Thursday, May 08, 2008Jumbo Rate Locking
It's a shame that a great idea can sometimes be dragged down by others.
Yes, I'm still touting Jumbo Mortgage Rates.
Here's a synopsis of what happened.
- Tuesday, May 6th: Fannie announces to that they are going to enable lower interest rates for Jumbo Mortgages - pushing them closer to Conforming Loan Rates.
- Wednesday, May 7th: Fannie did just that. Jumbo Mortgage Rates dropped significantly.
- Thursday, May 8th: Lenders are reporting, as expected, an increase in Jumbo Mortgage Locks.
However, upon closer inspection, those Lenders are reporting today that the loans that were locked were also a "bit higher than the prevailing interest rate".
Let me decipher that for you
(I'm using all hypothetical numbers and rates just for clarification)
You applied for a loan a couple of weeks ago with "Loan Officer Larry". At that time let's say Larry quoted you a real interest rate for your Jumbo Mortgage at 6.75%
Yesterday Larry called you. He was out of breath, excited, and could hardly contain himself. He told you he locked your loan not at 6.75%, not at 6.5%, but all the way down to the unbelievable rate of 6.0%!
Can you believe it? That Larry, what a great guy!
Here's what really happened
Rates did drop. They dropped significantly. But they dropped much more than Larry told you. What Loan Officer Larry did was give you a partial break and pocket the rest in the form of Yield Spread Premium. That's a fancy word for putting cash in his pocket.
According to the lenders, Larry made a lot of money yesterday.
How do you feel about Larry now? Did you get LOL'd? Sorry about that.
Labels: Jumbo Loans, mortgage, Mortgage professional
posted by Mike
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3 Comments:
Great post Mike, borrowers were very unsuspecting of what was going on and simply focused on the rate side of the equation. Thanks for pointing out the need to potentially ask for a refund of some of Larry's money.
LOL--too funny...but NOT if you're Larry's client.
A higher rate may not just be "Larry's fault"...sometimes Larry's company may be dictating rates and making an extra cushion as well.
This is why people need to work with qualifed mortgage professionals.
Robert - I don't think Larry is going to be forthcoming with the dough. But on the bright side, he will have a lot more money and will probably go buy a new BMW. It's all about stimulating the economy, right?
Rhonda - Spot on. I've seen some "corespondent lenders" that give their loan officers padded rates. Their Loan Officers had no idea. I've seen others who passed that saving directly to the consumer.
It's the Mortgage Professional that makes the difference.
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