The interest rate for a large jumbo mortgage is now less than the rate for a smaller conventional loan.
The increase in rate for conventional loans, combined with banks seeking jumbo mortgages for their portfolios, has created a situation in which interest rates on the two products have inverted. And observers feel the situation could continue for some time to come, according to a report by National Mortgage News.
The Mortgage Bankers Association’s application survey finds the average contract rate on the jumbo (mortgages more than $417,000) at 4.49 percent, but the conforming rate is 4.51 percent.
Many lenders keep jumbo loans in their portfolios, so the rates on those loans aren’t necessarily set by the bond market, and with fees on conforming loans being raised, that extra cost has translated to higher rates, notes Quicken Loans vice president, Bill Banfield.
The higher rate for the conventional mortgage has been in play for several months, notes the president of Vantage Production as quoted by National Mortgage News. This has made conforming loans riskier. “The implied risk of loss on conforming loans has risen to about 50 basis points.
“With jumbos available at historically low rates, it is unlikely these loans will be as quick to refinance as their conforming cousins. For banks wanting to portfolio these loans, that is good news.”
Q: Does it pay off to have your for-sale home posted on a real estate website?
A: All added exposure is good, but keep in mind that the majority of your website’s traffic is from automated bots (robots) – not human beings. Only 38.5 percent of traffic to websites is from humans. The rest is thanks to nonhuman traffic, such as search engines, scrapers, hacking tools, spammers and other impersonators, the study shows.
However, there are good bots and bad bots. About 30 percent of the traffic is from so-called good bots – search engines and cookies that claim to better users’ surfing experience, Forbes reports.
“It’s the lurking visitors from ‘bad bots’ that webmasters need to guard their sites against. Thirty-one percent of bots are malicious, the study found. For example, some bots are data scrapers that may steal your content and duplicate it on other sites.
“Others are spammers who have the potential to annoy your legitimate visitors with irrelevant content. Other bots include hackers who can inject malware onto your site and impersonators who can slow your site’s bandwidth.”
Q: Have the guarantee fees for mortgages been raised?
A: Yes, the Federal Housing Finance Agency has directed Fannie Mae and Freddie Mac to raise their g-fees.
The g-fee increase consists of three components: The base fee for all mortgages will increase 10 basis points; the g-fee grid will be updated to ensure pricing is aligned with credit risk; and the adverse market fee of 25 basis points is being eliminated except in four states where foreclosure carrying costs are exponentially high, it was reported by DS News.
Q: Is the number of homes on the market growing?
A: Inventories of homes for sale have been slow to bounce back since the 2007-09 recession, despite steady price appreciation since January 2012. Normally, higher prices reflect robust sales.
But lately, prices have been rising even though sales remain stuck at relatively low levels, largely due to a lack of inventory.
Q: Is it true that Fannie Mae has suspended evictions of foreclosed homes?
A: Yes, but only for the holidays. Fannie Mae announced it will issue an eviction moratorium for the holidays, as it has done in previous years.
Fannie Mae will suspend evictions of foreclosed single-family and two-to-four-unit properties through Jan. 3. During this period, legal and administrative proceedings for evictions may continue, but families will be allowed to remain in their homes.
Q: Does FHA have new guidelines for mortgage applicants?
A: Yes. The Federal Housing Administration issued new guidelines for manually underwritten loan applications that should improve a lender’s ability to evaluate borrowers’ risk and reduce credit requirement “overlays” that exceed FHA’s lending standards.
The agency says the move will help restore its depleted Mutual Mortgage Insurance Fund from which it pays claims without forcing lenders to over-tighten credit standards.
WOODARD has been writing about real estate news and trends since 1971 and is the resident storyteller at the Ronald Regan Presidential Library in Simi Valley, Calif.