Jumbo 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.

Did you see Jumbo Rates Today?

They were down dramatically.  Really Dramatically.

Last Friday the difference between Conforming 30 year fixed rates (loans under $417,000) and Jumbo Conforming 30 year fixed rates ($417,001 and above) was roughly 5/8ths.

That was a big difference.  On a $417,000 loan the Payment would be somewhere around $2,400 a month.  Add a single dollar to the loan amount and that same payment would have jumped to $2,568.  That's an additional $168 each and every month. 

Today that difference was almost nil.  How about 1/8th?  The same example above would have been $2,433 for a $417,001 Jumbo Conforming Loan today.

That makes a big difference ($135 a month), but let me share an even bigger difference.

I have a loan for $925,000 on my desk.  It's a Jumbo - always has been.  You can only guess at the difference a couple days makes for them.

Sometimes Good News Gets You In Trouble

I just got off the phone with a local Real Estate Agent relaying this information.  He's always on top of the information game.  Reads all the papers, watches the news.  You know the type.

"When did this happen?  Why didn't I hear about this?", says he.

The Media has plenty to report on, they don't know and they can't catch everything I explained.  "Besides, I reported on it yesterday".  Ooops... thought I.

"I read your blog every day, I saw nothing about that." I could tell he was pulling up the latest post as he was talking.

"Dave, it wasn't on the Blog.  It was on Twitter."  Ever get the feeling you shouldn't have uncorked the Genie?

"What's a Twitter?"  So for the next 20 minutes I walked Dave through Twitter.  Maybe I should have done that earlier.  My Fault.

For the rest - here's a simple way to get the same information that Dave does (now).

www.PatagoniaFinance.com/twitter

Will this pricing last?   If it doesn't how will you know?

Follow me, or the Bay Area Mortgage Report. 

Be informed.

Why the New Trustee?

When the Lender files the Notice of Default to start the foreclosure process often times they will also assign a New Trustee. 

When that happens you'll receive all sorts of important registered letters announcing the New Trustee.  By law they have make sure you are properly notified.

(you might call it being Spammed)

This is normal. 

So why do they do this do you ask?

 

Maybe the New Trustee is better, faster and / or cheaper than the old one when it comes to the Foreclosure Process.  That's all.

The Good News is that the New Trustee cannot change the terms of the Note.  They only act as instructed.

The Bad News is that you still have a Notice of Default and it's been transferred to a company that might better process that.

 

Want a FREE $33,000?

Yesterday we had a dip across the boards in interest rates.

I advised my clients to lock if they could. I had three that were ready to lock.

Talk about Volatility.

Today interest rates are back up and don't look like they'll be dipping again anytime soon.

For the rate shoppers out there. If you didn't have your Ducks in a Row - you lost.

What exactly are those Ducks? Good question.

1. a Complete Mortgage Loan Application including all requested documentation.
2. an Underwriters Conditional Loan Approval
3. The ability to meet those Conditions in a timely manner

That's it. Seems pretty simple right?

But that's also why you cannot pick up the phone and shop for rates.

Without covering items 1 thru 3 above, the rate quote you hear on the phone is either from a Liar or a Knucklehead (thanks Jack)

You must work with a True Mortgage Professional. One that can properly advise you to lock or NOT to lock at any given point. One that has real time information on what is happening in the marketplace.

Speaking of locks - you did get that lock verification in writing didn't you?

Here's the proof in real dollars.

Yesterday I ran a purchase scenario for a potential client. They were not ready to lock.
Had they locked they would have been able to buy $33,000 more home. Same loan, a Conforming 30 Year Fixed.

Not for the same monthly Principal and Interest Payment - but LESS!

Yes, that's $33,000 for nothing.

If you extend that out 30 years, at an annual appreciation rate of 7.2% (go ahead and ask why) that same $33,000 becomes $265,679.17.

Is it worth working with a True Mortgage Professional yet?

As my friend Brian Brady says, "If you thought dealing with a professional was expensive, wait until you find out how much dealing with an amateur costs!"

Fixed Rates are Better!

Ok, so are the ARMS.
I just wanted to stir up the pot a little.
Lately I get more calls for quotes on a 30 yr fixed than any other loan.

As of this morning we are almost 1/4% lower for the same conforming loan profile that I would have quoted two days ago.

That's a big jump!

This has little to do with the Fed's and more to do with what is happening in the market today.

Remember, we are in an extremely volatile market right now.
Change happens and it happens fast!

How's your Ducks?

I hope to lock two loans today, maybe three.

These have approvals already and ready to close.

They have their Ducks in a Row.

BTW: If you are locking your loans - make sure you get a lock confirmation (in writing). If not your loan officer is probably playing you.

I recently streamlined the application process I'm using.

Cleaner, Neater, More Concise.

Need financing?

Call Me

(925) 288-9977 ext 104

or email at Mike@PatagoniaFinance.com