Rates dropping on 'junior jumbo' mortgages
The L.A. Times today reports that rates for the newly created "junior jumbo" category of mortgages -- loans in the $417,000 to $729,000 range -- have come down over the last five weeks.
The chart at right shows most of the story, but here's more. "Rates on conforming jumbos began declining in May after Fannie said it would buy the loans for its own portfolio -- instead of trying to sell them to investors. It also said it would buy them at interest rates that were on par with smaller conforming loans, although it charges lenders higher fees on the bigger mortgages.
More: "Rates on 30-year fixed-rate conforming jumbos averaged 6.39% last week, just 0.14 of a percentage point above the 6.25% for conforming loans of less than $417,000, according to HSH."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
This could give a modest boost to the hellbound housing market, but sales price is still much much more important than interest rate.
Posted by: Fred | June 12, 2008 at 11:03 AM
Peter...Can you start a Fannie/Freddie watch? It's only a matter of time my tax dollars pay for these two to collapse...
Thanks...
Posted by: Wilson | June 12, 2008 at 11:04 AM
A kick in the nads to the housing speculators. Will demand go up or down now?? Hmmm.
Posted by: shockg | June 12, 2008 at 11:20 AM
shockg: i agree. demand for certain homes will strengthen on this info. buyers need to bring their down payment, and the principal has to conform -- but you have to admit, this will have a gravitational pull to pricing that meets this program.
Posted by: tealeaf | June 12, 2008 at 11:35 AM
Just curious.
In the worst case scenario: What would happen if the losses of Freddie/Fannie greatly exceeded its cash reserves?
How would that effect Americans?
Would that mean that everyone would now need 25% down on big purchases? What they mean that debt to income ratios would go back to 1/3 ratio?
If so, I could only afford a 200k home!
Posted by: Jeremy R | June 12, 2008 at 11:49 AM
May I remind you the news today,Lehman is biting the dust as predicted ,and Wamu is basically history.
Heads are rolling and oil prices are rising.We are about to strike on a nuclear plant in Iran with the approval of the EU community. And this is just the beginning, so Real Estate at this point is just a side thought. A nice diversion. Surviving the next 4 years will be the main concern.Meanwhile the clowns on CNBC are happy about nothing, as usual, although you can feel the tension rising on Wall Street.
Posted by: CD | June 12, 2008 at 11:54 AM
The drop in rates is balanced out by the additions of LLPAs (loan level pricing adjustments) unless you have 700+ credit and significant down payment.
The confumbos are full doc loans requiring qualification on a fully amortizing loan and stricter DTI than conforming loans. It isn't what will save the market, nobody cares if someone who can actually afford a home buys a home. Prices will align with income if that is all that is happening.
Posted by: Cal | June 12, 2008 at 12:07 PM
Cal's comments ... a kick to ShockG's nads ... ouch ...
Posted by: pugtv | June 12, 2008 at 01:30 PM
From the article: "He wants to borrow about $650,000 to pay off his mortgage and student loans, replacing his current adjustable-rate loan with a 30-year fixed-rate.
But Garcia is looking for a loan for which he doesn't have to fully document his income, and he's not sure when he'll find one."
And taking what CAL is saying, these are FULL DOC. People like Garcia, cannot qualify for as they cannot show their income to qualify. If those that can qualify can get these loans, that will mean prices are going to align with incomes - which is great! hmmm. what a concept right?
shockg wrote: "...A kick in the nads to the housing speculators....."
shockg, Owhch..Assuming of course that you have "nads". Sorry about your pain. Speculators like you need to be careful.
Shockg, it seems that you lack the knowledge in understanding the mortgage qualifications in the years 2002-2007...
To refresh your memory, back then, there was no need for a down payment to get a $1,000,000 loan...KAPISH? Not only this, but you could state your income and get Option ARM loan that would cost you same monthly as it costs TODAY to get a $500,000 fixed loan...COMPRENTE?
Back then, all these loans would be given to FICO of 600. Today you need 720+ . Do you understand this or not?
Posted by: Laker | June 12, 2008 at 02:08 PM
I love seeing the housing bears kick and squirm on these blogs to try to justify their negativity every time there is some positive news on the housing market. Thanks for the humor.
It is also pretty pathetic to see some of the comments from the people (see CD above) who want to see this country crash and burn. Go find a nice cave for yourself out in the Mojave, good riddance.
Posted by: JohnnyAppleseed | June 12, 2008 at 03:15 PM
p.s. Mister "I don't want to document my income" needs to worry more about working with his current lender than trying to find a loan that doesn't exist anymore.
Posted by: Cal | June 12, 2008 at 05:19 PM
Why doesn't he want to document his income?
What is there to hide?
Did he go stated for the original loan?
If he did...was he honest?...or was it just another one of those "liars" loans?
Posted by: E | June 12, 2008 at 07:36 PM
The only reason to go no doc is if you are a tax cheat or plan to lie about your income.
Posted by: SpamBotGo | June 12, 2008 at 08:45 PM
I know 95% of all Americans think numbers are magic and evil and unknowable, but there are ways (called math) to figure numbers out.
Maximum Jumbo mortgage required to buy any house in the greater Westside / Southbay / Beach Areas = $730,000
Rate given above : 6.39%
Given 20% down, the $730k loan will buy a house for $912,500 (which won't get you anything in many areas)
LA County property tax rate - approx 1.25%
Enter these into Jethro's ciphering machine and the answer is : just over $5500 per month before insurance.
That is $66,000 per year in house payments before insurance or any other home related expenses.
So you could probably afford this if you have good credit, good income records, a salary of $170k/year, and $183,000 for a downpayment. That sounds like the average Angelino. After all, we can all afford to pay $23,000 for Lakers tickets, right?
Posted by: keith | June 13, 2008 at 07:16 AM
This comes as good news to those of us who are well positioned to buy a house in this market!
Posted by: Drew | June 13, 2008 at 10:12 AM
SpamBotGo,
No doc loans have it's fair purpose. It serves
1. Sales people with unsteady incomes.
2. Foreigners with income documentation the US banks are unfamiliar with.
However, the lender and borrower have clearly abused no doc loans over the last few years.
Posted by: pugtv | June 13, 2008 at 11:13 AM
SpamBotGo,
There are other reason to go no doc.
1) If you buy a property with a partner, spouse and want to be by yourself on the loan. Then you cannot show the partner's income.
2) If you buy a property that has additional rental income such as two houses on one lot, guest house, duplex. You can't document the rental income that the property will bring to help you pay the mortgage.
Posted by: Laker | June 13, 2008 at 11:41 AM