Market Update: Interest Rates At Record Lows
Contributed by Mark Chrisman of West Coast Mortgage
It seems to be the only positive thing going on financially in our country right now. You’ve heard it on the news, read it in the paper, and you can’t miss all of the advertisements for low mortgage rates. So, is it for real? Are mortgage rates at record lows? Should you quit reading this article and start refinancing right this second? As a matter of fact, that might be a good idea.
Currently I am writing 15-year fixed loans at 3.250% with no closing costs. 30-year fixed rates are at 3.875% with no points, and 5/1 ARMS can be locked at 2.500%. Rates fluctuate constantly, but for the right borrower who acts fast, even for someone who has a great rate now, this can mean several hundreds a month in savings.
Last year about this time we saw 30-year mortgage rates hit record lows. The mortgage industry had been in a transition period: the heyday of the early 2000’s was long gone, banks had failed, rates had gone up, the tax incentives had expired, even the massive institutional lenders were still trying to recover from the TARP hangover. I knew a lot of people who had left the business altogether.
Suddenly the media declared that rates were at an all-time low and the entire world wanted to refinance. A frenzy ensued. Within weeks lenders were so backed up with applications, many of them raised rates just to try and get caught up. Appraisers that were knocking out full appraisals in 3 days were quoting 3 week turn times. Lenders took away 30 day rate locks and replaced them with a minimum 45 day lock, then they bumped it to 60 day locks, at the borrower’s expense. I have a friend who was a recruiter for one of the large banks and she blasted out an e-mail “URGENT: 500 experienced underwriters needed immediately.”
Then it all went away as fast as it came. In November we saw rates jump half a percent in a couple days. Borrowers who had taken too long to submit their required paperwork or had not locked in hopes of even lower rates were out of luck.
Many lenders learned from what happened last year and they have implemented procedures to handle sudden influxes of loan applications, but huge increases in volume are still going to create delays. If you missed the opportunity last year and are thinking about refinancing, even if you are just curious about what rates you qualify for, you need to start the process today. A good mortgage banker can let you know in a very short time if a refinance is right for your situation. If rates stay this low, and especially if they drop even more, the first borrowers in line with a complete file will be the only ones guaranteed to close before it all disappears.
Mark Chrisman is a Mortgage Banker with West Coast Mortgage, specializing in purchase, refinance, and equity loans including Conventional, FHA, VA, and Jumbo loans.
West Coast Mortgage
Mark Chrisman
(619) 795-6517
mark@markchrisman.com
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MORTGAGE LENDING 2011: WHERE WE WERE, ARE, AND ARE HEADED
THE BUYING FRENZY
I left the practice of law in 2002 to enter the real estate mortgage-lending world. Learning a whole new vocabulary and implementing that into the real-life workings of a mortgage broker, was tough at first, but the knowledge came pretty quickly and within about six months or so, I was pretty self-sufficient. Loan programs were well defined. Demand was brisk. People bought homes as quickly as they could in order to secure a price now ahead of what would sure to be a never-ending trend of upwardly moving values. As the buying frenzy increased, so did home values. They increased so much that buyers could no longer afford the 10% or 20% down payment, to say nothing of those hefty 30 year fixed payments on the ever-increasing loan amounts.
Rather than be OK with having people wait until they could afford to buy a home, banks and investor groups created loan programs that allowed for smaller down payments ($0 down and in some cases financing closing costs on top of the 100% loan amount), smaller monthly payments (interest only payment and in too many cases, payments that weren’t even covering the interest accruing on the loan each month), and smaller piles of documentation necessary to prove the borrower’s income (in many cases no documentation at all was required). The borrowers, having these new options available to them, snapped them up with all the self-control of a piranha in an Amazonian feeding frenzy.
We all, of course, know the end of that story. Since the start of the housing crash in 2006, banks that based their whole business platforms on these “creative” loans have vanished while others quickly eliminated these risky loans from their lineup.
By 2008, the risky type of loans were gone and the industry seemed to be making loans that were really clean: down payments were being made of at least 10%, borrowers income was required and provided, and appraisals were being scrutinized closely. The industry seemed to have corrected the problem.
Unfortunately, as most people now know, the finance world since has undergone several rounds of legislation that has made getting a loan one of the most exhausting and frustrating processes one can endure.
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