Archive for the ‘fixed jumbo mortgage rates’ Category

Jumbo Mortgage Borrowers:Avoiding Mistakes of the Past

Friday, March 5th, 2010

Cross-Posted with

Over the years, I have had countless conversations with home buyers about their . From 2003 to 2008, a typical a cocktail party or a BBQ invariably went something like this:

Home-Buyer: We got a great deal on our new mortgage.
Me: Did you do a 30 year fixed jumbo loan or something more exotic?
HB: 30 year — at 4.5% !
Me:  Sorry, but that’s not 30 year fixed — rates are 6.5% today. That’s probably a 2/28, with a reset in 200X.
HB: No, we definitely asked for a 30 year fixed.
Me:  Well, that’s not what you got — its impossible to get that loan at that rate today.
HB: We’re good negotiators.
Me: are set by the bond market. Banks charge a mark up ABOVE the rates that they can borrow money. They can’t get 30 year money at 4.5%, so you can’t get 4.5%.  There is only so much negotiating you can do with the bond market.
HB: Well, its definitely a 30 year fixed.
Me: Please make the pain stop . . .

And so on.

Huge swaths of people, did not understand what they were buying, what it cost them, what their other options were, whether they could afford it or not.

I am not saying this to exonerate their ignorance — it is inexcusable in my opinion. Adults must take responsibility for their decision making, regardless of how foolish it may have been. That home buyers cannot figure out a basic financing document is beyond my comprehension. However, that is the way it is. We must acknowledge the simple reality, if we wish to avoid this problem in the future. That’s why we need to insure consumers understand what they are purchasing.

We are happy to see clients take a serious look at their current loan and the pros/cons of their various jumbo loan ARM refinance options vs the certainty of a refinance into a fixed jumbo mortgage. I think this a great change from the days of simply selecting the “cheapest” option of “no-points, no fees” on a jumbo 5/1 Interest Only ARM. Home owners realize their risks and are trying to make the most informed decision possible.  The prudent behavior by lenders and borrowers will result in much better jumbo loan performance and better lending standards in the future.

Now for the meat and potatos of this week. The trend was largely sideways action for products that aren’t deposit based. Our portfolio products dropped by .125-.25% across the product spectrum  for money good credits. Here is a sampling

5.625% paying 1 discount point

7Y ARM 4.50% paying 1 discount point

*In order to help customers compare similar jumbo loans, we use the following parameters in conducting our rate survey: A jumbo loan amount of $1m, sales price $1.3m. Each loan is a purchase transaction, 720 credit score, 30 day rate lock, taxes and insurance being escrowed, single family primary residence with fully documented income and verified assets(savings/investments).

The movement of the satellites causes a frequency shift of the signal that can be observed to determine ground positions and other information

Wells Fargo:Forecasting Much Higher Mortgage Rates

Wednesday, January 20th, 2010

File this under: Warning.

The CFO of Wells Fargo which funds/services about 25% of the US mortgage market was asked a very good round of questions by a Wall St analyst today regarding their take on mortgage rates. Summary for the time pressed, higher and mortgage rates in general will rise after the FED is done in March 2010.

Analyst: just a follow-up question on rates. I just wanted to understand, Howard, how you are thinking about the impact of the Fed exit on the fixed-income market and how you are planning on managing the balance sheet for that?

Howard Atkins, Wells CFO: Well, that is a good question, Betsy, andthe Fed obviously is active in buying MBS. And despite the fact that the yield curve is as positively sloped as it is right now, their active purchases is a factor that is, in some senses, artificially keeping long MBS yields lower than they might otherwise be. At some point presumably, they will either gradually or more quickly reverse course and that could lead to an increase in mortgage interest rates. And as I mentioned a couple of times in my remarks, in possible preparation for that, we have been keeping our powder dry, in effect underinvesting this large base of core deposits that we have for the possibility that that reverses course.

Analyst: So you might get some OCI hit near term, but dry powder leads you to a better outlook for earnings, is that the way to think about it?

Atkins: Yes, again, while the mortgage business is showing good results right now, in effect, on the portfolio side, the investment portfolio, we, in effect, are giving up some current income. We don’t believe in the carry trade and we do want to preserve some powder in case rates do go up and we’ll have the powder at that point, we will invest the powder at that point to offset some — whatever is going on in the mortgage business.

John Stumpf, CEO: I see this as the classic short-term view of the business and long-term view of the business. 400 basis points or something like that, which you make in the carry trade today is very attractive. But we think it is the wrong decision long term because we think the bias is for higher rates, not for lower rates and we are willing to wait for that to happen. We think that is the better trade.

Atkins: we are effectively giving up 400 basis points today for possibly a year or so, maybe plus or minus, to avoid the potential risk of a larger number of basis points for 30 years. So the last thing we want to do is get stuck with securities at these low levels of interest rates. 

Stumpf: Because I think when rates move, they are probably going to move at some speed and I don’t think it’s going to be maybe a quarter. It could be more than that and it could happen relatively quickly.

Atkins: this is the same thing that we did back in 2002, 2003 when interest rates were also at cyclical low points just before they went up a lot. What we are doing now is not very different from the way the Company has always managed itself.

So they are positioning themselves for much higher rates in mid 2010 and beyond.