Amazing. Just amazing.
The last week in the mortgage industry has been a series of wild swings of ups and downs that has culminated in a furious wave of phone calls and emails to borrowers and homeowners to get them to refinance their mortgages because interest rates tumbled and tumbled and tumbled.
For a brief time Wednesday, it was possible to get a 30-year, fixed-rate mortgage for 3.875 percent. That used to be a great rate for a 5-year adjustable rate mortgage.
All of this sweet news to borrowers and loan officers is a byproduct of the absolute turmoil in the world’s financial markets. Money is seeking a haven amid fears of a double-dip recession, and it is finding it in U.S. Treasury bonds and mortgage-backed securities. In fact, if the economy wasn’t in such a sad shape, rates probably would have risen based on the S&P downgrade as well as the downgrades of Fannie Mae and Freddie Mac.
This week, the Mortgage Bankers Association released its weekly mortgage applications survey for the week ending Aug. 5, and it showed applications increasing 21.7 percent from the previous week.
The refinance share of that mortgage activity increased to 75.6 percent of total applications, from 70.1 percent the previous week.
And when the survey is released next week, it wouldn’t be surprising to see another leap based on the latest dip in rates.
“Amid substantial market turmoil last week, mortgage rates dropped to their lowest levels of the year, and refinance applications jumped more than 30 percent to their highest levels of the year,” said Mike Fratantoni, MBA’s vice president of research and economics. “Over the past month, refinance application volume has increased by 63 percent. Refinance applications for jumbo loans increased by almost 75 percent relative to last week.”
Even if you refinanced last year to a rate of 4.875 percent and thought that you were done, it still might be wise to revisit the process. Many lenders are capable of offering a rate that may be at least a half-point lower, while offering a lender credit to pick up much of the cost of the refinance. And if that is the case, where a borrower doesn’t have to increase their principal balance, it might make sense.
The one aspect that borrowers need to remember is that this is a very volatile market. The interest rate and terms quoted to you at 11 a.m. may not be there at 1 p.m. So, this goes back to my old saying of: “Who gets the lowest rate? The lucky ones.” By that I mean those borrowers who, after being contacted and getting the information and numbers they need, act on the moment instead of putting it off to get spousal approval at dinner.
Even so, borrowers who are taking advantage of this window should expect the following:
-Loan officers and institutions are getting crushed right now with an extraordinary amount of originations. Therefore, there may be some frustration when borrowers have to wait to talk to someone. Be patient.
-Start gathering all the material needed by a loan officer to assess your situation. Pay stubs, bank statements, tax returns. Have them ready to go.
-Many lenders are requiring refinances to be on a 60- or even a 90-day lock, just so there is enough time to process the files.
So with that in mind, where does the market go from here?
It’s impossible to say or predict or hedge. However, even if it seems that rates should drift lower than their current levels, lenders may artificially keep rates higher just to slow the rush and give their operations team to catch up.
The Federal Reserve tried to calm markets with its statement that it will keep rates low well into 2013, but if fear and uncertainly continue to grip economies throughout the world, borrowers should be seeing attractive mortgage rates for the foreseeable future.
Robert Nusgart is a loan officer with Prospect Mortgage LLC., which is associated with The Strata Group in Baltimore. He can be reached at 443-632-0858 or by email at Robert.Nusgart@prospectmtg.com. Visit his website at www.RobertNusgart.com for the latest mortgage and financial news.