Fair Isaac announced that by 2008 this loophole will be non-existent. http://news.cincypost.com/apps/pbcs.dll/article?AID/20070605/BIZ/706050339/1001        

What happens to a HELOC after it funds? Banks and thrifts own 75% of them in their own portfolios, with another chunk owned by credit unions and finance companies. Less that 10% are actually put into securities.

Treasuries and mortgages are worse this morning, with 30-yr A-paper prices worse by almost a half a point in price. The 10-year yield hit 5.05% - the highest it has been in almost a year. Some are expecting the 10-yr to move up toward 5.25%, which would be the highest Treasury yields since early 2002. Central banks in New Zealand and Europe have raised rates over the past few days, and in fact rates are moving up all over the world based on growing economies. Any expectation that our Fed has of lowering rates in the foreseeable future is almost gone. The Unemployment Claims report this morning indicated continued health and resilience in the labor market, not helping things.

Speaking of the Fed…who cares what Fed Funds are? Not mortgage rates! Fed Funds, set by the Federal Reserve, certainly garner press time, and are easier to explain than the supply and demand aspects that determine actual Treasury yields. If you take a look at this website (and I cut & pasted the graph at the bottom), one can see the correlation between 10-yr yields and mortgage rates.

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