidden practices: very high interest rates, long periods in which prepayment penalties apply, and lending on the basis of a home's foreclosed value rather than the borrower's ability to repay.

The OCC, which is one of the federal agencies that regulate national banks, says federal regulations should supercede (or "pre-empt") local laws and regulations. There's little dispute that the OCC has the right to rule that its regulations pre-empt local laws, and national banks said the OCC had a duty to do it.

Sometimes, something's legal even though it ain't right. That's what Matthew Lee, executive director of Inner City Press/Community on the Move, thinks. For years, Lee has sparred with regulators and banks over predatory lending and community reinvestment. He says the OCC's move is a shame and is anti-democratic, but follows precedent.

"Legally, it's not unreasonable. I wish it weren't the case," he says.

BACKGROUND: The OCC proposed the rule in reaction to a controversial law that was enacted in Georgia early this year. The law, which since has been amended, made several definitions of predatory loans, then made everyone connected with a predatory loan liable to lawsuits. Even investors buying mortgage-backed securities on the secondary market could have been liable for punitive damages.

Big players in the secondary market objected and threatened to make it much more difficult for Georgians to get mortgage loans. The legislature changed the law. But National City Bank asked the OCC to issue a rule pre-empting national banks from all local and state laws. The OCC proposed such a regulation on Thursday. The agency will adopt the regulation after a commentary period.

In a news release announcing the proposed regulation, Comptroller John Hawke says, "We have no evidence that national banks are engaged in predatory lending practices."

Hawke's see-no-evil statement draws rueful laughs from the likes of Lee and of ACORN, the Association of Communities Organizations for Reform Now. Lee's organization has filed complaints to the OCC about subsidiaries of Citigroup, and ACORN is campaigning against the lending practices of some affiliates of Wells Fargo.

The OCC's proposed pre-emption policy "is a backward approach," says David Swanson, ACORN's communications coordinator. "States are very carefully enacting good legislation protecting their homeowners, and that's because, you might argue, the federal government is not doing its job."

EVIDENCE: In support of its proposed rule, the OCC argues that anti-predatory lending statutes harm low-income borrowers by making loans more expensive. It cites evidence from results in North Carolina, which was one of the first states to pass a tough anti-predatory lending law.

Proponents of state laws say the cure of strong regulation is preferable to the disease of predatory lending; the OCC says the cure is worse than the disease.

Asserting that borrowers can have it both ways, the OCC says the "proposed regulation … establishes a strong anti-predatory lending standard … without denying low-income Americans and other subprime borrowers access to credit they need to improve their lives."

ACORN's president, Maude Hurd, says, "We expect the OCC to take a much more active role in investigating abuses and pursuing enforcement actions against institutions they regulate."

I doubt she will be satisfied. The OCC notes that about 12 percent of high-rate subprime mortgages go to borrowers who have credit scores that would qualify them to get lower-rate loans. But the OCC says this is not a problem. Lee calls it an outrage.
Posted 2:39 p.m.

THE NUMBERS: We got contradictory numbers today. Let's begin with the yield on the 10-year Treasury. It's down this morning. That's surprising, for reasons to come. Late this morning, the 10-year yield is 4.43 percent, down from Thursday's close at 4.49 percent.

The 10-year Treasury yield is a good barometer of long-term mortgage rates, and so are the required net yields of Fannie Mae and Freddie Mac, which you can think of (roughly) as the wholesale price of money for 30-year, fixed-rate mortgages. A key Fannie Mae required net yield this morning is 6.24 percent, compared to 6.09 percent Thursday afternoon. Freddie Mac's corresponding required net yield is also up, by 6 basis points.

Both companies' required net yields are up about a quarter of a percentage point since Wednesday, which implies that mortgage rates have gone up about a quarter of a point since Bankrate.com conducted its weekly mortgage rate survey on Wednesday. In that survey, the average rate on a 30-year home loan was 6.26 percent. If the survey were conducted today, the average rate would be around 6.5 percent. Rates haven't been that high since July 2002.

MORE NUMBERS: The employment numbers came out this morning, and they're a muddle. The unemployment rate fell substantially -- from 6.4 percent in June to 6.2 percent in July -- and so did the number of jobs held.

Let me repeat that slowly. The economy shed 44,000 jobs in July -- I'm not talking about people losing their jobs (1.5 million people filed for unemployment), but about jobs that moved overseas or otherwise disappeared -- yet the unemployment rate dropped. This sounds contradictory, and it's explained by the way the government counts unemployment. You're unemployed if you don't have a job and you're looking for one. You're not unemployed if you don't have a job and you're not looking for one -- you're an early retiree, or a stay-at-home mom, or one of those lucky full-time students who doesn't need a job.

The government defines the "civilian labor force" as people who want jobs, whether they have jobs or not. The civilian labor force got smaller unexpectedly in July -- to 146,540,000 people from June's figure of 147,096,000.

"July's drop in the labor force reflects marginal declines in both employment and unemployment," was the cryptic explanation of Kathleen Utgoff, commissioner of the Bureau of Labor Statistics. She added that manufacturing employment declined by 71,000 in July.
Posted 11:35 a.m.

Thursday, July 31
THE NUMBERS: Early this morning, the 10-year Treasury yield stands at 4.41 percent, up from Wednesday's close at 4.34 percent. The rise is a response to today's jobless claims report, which says 388,000 people filed for unemployment last week. That's down 3,000 from the previous week's upwardly revised number, and it marks two weeks in a row when fewer than 400,000 people filed for unemployment.

Gross domestic product increased at an annual rate of 2.4 percent from April through June, the Department of Commerce reports.

Taken together, the jobless claims report and the rising GDP are considered good news, and probably will translate into higher rates.

Speaking of rates, they rose sharply this week. The average 30-year rate was up more than a quarter of a percentage point, to 6.26 percent.

In this week's Rate Trend Index, our panel of experts believes that mortgage rates will rise over the next 30 to 45 days.

QUICK TAKES: A design-build firm does the architectural work and can act as the general contractor, the New York Times (registration required) says, adding: "For a would-be homeowner faced with the issue of whom to hire for a residential project - an architect, a contractor or a craftsman - design-build would seem the best of all worlds. But it is not a perfect universe."

When renovating a house, the decision whether to hire an architect depends on the complexity of the project and whether you want to hire someone to supervise the contractor, the Times's Bradford McKee writes in a first-person sidebar.

The idea of creating a futures market in terrorism is "the latest and loopiest manifestation of a near-religious belief within the Bush administration in the power of markets to solve all problems -- or at least those that can't be cured by tax cuts," writes business columnist Steven Pearlstein in the Washington Post (brief questionnaire possibly required).

The federal government plans to borrow $230 billion in the second half of the year, the Post says. Many people believe that heavy government borrowing causes interest rates to rise, but empirical evidence to support that belief is hard to find.

Rising rates for long-term mortgages are creating a call to ARMs, writes Ruth Simon of the Wall Street Journal. I dunno … I'm not sure it's a great idea to get an adjustable-rate mortgage when rates are near historical lows but are on the rise.

Freddie Mac's troubles have drive mortgage rates upward, says Fannie Mae CEO Franklin Raines. I'm skeptical of that assertion, and Freddie Mac says it's nonsense.

John Andrew was laid off last week. "Later the same day I heard that President Bush's economic team would be doing a bus tour through Wisconsin and Minnesota this week touting Bush's tax cut and its prosperous economic effects," he writes. Andrew packed up his minivan and followed the Bush caravan to "talk to whoever would listen about the real facts -- that this economy stinks, and Bush's tax cuts are making it worse."
Posted 10:20 a.m.

Wednesday, July 30
NUMBERS: Mortgage rates rocketed upward this week. The benchmark 30-year fixed-rate mortgage rose 27 basis points to 6.26 percent. Rates haven't been this high since Oct. 23, when the average 30-year rate was 6.40 percent. The increase in the 30-year rate was the biggest one-week jump since Nov. 21, 2001, when the average 30-year rate rose from 6.58 percent to 6.90 percent.

There are plenty of reasons. Members of the Fed's rate-setting committee continue to express optimism about the economy, and there actually are signs that things are getting better -- fewer unemployment claims, rising orders for durable goods. Lemminglike investors bail out of the Treasury market as Treasury prices continue to sink (and yields rise). And it's the nature of mortgage rates to move up or down abruptly when they switch direction.

This afternoon the yield on the 10-year Treasury is down to 4.31 percent. It closed Tuesday at 4.42 percent. That looks like a rather steep decline for one day, but the yield is back to where it closed on Monday.

THE GRADE: Every week, I predict whether mortgage rates will go up, down or stay the same over the next 30 to 45 days. Every week, I grade myself by looking at my rate prediction from five weeks before. On June 25, when the average 30-year rate was 5.31 percent, I predicted that rates would rise. "Investors and economists believe the economy is on the upswing," I wrote. "If they're right, so are long-term interest rates. I don't expect a drastic rise, but a gradual one." Well, I was right about the direction of rates, but not the magnitude.

I have guessed correctly 21 of the past 52 weeks, for a .404 batting average -- better than the .333 you would expect if I guessed randomly.
Posted 4:38 p.m.

Tuesday, July 29
AFTERNOON UPDATE: Despite declining consumer confidence, the yield on the 10-year Treasury went up sharply today, to 4.43 percent. Less than a month ago, the yield was 3.54 percent.

A key senator put the kibosh on the Pentagon's plan to allow people to make money by correctly predicting terrorist attacks.
Posted 4:25 p.m.

THE NUMBERS: Every morning, I consult this Treasury Department Web page as the final word on Treasury yields. So far this morning, it hasn't been updated. The last I knew, the yield on the 10-year Treasury was 4.31 percent late Monday afternoon. Late this morning, it's 4.29 percent.

EXPLAINER: As Rachel Koning of CBS Marketwatch notes, the upward spiral on Treasury yields feeds on itself. OK, that didn't make sense. Let me explain it this way:

Mortgages are bundled and sold on the secondary market in financial instruments that behave like bonds. The loans in a bundle of mortgages will have varying rates, and they average out to a yield that acts like a bond yield. So you might have a billion-dollar bunch of mortgages with a yield of, say, 6 percent.

Now, think of what happens during a time of falling mortgage rates (a period like the one that lasted from 2001 until the middle of 2003). When investors buy mortgage-backed securities while rates are dropping, they run a high risk that those securities will lose value. Why? Because homeowners are refinancing. As they refinance, they pay off their mortgages. So if you buy a billion-dollar bundle of mortgages, and the homeowners paying those mortgages are refinancing at a rate of $10 million a month, the underlying value of your mortgage-backed security is declining by $120 million a year. You're getting that money in cash, but you're no longer earning interest on it.

So, to protect yourself from falling mortgage rates, and to park your money somewhere, you buy U.S. Treasuries. As the demand for Treasuries rises, prices rise, and that makes Treasury yields fall. And that reinforces the downward trend in mortgage rates, which reinforces the downward trend in Treasury yields.

That circle was broken in June. Treasury yields and mortgage rates began to rise. Now rising mortgage rates are reinforcing an upward trend in Treasury yields, which reinforces the upward trend in mortgage rates. Why? Because investors in mortgage-backed securites feel confident that homeowners won't refinance their loans. The end of the refinancing boom means that mortgage-backed securities become more attractive as investments. They look better than U.S. Treasuries. Reduced demand for U.S. Treasuries causes Treasury prices to drop and yields to rise, which provides upward pressure on mortgage rates, and so on.

REQUEST: Every week, we compile the Mortgage Rate Trend Index, in which mortgage brokers and loan officers vote to predict which way mortgage rates will go in the next 30 to 45 days. We're always looking for a bigger sample. If you're interested in casting a ballot on a password-protected Web page every week, drop me a line. Mortgage professionals only, please.

QUICK TAKE: I'm fascinated by futures markets, in which traders bet on a variety of possibilities -- anything from a drop in the federal funds rate to a deep freeze in Florida citrus groves. The futures market in Chicago is probably the best predictor of what will happen to short-term interest rates. Now comes word that the Pentagon is setting up a futures market for events in the Middle East. Traders will be able to speculate on anything from assassinations of Palestinian leaders to the economic health of Turkey. Traders who guess right can make tidy profits.
Posted 11:25 a.m.

Monday, July 28
THE ZONE: I spent last week in the vicinity of Franklin, N.C., in the southern fringe of the Appalachians. Beautiful countryside and a fun place to ride a bicycle -- I hit 47 mph on one twisty downhill.

Three times a day, (7:45 a.m., 11:45 a.m. and 4:45 p.m.), the Baptist church a half-mile from where I was staying blared tunes ("Green, Green Grass of Home," "Amazing Grace") from four loudspeakers mounted on the steeple. The recorded songs were a strange amalgram -- the vocal line was traced by what sounded like a carillon, with accompaniment from what sounded like fiddles and steel guitars.

Franklin is a nice town. It would be nicer without the visual clutter -- double-decker billboards and large signs for businesses. It's a touristy town, so you would think that the business and political leaders would want to make it prettier.

Walking through Franklin one day, I saw a bumper sticker that read: "Say No To Zoning." When you're in an area where there is controversy over whether zoning should exist, you're in a place where (for some people, at least) ideology trumps common sense. In this case, the ideology is that property ownership gives one the right to dominate one's neighbors. It's your property, and you can do with it as you please, even if it harms or annoys your neighbors.

This ideology allows you to erect a double-decker billboard that blocks a scenic view, making the town less desirable for free-spending tourists who have other destinations to choose from. And it allows a church to break the silence of an early morning with loud music, whether neighbors want to hear it or not. Money isn't the issue; dominance is. People own property, and they believe that gives them the right to shove sights and sounds past your corneas and eardrums whether you want it or not.

The issue is not about property rights, but about who will dominate whom. It's proper to have zoning laws, and for the majority to pass laws to limit visual and auditory clutter. I live in Jupiter, Fla., and one of the things that makes it such a pleasant place to visit (besides the weather) is the town's ban on big, ugly signs. Home Depot and the local car dealership might resent the ordinance that forces them to put up 6-foot-high signs, but the town looks nice.

NUMBERS: The 10-year Treasury yield, a barometer of mortgage rates, continues to rise. Late this afternoon it's 4.31 percent after Michael Moskow, president of the Federal Reserve Bank of Chicago, said he expects the economy to improve.
Posted 4:26 p.m.

GREETINGS: Glad to be back. I'm wading through 1,300 pieces of e-mail (more than 1,200 of which is junk), and I'll post something deep and thoughtful later today. I see that mortgage rates went up while I was gone. I don't mean to imply that there is a causal connection. The 10-year Treasury yield is 4.23 percent this morning, virtually unchanged from Friday.
Posted 9:47 a.m.

Don't forget that I'm taking the week of July 21 off. See you the week after that.
Posted 4:44 p.m.

THE NUMBERS: U.S. Treasury yields and Fannie Mae's and Freddie Mac's required net yields are virtually unchanged. Rates aren't moving this morning. The yield on the 10-year Treasury is 3.99 percent, up a little from Thursday's close at 3.98 percent.

A REMINDER: I'm taking next week off. I'll return to blogging the week of July 28.

QUICK HITS: Steve Kerch of CBS Marketwatch shares his house-hunting horror stories. Don't miss this article. If you have ever shopped for a house, you will recognize the frustrations that Kerch is going through. I wish he would write a house-hunting blog.

People are jumping on the homeownership bandwagon, Sarah Max writes in CNN/Money.

You're simply a loser if you lost your job since 2001, Allen Wastler observes bitterly in CNN/Money. The real object of his ire is the National Bureau of Economic Research, which has decreed that the recession that began in March 2001 ended that November. Try telling that to the 1 million people whose jobs have disappeared in the past two-plus years, Wastler says.

When homeowners in the Hamptons disagree, their shared hedge is of two minds, woolly on one side, clipped on the other, writes Anne Raver in the New York Times (registration required).

Q&A: Ruben of Houston asks: "I should be closing in mid August. I got a 60-day rate lock on June 30 with a mortgage broker at 5.25 percent for 30 years with 5 percent down. My PMI would be about $95 per month. The broker then offered a 80-15-5 deal at a higher rate: 80 percent at 5.375 percent for 30 years and the second lien would be at 6.75 percent for 15 years. The amount to be financed is just under $150,000. I am having trouble deciding which is the best deal and would like some feedback."

Here's how to run the numbers on a scenario such as this: First, go to Bankrate.com's mortgage calculator. This page lets you plug in the amount borrowed, the term (or length of the loan), the interest rate and the loan starting date.

On Ruben's question, I assumed that the house costs $158,000. In the first scenario, he borrows $150,000 at 5.25 percent. The Bankrate.com calculator says that yields a monthly payment of $828.31. That plus the $95 PMI equals $923.31 a month.

On the second scenario, I calculate that the first loan is for 80 percent of the $158,000 purchase price, which comes to a loan amount of $126,400. For a 30-year loan at 5.375 percent, the payment is $707.80 a month. The piggyback loan is 15 percent of the purchase price, or $23,700. For a 15-year loan at 6.75 percent, the payment is $209.72 a month. Add them together and the total monthly payment is $916.64 a month. So, by getting the piggyback mortgage, he saves $6 a month.

Ruben can consult a tax adviser about the tax implications. If he is better off taking the standard deduction on his federal income taxes, instead of itemizing his deductions, the difference between the two scenarios remains $6 a month for the first 15 years.

Kathe from our nation's capital writes: "We refinanced in December 2002 to a 30-year fixed jumbo loan of 5.875 percent. I have been watching the rates for 30-year fixed jumbo and they have not moved enough to justify another refinance. I mentioned to my husband that maybe we should get a low-rate adjustable loan, take the money we would be saving and pay down the mortgage and as we see the rates start heading north again, refi again. Does this make sense or is it a waste of time and money?"

This is a question best posed to a financial adviser. I think many advisers would tell you that an adjustable-rate loan would be a good choice if you planned to sell the house within three to five years. We bottomed out on mortgage rates in June, and now that rates are low but rising, adjustables don't seem tempting -- not to me, at least. I know mortgage lenders who would disagree with me. Perhaps an accredited financial adviser would, too.
Posted 9:59 a.m.

Thursday, July 17
THE NUMBERS: The yield on the 10-year Treasury, a barometer of the direction of mortgage rates, is 4.00 percent early this afternoon, slightly higher than Wednesday's close at 3.97 percent. Treasury yields have stabilized since Tuesday's Greenspan-induced sell-off; the 10-year yield finished at 3.94 percent on Tuesday.

Fannie Mae and Freddie Mac are requiring roughly the same rates on mortgages they buy as they demanded Wednesday.

As I mentioned Wednesday, mortgage rates skyrocketed this week, with the 30-year fixed averaging 5.83 percent. A week earlier, it had averaged 5.61 percent. The average 15-year rate jumped to 5.20 percent from the previous week's 4.97 percent.

HEADS UP: Quite a few of you have told me you read this weblog daily, and have come to depend on it. So, please, don't freak out at this news: I'm taking the week off next week. I'll return to the blogging trade July 28 or 29, depending on whether I'm so worn-out from relaxing that I decide to take Monday the 28th off.

Another heads-up: I'll be on WBBM in Chicago briefly today at 12:40 Central time to talk about whether the refinancing boom is ending and about housing starts. That's WBBM 780 Newsradio -- 780 on your AM dial.

MUST-ASK: This week I list the four questions that you gotta ask your mortgage broker.

Q&A: Keith from North Carolina asks: "Why are mortgage rates (which tend to terms of 30/15 years) tied to/indexed against the 10 year T-bill? How did that evolve and why aren't mortgage rates pegged to some other government security with longer term to maturity?"

The typical 15- or 30-year mortgage is held for an average of eight years and some months. That's because most mortgages aren't held for the entire term: Borrowers usually refinance their loans, or sell their houses, long before 15 or 30 years pass. Because the 10-year Treasury has roughly the same term as the average duration of a 30-year mortgage, that's the benchmark for mortgages.

Long-term mortgage rates aren't "tied" or "indexed" to 10-year Treasuries. They tend to move in the same direction as Treasury yields, but they don't always move in the same direction, or by the same amount. And mortgage rates usually aren't as volatile as Treasury yields; in other words, when Treasuries spike upward, long-term mortgage rates usually don't move up as much, and when Treasury yields plunge, mortgage rates usually don't drop as much.

Adjustable-rate mortgages, or ARMs, are indexed to some other rate. They're often indexed to the yield on the 1-year Treasury. So ARMs do move in lockstep with whatever they are indexed to.

MORE Q&A: Seshan of Needham, Mass., asks: "I have floated my rate and I am closing on Aug 15. I am nervous as everybody else in my situation. Should I wait out a week or two to see if the market stabilizes from the shock of Greenspan's panic stroke and come down (hopefully)?"

Man, oh, man, I hate to answer questions like this, because I don't have a great track record when it comes to predicting rates, and I don't want to steer anyone wrong with a bad guess. A lot of money is at stake. But I frequently get questions like this, and I feel like I owe loyal readers an answer. Just remember