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lendingmaestro - Countrywide says it has $50 bil to lend. Do you know how much funding Countrywide does per day, and how long $50 bil will last? It sounds like alot to me.<p>


Just found out the $50 bil is financing, not actual accessible funds. Or in other words, Mozillo could be lying through his teeth again.<p>


Don't know if anyone is keeping up on the CDS market or even if anyone realizes why it is relevant to the mortgage market, but it looks like the spread is exploding by another 70 points this morning. And the hilarious part ... bubblevision is assuring all with the sound on that the credit market is stabilizing. Yeah, stabilizing like 6.5 aftershocks.
 
Let's all take a moment to mourn the passing of American Home Mortgage (AHM)





<a href="http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=AHM:US&sid=abEuBa_evwH4">www.bloomberg.com/apps/news</a>





<a href="http://www.marketwatch.com/news/story/american-home-claims-more-victims/story.aspx?guid=%7B92AD2072%2D2B56%2D47D1%2D8DD7%2D3FBF3B495F4C%7D&siteid=yhoof">www.marketwatch.com/news/story/american-home-claims-more-victims/story.asp</a>





Nearly 7,000 more jobs lost. . .
 
I was reading this article this morning that was mostly bearish in its tone. However, I was shocked (and maybe I shouldn't be by now) about the false hopes that some people are leaning upon.





<a href="http://www.businessweek.com/investor/content/aug2007/pi2007081_127444_page_2.htm">www.businessweek.com/investor/content/aug2007/pi2007081_127444_page_2.htm</a>





My favorite quotes are:





1. "Subprime woes have moved far beyond the mortgage industry. Already, at least five hedge funds have blown up. The latest worry is that a recent slump in the markets for corporate loans and junk bonds will deepen, jeopardizing the financing of leveraged buyouts, a big profit driver for investment banks. What's more, fears are growing that banks may be on the hook for some of the $300 billion in loan commitments they've made for buyouts already in the pipeline. The mood has gone so somber that derivatives traders are betting that bonds issued by major investment banks will tumble to near junk territory."





2. <strong>Wall Street is banking on the credit market improving in September after big institutional investors return from summer vacations. </strong>(I wasn't aware that big institutional investors work on a school-year schedule).





3. "The ultimate worry is that the trouble in the junk-debt markets will spread to the traditional corporate bond market and create a full-fledged credit crunch that would threaten the economy. That scenario may be unfolding. Issuance of investment-grade corporate bonds fell 72% in July from June's level and 34% from July, 2006, according to Dealogic. And some say the subprime-mortgage and leveraged-loan markets are harbingers of wider credit troubles. Greg Jensen, co-chief investment officer for money-management firm Bridgewater Associates, wrote in a July 31 client note: "Both problems are just the symptoms of…a significant financial fragility built on too much liquidity for too many years." Adds Leslie Rahl, president of Capital Market Risk Advisors in New York and former co-head of Citibank's (<a href="http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?symbol=C" rel="ticker">C</a>) derivatives group: "Nothing stays rosy forever. We've been in a rosy world, with credit spreads at historically tight levels for some time now. But we seem to be leaving it." (Translation: Monopoly money was fun while it lasted).
 
Looks like Wells Fargo just jacked up their rates on a 30 yr jumbo from 6 7/8% to 8%!!!!!!!! (per the WSJ "Heard on the Street" column)





WOW!?!?!?
 
From Wells Fargo's website:











<th class="c21Hdr">Product</th>

<th style="text-align: center;" class="c21Hdr"><a onclick="javascript:newWindow(popup(this,2));return false;" title="Interest Rate. This link will open a new window." href="https://www.wellsfargo.com/comp/body/mortgage/glossary/rate.html">Interest Rate</a></th>

<th style="text-align: center;" class="c21Hdr"><a onclick="javascript:newWindow(popup(this,2));return false;" title="APR. This link will open a new window." href="https://www.wellsfargo.com/comp/body/mortgage/glossary/apr.html">APR</a></th>





<th axis="product" id="a1" class="c21Hdr" colspan="3"><a onclick="javascript:newWindow(popup(this,2));return false;" title="Conforming. This link will open a new window." href="https://www.wellsfargo.com/comp/body/mortgage/glossary/conforming.html">Conforming</a> – loan amount less than or equal to $417,000; $625,500 in AK and HI.</th>





<th id="r1">40-Year Fixed</th>

6.750%

6.954%





<th id="r1">30-Year Fixed</th>

6.625%

6.860%





<th id="r1">15-Year Fixed</th>

6.250%

6.631%





<th id="r2">5-Year ARM</th>

6.250%

7.227%





<th id="r2">3-Year ARM</th>

6.500%

7.474%





<th axis="product" id="a2" class="c21Hdr" colspan="3"><a onclick="javascript:newWindow(popup(this,2));return false;" title="Jumbo. This link will open a new window." href="https://www.wellsfargo.com/comp/body/mortgage/glossary/jumbo.html">Jumbo</a> – loan amount greater than $417,000; $625,500 in AK and HI. </th>





<th id="r3">40/30 Fixed-Rate Balloon</th>

7.250%

7.394%





<th id="r3">30-Year Fixed</th>

7.000%

7.156%





<th id="r3">15-Year Fixed</th>

6.500%

6.749%





<th id="r4">5-Year ARM</th>

6.625%

7.297%





<th id="r4">3-Year ARM</th>

7.000%

7.524%





<th axis="product" id="a3" class="c21Hdr" colspan="3"><a onclick="javascript:newWindow(popup(this,2));return false;" title="FHA. This link will open a new window." href="https://www.wellsfargo.com/comp/body/mortgage/glossary/fha.html">FHA</a> – loan limits vary by county. </th>





<th id="r6">1-Year ARM</th>

6.625%

7.956%













From the WSJ article that Optimus Prime (love that nickname) mentioned:





Lenders are tightening standards and "raising rates like crazy," said Melissa Cohn, chief executive of Manhattan Mortgage, a New York mortgage broker. <strong>She said <a class="times rolloverQuote" href="http://online.wsj.com/quotes/main.html?type=djn&symbol=wfc" onmouseover="window.status=(' Quotes 'amp; Research for WFC');return true" onmouseout="window.status=('');return true">Wells Fargo</a> & Co. is charging 8% for a prime jumbo 30-year fixed-rate loan that carried a 6 7/8% rate late last week.</strong> (Jumbo loans are those too large to be sold to government-sponsored mortgage investors Fannie Mae and Freddie Mac.) <strong>A Wells spokesman said rates are lower on loans made directly by the bank than on those through brokers.</strong>
 
For comparison purposes:





Bank of America: ($600K loan with $120K down)





40 year fixed: 7.75% w/1.014 points (7.918% APR)


30 year fixed: 7.125% w/1.106 points (7.310% APR)


5/1 ARM (I/O): 6.875% w/1.066 points (7.42% APR)


5/1 ARM: 6.75% w/0.973 point (7.363% APR)





(Although you can still get a 1-year ARM with a 1% teaser rate-Sign me up!!!!)





Interestingly enough, I could not get an online rate quote from either Quicken loans or Countrywide. . ..
 
<p>The context of the of Wells 8% int rate is that IF YOU GO THROUG BROKERS. I think what Wells wants to do is to do more loans in house to make sure that they have more control over the loan. It is the loan brokers who are getting killed. Personally, I don't see the need for a broker in the internet age. Brokers make the spread between what they can get from the banks and what they charge the home owners.</p>

<p>Mortgage business won't go away, and this rate jitter has be temp. As most of know, market always over reactor on both good news and bad news. Just wait it out for couple months at the most. I don't see 8% being a sustainable rate unless fed increase their rates. </p>
 
<p>>>><strong>She said <a class="times rolloverQuote" onmouseover="window.status=(' Quotes 'amp; Research for WFC');return true" href="http://online.wsj.com/quotes/main.html?type=djn&symbol=wfc">Wells Fargo</a> & Co. is charging 8% for a prime jumbo 30-year fixed-rate loan that carried a 6 7/8% rate late last week.</strong> <<<</p>

<p>That's awesome. Home prices effectively just plunged 12% in a week.</p>
 
<em>Mortgage business won't go away, and this rate jitter has be temp. As most of know, market always over reactor on both good news and bad news. Just wait it out for couple months at the most. <strong> I don't see 8% being a sustainable rate unless fed increase their rates.





</strong></em>Sustainable if you still want to run a bank...otherwise their borrowing cost will bleed them dry if they keep doing 6% loans ...welcome to the NEW (old) paradigm of lending!!! Where you need some of your (borrower) own skin in the game!
 
Irvine123, you have gotten used to having low interest rates. 7 (and even 8) percent interest is very low historically. Interest was running 12-15 percent in the 1980s and early 1990s and even higher previous to that.
 
<p>several clarification: </p>

<p>a. I am only talking about prime loans with at least 20% down ( so borrowers does have skin in the game, Optimusprime).</p>

<p>b. I fully understand there were 12 to 15% in the 80s and 90s, IrvineCommuter. but pls correct me if I am wrong here, what is the fed rate at that time????</p>

<p>All I am saying, for the person who has enough downpayment, good credit score, they can still find good rates. It won't as good as the "old good times', but it won't be 8% unless fed increase rates. I don't think the appetite for Prime loan ( again fully doc, large downpayment) backed bonds will be much less in the long run. That is why I am saying it is a "jitter". Just go check out UnionBank's site ( I don't work for them, and I am not in real estate business). They have 6.5% rate for 10 year adjustables - just remember avg. folks doens't live in a house for more than 10 years. </p>

<p>Also, it appears that many of us on this blog are relatively young. If you work for a large Fortune 500 company, and want to get promotions, it is given you will have to move around. So what is the sense of getting a 30 yr fix mortage if you can get a lower rate with a 10 year fixed rate? Off course if you have decided not to move out of your own house at the age of 30, then good for you, go get a 30 year mortgage. </p>

<p> </p>

<p> </p>

<p> </p>
 
<p> </p>

<p class="MsoNormal">30? ha ha, that a few years ago. This is probably the final implosive push before the catastrophic nuclear cascade (at least on the secondary/sub prime/alt markets). I can see though that most lenders will push up their rates a bit to take up the slack, making ALL of us pay for the lower performers of the bunch. Anyways good luck and keep us apprised of anything new that happens.</p>

<p class="MsoNormal">-bix</p>
 
More analysis on the topic:





<a href="http://www.cnbc.com/id/15840232?video=452655281">www.cnbc.com/id/15840232</a>





My favorite quote (paraphrase): One lender (AHG) shuts down while another prices itself out of the home mortgage business (Wells)
 
I feel I should explain some things about the broker vs bank comparisson.





Banks operate like retail stores. They only sell their products. They have built in profit margin of 2-3%+ of the loan amount (higher rates and fees to get this). There is no wiggle room, no discussion. In addition, banks are notoriously dirtier than brokers, since they are NOT held to the same standards as far as underwriting goes. They generally don't do verification of deposits on loans originated via retail. Having worked at a bank, I have seen the most serious and outlandish examples of fraud you can imagine.





Brokers operatate like wholesale stores (Costco and such). They carry products from every bank. In addition, since the broker(wholesale) business accounts for OVER 2/3's of ALL the loans done in the country, they get huge discounts form the retail bank prices. This means they can give a homeowner more choices, lower rates, and do it cheaper. In addition, brokers loans are SCRUTINIZED by a team of processors, underwriters, QC, etc. Everything is checked and verified twice. It is a common misconception that the banks business will be cheaper, cleaner, and more honest. In reality, there is no such thing. They are responsible for monitoring themselves on transactions that they make massive amounts of money on... conflict of interest maybe? :) The banks will be quick to throw everyone BUT themselves under the bus regarding the lax lending standards of the past 5 years. Probably focusing on brokers and wholesalers. Pot meet kettle. :)
 
<p>Funny Cramer was just on CNBC sincerely and passionately screaming that the Fed has no idea how bad the credit market is right now. He says Ben needs to do something, anything, call someone but do something.</p>

<p>I don't pay much attention to him but this time he was so serious that I thought he was going to cry and he nearly said the f-word. </p>
 
<p><em>>>Bear Stearns on their earnings conference call said that the credit market is the worst they have seen in 22 years.</em></p>

<p>That's their bed, and they can sleep in it.</p>
 
<p><em>>>Funny Cramer was just on CNBC sincerely and passionately screaming that the Fed has no idea how bad the credit market is right now. He says Ben needs to do something, anything, call someone but do something.</em></p>

<p>I am asking the Court for mercy because I am an orphan, even if I have been convicted of killing my parents.</p>
 
<p class="textBodyBlack">this is from CNBC this am:</p>

<p class="textBodyBlack"> </p>

<p class="textBodyBlack">For those with good credit scores of 700 or above, mortgage rates have actually eased lately because of the decline in the 10-year Treasury yield, the traditional benchmark for many mortgage rates. But for everyone else, banks are no longer using the 10-year Treasury as a guide but raising rates on their own.</p>

<p class="textBodyBlack">The reason: investors are more reluctant to buy mortgage-backed securities because of the rising default rate, so banks are forced to offer higher rates to sell the mortgages they originate. This so-called "risk premium" is being passed on to consumers with less-than-stellar credit histories.</p>

<p class="textBodyBlack">"If lenders can't sell loans they have, there is no choice but to offer mortgages at a higher rate to homeowners," Cohn says. "It has nothing to do with bond market yields right now".</p>

<p class="textBodyBlack">As an example, Cohn says that even someone with a high credit score could pay as much as 8.25% for a jumbo 30-year loan. That's well above the conventional 30-year fixed mortgage rate, which currently average 6.26%, according to <a target="_blank" href="http://www.bankrate.com/#">Bankrate.com</a>.</p>

<a name="StoryImage"></a>

<p class="textBodyBlack"><SCRIPT>getCSS("17703499")</SCRIPT>

</p>

<SCRIPT></SCRIPT>









Mortgage Rates Rising















<strong>Bank</strong>

<strong>Rate</strong>





Wells Fargo

8%





Countrywide

7.39%





Bank of America

7.94%





BB&T

6.88%









<p> </p>

<p class="textBodyBlack">A broker originated jumbo loan through Wells Fargo is carrying at interest rate of 8%, up from 6.875% last week. Prime jumbo loans accounted for about 12% of the mortgages granted last year, according to Inside Mortgage Finance.</p>

<p class="textBodyBlack">"The mortgage market is like a diving board," according to Greg McBride, senior financial analyst at Bankrate.com. Those with the lowest credit scores are farther out on the board because they're the riskiest borrowers, and so they pay the highest rates.</p>
 
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