Further Affiants Sayeth Naught
Last night we made our second attempt at signing loan documents – we barely made it as we finished up at 11:58PM. The long, grueling battle was triggered when we embarked on a course called an “e-signing”.
Instead of physically signing documents, we could just click a button with a notary present. As with most new technologies, it performed not at all initially, and then just well enough so that it worked, but not well enough that it wouldn’t have been much faster to skip altogether.
The obscure title of this post comes directly from the opaque language of the loan documents. For those lucky enough to have their entire life boiled down to a number that happens to be high enough, it is – yet again – a good time to refinance.
One can’t help but wonder why. Just who is so eager to lend money at extremely low rates of interest to Americans, in a declining currency, against a depreciating asset, in a disastrous economic climate? Indeed, why mortgage interest rates are so low is truly one of the great puzzles of our time.
The logic behind these interest rates is shaky, but with the Fed’s support and ignorant investors, anything is possible – for a time. How long can the cloak of stability shroud the systemic decay? The answer is always the same: for a little while longer, I guess.
Mark, since alternative interest rate yields are so low, do you think investors are just giving up and accepting these currently (historically!) low mortgage rates because they don’t have better places to employ their money? With the stock market crash still fresh in the minds of investors, mortgage interest rates may oddly be considered “a good return” and now that home prices are more realistic and lending standards have been strengthened, a level of investment safety has returned. As long as alternative investment yields remain puny, mortgage rates may continue to stay low if the demand stays strong … and inflation expectations remain low.
Reply@Steve:
ReplyYou make some great points, but while investors are no doubt comparing interest rates in a relative way, it would seem better to evaluate each investment on its own merits. Any objective assessment should make a good investor flee in terror from the entire bond market! In time, bonds’ perceived safety may be shattered, and mortgage backed bonds seem a likely candidate for the worst performing tier in a bad class of investments.