On May 28 I wrote Mortgage Market Locks Up. Ten year treasury yields started to soar and 30 year mortgages for good borrowers jumped a full point from 4.5% to 5.5%.
The question on my mind at the time was whether or not the mortgage action was a brief outlier. It wasn’t. Things are now worse.
Two days ago Michael Becker, a Mortgage Consultant at Green Pastures Mortgage & Finance wrote:
Mish, I’ve attached two rate sheets to this e-mail. One shows the rates from May 21st, and the other from today June 5th (after a re-price). You can see on May 21st 4.625% was paying .375 points, and today 5.625% is paying .25 points.
So in a little over 2 weeks rates have jumped 1%. That is a huge jump.
When you add in the effect of the new Home Valuation Code of Conduct (HVCC) appraisal process, many loans originations will never close. This is because it is taking 15-25 days to get an appraisal back, and often those appraisals are coming 10-25% low. So locks expire or appraisals kill the deal, the latter possibly on purpose.
You are going to see the recovery in housing come to a complete halt. Trade up buying is already dead.
Michael Becker
On Wednesday I called Jeff Bell a Certified Mortgage Planning Specialist at Cobalt Mortgage for his take on the situation.
Jeff commented: "Mortgage rates jumped again to 5.75% and refis are frozen solid. The trade-up market is dead but some new houses are still moving …. for now. "
Fannie Mae 4.5% Mortgage Backed Securities
click on chart for sharper image
The current price is 96.66%. Compared to a couple short weeks ago, that is a crash.
Interestingly Jeff Bell also commented on the new Home Valuation Code of Conduct (HVCC), and is not too pleased with it.
One problem is lenders are requiring applicants to put up $500 for appraisals and if the amounts do not come in, even if they miss by a tiny bit, the deal is denied and the applicant is out $500. Jeff had a $1.2 million sale fall through because an appraisal was $20K short.
A couple years back lenders were letting anything slide, now they appear to be looking for