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lendingmaestro_IHB

lendingmaestro_IHB

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NEWS FLASH!!!!!





Massive, earth shattering pricing changes effective today in the secondary market. Mortgage brokers are running around frantically trying to figure what the hell happened. A loan that would pay a 3 point rebate to the broker will now cost the broker a quarter of a point. Every Bank/Lender that I know of instituted these pricing changes.





REIT's are dead. First Franklin is shutting down. Impac...gone...Accredited...gone. SCME...up sh*t's creek. Merryl Lynch is pulling ALL warehouse lines of credit from its Brokers and Correspondent lenders. Unless you are a Bank like Wells, Wamu, B of A, Indymac, Chevy Chase, World Savings, etc., you are screwed. The banks will survive, but will take hideous cuts in profit. I can't even possibly begin to fathom the devastation this is going to cause.





Several people that work with me at my bank were getting calls from their broker friends. The dialogue went something like this..."WTF just happened!?"...or..."Is your pricing system broke today??"





Bear Stearns is now keeping its investors from pulling money out of a third MBS hedge fund. By the end of the year we are going to be in tailspin economically.





I am basically speechless........
 
<em>"A loan that would pay a 3 point rebate to the broker will now cost the broker a quarter of a point."





</em>Did I read that right? Or did you type that wrong? Are you saying that a broker now has to PAY a quarter of a point to do the loan?
 
<p>What happened today has put us on track for a housing downturn way beyond what even IR could imagine.</p>

<p>Lendingmaestro is telling the truth. What does it mean?</p>

<p>It means that rates on home loans went up a realistic 2-3% today. TODAY alone.</p>

<p>Affordibility will destroy the home prices and move the spiral lower.</p>
 
<p>>>>It means that rates on home loans went up a realistic 2-3% today. TODAY alone.<<<</p>

<p>I, too, am speechless if this is in fact what has happened. The average monthly payment is now 30-50% higher? </p>

<p>What type of loans have been affected?</p>
 
Please...if "rates on home loans went up a realistic 2-3% today," it would have been the front page story on the Wall Street Journal, and the top story on every news channel. Banks may be squeezing brokers, but mortgage rates for the average buyer have not changed significantly in the past week.
 
<p>Lendingmaestro:</p>

<p>Since new homes are just sitting idle and have been dropping in price. With the changes that you have mentioned. Is it logical to see more price reduction?</p>
 
<p>Holy sh%t! He isn't kidding at all. At Greenpoint if you need a jumbo loan a 5 year interest only for a 720 FICO buyer with 20% down would be 8.375% with a cost of .25% or 7.75% with a cost of 1% compared to yesterday of 6.875% and 6.5% for the same costs. A 30 year fixed jumbo is 7.25% with a cost of .75% compared to yesterday at 6.875% for the same cost.</p>

<p>All Alt-A products are restricted to Fannie Mae loan limits i.e. 1 unit is capped at $417k.</p>

<p>I'll be back with more rates. If this is true for all lenders then we are seriously bleeped.</p>
 
<p>graphrix,</p>

<p>With rates so high. Am I right to assume that home prices will have to be reduced more to accomodate the higher rates? </p>
 
I've been saying that there's NFW I'm buying anything in the next 24 months. If this is for real, I could fathom being a homeowner by next summer.
 
<p>Very true, but I can eventually refi out of an expensive mortgage. An expensive house is a different story.</p>

<p>Besides, if modest condos crash as hard as us bears expect, my loan would only be 60-70% LTV. </p>
 
prices of homes move the opposite direction of rates. When rates rise, all other things kept the same, you must purchase a lower price.


Hello Mcfly...anyone there McFly....???? JK. Bad Back to the Future analogy.





Actually yes rates can jump just like that overnight. Rates are computed by a compilation of 3 things:


1.) credit/income profile of the borrower


2.) The required profit margin of the servicing bank.


3.) The price the underwriting/investment firm is willing to pay.





The giant firms like Deutsche Bank, Bear Stearns, Merryl Lynch, etc., will only continue to purchase loans if they can effectively pool the loans and sell them as bonds to individual investors. These investors are mainly other mutual funds, hedge funds, and pension funds and they've had enough. Sh*t rolls downhill so this means that investors (MBS writers) severely slashed the prices they are willing to pay originating banks for loans. Federally insured banks like Wamu, Wells, Indymac, etc. will be less affected than your traditional REITS like SCME, Greenpoint, Quicken, Accredited, Etc. Banks will still feel the pain however. If a bank like Indymac for example wants to make the same per loan they must either pay the broker that originates the loan far less (the broker must then charge a hellacious amount of fees to the borrower) or if Indymac originates the loan directly they will charge the borrower more. Either way the borrower will feel the pain.
 
<p>Ok Greenpoint is reacting very fast and hard. Accredited and Impac currently (which means when they get the memo things can change) are a bit better in pricing but you stll would have to pay to be in the 7% range for any Jumbo ALT-A loan with a 720 FICO full doc and 20% down. I guess Argent didn't get the memo because they aren't known for alt-a but I doubt they could close the loan. The reaction at <a href="http://forum.brokeroutpost.com/loans/forum/2/148195.htm">BrokerOutpost</a> confirms that the recent downgrades by S&P and Moodys killed ALT-A today.</p>

<p>I just listened to the blast call from Barry Habib from <a href="http://www.mortgagemarketguide.com">www.mortgagemarketguide.com</a> and his tone was the worst I have heard in the four years of being a subscriber. Basically what he said was although the fannie mae bonds were unchanged the secondary market went in to a serious liquidity crunch. Due to the lower values of jumbo, alt-a, arms or anything other than fannie mae has caused a sell off which means margin calls which means more selling. He said he "hoped it would end soon" but from what he said and judging by his tone it won't be happening soon. </p>

<p>Make sure you read the post at <a href="http://calculatedrisk.blogspot.com/2007/08/alt-no-bid.html">CR</a> and click the link to <a href="http://forum.brokeroutpost.com/loans/forum/2/147955.htm">BrokerOutpost</a>. </p>

<p>I will see what I can find during working hours on Chase, Countrywide and Bear Stearns. I have bad feeling the people I contact for this are going to be really pissed. If those lenders made the same drastic changes I gaurantee you that the homebuilder cancellation rate in CA will shoot up even more drastically.</p>
 
what does this mean to prime borrowers? i still harbor thoughts (or dreams) of getting a bigger home. does this mean even prime loans went up 1+% across the board?





thanks
 
<p>almon,</p>

<p>Prime loans are up if they are jumbo but if they meet FNMA guidelines i.e. $417k they are somewhat ok. I will see if the prime jumbo market like Chase, Countrywide and Wells as a whole has seen an uptick this drastic tomorrow. It could be a knee jerk reaction but it could hold until things work it's way through. To be honest this is just nasty and it may take some time before this calms down.</p>
 
<p>>>>Accredited and Impac currently (which means when they get the memo things can change) are a bit better in pricing but you stll would have to pay to be in the 7% range for any Jumbo ALT-A loan with a 720 FICO full doc and 20% down<<<</p>

<p>Is there a definition for Alt-A? It sounds like 720 FICO full doc and 20% down would be a prime loan. What would make it Alt-A?</p>
 
<p>lm - What does SCME stand for? Is it a publicly traded company? Do you have any suggestions as to which publicly traded companies will get hit hardest?</p>

<p>Accredited, (LEND), a company which made oodles for me on the way down, is down 30% in after hours trading. OUCH!</p>
 
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