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TODAY'S CNN MONEY ARTICLE-MORTGAGE RATES RISE

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astroqueen74
Vibrant Health

Member since 1/07

2822 total posts

Name:
Karina

TODAY'S CNN MONEY ARTICLE-MORTGAGE RATES RISE

http://money.cnn.com/2007/08/07/real_estate/jumbo_jam/index.htm?postversion=2007080711

Message edited 8/7/2007 2:21:47 PM.

Posted 8/7/07 11:45 AM
 
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Beth
The Key to your new home....

Member since 2/06

24849 total posts

Name:
Beth

Re: TODAYS' CNN MONEY ARTICLE-MORTGAGE RATES RISE

can you post the link

I can't find it

Posted 8/7/07 11:53 AM
 

LeShellem
A new beginning

Member since 2/07

3600 total posts

Name:
LeShelle

Re: TODAYS' CNN MONEY ARTICLE-MORTGAGE RATES RISE

Just further proof that things will get worst long before they get better.

Posted 8/7/07 12:54 PM
 

astroqueen74
Vibrant Health

Member since 1/07

2822 total posts

Name:
Karina

Re: TODAY'S CNN MONEY ARTICLE-MORTGAGE RATES RISE


Big-ticket mortgage rates rise
The cost of financing an expensive home purchase is jumping, making high-end buyers the latest victims of the mortgage meltdown.
By Les Christie, CNNMoney.com staff writer
August 7 2007: 11:17 AM EDT


NEW YORK (CNNMoney.com) -- Don't look now but the cost of financing a home purchase in some of the nation's priciest areas just got more expensive.

Wells Fargo, one of the nation's biggest mortgage lenders, raised the interest rates on it 30-year, fixed-rate, non-conforming (AKA jumbo) loan to 8 percent last week, up from 6.875 percent. Other lenders followed suit and more are likely to join them.


Current Mortgage Rates

Type Overall avgs


30 yr fixed mtg 6.22%
15 yr fixed mtg 5.90%
30 yr fixed jumbo mtg 6.80%
5/1 ARM 5.90%
5/1 jumbo ARM 6.29%

Find personalized rates:

Video More video


CNN's Gerri Willis explains why the market reacted so strongly to one mortgage lender's problems.
Play video




The rate jump means the monthly bill for a $600,000 mortgage would hit $4,403, compared to $3,942 previously, an increase of $461.

Jumbos are loans of more than $417,000, the limit observed by Freddie Mac and Fannie Mae, the government sponsored enterprises (GSEs) that buy loans in the secondary markets. Freddie and Fannie don't buy loans above that cap.

Wells Fargo's timing may seem odd: 30-year, fixed-rate mortgages have come off their highs for the year; their benchmark 10-year treasury has fallen considerably in the past few weeks to 4.69 percent from 5.2 percent, with further drops expected. And the Federal Reserve, which meets on Tuesday, has shown no inclination to raise its key rate.

Even borrowers with shakier credit scores than many jumbo loan applicants can qualify for a prime loan at about 6.75 percent, only 0.25 or 0.30 percent above what more qualified borrowers get, according to Keith Gumbinger, of HSH Associates, a mortgage information publisher.

But jumbo borrowers are paying a point and a half more than those who receive a conforming loan. That's way up from the traditional premium spread of about a half to three/quarters of a point.

Why should jumbos, whose borrowers often boast high incomes and assets, cost more than conforming loans? It's because Wall Street has stopped buying the loans.

Conforming mortgages, or loans below $417,000, carry much lower risk, because Freddie Mac and Fannie Mae guarantee a market for them. In a tighter credit market, lenders are charging more for jumbos because of the extra risk of not being able to sell them to the investment community.

Allen Hardester, a mortgage broker in Maryland, said that jumbos have lost their appeal for investors. "[Lenders] are having trouble unloading even prime, fully documented, 20 percent down jumbos. Nobody has any faith in real estate," he said.

George Hanzimanolis, president of the National Association of Mortgage Brokers, said, "Wall Street is just so shaky right now that any kind of mortgage-backed anything is a concern."

The implications for high-priced markets may be serious. On a wider scale, jumbos account for 16 percent of the overall mortgage market, according to Inside Mortgage Finance, which provides news and stats to the mortgage industry.

On an individual level, it can push potential buyers out of a market, because they generally care less about a property's price than their final monthly mortgage costs.

A buyer with a budget of $4,000 a month may be able to afford a $600,000 mortgage at 6.875 percent, but with jumbos up to 8 percent, a buyer with the same budget can only afford a $545,000 mortgage. To make up for the increased interest rate, a home seller would have to knock off nearly 10 percent from a selling price.

In many places, rate hikes for jumbo loans matter little, because most house prices fall well below the limits set by the GSEs. The median house price in the United States still stands at about $220,000.

Factoring in a 20 percent down payment, a home would have to cost more than $521,250 to trigger the higher interest rates of a jumbo loan.

But in some housing markets, such as most of California, much higher home prices prevail, pushing the majority of purchases into jumbo territory, according to mortgage broker Steve Habetz of Threshold Finance in Connecticut.

Buyers have to pay an extra premium, above already outsized home prices, to get a mortgage in the Bay Area, Silicon Valley, Los Angeles and many other California areas. The same holds true for the New York region, Boston, Washington D.C., parts of Florida and other high-priced markets.

"There are hot spots like that all over the country," Habetz said, "where there's a potential for a real meltdown."

The drying up of investment capital for jumbos is part ofa widespread liquidity squeeze. According to Gumbinger, a lot of the secondary market -the investors who buy securitized loans from lenders - has put itself on hold.

"They're saying, 'I'm not going to buy any more paper until I know what I have to know,'" he said.

As far as non-conforming loans are concerned, "We are seeing essentially a frozen market," said Jay Brinkman, the Mortgage Bankers Association vice president for research and economics. "When lenders can't get a bid even on the AAA loans, it's a market that has ceased to function."

A whole class of borrowers, subprime home buyers, has already been virtually eliminated from the home-buying universe. If jumbo buyers also face much higher interest rates, many will postpone home buying plans. And that can only add to the pain of slumping or stagnant markets.

Do you plan to sell your home on your own? Have you already done so? If you'd like to share your story for an upcoming feature in Money Magazine, e-mail Josh Hyatt at [email protected].

Message edited 8/7/2007 2:22:21 PM.

Posted 8/7/07 2:20 PM
 

astroqueen74
Vibrant Health

Member since 1/07

2822 total posts

Name:
Karina

Re: TODAY'S CNN MONEY ARTICLE-MORTGAGE RATES RISE

Posted by Beth1210

can you post the link

I can't find it



HIi, I COPY AND PASTE THE ARTICLE. I DON'T HOW TO GET THE ACTUAL LINK ON HERE.

Message edited 8/7/2007 2:22:05 PM.

Posted 8/7/07 2:21 PM
 

~Colleen~
my loves...

Member since 5/05

9129 total posts

Name:
guess

Re: TODAYS' CNN MONEY ARTICLE-MORTGAGE RATES RISE

Historically, rates are still very low...and with housing prices stabilizing, it's still a good time to buy.

Posted 8/7/07 2:22 PM
 

Beth
The Key to your new home....

Member since 2/06

24849 total posts

Name:
Beth

Re: TODAY'S CNN MONEY ARTICLE-MORTGAGE RATES RISE

Posted by ~Colleen~

Historically, rates are still very low...and with housing prices stabilizing, it's still a good time to buy.



well- I would bet most people in the NY, NJ area need a jumbo mortgage

$417K is a $500K house minus 20%

if other lenders follow wells fargo- it could really make an impact on the LI market

Posted 8/7/07 4:20 PM
 

JandJ1224

Member since 6/06

5911 total posts

Name:
Jannette

Re: TODAY'S CNN MONEY ARTICLE-MORTGAGE RATES RISE

I agree, I think this will definitely effect long island housing market. Its closer to homes priced $525 with 20% down that will be effected. In some areas this is a majority of the homes. We aren't talking a small change in payments either.
Good thing the houses we are looking are much lower than $525

Posted 8/7/07 4:25 PM
 

Beth
The Key to your new home....

Member since 2/06

24849 total posts

Name:
Beth

Re: TODAY'S CNN MONEY ARTICLE-MORTGAGE RATES RISE

I mentioned this to my husband last night and he said that wells fargo has the highest rates of all the banks (he worked for them and for almost everyone else)

Posted 8/8/07 2:58 PM
 

sunnyplus3
:)

Member since 11/05

8749 total posts

Name:

Re: TODAY'S CNN MONEY ARTICLE-MORTGAGE RATES RISE

my co-worker was a casuality of the American Home Mortgage fiasco. She sold her house wed morn & by wed afternoon when she was supposed to close on her new house AHM had no money left to lend. She was using them only because a friend was a broker there, she ended up getting Wells Fargo(the lender for the buyer of her 1st house) to give her the same deal as AHM She closed Monday after paying rent to the sellers for 5 days.
I don't think her loan was quite Jumbo, she may have missed it by a hair.

I agree that most of the serious lenders that deal in Jumbos are going to go down the same road, home prices will be affected.

Posted 8/8/07 3:21 PM
 

SweetestOfPeas
J'taime Paris!

Member since 3/06

32345 total posts

Name:

Re: TODAY'S CNN MONEY ARTICLE-MORTGAGE RATES RISE

this is crazy! how do they justify increasing the interest rates in an already depressed market? Chat Icon

this is not good, for ANYONE!

Posted 8/8/07 6:29 PM
 

SweetTooth
I'm a tired mommy!

Member since 12/05

20105 total posts

Name:
Lauren

Re: TODAY'S CNN MONEY ARTICLE-MORTGAGE RATES RISE

I know its not what anyone wants to hear, but its happened before... and the market survived... these things happen in cycles. At least the interest rates are not in the teens like they were in the 80's!! yet...Chat Icon

Posted 8/8/07 6:43 PM
 
 

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