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All-time low mortgage rates, coupled with belief that the economy is finally recovering, have caused an increase in the demand for home loans and refinancings. In fact, there been so much of a surge that banks are having a problem processing the paperwork in a timely manner, causing a log jam.
But instead of hiring more staffers, mortgage bankers are using the situation to add to their profit margins.
In the end, home buyers and refinancers are waiting way longer than they should be!
How is something like this possible?
No Lender wants to be the first one to loosen because those will be the worst loans.
Mortgages are at record lows. That's not to say the banks aren't engaged in behavior to keep their under-writing profits higher than they ordinarily would, but lets be honest, mortgages are in the 4% handle. Can anyone claim mortgage rates are too high and waiting for a lower rate to make a home purchase?
Rates are super low but underwriting standards are super stringent. I'm not a mortgage guy but I do wonder why mortgage lenders don't do more risk-based pricing e.g., as opposed to not offering the loan at all, offer it at 6% rather 4%. Thoughts?
Bernie, it's simple. The banks are looking to prevent mortgages on their books from refinancing, so they can benefit from the high coupon rate, or servicing income stream. The banking sector is not very competitive these days and the four large banks control a larger share than ever, so they are able to exert oligopoly control.
Flmaozz. Riversider. You do know 99.0% of all mortgages are sold to govt entities bc no other moron would give you 30yr fixed at 4% on an 'azzet' which is still in huge huge bubble territory.
Bernie. What sane investor would take 3% returns for 30 yrs locked in? No one except the dumb fking taxpayers.
Wtf do I care? It's all academic as I count my change and buy more $20k sails for my 50 footer for next season. No worries my yacccht is in safe hwrbor. Borrow at 3% earn 140% in 6 months. Yeah beytches that's how it rollzzzz. Nyc re not so much.
Any loan can be priced profitably. There are borrowers who would take 6% and investors too.
w67th has the hurricane winds behind his sails...
his sailboat is in "safe hwrbor".
Get your "yacccht" up into dry-dock.
bernie...would you take 6% with no prepayment penalty with 20% down? i wouldn't.
all of a sudden columbiacounty is in the same league as the Fed Chairman.
what recovery? with the crooks controlling our nation, only the retards will hope for a "recovery"
caonima, who would you suggest "control" our nation?
Riversider - I hate to publicly agree with w67th (I agree with w67th silently much of the time). Our bank, which carries our low LTV mortgage on its balance sheet, proactively notified us of absurd rate they were willing to give us (we were at 3.375; now we are at 2.75) and also waived all of their fees to have us refi with them, leaving only title insurance and appraisal fees for us to pay for refi. In DC, you can shop title insurance and providers are fiercely competitive. We couldn't figure out why they have been so proactive since they are giving up revenue in this deal, but then they started begging us to borrow more. I agree with w67th that there is a fortune to be made by people who really know how to invest. Someone is offering us the ability to borrow quite a large sum of money at 2.75, and if we had a good investment advisor that we trusted, we would take the bank up on its offer. We are in some private equity funds that are black boxes that we don't trust anymore after the whole Madoff fiasco; returns look great on paper, but I don't pretent to understand how the PEF is generating those retuns. Money managers are like any other profession - there are good ones and bad ones, and the lay person is at a loss as to discern between the good and the bad, but I digress. Point of this post is that I agree with w67th that most of the few loans that are being made right now are still being securitized and sold off; re nonconforming loans that banks are keeping on their books, our personal experience suggests that banks are not trying to prevent refi to lower rate, but are actually facilitating refi to lower rate. I suspect the reason the banks are moving slowly is because financial regs implementing DoddFrank are still wide open and currently being written and debated - "qualified mortgage" has yet to be defined.
Correction: sold off and securitized rather than securitized and sold off.
@nycnovice: if you don't mind me asking what bank is giving you 2.75 (with low LTV).
I still maintain lenders could make money by offer higher priced mortgages as opposed to a flat out "no". I am not sorry go back to alt A just that the pendulum has swung back pretty damn far.
But yeah Dodd Frank is tying up the whole system right now I think.
Dodd Frank is a disgrace
Here is a question for w67th or anyone else who wants to weigh in: Why is the bank willing to give us 2.85 on a 15-year fixed? (2.75 referenced above is for 5/1 ARM, interest only). We haven't closed yet on our refi and there is still time to change to the 15-year fixed. We are torn, but we view the bank's willingness to give us 2.85 on 15-year fixed that they are keeping on their books (not eligible for sale to USG) as evidence that bank doesn't think interest rates are rising anytime soon. We also view it as evidence that the bank is having trouble finding reliable returns anywhere else. True that we are not talking 30-year fixed here, but we are talking about a private entity that is willing to extend 15 year sizable loan on a piece of real estate at what seems an absurdly low rate. I believe I have already admitted that I am just a half-step up from an idiot, so please don't call me a fktard anymore. I have a basic understanding of financial management, but not nearly as sophisticated as many of you on this site, and I really am curious. What are we to make of this?
that you are very wealthy and therefore a very good credit risk.
cc found a new mark
w67th had written: "You do know 99.0% of all mortgages are sold to govt entities bc no other moron would give you 30yr fixed at 4% on an 'azzet' which is still in huge huge bubble territory."
My question: A private entity is willing to give 15-year fixed at 2.85%. Why would they accept such a low interest rate for such a long period of time? I don't know the answer and am genuinely curious about this. Yes, I am a good credit risk, but can't the bank find a better return on its own money than 2.85%?
like what? 20 yr treasuries? the problem that banks have is finding good risks not finding money. how likely are you to go bad on your loan? what is your LTV? what other assets do you have?
you seem to have a tendency to ignore answers that you don't like.
CC, I really am not ignoring your answers (and please point to an instance where I have ignored any answer you perceived me not to like; I admit that I do ignore some answers that are such nonsense that they don't merit a response, but that is different from ignoring an answer that I don't like). I just don't understand why banks don't have a team of people like w67th looking for better returns than 2.85%. I don't think w67th would extend a longterm loan at 2.85%, and w67th appears to think that nobody else would except the taxpayer. Here we have an example of an entity that is not a taxpayer offering a longterm loan on real estate at 2.85%. This seems to be at odds with what w67th said, and I am trying to reconcile. Is there something in existing financial regs that precludes bank from investing its money in higher yield vehicle?
i guess you have never worked in a corporate environment. There are no people there like w67th st. People who work in large banks are the complete opposite of w67th st. The most important thing to them is not to rock the boat. So....if 20 yr treasuries are paying 2.4% and they can get you to pay 2.85% they think of that as a big win.
Well okay then, there is an answer for me, and I thank you for it!
are you 19% riskier than the us gov't?
I don't want to leave you hanging CC b/c you seem to be speaking to me nicely these days, so I will answer: I have no idea if I am riskier than USG. Generally we live below our means and don't like leverage.
Wanted to update data provided on this thread because it has changed since last post: We did change to 15- year fixed, and when that application went through underwriting, final rate was 3.0%, with bank paying all origination and closing costs, including appraisal fee (we initially had paid for appraisal outside of closing but they then gave costs back to us at closing). I do not expect this to be of much interest to those focused exclusively on NYC real estate because property at issue is in Washington, DC, but I did want to update the data point I had provided. We still cannot figure out why bank was so proactive in contacting us and alerting us to the fact that we could save money when they do not appear to have gotten anything out of the deal. From my perspective, they got our appreciation of what I would call excellent customer service; my husband is more cynical (rare for him; I am usually the more cynical of the two of us); his take is that Citibank must be offering even lower rates. There you have it for anyone who cares.
I am working with two clients right now. One is purchasing a coop in Chelsea and the other is purchasing a Commercial Condo and both lenders on both transactions are really dragging things out. It is amazing how slow and how much red tape the banks have now.