Find a Low Cost Loan

Cross-Posted with www.freerateupdate.com

Over the years, I have had countless conversations with home buyers about their jumbo mortgages. 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 fixed jumbo mortgage— 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: Jumbo Mortgage rates 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 jumbo mortgage rates 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

30Y Fixed Jumbo Mortgage 5.625% paying 1 discount point

7Y ARM Jumbo Loan 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).

Cross post.

Los Angeles Feb 24th (Freerateupdate.com)

Warning: A little technical.This is the Whole Wheat 8 Grain Variety of our ongoing commentary on the jumbo mortgage market.







As the top chart shows, 30-year fixed rate jumbo mortgage rates are going for a post-crisis low, a rate not seen since 2005. With a few scattered exceptions, the rate you get today is about as low as it has ever been in history. Conforming rates are still very close to all-time lows.

As the second chart shows, the Federal Reserve has put on the books about $1.25T of mortgage securities(tan section) which completes the program as announced. Anything could change as the conforming mortgage market tries to stand on its own. If rates skyrocket(unlikely) expect FED action as a stable housing market is a distinct policy of the Obama Administration and the too big to fail banks. The TBTF are sitting on north of 4m homes that they will need to short sale or foreclose on this year per various estimates being thrown around the industry.



The fundamentals driving the jumbo mortgage rates (i.e., 10-year Treasury yields and the spread between MBS and Treasury yields that investors demand in order to compensate them for the prepayment risk of mortgage-backed securities) suggest that we are very unlikely to see rates go lower than they are now. Treasury yields are quite low from a historical perspective, and spreads are about as tight as they have ever been.

One other interesting fact that shows up in the first chart is that the difference between jumbo and conforming mortgage rates is still quite large given that a conforming 30Y fixed is at 4.75% currently. That means that even if conforming rates move higher, it will likely take awhile before jumbo rates move much higher; the spread between them could compress by another 25-50 bps for the absolute Super Prime Credits with 30-40% equity and substantial investment assets. aka Money Good Credits.

However, I should also point out that the declining spread between jumbo and conforming loan rates is a very good sign that private capital is returning to the jumbo mortgage market in general. The Fed is only buying conforming mortgages, not jumbos, so jumbos have been outperforming conforming MBS, which in turn suggests that private capital has been actively seeking out the higher yields on jumbos. That is also an indication that when the Fed stops buying MBS at the end of March, there is no reason to expect jumbo mortgage rates to move significantly higher. A lot of pressure is building because of the RECORD default rate of 9.6% which prevents investors such as pension funds, insurance companies and mutual funds from aggressively buying jumbo mortgage bonds. These twin forces lead us to believe we will see rates in the 5.75-6.50% range on the 30Y Fixed Jumbo Loan throughout the year.

We continue to believe that prospective homebuyers and most long term homeowners would be well-served to choose a 30-year fixed jumbo mortgage instead of an adjustable rate. But, one size fits all advice never works as you well know.  Fixed rates are very low from a historical perspective, while the short-term rates that drive ARMs are very likely to rise significantly in coming years. With the fixed rate you get the certainty of locking in a historically low jumbo loan rate, but with adjustable rates you are exposed to considerable uncertainty down the road, because no one knows today how high short-term rates will be in the future. We always advise matching the loan term with personal and financial plans.

Have a prosperous day.

I don't want to be too quick to judge 2010. But the readings I am seeing point to a very tough year economically. I learned a long time ago to watch behavior and action above all else. I do the action test when out in the real world. I will watch the number of shopping bags in the mall, car dealership parking lots, traffic at the Starbucks, store traffic and cart composition at the Costco or grocery store. I have been wondering if the anecdotal evidence I had been hearing was really speaking to a real sustainable economic recovery.

With this question on my mind and back at the house, I gazed into the crystal ball and saw two troubling charts. These charts are the actual Google US search volume for real estate and mortgage related terms. Google has roughly 70% of the search market. The action points to a very tough start to 2010. I am not counting this year out in terms of economic growth entirely. Until unemployment really improves, I expect to see falling home prices, retailers constantly having huge promos, auto makers pushing crazy deals and people putting the financial house in order after the meltdown.

It is so rough that even the luxury goods index is down 6.90% YoY. How are the wealthy even getting by these days? May God Bless them and keep them in 1000 thread count sheets while they drift off to never never land.
CLICK Pics for larger view.
-13% vs 09
-29% vs 08
Mortgage Index. This includes all mortgage terms and not just jumbo loans.
-44% vs 09
-43% vs 08

You can also find other indexes for Autos, Furniture, Travel etc. Go to Google Index Tool Here.

BTW, look at the Blue Moon Tonight. They only occur once every 19 years.



Below is from Dr. Oz via www.huffingtonpost.com:

Mehmet Oz, M.D.

Vice-Chair and Professor of Surgery at Columbia University, author, radio and TV show host

 Here are my suggested resolutions for 2010: Have more sex, get more sleep, and never let yourself feel hungry. Sound hedonistic? These three resolutions will save and lengthen your life, and they are very realistic and noble goals. New Year's resolutions were never so much fun -- it's all in how you see it. Let's think about it for a minute, shall we?

Like millions of others, you are waking up on New Year's Day with the best of intentions. It's a new year and time for a clean slate. Resolutions come in all shapes and sizes and they are as varied as the people who make them. I get very excited about New Year's resolutions -- not because I have a long list, but because New Year's is a teachable moment. Everyone is looking themselves in the mirror in a rare, private moment of honest reflection. I was being purposely provocative instructing you to have more sex in 2010, but the act of making a resolution isn't flippant or funny -- it's actually sacred. Unlike any other time of year, I can have a heart-to-heart with my family, my friends, my patients, my audience and most importantly myself (I am right there with you!) and decide what needs to be changed for the better. Like all of you, I make a list. And like all of you, each year I fail at a considerable portion of that list. But over time I have seen the success column grow longer than the failure column. You can too.

I believe resolutions are so important that I devoted my show for the entire first week of January to creatively incite a revolution in your resolutions. The first salvo is that changing your life doesn't have to be a painful effort leaving us demoralized and depressed. Food, sex and sleep, three critical components of a healthy life, are a solid starting point for any resolution list.

The most common intention that we wake up with on January first is to lose weight. That's appropriate since a whopping 60 percent of us need to! What if I told you the best way to lose weight is to make sure you never let yourself feel hungry? Sound counterintuitive? It is. But you have a hormone named Ghrelin made in our intestines and stomach that lets you know when it's time to eat. It's the nasty hormone that makes your stomach growl and overwhelms your willpower. If Grhelin starts growling, you are going to overeat and likely eat the wrong foods. You have to always keep your Grhelin levels in check by lightly snacking on nuts, apples or other sensible foods. Keep the lion in its cage by feeling full and you will lose weight because you don't have an uncontrolled urge to overeat.

On our January fourth episode we'll show you exactly how to lose weight, but we will also caution you that your waist size is the better indicator of your health. If you aren't sure whether you need to lose waist, here is an equation you can use: your waist must be half your height or roughly between 32.5 and 37 inches for a woman and between 35 and 40 inches for a man. For years I bet you have focused on the scale. Now, focus on the waist size - it's all in how you see it.

Now, instead of seeing your New Year's resolution as a diet, what if we broke it down into specific steps and played with the language a little bit? For instance: "My New Year's Resolution is to never have anything in the house with these five items listed as the first five ingredients on the label: simple sugars, syrups, enriched flours, saturated fats, or trans fats. If you make your resolution about dumping out the bad food and bringing in the great substitutions that we show you on January fourth, you'll feel you have a bit more control of the situation and you'll forget the D word (Diet! Ahem.) See it differently and it will feel different. For a list of tips, recipes and a 14-day-plan visit www.doctoroz.com.

Still want to hear about that resolution to have more sex? Let's save the best for last and talk about sleep first. I want you to go into your bathroom at home, shut the door and have a conversation with yourself in the mirror. Take a good look at that person staring back at you and tell her that she is worth nurturing with seven hours of sleep per night. I am adamant about this. Sleep is one of the most important and most overlooked health drivers. You simply must give your brain time to re-organize its files and your tissues time to repair themselves. I do understand the pressures of parenting and working - I have four children and I have worked many long hours in the hospital over the years. I empathize with the stress life brings -- and I feel infinitely more prepared to handle it when I am well rested. I have more energy. I think more clearly, my mood is better and my appetite stays in check. The benefits of sleep are too numerous to list and it comes down to a question you've heard me ask before: Are you willing to admit that your life is so far out of your control that you can't get enough sleep each night? If, after proper planning, you aren't able to fall asleep it could signify a serious illness that mandates a consult with your doctor. I want you to stop seeing sleep as a luxury where you can cut corners. It's all in how you see it -- so see it differently and put it on your resolution list!

Now for the other resolution that involves your bedroom: sex. Stop seeing sex as something that is only for younger people or budding romances or those with enough time. I really need you to see this one differently because it's a hugely important part of being healthy. I want you to make a New Year's resolution that you will have sex several times a week with your partner. Believe it or not, that's actually a lot of work for many people out there. It's a lot of work because right now we are in the middle of a sexual famine in America. We simply aren't having enough. Why is this an issue? Because a loving, healthy sexual relationship is an indicator that things are great all over, and a lack of one means the opposite. Sex is an indicator of many things, and if you aren't having it at least once (and ideally more) a week for 30 minutes, it could mean something is dangerously wrong. Physical issues that get in the way of a healthy sex life are depression, heart disease, diabetes, and obesity to name a few. All of these can pose grave threats to your overall health. If none of these factors apply to you but you and your mate still aren't wearing out the lock on the bedroom door then it's time to examine your relationship. Sex is an expression of intimacy and is often a valuable indicator of the health of your relationship. Looking at the reasons you are struck by a sexual famine can be painful, but they will be well worth it, and may just save your life or relationship. So make a resolution to have more sex, and embrace all the obstacles along the way - the outcome will be blissful.

So join me in the resolution revolution - I bet you didn't think that food, sleep and sex could make up such a great resolution list. It's up to you in what order you want to start, and it probably depends what time of day you read this. Tune in the week of January 4 and we can go over each one in more detail. Happy New Year. Now if you'll excuse me, I have a resolution to keep, and I am not saying which one....

article link here. 

The information below is consistent with the large bank risk profile for jumbo mortgage lending in most states. As an example the standard down payment has moved to 30% from 20-25% just this summer in a lot of markets. This also is related to the Strategic Default problem. Most jumbo mortgage holders are on-time and won't default but the economics of the business change when defaults move from historic 1% levels to3-5%.

Moody's Investors Service has revised its loss projections for US prime jumbo residential mortgage backed securities (RMBS) issued between 2005 and 2008. On average, Moody's is now projecting cumulative losses of 3.8% for 2005 securitizations, 8.0% for 2006 securitizations, 10.9% for 2007 securitizations and 12.3% for 2008 securitizations, reported as a percentage of original balance. As a result of the revision, Moody's has now placed 4474 tranches of jumbo RMBS with an original balance of $234 billion and current outstanding balance of $143 billion, on review for possible downgrade.

To estimate losses, Moody's first projected delinquencies through the second half of 2010. Moody's estimated that the proportion of contractually current or 30-day delinquent loans today that will become seriously delinquent by the second half of 2010 will be 3.7%, 7.0%, 8.4%, and 9.4% for the 2005, 2006, 2007 and 2008 vintages, respectively.

---

New York, December 17, 2009 -- Moody's Investors Service has revised its loss projections for US prime jumbo residential mortgage backed securities (RMBS) issued between 2005 and 2008. On average, Moody's is now projecting cumulative losses of 3.8% for 2005 securitizations, 8.0% for 2006 securitizations, 10.9% for 2007 securitizations and 12.3% for 2008 securitizations, reported as a percentage of original balance. As a result of the revision, Moody's has now placed 4474 tranches of jumbo RMBS with an original balance of $234 billion and current outstanding balance of $143 billion, on review for possible downgrade.

From the NYT:

“Mortgage rates in the United States have dropped to their lowest levels since the 1940s, thanks to a trillion-dollar intervention by the federal government. Yet the banks that once handed out home loans freely are imposing such stringent requirements that many homeowners who might want to refinance are effectively locked out.
The scarcity of credit not only hurts homeowners but also has broad economic repercussions at a time when consumer spending and employment are showing modest signs of improvement, hinting at a recovery after two years of recession.”

Sure, jumbo mortgage refinancing could save home-owners lotsof money they could then plow back into the economy — or even avoid foreclosure. But not if bank lending standards are too tight.

That is the problem with an abdication of lending standards — as we saw from 2002 – to 2007. After the collapse, the over-reaction sends the pendulum swinging too far the other way. Lending standards become too tight.
If only we monkeys could learn anything from history . . .

Mortgage markets were relatively calm throughout last week's holiday-shortened trading sessions.

After trading within a tight range between Monday and Wednesday, a weak jobs report helped edge rates lower into the weekend.

For the second week in a row, mortgage rates ended the week lower than where they started -- if only slightly.

Meanwhile, if it's the expectation of runaway economic growth that fueled the early-June, mortgage rate run-up past 6 percent, it's the tempering of those expectations that helped rates retreat by a 1/2 percent or more since.

While the housing sector continues to post strong numbers, employment is showing that it may not rebound as quickly as previously thought and U.S. consumer confidence remains shaken.

The Unemployment Rate rose to its highest levels in 25 years last month and key confidence levels fell.

With negative job growth and falling consumer optimism, it only makes sense that mortgage rates would fall -- fewer people are working and the public feels uneasy about spending its money.

This week -- without much new data due -- market momentum could push rates even lower. In general, perceived weakness in the economy will be good for mortgage rates and strength will be bad.

However, there's a wildcard.

This week, some of the world's largest nations are expected to call on a replacement for the U.S. dollar as a global currency reserve. Depending on how serious the discussion grows, the value of the U.S. dollar could be negatively impacted and that would spell bad news for rate shoppers.

A weakening U.S. dollar is linked to higher mortgage rates.

Mortgage rates remain favorable and unpredictable. If today's rates make sense for your household budget, consider locking in. Rates won't likely end the week at the same levels at which they started.

The American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index rose for the first time since February 2009, gaining 3.2 percent in May. May’s increase, which raised the SA index to 102.3, wasn’t large enough to offset the March through April cumulative reduction of 6.7 percent. ...

Compared with May 2008, tonnage contracted 11 percent, which was the best year-over-year result in three months. Despite the improvement from April’s 13.2 percent plunge, May’s decrease is still historically large.

ATA Chief Economist Bob Costello said the month-to-month improvement was encouraging, but cautioned that tonnage is unlikely to surge anytime soon. “I am hopeful that the worst is behind us, but I just don’t see anything on the economic horizon that suggests freight transportation is ready to explode,” Costello said. “The consumer is still facing too many headwinds, including employment losses, tight credit, rising fuel prices, and falling home values, to name a few, that will make it very difficult for household spending to jump in the near term.” He also noted that he doesn’t expect tonnage to deteriorate much further and that any growth in tonnage over the next few months is likely to be modest.

Note on the impact of trucking company failures on the index: Each month, ATA asks its membership the amount of tonnage each carrier hauled, including all types of freight. The indexes are calculated based on those responses. The sample includes an array of trucking companies, ranging from small fleets to multi-billion dollar carriers. When a company in the sample fails, we include its final month of operation and zero it out for the following month, with the assumption that the remaining carriers pick up that freight. As a result, it is close to a net wash and does not end up in a false increase. Nevertheless, some carriers are picking up freight from failures, and it may have boosted the index. Due to our correction mentioned above, however, it should be limited.

Trucking serves as a barometer of the U.S. economy, representing nearly 69 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods ...

repost from our favorite blog: Calculated Risk.

Expect to see good conforming and jumbo loan rates for the next six months at least. It will take some time for the inflation rate to budge and force rates higher.

After a dreadful start to the month of May, mortgage markets improved last week, pushing jumbo mortgage rates lower overall.

It was the first week since late-April in which mortgage rates fell.

The biggest reason rates improved last week was because the economic optimism that was responsible for the stock market's 30% gain since March faded somewhat.

Retail Sales came in weaker-than-expected as did Initial Jobless claims. Both of these data points show that the economy may not be recovering as quickly as investors had wanted to believe.

Combined with gas prices ballooning more than 10 percent over the last three weeks, it's clear that consumer spending will be muted this summer and into fall.

Consumer spending is important because it accounts for two-third of the economy. If it's slowed for any reason, the economy is less likely to emerge from the current recession as quickly as had been anticipated.

This is good news for mortgage rates because a slow economy tends to draw investors out of stocks and into bonds, including the mortgage-backed kind. More mortgage bond demand leads to higher bond prices and, therefore, lower bond yields and mortgage rates.

This week, there isn't much data to watch and, because of Memorial Day, trading will be very light towards Thursday and Friday.

It's during "calm" weeks like this that mortgage rates can make huge movements up or down. With no official announcements against which traders can make bets, every piece of news is a surprise.

If you're still floating a mortgage rate, take some risk off the table by locking in this week.