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I’m back. Hold your applause please.
It has been several weeks since my last post. I promised the Blown Mortgage cognoscenti that I wouldn’t write posts unless I was moved to do so. I should probably be moved more often, but I digress.
The past four days have been a whirlwind at Brown Ram Mortgage as they have surely been elsewhere. I can break the week down into four parts:
1) Rates Hit the Floor- As 30-year Fixed Mortgages hit 5% the leads from prospective clients roll in real time. My partner and I brace for the windfall of new applications.
2) Existing Clients Want in on the Action- After sending out a flurry of applications to potential clients, old clients come calling with one demand: they want in on the action. Many of those clients whose rates have not changed as a result of the Fed Rates Cut (i.e. 99% of them) heard the news on Good Morning America about “rates being cut.” Why can’t theirs be cut too???
3) Pleading for Clients to Send in Their Applications- My partner and I hit the phones pleading with clients to take advantage of our free 30-day rate lock. “We can lock the 5% for free for 30-days. Worst case scenario you get the 5%, with the best case being a continuing drop in rates, whereby I will move you into the better loan.” Our fax sits quietly at its desk, waiting to be called upon.
4) Mortgage Rates Return to Normalcy (and by normalcy I mean still well below historical averages)- My partner and I call each potential client to let them know that we can no longer honor the rates on the applications due to back-to-back midday rate changes. Tears well up in our eyes; defiant prospects point to another “rate cut meeting” at the end of the month. Frustration brews a cup of coffee in our office kitchen.
So why did people wait? Why did they not send in their application and lock their interest rates at 5%? Why did homeowner’s who could merely swap their 6.625% for a 5.625% without cost hold-off??? Because Predicting Rates is the Newest Vegas Table Game.
This forum has already been used to bemoan the fact that everyone is an “expert” on mortgages, especially those people who aren’t involved in the industry at all. If I knew as much about my potential borrowers jobs as they knew about mine, I would be a qualified auto-mechanic, doctor, lawyer and geologist all at the same time! That mortgage arrogance, as I would like to deem it, is certainly part of the problem. However, there is a greater problem which is greed. Much like at the blackjack, craps or poker tables, mortgage shoppers always want more. Cutting their rate by .5% or even 1.25% isn’t enough because they want more. And much like that friend of yours who “knows how to win at blackjack” because they read a book, each mortgage shopper has the inside scoop from their trusted source about the direction of rates. “I heard on the_________(radio, TV, neighbor, newspaper, etc.) that rates are going to go down even more, so I am going to hold out.”
Well, I have heard that if you double down on 11, split 9’s or higher, and hold on 16, that you can win more money playing blackjack. But, I can count on one hand the amount of times that advice has panned out, so I’d rather take the guaranteed money (or savings) and push away from the table.
Great Post. Everyone seems to think they are a mortgage expert. Especially those with no financial background. Treating their home like a Vegas table game tells you why we are where we are today.
I’m going to bet the house… or not. Yeah I’m amused by all these attempts to predict the next rate move, people should do something more productive.
Well, I was one of the few who tried, tried DESPARATELY, to have the rate locked on Wednesday morning, on two mortgages, where my apps were in. I was in the process of awaiting a counter offer on a small investment property . (I’m in Denver, one of the cities with the best prospects, not necessarily good, just better than most cities. When a new foreclosure on a condo became available at 30% less than its 2004 price after concessions, I was able to make the numbers work. I have been looking daily or atleast weekly for an investment for 4 years and this was the first one that I could find that worked for me in 2 decades. Plus it’s in a project where I once owned one for 19 years, so I am comfortable with it.
So, I wake up on Wed morning, see 10-year T-bills at 3.32%, can’t believe my eyes, put on my glasses, stand in front of the TV and wait to look again. I then call my mortgage broker/friend/neighbor who had quoted me 6 1/8% 30 yr fixed the day before for an 80,000 75% L/V (Yes, I am only paying $105,000 for a 1984 3bed,2 bath plus garage condo in a a better than average suburban neighborhood…that’s why the numbers work, with an $1100/m rent). So I call her up and ask, is it down again? She looks on her sheet, says how about 5 5/8%?. She then squeezes her numbers to get me a fixed 20 year fully amort. for my house at 5.125%. (Only 40% L/V and 800 Fico’s, and not a jumbo, so it is pretty slam dunk for her). I say I need to make a couple of calls . My house is at 5.25% , so I had never looked into it because it had never been close enough before. less. SO, I say, let me call and see what is up with my counter offer on the condo investment and and then check with my current lender just to see if he can beat your refi quote. I make 2 calls, I call her back 20 minutes later, leaving a message to go ahead on both and lock them. (She already had my app done). She was out to lunch and her cell phone wouldn’t pick up. I call back another hour later, after turning on CNBC and seeing that 10 yr t-bills had jumped to 3.53% and were still heading up. I leave another message saying LOCK! LOCK NOW!!! She calls me back another half hour or so when she returns to the office. She soon learns that all of the lender systems have been locked down for all of the potential lender matches. They fax in the apps and lock requests. Long story short, the quoted rates were not honored by any of the lenders she submitted it to by fax.
It ticks me off that I couldn’t even lock within a half hour of getting the quote.
DID anyone actually GET A LOAN LOCKED on Wednesday morning anywhere at those really low rates?
An article in the paper this morning quoted another area mortgage broker saying those low rates were only available for an hour on Wednesday morning.
Lenders should atleast honor their quotes for the same day.
Thank you for explaining what happened last week! What a funny post…I was really feeling quite frustrated that many of my clients did not put their chips in and refi.
>>So why did people wait? Why did they not send in their application and lock their interest rates at 5%? Because Predicting Rates is the Newest Vegas Table Game.
I also tried to lock down my rate Wednesday, and LO wouldn’t return phone calls or e-mails (more than one).
Well, guess it’s time for a new LO.
By Friday, FNMA’s net yield for a 30 day delivery was 5.622. Add .125% for servicing and you get 5.747 or 5.75%. This is the rate lenders can sell to FNMA and get 100cents on the dollar. So, to make money, you charge the borrower a point, and 5.75% rate for a 30 year fixed conforming to $417,000..
According to the National Financial News Services, the average rate in so Calif last week was 5.63% at 1.12 point. You had to be quick to get any lower. Keep this in mind when you see advertised rates in the newspaper today for 5%…….
To the consumers wondering why they couldn’t lock in their rates:
Many bank systems were inundated with all of us trying to lock…it was very frustrating…then factor this:
1) There are fewere Loan Originators remaining in this field by far…I’d say 50% less than this time last year.
2) Those of us remaining need to sort out who is serious and committed to working with us vs. who has multiple locks w/different different lenders, who’s a perinial rate shopper, who will drop you for an 0.125% better in rate.
Lenders cannot honor rates that are issued during the same day when rates are changing constantly. You need to be prepared and committed to locking. You might have better luck next time.