August 26, 2010
Rates Hit 20-Year Low Yet Purchase Activity Is Down 38.8% YOY
Mortgage rates dropped to their lowest levels in at least 20 years last week. And while refinancing activity is up to its highest level in fifteen months, according to the Mortgage Bankers Association’s mortgage activity index, purchase activity in the U.S. fell 1.1 percent last week and is currently running 38.8 percent lower on a year-over-year basis.
∙ Mortgage Bankers Association Applications Survey: 8/20/10 [mortgagebankers.org]
First Published: August 26, 2010 9:45 AM
Comments from "Plugged In" Readers
It's too bad the the credit bubble popped when it did, I was hoping to see the dawn of The Ultimate Mortgage™
This mortgage would have:
No down payment
No payments for 30 years
No interest for 30 years
and one balloon payment at the end of 30 years for a bazillion kajillion dollars.
Think how high real estate prices could have gone. Starbucks baristas could have plunked down a billion dollars for a studio in South Beach. The retirement savings of the entire american middle class could have been funneled into real estate through Wall Street selling kajillion backed mortgage securities. Life would have been a continual party for 30 years until the first of the balloon payments started coming due and the whole thing blew up in everyone's face.
Somehow a few basis point reduction in mortgage rates just seems penny-ante compared to that.
(N.B. While the spell checker protests at kajillion apparently bazillion is actually a word.)
Posted by: diemos at August 26, 2010 10:06 AM
Diemos, you forgot to imagine how much the prepayment penalty, if any, would have been.
I get the humor of the post, and I'm no structured finance expert by a long shot, but from what I've read, the reason that Wall Street was able to securitize mortgages was the payment stream(s) of the amortized principle and interest, not the payoff of the loan. Wasn't the "theoretical" rationale for mortgage securitization that investors didn't want to buy loans on the secondary market that could be paid off early, thus depriving the holder of regular payments?
Posted by: Brahma (incensed renter) at August 26, 2010 10:33 AM
Your logic is deeply flawed. As they say in science: "nature abhors a vacuum". When everyone knows prices are guaranteed to increase forever, everyone rushes to offer next years price TODAY, which quickly transforms into a hyperbolic curve. With your way-too-cool-to-fail product, you'd have had a 6 month bubble into Bazillion dollar territory then a one week-stagnation followed by the MOAN (Mother Of All Nosedives). Except for SF which way too smart and we all know the Chinese, Russians and Europeans are buying up everything cash. Even Bazillions.
No. I much prefer the safety of Neg-Am with at least $500 of your money vested. Way safer.
Posted by: lol at August 26, 2010 10:35 AM
It isn't humor, it is irony. While funny, it is eerily close to what actually happened.
Posted by: tNOB at August 26, 2010 10:42 AM
It's not irony at all, but sarcasm. You missed the irony.
Posted by: no dice at August 26, 2010 11:22 AM
Anyone have comps for refi rates (at least quotes) to share on $729,750? My broker is quoting me 4.75 with no closing costs / 4.25 for 1 point on a 30-year fixed. (Gotta keep her honest...).
Posted by: bzone at August 26, 2010 1:09 PM
your "broker"? call Wells Fargo and BofA directly. I bet you beat it assuming you have great credit
Posted by: hangemhi at August 26, 2010 1:23 PM
The Mortgage Bankers Association also announced that mortgage delinquencies remain high at 1 in 10 loans:
One in 10 American households with a home loan was behind on payments by at least one month this summer, the Associated Press reported.
The wire service quoted a Mortgage Bankers Assn. report on second-quarter delinquencies as saying that 9.9% of borrowers fell into that category as of June 30.
It goes on to say that "the number of homes in the actual foreclosure process fell slightly, the first drop in four years", which leads me to believe that the note holder's strategy of "extend and pretend" is going to hold sway for the foreseeable future.
[Editor's Note: The actual release: Delinquencies and Foreclosure Starts Decrease in Latest MBA National Delinquency Survey.]
Posted by: Brahma (incensed renter) at August 26, 2010 2:29 PM
I just refinanced my $630K loan at 4.375 rate (30-year fixed), using Amerisave.
I didn't pay any points, and in fact most of the closing costs are covered by a "discount" they offered me. My out-of-pocket is expected to be less than $1,000.
They did offer me a 4.25 rate, but that was going to cost me a point, and that didn't seem worth it.
Incidentally, I did also look at Bank of America - my existing bank. The best they could offer me was 4.875 rate, at a cost of .625 of a point!
Other data that may be relevant: house was appraised at $1M, and I have good credit.
Hope this helps.
Posted by: dannyboy at August 26, 2010 5:38 PM
I am closing on a refi that is 4.375% on a $533k20 year loan. It is a two unit building and I got the loan with no points and only $900 closing costs.
This from Integrity First Financial Group. I know, you probably can't trust a company with the word "Integrity" in their name, but they seem to be legit. They beat out Patelco Credit Union. You can actually apply online with Patelco and get a quote on the spot. Their rates are quite competitive, much better than the big banks right now.
Posted by: NoeValleyJim at August 26, 2010 6:40 PM
@ NoeValleyJim and Dannyboy:
Have your refis finalized? Your rates are nice and low compared to what our broker gave us (4.875, no fees/points, on a 695K primary residence balance, 750+ credit, similar to bzone's). Ours is basically closed, but with the 3-day cancellation still pending...I'm getting second thoughts seeing your posts but don't want to risk what we have for something that ends up being either basically a switch and bait or just plain rejected in the end.
Posted by: jenofla at September 10, 2010 11:29 AM